<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE) QUARTERLY REPORT / X / OR TRANSITION REPORT / /
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended
January 31, 1999 Commission File No. 1-5865
GERBER SCIENTIFIC, INC.
---------------------------------
(Exact name of Registrant as
specified in its charter)
CONNECTICUT 06-0640743
------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
83 Gerber Road West, South Windsor, Connecticut 06074
- ------------------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area (860) 644-1551
code ---------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes / X /. No / /.
At January 31, 1999, 22,662,326 shares of common stock of the
Registrant were outstanding.
<PAGE 1>
GERBER SCIENTIFIC, INC.
AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended January 31, 1999
PAGE
Part I - Financial Information
Item 1. Consolidated Financial Statements:
Statement of Earnings for the three months
ended January 31, 1999 and 1998 2
Statement of Earnings for the nine months
ended January 31, 1999 and 1998 3
Balance Sheet at January 31, 1999 and
April 30, 1998 4-5
Statement of Cash Flows for the nine months
ended January 31, 1999 and 1998 6
Notes to Financial Statements 7
Independent Accountants' Report 13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 20
Signature 21
Exhibit Index 22
<PAGE 2>
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
- ------------------------------------------------------------
In thousands
(except per share amounts)
- ------------------------------------------------------------
Three Months Ended January 31, 1999 1998
- ------------------------------------------------------------
Revenue:
Product sales $128,852 $92,559
Service 11,947 12,277
------- -------
140,799 104,836
------- -------
Costs and Expenses:
Cost of product sales 74,159 48,743
Cost of service 7,250 7,301
Selling, general and administrative 38,837 32,219
Research and development expenses 7,682 7,746
------- -------
127,928 96,009
------- -------
Operating income 12,871 8,827
Other income 478 378
Interest expense (2,604) (90)
------- -------
Earnings before income taxes 10,745 9,115
Provision for income taxes 3,700 2,900
------- -------
Net earnings $ 7,045 $ 6,215
======= =======
Per share of common stock:
Basic $ .31 $ .28
Diluted $ .31 $ .27
Dividends $ .08 $ .08
Average shares outstanding:
Basic 22,700 22,586
Diluted 23,058 23,025
See Accompanying Notes
<PAGE 3>
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
- ------------------------------------------------------------
In thousands
(except per share amounts)
- ------------------------------------------------------------
Nine Months Ended January 31, 1999 1998
- ------------------------------------------------------------
Revenue:
Product sales $409,010 $274,703
Service 36,038 35,486
------- -------
445,048 310,189
------- -------
Costs and Expenses:
Cost of product sales 239,296 148,623
Cost of service 21,270 22,681
Selling, general and administrative 120,186 94,926
Research and development expenses 22,955 23,099
------- -------
403,707 289,329
------- -------
Operating income 41,341 20,860
Other income 1,675 3,388
Interest expense (9,114) (266)
------- -------
Earnings before income taxes 33,902 23,982
Provision for income taxes 12,400 7,700
------- -------
Net earnings $ 21,502 $ 16,282
======= =======
Per share of common stock:
Basic $ .95 $ .71
Diluted $ .93 $ .70
Dividends $ .24 $ .24
Average shares outstanding:
Basic 22,721 22,863
Diluted 23,213 23,354
See Accompanying Notes
<PAGE 4-5>
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
In thousands
--------------------------------------------------------------
January 31, April 30,
1999 1998
--------------------------------------------------------------
Assets
Current Assets:
Cash and short-term cash investments $ 16,884 $ 27,007
Accounts receivable 109,395 79,114
Inventories 80,663 61,111
Prepaid expenses 11,440 18,227
-------- --------
218,382 185,459
-------- --------
Property, Plant and Equipment 149,407 117,334
Less accumulated depreciation 63,179 57,335
-------- --------
86,228 59,999
-------- --------
Intangible Assets 240,560 99,463
Less accumulated amortization 15,615 8,208
-------- --------
224,945 91,255
-------- --------
Other Assets 1,852 2,054
-------- --------
$531,407 $338,767
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable $ -- $ 326
Current maturities of long-term debt 193 193
Accounts payable 41,008 30,462
Accrued compensation and benefits 17,785 17,253
Other accrued liabilities 34,467 30,347
Deferred revenue 7,265 6,619
Advances on sales contracts 5,837 5,498
-------- --------
106,555 90,698
-------- --------
Noncurrent Liabilities:
Deferred income taxes 10,036 10,202
Long-term debt 170,535 6,953
-------- --------
180,571 17,155
-------- --------
Contingencies and Commitments
Shareholders' Equity:
Preferred stock, no par value;
authorized 10,000,000 shares; no
shares issued -- --
Common stock, $1.00 par value;
authorized 65,000,000 shares; issued
23,462,326 and 23,436,523 shares 23,462 23,437
Paid-in capital 40,344 37,779
Retained earnings 199,554 187,981
Accumulated other comprehensive loss
(foreign currency translation
adjustment) (2,157) (1,833)
Unamortized value of restricted stock
grants (472) --
Treasury stock, at cost (800,000
shares) (16,450) (16,450)
-------- --------
244,281 230,914
-------- --------
$531,407 $338,767
======== ========
See Accompanying Notes
<PAGE 6>
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
In thousands
- ---------------------------------------------------------------------
Nine Months Ended January 31, 1999 1998
- ---------------------------------------------------------------------
CASH PROVIDED BY (USED FOR):
Operating Activities
Net earnings $21,502 $ 16,282
Adjustments to reconcile net earnings to
cash provided by operating activities:
Depreciation and amortization 17,809 9,655
Deferred income taxes (382) 494
Other non-cash items 178 --
Changes in operating accounts, net of
effects of business acquisitions:
Receivables (6,963) (778)
Inventories 7,322 (8,299)
Prepaid expenses 9,060 291
Accounts payable and accrued expenses (10,901) 16,150
-------- --------
Provided by Operating Activities 37,625 33,795
-------- --------
Financing Activities
Purchase of common stock (4,940) (16,450)
Additions of long-term debt 186,686 --
Repayments of long-term debt (24,445) (143)
Net short-term financing (11,963) --
Debt issue costs (800) --
Exercise of stock options 2,602 993
Dividends on common stock (5,458) (5,477)
-------- --------
Provided by (Used for) Financing Activities 141,682 (21,077)
-------- --------
Investing Activities
Maturities of long-term debt securities -- 19,378
Additions to property, plant and equipment (14,369) (13,109)
Business acquisitions (175,952) --
Intangible and other assets (222) 52
Other, net 1,113 (2,799)
-------- --------
Provided by (Used for) Investing Activities (189,430) 3,522
-------- --------
Increase (Decrease) in Cash and Short-Term
Cash Investments (10,123) 16,240
Cash and Short-Term Cash Investments,
Beginning of Period 27,007 9,503
-------- --------
Cash and Short-Term Cash Investments, $ 16,884 $ 25,743
End of Period ======== ========
See Accompanying Notes
<PAGE 7>
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The consolidated balance sheet at January 31, 1999, the
consolidated statements of earnings for the three- and nine-month
periods ended January 31, 1999 and 1998, and the consolidated
statement of cash flows for the nine-month periods ended January
31, 1999 and 1998 are unaudited but, in the opinion of the
Company, include all adjustments, consisting only of normal
recurring accruals, necessary for a fair statement of the results
for the interim periods. The results of operations for the nine-
month period ended January 31, 1999 are not necessarily
indicative of the results to be expected for the full fiscal
year.
NOTE 2
The classification of inventories was as follows (in thousands):
January 31, 1999 April 30, 1998
---------------- ---------------
Raw materials and
purchased parts $47,675 $37,329
Work in process 32,988 23,782
------- -------
$80,663 $61,111
======= =======
NOTE 3
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share," effective for financial statements for both
annual and interim periods ending after December 15, 1997. SFAS
No. 128 replaced the previously reported primary and fully
diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per
share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is similar to
the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented,
and where necessary restated, to conform to the SFAS No. 128
requirements. This restatement had an immaterial impact on the
prior period earnings per share amounts under the previous
method.
<PAGE 8>
The following table sets forth the computation of basic and
diluted earnings per share:
Three Months Nine Months
Ended January 31, Ended January 31,
----------------- -----------------
1999 1998 1999 1998
------- ------- ------- -------
Numerator:
Net income $ 7,045,000 $ 6,215,000 $21,502,000 $16,282,000
========= ========= ========== ==========
Denominators:
Denominators for
basic earnings per
share--weighted-
average shares
outstanding 22,699,682 22,585,845 22,720,640 22,863,194
Effect of dilutive
securities:
Employee stock
options 358,573 438,662 492,430 490,619
---------- ---------- ---------- ----------
Denominator for
diluted earnings
per share--
adjusted
weighted-average
shares
outstanding 23,058,255 23,024,507 23,213,070 23,353,813
========== ========== ========== ==========
Basic earnings per
share $ .31 $ .28 $ .95 $ .71
========== ========== ========== ==========
Diluted earnings per
share $ .31 $ .27 $ .93 $ .70
========== ========== ========== ==========
NOTE 4
Beginning in the first quarter of FY 1999, the Company adopted
SFAS No. 130, "Reporting Comprehensive Income," which established
standards for reporting and displaying comprehensive income and
its components in an annual financial statement with the same
prominence as other financial statements. This statement also
requires that an entity report a total for comprehensive income
in condensed financial statements of interim periods.
The Company's total comprehensive income was as follows (in
thousands):
<PAGE 9>
Three Months Ended Nine Months Ended
January 31, January 31,
1999 1998 1999 1998
------- ------- ------- -------
Net income $7,045 $6,215 $21,502 $16,282
Other comprehensive
income (loss):
Foreign currency
translation
adjustments 1,511 (1,675) (324) (2,799)
------ ------ ------ ------
Total comprehensive
income $8,556 $4,540 $21,178 $13,483
===== ===== ====== ======
NOTE 5
In June of 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which must be adopted by May 1, 2000. The Company
is evaluating the impact of the new requirement. At this time,
management does not expect implementation will result in a
material impact on the Company's financial position, results of
operations, or cash flows.
Effective May 1, 1998, the Company adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related
Information." This standard changes the criteria used to
determine the segments for which SEC registrants must report
information. As permitted by the standard, the Company will
provide the required disclosures for its segments in its Form 10-
K for the year ending April 30, 1999.
Effective May 1, 1998, the Company adopted SFAS No. 132,
"Employers' Disclosures about Pensions and Other Post Retirement
Benefits." This statement requires additional disclosure on
changes in the benefit obligations and fair values of plan assets
during the year. As permitted by the standard, the Company will
provide the required disclosures for its benefit plans in its
Form 10-K for the year ending April 30, 1999.
NOTE 6
Included in other income for the nine-month period ended
January 31, 1998 was a gain resulting from the final settlement
of the Company's UK patent litigation with Lectra Systemes, S.A.
of France, which added $1,563,000 to earnings before income taxes
and approximately $1,000,000, or $.04 per diluted share, to net
income.
<PAGE 10>
NOTE 7
On February 27, 1998, Gerber Optical, Inc., a wholly owned
subsidiary of the Company, acquired the outstanding stock of
Coburn Optical Industries, Inc. (Coburn) of Muskogee, Oklahoma,
and subsequently merged with Coburn. The company was renamed
Gerber Coburn Optical, Inc. (GC). The purchase price, including
the costs of acquisition and the repayment of Coburn's
outstanding debt, was approximately $63,000,000. Coburn was a
leading manufacturer and international distributor of a broad
range of ophthalmic lens processing equipment and related
supplies used in the production of eyeglass lenses. GC has
continued to develop, manufacture, market, and support the Coburn
product lines.
On May 5, 1998, the Company announced the successful completion
of its cash tender offer for the outstanding capital stock of
Spandex PLC (Spandex) of Bristol, UK. Spandex was the largest
distributor of equipment and related materials to the sign making
industry in Europe and North America. The offer valued Spandex at
approximately $173,000,000. In addition, Spandex had
approximately $11,600,000 in outstanding debt that was assumed.
Each acquisition was accounted for as a purchase and the results
of operations of the acquired companies have been included in the
Company's consolidated statements of earnings from the respective
dates of acquisition. The acquisition costs were allocated to
the assets and liabilities acquired based upon their fair values.
The excess of acquisition costs over the fair values of the net
assets acquired was included in intangible assets as goodwill and
is being amortized on a straight-line basis over 25 years from
the date of acquisition.
The following pro forma combined results of operations for the
three- and nine-month periods ended January 31, 1998 have been
prepared as if the Coburn and Spandex acquisitions occurred at
May 1, 1997 and give effect to estimated purchase accounting and
other adjustments resulting from the acquisitions. The pro forma
information is presented on the assumption that the acquisition
costs would have been the same at May 1, 1997. The pro forma
financial information is not necessarily indicative of the
results of operations that would have been achieved had the
acquisitions of Coburn and Spandex actually been effective as of
May 1, 1997 or of future results of the combined companies.
<PAGE 11>
(Unaudited) (Unaudited)
--------------- -------------
Three Months Ended Nine Months Ended
January 31, January 31,
------------------ -------------------
In thousands
(except per share
amounts) 1998 1998
- -------------------- ------------------ -------------------
Sales $159,864 $478,885
Net earnings 6,469 17,355
Net earnings per
common share-basic .29 .76
Net earnings per
common share-diluted .28 .74
<PAGE 12>
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
With respect to the unaudited consolidated financial statements
of Gerber Scientific, Inc. and subsidiaries at January 31, 1999
and for the three- and nine-month periods ended January 31, 1999
and 1998, KPMG LLP has made a review (based on procedures adopted
by the American Institute of Certified Public Accountants) and
not an audit, as set forth in their separate report dated
February 17, 1999 appearing on page 13. That report does not
express an opinion on the interim unaudited consolidated
financial information. KPMG LLP has not carried out any
significant or additional audit tests beyond those which would
have been necessary if their report had not been included.
Accordingly, such report is not a "report" or "part of the
Registration Statement" within the meaning of Sections 7 and 11
of the Securities Act of 1933 and the liability provisions of
Section 11 of such Act do not apply.
<PAGE 13>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Gerber Scientific, Inc.
We have made a review of the consolidated statements of earnings
of Gerber Scientific, Inc. and subsidiaries for the three- and
nine-month periods ended January 31, 1999 and 1998, the
consolidated statement of cash flows for the nine-month periods
ended January 31, 1999 and 1998, and the consolidated balance
sheet as of January 31, 1999 in accordance with standards
established by the American Institute of Certified Public
Accountants. We have previously audited, in accordance with
generally accepted auditing standards, and expressed our
unqualified opinion dated May 21, 1998 on the consolidated
financial statements for the year ended April 30, 1998 (not
presented herein). The aforementioned financial statements are
the responsibility of the Company's management.
A review of interim financial information consists principally of
applying analytical review procedures to financial data and
making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
examination in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
consolidated statements of earnings for the three- and nine-month
periods ended January 31, 1999 and 1998, the consolidated
statement of cash flows for the nine-month periods ended January
31, 1999 and 1998, or the consolidated balance sheet as of
January 31, 1999 for them to be in conformity with generally
accepted accounting principles. Also, in our opinion the
information in the accompanying consolidated balance sheet as of
April 30, 1998 is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
/ s / KPMG LLP
Hartford, Connecticut
February 17, 1999
<PAGE 14>
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In May 1998, the Company acquired the outstanding stock of
Spandex PLC (Spandex). Accordingly, Spandex was included in the
Company's consolidated balance sheet at January 31, 1999, in the
Company's results from operations for the three- and nine-month
periods ended January 31, 1999, and in the Company's cash flows
for the nine-month period ended January 31, 1999.
In February 1998, the Company acquired the outstanding stock of
Coburn Optical Industries, Inc. (Coburn). Coburn was included in
the Company's consolidated balance sheet at April 30, 1998, in
the Company's results from operations for the three- and nine-
month periods ended January 31, 1999, and in the Company's cash
flows for the nine-month period ended January 31, 1999.
In March 1998, the Company sold its Gerber Systems unit, which
comprised the Company's imaging and inspection systems product
class. As a result, the Company's April 30, 1998 consolidated
balance sheet and the fiscal year 1999 consolidated financial
statements do not include any Gerber Systems activity.
FINANCIAL CONDITION
The Company's ratio of current assets to current liabilities was
2.0 to 1 at January 31, 1999 and April 30, 1998. Net working
capital at January 31, 1999 was $111.8 million, an increase of
$17.1 million from the beginning of the current fiscal year and
largely attributable to the Spandex acquisition. The Company's
cash and investments totaled $16.9 million at January 31, 1999
compared with $27 million at the end of the prior fiscal year.
Operating activities provided $37.6 million in cash for the nine-
month period ended January 31, 1999 compared with $33.8 million
provided by operating activities for the same period last year.
Cash in this year's first nine months was generated by earnings
and the non-cash charges for depreciation and amortization, lower
inventory balances, and a tax refund resulting from the sale of
the Company's imaging and inspection systems product class. Cash
generated from operations was somewhat offset by higher accounts
receivable balances caused by the higher volume of business and
lower accounts payable and accrued liabilities balances due
largely to the timing of vendor payments.
The principal non-operating use of cash in the nine months ended
January 31, 1999 was for the purchase of Spandex for $187.6
million, which included the repayment of its debt. The financing
for the acquisition was provided primarily by a $235 million
revolving multi-currency credit facility the Company entered into
<PAGE 15>
with a group of major U.S., European, and Asian commercial banks.
Other non-operating uses of cash in the nine months ended January
31, 1999 were repayments of long-term debt of $24.4 million,
additions to property, plant, and equipment of $14.4 million, and
payment of dividends of $5.5 million. The Company anticipates
that capital expenditures for the current fiscal year will be in
the range of $20-$22 million and expects to fund these with cash
on hand and cash from operations.
Another significant non-operating use of cash in the nine months
ended January 31, 1999 was for the Company's common stock
repurchase program. In November 1998, the Board of Directors
authorized a new stock repurchase program for up to 3,000,000
shares, or approximately 13 percent, of the Company's then-issued
and outstanding common stock. As of January 31, 1999, the
Company had repurchased 239,100 shares, of which 107,900 shares
were under the new authorization and 131,200 were under an
earlier authorization. The cost of these shares was $5.1 million
(of which $4.9 million was paid as of January 31, 1999), or an
average cost of $21.35 per share. Under the authorization,
management of the Company has discretion to purchase stock as
market conditions warrant.
The Company's total debt at January 31, 1999 was $170.7 million,
which was up substantially from the April 30, 1998 balance of
$7.5 million and caused by the acquisition of Spandex. Net debt
(total debt less cash and investments) was $153.8 million at
January 31, 1999 versus a net cash position of $19.5 million at
April 30, 1998. The ratio of net debt to total capital was 38.6
percent at January 31, 1999.
RESULTS OF OPERATIONS
Combined sales and service revenue for the three- and nine-month
periods ended January 31, 1999 increased $36 million (34.3
percent) and $134.9 million (43.5 percent), respectively, from
the same periods last year. The increase reflected higher
product sales, predominantly from the acquisitions of Spandex
(increases of $35.6 million and $117.4 million in sales for three-
and nine-month periods ended January 31, 1999, net of
intercompany eliminations, respectively) and Coburn (increases of
$14.3 million and $48 million in sales for the three- and nine-
month periods ended January 31, 1999, respectively). The sale of
the Company's imaging and inspection system product class in last
year's fourth quarter was an offsetting factor ($9.6 million and
$32.4 million in sales in the three- and nine-month periods ended
January 31, 1998).
Adjusting for the business acquisitions and divestiture, combined
sales and service revenue was lower in this year's third quarter
and higher in this year's first nine months from the comparable
periods last year. The decrease in the quarter was caused
predominantly by lower sales of the Company's automated cutting
equipment in certain international markets (particularly Turkey,
<PAGE 16>
Southeast Asia, and Brazil). The year-to-date revenue growth
came predominantly from higher sales of the Company's optical
lens manufacturing systems.
Recently, the Company also experienced weakness in its optical
lens manufacturing systems business, which was caused by softness
in the prescription optical lens business, consolidation in both
the retail and wholesale segments of the industry, and, to a
lesser extent, the economic softness in Brazil. The Company's
management took immediate action to resize its optical lens
manufacturing business to account for the lower volume, which
included reducing employee headcount and other initiatives. These
actions are intended to eliminate approximately $8 million from
costs and expenses next fiscal year.
Service revenue increased $1.5 million (14.6 percent) and $5.6
million (18.3 percent) from the prior year's three- and nine-
month periods ended January 31, 1998, respectively, after
adjusting for the elimination of the service revenue from the
imaging and inspection systems products. These increases were
caused by growth in the Company's service operations and by the
acquisitions of Spandex and Coburn.
The consolidated gross profit margin in this year's first nine
months was 41.5 percent, which was lower than the prior year
margin of 44.8 percent. Gross profit margins on product sales
were lower, while service margins were higher. The decrease in
product gross profit margins was related primarily to the
inclusion of Spandex in the Company's financial statements in
fiscal year 1999. As a distributor, Spandex historically had
gross profit margins substantially lower than the Company's.
However, Spandex's historical operating margins were
incrementally higher than the Company's recent operating margins,
owing in part to the absence of spending on research and
development. Also reducing the comparative product gross profit
margins in this year's third quarter and first nine months was
the inclusion of Coburn. A larger percentage of Coburn's product
mix comes from sales of aftermarket products (e.g., consumables),
which have gross profit margins lower than equipment sales.
Service gross profit margins were lower in this year's third
quarter and higher in this year's first nine months. The year-to-
date increase was caused primarily by the elimination of the low
service margins of the Company's imaging and inspection systems
product class, which was included in last year's results. The
third quarter comparison was affected by the heavier utilization
of service personnel in the prior year to assist in new
installation of automated cutting systems.
Selling, general, and administrative expenses in this year's
third quarter and first nine months rose by $6.6 million and
$25.3 million from last year but declined as a percentage of
revenue to 27.6 percent and 27 percent this year from 30.7
percent and 30.6 percent last year. The Spandex and Coburn
<PAGE 17>
acquisitions were the principal reasons for the dollar increase,
while the sale of the imaging and inspection system product class
was an offsetting factor. The amortization of the Spandex and
Coburn acquisition goodwill ($1.9 million and $5.7 million in
this year's third quarter and first nine months, respectively)
was also a factor contributing to the overall dollar increase.
The Company continued to commit significant resources to research
and the development of new products. However, the ratio of R&D
to revenue declined significantly this year. R&D expense of $7.7
million in this year's third quarter and $23 million in the first
nine months was roughly the same as the prior year. The ratio of
R&D to revenue declined to 5.5 percent and 5.2 percent in the
third quarter and first nine months this year, respectively, from
7.4 percent in the comparable periods last year. The lower
current year ratio was caused by the higher revenue base from the
Spandex acquisition without commensurate R&D expense as Spandex
is predominantly a distribution company. In addition to the
incremental expenses of Coburn, R&D dollar increases for the
three- and nine-month periods ended January 31, 1999 were also
related to the development of new sign making plotters and output
devices ($0.1 million and $0.9 million, respectively) and
automated cutting systems ($0.4 million and $1.2 million,
respectively). These increases were offset by the elimination of
the Company's imaging and inspection system product class.
Management anticipates that this lower ratio of R&D expense to
revenue will continue for the balance of the current year.
Compared to the prior year, other income in this year's third
quarter was slightly higher, while lower for the nine months
ended January 31, 1999. The year-to-year decrease related
primarily to a prior year gain of approximately $1.6 million
($.04 per diluted share) from the final settlement of outstanding
patent litigation.
Interest expense increased $2.5 million and $8.8 million in the
three- and nine-month periods ended January 31, 1999 compared
with the prior year periods. These increases were caused by
significantly higher debt balances to finance the acquisition of
Spandex. Most of these borrowings were against a $235 million
revolving multi-currency credit facility. The interest rate on
these borrowings is variable and is based on the London Interbank
Offered Rate (LIBOR) for the relevant currency and term, plus a
margin based on the relationship of the Company's consolidated
total debt to EBITDA (earnings before interest, taxes,
depreciation, and amortization).
The provision rate for income taxes was 36.6 percent for the nine
months ended January 31, 1999 compared with 32.1 percent in the
comparable prior year period. The higher tax rate this year was
primarily the result of the goodwill amortization related to the
acquisitions of Spandex and Coburn, which is not deductible for
Federal and state income tax purposes. The year-to-year increase
in the provision rate also reflects the higher marginal income
<PAGE 18>
tax rates associated with higher levels of pre-tax earnings in
the current year and the liquidation of the Company's investments
in tax-exempt municipal securities.
Net earnings increased in this year's third quarter to $7 million
or $.31 diluted earnings per share from $6.2 million or $.27
diluted earnings per share in last year's third quarter. For the
first nine months, net earnings this year increased to $21.5
million or $.93 per diluted share compared with $16.3 million or
$.70 per diluted share last year. Earnings per share in last
year's first quarter and nine months included $.04 per diluted
share from the patent litigation settlement.
YEAR 2000
The Company recognizes the business risks posed by the Year 2000
computer date issue. The Company continues to make this issue a
top business priority and is actively working to control the
associated risks. Each Gerber Scientific business unit has
project teams to address the impact of the Year 2000 on their
products and facilities, internal systems, key suppliers, and
customers. These project teams are responsible for Year 2000
awareness, assessment, remediation, testing, contingency
planning, and reporting to business unit senior management. In
addition, the Company has a Year 2000 Corporate Oversight
Committee that reports to Executive Management and to the Board
of Directors.
The Company has completed its Year 2000 awareness and assessment
phases. The Company is in the process of carrying out the
remediation and testing phases, which are expected to be
substantially completed by May 1, 1999.
Testing of manufactured products, including internally developed
software, has been completed. The results of this testing are
being communicated to customers through the Company's web sites.
Some of the Company's internal systems are third party software
packages which were implemented without modification. In these
instances, only software upgrades were required for Year 2000
remediation, which are now being tested. Additionally, the
Company is implementing an enterprise resource planning system
across each of its businesses. Although this system
implementation is a direct result of a key management initiative
to install improved business processes, it also enables the
remediation of certain legacy systems in one business that are
not Year 2000 compliant.
The Company is also taking steps to understand the Year 2000
risks of its significant suppliers and customers. As part of
that process, the Company sent questionnaires to third parties
and is analyzing the responses. Further analysis, including site
visits, will be conducted as necessary. The Company is working
directly with its key suppliers and customers to avoid any
<PAGE 19>
business interruptions. As issues arise in this analysis,
contingency plans are being developed. Despite these efforts,
the Company can provide no assurance that supplier and customer
Year 2000 plans will be successfully completed in a timely
manner.
Year 2000 expenditures, which are not expected to be material,
are planned to be incurred by April 30, 1999 and funded through
operating cash flows. The schedule for completion and the
estimated associated costs are based on management's estimates,
which include assumptions of future events. There can be no
assurance that the Company and its suppliers and customers will
be fully Year 2000 compliant by January 1, 2000. The Company,
therefore, could be adversely impacted by such things as loss of
revenue, production delays, lack of third party readiness, and
other business interruptions. Accordingly, the Company is
developing contingency plans to address potential issues, which
include identification of alternate suppliers. The ultimate
effects on the Company or its suppliers or customers of not being
fully Year 2000 compliant is not reasonably estimable. However,
the Company believes its Year 2000 remediation efforts, together
with the diverse nature of its businesses, help reduce the
potential impact of noncompliance to levels that will not have a
material adverse impact on its financial position, results of
operations, or cash flows.
EURO CONVERSION
On January 1, 1999, certain member countries of the European
Union established fixed conversion rates between their existing
currencies and the European Union's common currency (Euro). The
transition period for the introduction of the Euro will be
between January 1, 1999 and January 2, 2002. The Company has
begun to identify and ensure that all Euro conversion compliance
issues are addressed. At this time, the Company cannot predict
the impact of the Euro conversion because of numerous associated
uncertainties, such as the effect on the Company of noncompliance
by third parties.
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements that describe the
Company's business prospects. Readers should keep in mind
factors that could have an adverse impact on those prospects.
These include political, economic, or other conditions, such as
recessionary or expansive trends, inflation rates, currency
exchange rates, taxes, regulations and laws affecting the
business, as well as product competition, pricing, the degree of
acceptance of new products in the marketplace, and the difficulty
of forecasting sales at various times in various markets.
<PAGE 20>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3.1) Restated Certificate of Incorporation of the Company.
(3.2) Restated By-Laws of the Company.
(15) Letter regarding unaudited interim financial
information.
(27) Financial data schedule.
(b) Reports on Form 8-K
No Form 8-K was filed during the quarter for which this
report is filed.
<PAGE 21>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GERBER SCIENTIFIC, INC.
------------------------
(Registrant)
Date: March 1, 1999 By: /s/ Gary K. Bennett
------------------ --------------------------------
Gary K. Bennett
Senior Vice President, Finance
and Principal Financial Officer
<PAGE 22>
EXHIBIT INDEX
Exhibit Index
Number Exhibit Page
- ------------- ------- ----
3.1 Restated Certificate of
Incorporation of the Company.*
3.2 Restated By-Laws of the Company.*
15 Letter Regarding Unaudited Interim
Financial Information.*
27 Financial Data Schedule.*
*Filed herewith.
EXHIBIT NO. 3.1
RESTATED CERTIFICATE OF INCORPORATION
(with amendment approved by shareholders on 9/12/97)
FIRST: That the name of the corporation is
Gerber Scientific, Inc.
SECOND: That said Corporation is to be located in the Town
of South Windsor, in the State of Connecticut.
THIRD: That the nature of the business to be transacted
and the purposes to be promoted or carried out by said
Corporation are as follows:
1. To manufacture, fabricate, assemble, sell, distribute,
license, export, and import and deal in all kinds and forms of
scientific and drawing instruments and appliances, and parts,
goods, wares, merchandise, and personal property of every nature,
kind and description whatsoever.
2. To engage in any mercantile, manufacturing or trading
business of any kind or character whatsoever throughout the
world, and to do all things incidental to any such business.
3. To adopt, purchase or otherwise acquire and own,
control and operate under letters patent issued by the United
States or by the government of any other country whatsoever
securing any invention or improvement or any license or rights
under any such letters patent which may be deemed necessary,
convenient, expedient or useful in the prosecution of its
business and to sell such patents or patent rights, or to grant
licenses or rights thereunder to others and to sue for any
infringement upon the right of said Corporation.
4. To apply for, obtain, register, purchase, lease or
otherwise acquire and to hold, use, pledge, lease, sell, assign
or otherwise dispose of formulas, secret processes, distinctive
marks, improvements, processes, trade names, trade marks,
copyrights, patents, licenses, concessions and the like, whether
used in connection with or secured under Letters Patent of or
issued by any country or authority; and to issue, exercise,
develop and grant licenses in respect thereof or otherwise turn
the same to account.
5. To purchase or otherwise acquire, hold, sell, pledge,
transfer or otherwise dispose of and to reissue or cancel the
share of its own capital stock or any securities or other
obligations of the Corporation in the manner and to the extent
now or hereafter permitted by the laws of the jurisdiction of
incorporation of this Corporation.
6. To acquire, purchase, hold, operate, develop, lease,
mortgage, pledge, exchange, sell, transfer, or otherwise invest,
trade or deal in, any manner permitted by law, real and personal
property of every kind and description or any interest therein.
7. To borrow or raise monies for any of the purposes of
the Corporation and from time to time, without limit as to
amount, to draw, make, accept, endorse, guarantee, execute and
issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures and other negotiable or non-negotiable
instruments and evidences of indebtedness, and to secure the
payment thereof, and of the interest thereon by mortgage on or
pledge, conveyance, or assignment in trust of, the whole or any
part of the assets of the Corporation, real or personal or mixed,
including contract rights, whether at the time owned or
thereafter acquired, and to sell, pledge, or otherwise dispose of
such securities or other obligations of the Corporation for its
corporate purposes.
8. The foregoing enumerated powers shall not be in
limitation of the rights, powers, and privileges of this
Corporation, it being the intention of the Corporation to
exercise all the rights, powers, and privileges granted to
corporations under the General Laws of the State of Connecticut,
which powers and privileges are not expressly prohibited thereby,
and to conduct in any manner whatsoever any business or
businesses necessary, incidental or connected with the foregoing
purposes.
9. The foregoing clauses shall be construed as powers as
well as objects and purposes, and the matters expressed in each
clause shall, unless herein otherwise expressly provided, be in
no wise limited by reference to or inference from the terms of
any other clause, but shall be regarded as independent objects,
purposes and powers and the enumeration of specific objects,
purposes and powers shall not be construed to limit or restrict
in any manner the meaning of general terms or the general powers
of the corporation, nor shall the expression of one thing be
deemed to exclude another not expressed, although it be of like
nature.
10. To do everything necessary, proper, advisable, or
convenient for the accomplishment of any of the purposes or the
attainment of any of the objects of the furtherance of any of the
powers herein set forth and to do every other act and thing
incidental thereto or connected therewith, provided the same to
be not forbidden by the laws of the jurisdiction of incorporation
of this Corporation.
FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is seventy-
five million (75,000,000), of which sixty-five million
(65,000,000) shall be Common Stock, par value one dollar ($1.00)
per share, and ten million (10,000,000) shall be Preferred Stock,
without par value.
Except as otherwise provided in this Certificate of
Incorporation, the Board of Directors shall have authority to
authorize the issuance, from time to time, without any vote or
other action by the shareholders, of any or all shares of stock
of the Corporation of any class or series at any time authorized,
and any securities convertible into or exchangeable for any such
shares, and any options, rights, or warrants to purchase or
acquire any such shares, in each case to such persons and on such
terms (including as a dividend or distribution on or with respect
to, or in connection with a split or combination of, the
outstanding shares of stock of the same or any other class or
series) as the Board of Directors from time to time in its
discretion lawfully may determine. Shares so issued shall be
fully paid stock, and the holders of such stock shall not be
liable to any further call or assessments thereon.
A description of the different classes of stock of the
Corporation and the manner of determining the designations and
number of series of Preferred Stock and the terms, limitations
and relative voting, dividend, liquidation and other rights and
preferences of each such series are as follows:
PREFERRED STOCK
The Board of Directors is hereby empowered to cause the
Preferred Stock to be issued from time to time for such
consideration as it may from time to time fix, and to cause such
Preferred Stock to be issued in one or more series, with such
voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue of such stock
adopted by the Board of Directors. Each such series of Preferred
Stock shall be distinctly designated. Except in respect of the
particulars fixed by the Board of Directors for each series as
permitted hereby, all shares of Preferred Stock shall be of equal
rank and shall be identical. All shares of any one series of
Preferred Stock so designated by the Board of Directors shall be
alike in every particular, except that shares of any one series
issued at different times may differ as to the dates from which
dividends thereon may be cumulative. The voting rights, if any,
of each such series and the preferences and relative,
participating, optional and other special rights of each such
series and the qualifications, limitations and restrictions
thereof, if any, may differ from those of any and all other
series at any time outstanding; and the Board of Directors of the
Corporation is hereby expressly granted authority to fix, by
resolutions duly adopted prior to the issuance of any shares of a
particular series of Preferred stock so designated by the Board
of Directors, the voting powers of such series, if any, and the
designations, preferences and relative, participating, optional
and other special rights and the qualifications, limitations and
restrictions thereof, if any, for such series, including without
limitation the following:
1. The distinctive designation of and the number of shares
of Preferred Stock which shall constitute such series; provided
that such number may be increased (except where otherwise
provided by the Board of Directors and in any case not above the
number of authorized but then unissued shares thereof) or
decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the Board of
Directors;
2. The rate and time at which, and the terms and
conditions upon which, dividends, if any, on Preferred Stock of
such series shall be paid, the extent of the preference or
relation, if any, of such dividends to the dividends payable on
any other series of Preferred Stock or any other class of stock
of the Corporation and whether such dividends shall be cumulative
or noncumulative;
3. The right, if any, of the holders of Preferred Stock of
such series to convert the same into, or exchange the same for,
shares of any other class of stock or any series of any class of
stock of the Corporation and the terms and conditions of such
conversion or exchange;
4. Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and the
time or times at which, and the terms and conditions upon which,
Preferred Stock of such series may be redeemed;
5. The rights, if any, of the holders of Preferred Stock
of such series upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation.
6. The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
7. The voting powers if any, of the holders of such series
of Preferred Stock which may, without limiting the generality of
the foregoing, include the right, voting as a series by itself or
together with any other series of the Preferred Stock as a class,
(i) to vote more or less than one vote per share on any or all
matters voted upon by the shareholders, and (ii) to elect one or
more directors of the Corporation if there has been a default in
the payment of dividends on any one or more series of the
Preferred Stock or under such other circumstances and upon such
other conditions as the Board of Directors may fix.
COMMON STOCK
The Common Stock shall be subject to the prior rights of the
holders of the Preferred Stock as set forth above and in the
resolutions of the Board of Directors pursuant to which any such
Preferred Stock may be issued.
At every meeting of the shareholders, every holder of Common
Stock shall be entitled to one vote in person or by proxy for
each share of Common Stock standing in his or her name on the
books of the Corporation.
Whenever there shall have been paid, or declared and set
aside for payment, to the holders of the outstanding shares of
Preferred Stock and to the holders of outstanding shares of any
other class of stock having preference over the Common Stock as
to the payment of dividends, the full amount of dividends and of
sinking fund or purchase fund or other retirement payments, if
any, to which such holders are respectively entitled in
preference to the Common Stock, then dividends may be paid on the
Common Stock and on any class or series of stock entitled to
participate therewith as to dividends, out of any assets legally
available for the payment of dividends, but only when and as
declared by the Board of Directors.
In the event of any liquidation, dissolution or winding up
of the Corporation, after there shall have been paid to or set
aside for the holders of the shares of Preferred Stock and any
other class having preference over the Common Stock in the event
of liquidation, dissolution or winding up the full preferential
amounts to which they are respectively entitled, the holders of
the Common Stock, and of any class or series of stock entitled to
participate therewith, in whole or part, as to distributions of
assets, shall be entitled to receive the remaining assets of the
Corporation available for distribution, in cash or in kind.
Each share of Common Stock shall have the same relative
rights as and be identical in all respects with all the other
shares of Common Stock.
FIFTH: That the amount of capital stock with which this
Corporation shall commence business is Six Thousand Dollars
($6,000).
SIXTH: That the duration of said Corporation is unlimited.
SEVENTH: That no stockholder of said Corporation shall have
any preemptive or other right of subscription to any shares of
any class of stock of said Corporation, issued or to be issued or
sold, whether now or hereafter authorized, or to any securities
convertible into stock of said Corporation of any class, or to
receive any such shares or securities by way of dividend, other
than such right or rights, if any, as the Board of Directors may
determine, but any shares of stock or convertible securities
which the Board of Directors may determine to offer for
subscription to stockholders may, at the discretion of the Board
of Directors, be offered in such proportions and to the holders
of any one or more or all classes of stock of said Corporation
then outstanding, and at such price or prices as the Board of
Directors may determine.
EIGHTH: The following provisions are inserted for the
regulation and management of the affairs of the Corporation, and
it is expressly provided that the same are intended to be in
furtherance and not in limitation or exclusion of the powers
conferred by statute:
1. Amendments
The Corporation may amend, alter, change or repeal any
provisions contained in this Certificate of Incorporation or in
any amendment thereto, in the manner now or hereafter prescribed
by law. The Board of Directors shall have the power, concurrent
with the power of the shareholders, to make, alter, amend and
repeal the By-Laws of the Corporation. Any By-Laws made by the
directors under the powers conferred hereby may be altered,
amended or repealed by the directors or by the shareholders.
Notwithstanding the foregoing and anything contained in this
Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least eighty percent (80%) of the
outstanding shares of capital stock of the Corporation entitled
to vote thereon, voting together as a single class, shall be
required to alter, amend or repeal, or adopt any provision
inconsistent with, Article III, Sections 1, 2, 3, 4 and 5 of the
By-Laws or this Article EIGHTH of this CERTIFICATE OF
INCORPORATION.
2. Board of Directors
(a) Number, Term of Office, Classification--The business
and affairs of the Corporation shall be managed by or under the
direction of the Board of Directors. The number of directors
(exclusive of directors, if any, elected by the holders of one or
more series of Preferred Stock, which may at any time be
outstanding, voting separately as a class pursuant to the
provisions of the Certificate of Incorporation applicable
thereto) shall not be fewer than three (3) nor more than eleven
(11), the exact number of directors to be determined from time to
time by resolution adopted by affirmative vote of a majority of
the Directors then in office, or, in the absence of such a
determination, shall be the number of directors in office
immediately after the election of directors at the preceding
annual meeting of shareholders. The directors (exclusive of
directors, if any, elected by the holders of one or more series
of Preferred Stock voting separately as a class) shall be divided
into three classes, designated Class I, Class II and Class III.
Each class shall be as nearly equal in number as possible. The
term of the initial Class I directors shall terminate on the date
of the 1988 annual meeting of shareholders, the term of the
initial Class II directors shall terminate on the date of the
1989 annual meeting of shareholders and the term of the initial
Class III directors shall terminate on the date of the 1990
annual meeting of shareholders. At each annual meeting of
shareholders beginning in 1988, successors to directors whose
terms expire at that annual meeting shall be of the same class as
the directors they succeed, and shall be elected for three-year
terms. A director shall hold office until the annual meeting for
the year in which his or her term expires and until his or her
successor shall be elected and shall qualify, subject, however,
to prior death, resignation, retirement or removal from office.
If the number of directors is changed by resolution of the Board
of Directors pursuant to this paragraph 2, any increase or
decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as
possible, but in no case shall a decrease in the number of
directors shorten the term of any incumbent director.
(b) Vacancy, Resignation, Removal, Nomination -- Subject to
the rights of the holders of any series of Preferred Stock then
outstanding with respect to directors elected by the holders of
such Preferred Stock, any directorship to be filled by reason of
an increase in the number of directorships shall be filled by the
concurring vote of directors holding a majority of the
directorships in existence prior to such increase in the number
of directorships and any other vacancy on the Board of Directors,
however caused, shall be filled for the unexpired term by the
concurring vote of a majority of the directors then in office,
although less than a quorum, or by a sole remaining director.
Any director so elected to fill a vacancy shall hold office until
the next election of the class for which such director shall have
been chosen and until his or her successor shall have been
elected and qualified. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any
incumbent director.
Any director may resign his or her office at any time, such
resignation to be in writing and to take effect from the time of
its receipt by the Corporation or at such other time as shall be
fixed therein and acceptance thereof shall not be required to
make it effective. Subject to the rights of the holders of any
series of Preferred Stock then outstanding with respect to
directors elected by the holders of such Preferred Stock, one or
more or all of the directors of the Corporation may be removed
only for cause and only by the affirmative vote of (i) the
holders of at least eighty percent (80%) of the outstanding
shares of capital stock of the Corporation entitled to vote in
the election of such directors or (ii) directors holding a
majority of the directorships.
No person shall be eligible for election as a director at
any annual or special meeting of shareholders unless such person
was nominated by action of the Board of Directors or by any
shareholder of the Corporation entitled to vote for the election
of directors at the meeting who complies with the following
notice procedures. Such shareholder nominations shall be made
pursuant to timely notice in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice must be
received by the Secretary of the Corporation not less than sixty
days nor more than ninety days prior to the meeting; provided,
however, that in the event that less than seventy days' notice or
prior public disclosure of the date of the meeting is given or
made to shareholders, notice by the shareholder to be timely must
be received by the Secretary of the Corporation not later than
the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public
disclosure was made. Such shareholder's notice shall set forth
(a) as to each person whom the shareholder proposes to nominate
for election or re-election as a director, (i) the name, age,
business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the
class and number of shares of capital stock of the corporation
which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to being named
in the proxy statement as a nominee and to serving as a director
if elected) and (b) as to the shareholder giving the notice (i)
the name and address, as they appear on the Corporation's books,
of such shareholder and, (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by
such shareholder. At the request of the Board of Directors any
person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that
information required to be set forth in a shareholder's notice of
nomination which pertains to the nominee. The Chairman of the
meeting shall, if the facts warrant, determine and declare to the
meeting that a nomination was not made in accordance with the
procedures herein prescribed and, if the Chairman should so
determine, the Chairman shall so declare to the meeting and the
defective nomination shall be disregarded.
Notwithstanding the foregoing, whenever the holders of any
one or more classes or series of Preferred Stock issued by the
Corporation shall have the right, voting separately by class or
series, to elect directors at an annual or special meeting of
shareholders, the election, term of office, filling of vacancies
and other features of such directorships shall be governed by the
terms of the Certificate of Incorporation and the resolution or
resolutions applicable thereto adopted by the Board of Directors
pursuant to Article FOURTH thereof. Directors so elected shall
not be divided into classes unless expressly provided by such
terms, and, during the prescribed terms of office of such
directors, the Board of Directors shall consist of such directors
in addition to the number of directors determined as provided in
subparagraph (a) of this paragraph 2.
NINTH: 1. In addition to any affirmative vote required by
law or this Certificate of Incorporation or the By-Laws of the
Corporation, and except as otherwise provided in paragraph 2 of
this Article NINTH, a Business Combination (as hereinafter
defined) shall be approved by the Board of Directors and shall
then be approved by the affirmative vote of not less than (A)
eighty percent (80%) of the votes entitled to be cast by the
holders of all the then outstanding shares of Voting Stock (as
hereinafter defined), voting together as a single class and (B)
two-thirds of the votes entitled to be cast by the holders of all
the then outstanding shares of Voting Stock, voting together as a
single class, other than shares of Voting Stock held by any
Interested Shareholder (as hereinafter defined) with respect to
such Business Combination. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required,
or that a lesser percentage or separate class vote may be
specified, by law or in any agreement with any national
securities exchange or otherwise.
2. The provisions of paragraph 1 of this Article NINTH
shall not be applicable to any particular Business Combination,
and such Business Combination need be approved by only such
affirmative vote, if any, as is required by law or by any other
provision of the Certificate of Incorporation or the By-Laws of
the Corporation, or any agreement with any national securities
exchange, if all of the conditions specified in either of the
following subparagraphs (a) and (b) are met or, in the case of a
Business Combination not involving the payment of consideration
to the holders of the Corporation's outstanding Capital Stock (as
hereinafter defined), if the condition specified in the following
subparagraph (a) is met:
(a) The Business Combination shall have been approved
(whether such approval is made prior to or subsequent to the
acquisition of beneficial ownership of the Voting Stock that
caused the Interested Shareholder to become an Interested
Shareholder) by a majority of the Continuing Directors (as
hereinafter defined) (even if the Continuing Directors do not
constitute a quorum of the entire Board of Directors).
(b) All of the following conditions shall have been met:
(1) The aggregate amount of cash and the Fair Market Value
(as hereinafter defined), as of the Valuation Date (as
hereinafter defined), of consideration other than cash to be
received per share by holders of Common Stock in such Business
Combination shall be at least equal to the highest amount
determined under clauses (i), (ii), or (iii) below:
(i) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Shareholder for any
share of Common Stock in connection with the acquisition by the
Interested Shareholder of beneficial ownership of shares of
Common Stock (x) within the two-year period immediately prior to
the first public announcement of the proposed Business
Combination or its first communication generally to shareholders
of the Corporation, whichever is earlier (the "Announcement
Date") or (y) in the transaction in which it became an Interested
Shareholder, whichever is higher, in either case as adjusted for
any subsequent stock split, stock dividend, subdivision or
reclassification with respect to Common Stock; or
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Shareholder became an Interested Shareholder (the "Determination
Date"), whichever is higher, in either case as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to Common Stock; or
(iii) the price per share equal to the Fair Market Value
per share of Common Stock determined pursuant to paragraph (ii)
above, multiplied by the fraction of: (x) the highest per share
price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by or on behalf of the Interested
Shareholder for any share of Common Stock in connection with the
acquisition by the Interested Shareholder of beneficial ownership
of shares of Common Stock within the two-year period immediately
prior to the Announcement Date, over (y) the Fair Market Value
per share of Common Stock on the first day in such two-year
period on which the Interested Shareholder or any person acting
on its behalf acquired beneficial ownership of any shares of
Common Stock, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to Common
Stock.
(2) The aggregate amount of cash and the Fair Market Value,
as of the Valuation Date, of consideration other than cash to be
received per share by holders of shares of any class or series of
outstanding Capital Stock, other than Common Stock, shall be at
least equal to the highest amount determined under clauses (i),
(ii), (iii) or (iv) below:
(i) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Shareholder for any
share of such class or series of Capital Stock in connection with
the acquisition by the Interested Shareholder of beneficial
ownership of shares of such class or series of Capital Stock (x)
within the two-year period immediately prior to the Announcement
Date or (y) in the transaction in which it became an Interested
Shareholder, whichever is higher, in either case as adjusted for
any subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of Capital
Stock; or
(ii) the Fair Market Value per share of such class or
series of Capital Stock on the Announcement Date or on the
Determination Date, whichever is higher, in either case as
adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to such class or
series of Capital Stock; or
(iii) (if applicable) the highest preferential amount per
share to which the holders of shares of such class or series of
Capital Stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation; or
(iv) the price per share equal to the Fair Market Value per
share of such class or series of Capital Stock determined
pursuant to paragraph (ii) above, multiplied by the fraction of:
(x) the highest per share price (including any brokerage
commissions,
transfer taxes and soliciting dealers' fees) paid by or on behalf
of the Interested Shareholder for any share of such class or
series of Capital Stock in connection with the acquisition by the
Interested Shareholder of beneficial ownership of shares of such
class or series of Capital Stock within the two-year period
immediately prior to the Announcement Date, over (y) the Fair
Market Value per share of such class or series of Capital Stock
on the first day in such two-year period on which the Interested
Shareholder or any person acting on its behalf acquired
beneficial ownership of any share of such class or series of
Capital Stock, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to such
class or series of Capital Stock.
(3) The consideration to be received by holders of a
particular class or series of outstanding Capital Stock shall be
in cash or in the same form as previously paid by or on behalf of
the Interested Shareholder in connection with its direct or
indirect acquisition of beneficial ownership of shares of such
class or series or Capital Stock. If the consideration so paid
for shares of any class or series of Capital Stock varied as to
form, the form of consideration for such class or series of
Capital Stock shall be either cash or the form used to acquire
beneficial ownership of the largest number of shares of such
class or series of Capital Stock previously acquired by the
Interested Shareholder, as adjusted for any subsequent stock
split, stock dividend, subdivision or reclassification with
respect to such class or series of Capital Stock.
(4) After the Determination Date and prior to the
consummation of such Business Combination: (i) except as
approved by a majority of the Continuing Directors, there shall
have been no failure to declare and pay at the regular date
therefor any full periodic dividends (whether or not cumulative)
payable in accordance with the terms of any outstanding Capital
Stock; (ii) there shall have been no reduction in the annual rate
of dividends paid on the Common Stock except as necessary to
reflect any stock split, stock dividend or subdivision of the
Common Stock and except as approved by a majority of the
Continuing Directors; (iii) there shall have been an increase in
the annual rate of dividends paid on the Common Stock as
necessary to reflect any recapitalization, reorganization or any
similar transaction that has the effect of reducing the number of
outstanding shares of Common Stock, unless the failure so to
increase such annual rate is approved by a majority of the
Continuing Directors; and (iv) such Interested Shareholder shall
not have become the beneficial owner of any additional shares of
Capital Stock except as part of the transaction that resulted in
such Interested Shareholder becoming an Interested Shareholder
and except in a transaction
that, after giving effect thereto, would not result in any
increase in the Interested Shareholder's percentage beneficial
ownership of any class or series of Capital Stock.
(5) After the Determination Date, such Interested
Shareholder shall not have received the benefit, directly or
indirectly (except proportionately as a shareholder of the
Corporation), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in anticipation
of or in connection with such Business Combination or otherwise.
(6) A proxy or information statement describing the
proposed Business Combination and complying with the requirements
of the Securities Exchange Act of 1934 and the rules and
regulations thereunder (the "Act") (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to
shareholders of the Corporation at least thirty (30) days prior
to the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions). The proxy or
information statement shall contain, in a prominent place, any
legally permissible statement as to the advisability (or
inadvisability) of the Business Combination that the Continuing
Directors, or any of them, may choose to make and, if such
opinion is deemed appropriate by a majority of the Continuing
Directors, shall contain the opinion of an investment banking
firm selected by a majority of the Continuing Directors as to the
fairness (or not) of the terms of the Business Combination from a
financial point of view to the holders of the outstanding shares
of Capital Stock other than the Interested Shareholder and its
Affiliates or Associates (as hereinafter defined), such
investment banking firm to be paid a reasonable fee for its
services by the Corporation.
(7) Such Interested Shareholder shall not have made any
major change in the Corporation's business or equity capital
structure without the approval of a majority of the Continuing
Directors.
The provisions of this subparagraph (b) shall be required to
be met with respect to every class or series of outstanding
Capital Stock, whether or not the Interested Shareholder has
previously acquired beneficial ownership of any shares of a
particular class or series of Capital Stock.
3. The following definitions and interpretations shall
apply with respect to this Article NINTH.
(a) The term "Business Combination" shall mean:
(1) any merger, consolidation or share exchange of the
Corporation or any Subsidiary (as hereinafter defined) with (i)
any Interested Shareholder or (ii) any other company (whether or
not itself an Interested Shareholder) which is or after such
merger, consolidation or share exchange would be an Affiliate or
Associate (as hereinafter defined) of an Interested Shareholder;
or
(2) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition or security arrangement, investment, loan,
advance, guarantee, agreement to purchase, agreement to pay,
extension of credit, joint venture participation or other
agreement (in one transaction or a series of transactions) with
or for the benefit of any Interested Shareholder or any Affiliate
or Associate of an Interested Shareholder involving any assets,
securities, or commitments of the Corporation or any Subsidiary,
any Interested Shareholder, any Subsidiary of any Interested
Shareholder or any Affiliate or Associate of any Interested
Shareholder having, measured at the time the transaction or
transactions are approved by the Board of Directors of the
Corporation, an aggregate Fair Market Value and/or involving
aggregate commitments in an amount which is ten percent (10%) or
more of the lesser of (i) the Fair Market Value of the
outstanding shares of Capital Stock of the Corporation as of such
time or (ii) the net worth of the Corporation and its
consolidated Subsidiaries as of the end of the Corporation's most
recent fiscal quarter (the "Corporation's Net Worth"); or
(3) the adoption of any resolution, plan or proposal for
the liquidation or dissolution, or any spin-off or split-off of
any kind, of the Corporation or any Subsidiary which is voted
for, approved or consented to by any Interested Shareholder; or
(4) the issuance or transfer by the Corporation or any
Subsidiary, in one transaction or a series of transactions, of
any Capital Stock of any class or series of the Corporation or
any Subsidiary which has an aggregate Fair Market Value of five
percent (5%) or more of the total Fair Market Value of the
outstanding shares of such class or series of Capital Stock of
the Corporation to any Interested Shareholder or any Affiliate or
Associate of any Interested Shareholder, other than the
Corporation or any of its Subsidiaries, except pursuant to the
exercise of warrants, rights or options to subscribe to or
purchase shares of Capital Stock of such class or series offered,
issued or granted pro rata to all holders of the Capital Stock of
the Corporation of such class or series or any other method
affording substantially proportionate treatment to the holders of
Capital Stock of such class or series; or
(5) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or
any merger, consolidation or share exchange of the Corporation
with any of its Subsidiaries or any other transaction (whether or
not with or otherwise involving an Interested Shareholder) that
has the effect, directly or indirectly, of increasing the
proportionate share of any class or series of Capital Stock, or
any securities convertible into Capital Stock or into equity
securities of, the Corporation or any Subsidiary, that is
beneficially owned by an Interested Shareholder or any Affiliate
or Associate of any Interested Shareholder; or
(6) any agreement, contract or other arrangement providing
for any one or more of the actions specified in the foregoing
clauses (1) to (5).
(b) The term "Capital Stock" shall mean all capital stock
of the Corporation, and the term "Voting Stock" shall mean all
Capital Stock which by its terms may be voted on all matters
submitted to shareholders of the Corporation generally.
(c) The term "person" shall mean any individual, firm,
company or other entity and shall include any group comprised of
any person and any other person with whom such person or any
Affiliate or Associate of such person has any agreement,
arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Capital
Stock.
(d) The term "Interested Shareholder" shall mean any person
(other than the Corporation or any Subsidiary of the Corporation
and other than any profit sharing, employee stock ownership or
other employee benefit plan for the Corporation or any Subsidiary
or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) who (i) is the beneficial owner of
Voting Stock representing ten percent (10%) or more of the votes
entitled to be cast by the holders of all then outstanding shares
of Voting Stock; or (ii) is an Affiliate or Associate of the
Corporation and at any time within the two-year period
immediately prior to the date in question was the beneficial
owner of Voting Stock representing ten percent (10%) or more of
the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock.
(e) A person shall be a "beneficial owner" of any Capital
Stock (i) which such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly; (ii) which
such person or any of its Affiliates or Associates has, directly
or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding, or (C) the right to
dispose of or to direct the disposition of pursuant to any
agreement, arrangement or understanding; or (iii) which such
person or any of its Affiliates or Associates, directly or
indirectly, has any agreement, arrangement or understanding for
the purpose of acquiring holding, voting or disposing, with any
other person that beneficially owns or whose Affiliates or
Associates beneficially own, such Capital Stock. For the
purposes of determining whether a person is an Interested
Shareholder pursuant to subparagraph (d) of this paragraph 3, the
number of shares of Capital Stock deemed to be outstanding shall
include shares deemed beneficially owned by such person through
application of this subparagraph (e) of paragraph 3, but shall
not include any other shares of Capital Stock that may be
issuable pursuant to any agreement, arrangement or understanding,
or upon the exercise of conversion rights, warrants or options,
or otherwise to any person other than such Interested
Shareholder.
(f) The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 under
the Securities Exchange Act of 1934 (the "Act") as in effect on
the date that this Article NINTH is approved by the Board of
Directors (the term "registrant" in such Rule 12b-2 meaning in
this case the Corporation).
(g) The term "Subsidiary" means any company of which a
majority of any class of equity security is beneficially owned by
the Corporation; provided, however, that for the purposes of the
definition of Interested Shareholder set forth in subparagraph
(d) of this paragraph 3, the term "Subsidiary" shall mean only a
company of which a majority of each class of equity security is
beneficially owned by the Corporation.
(h) The term "Continuing Director" means any member of the
Board of Directors, while such person is a member of the Board of
Directors, who is not the Interested Shareholder with respect to
a particular Business Combination or an Affiliate or Associate or
representative of such Interested Shareholder and was a member of
the Board of Directors prior to the time that such Interested
Shareholder became an Interested Shareholder, and any successor
of a Continuing Director while such successor is a member of the
Board of Directors, who is not an Affiliate or Associate or
representative of such Interested Shareholder and is recommended
or elected to succeed the Continuing Director by a majority of
Continuing Directors.
(i) The term "Fair Market Value" means (i) in the case of
cash, the amount of such cash; (ii) in the case of stock, the
highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange Listed Stocks, or, if
such stock is not listed on such exchange, on the principal
United States securities exchange registered under the Act on
which such stock is listed, or, if such stock is not listed on
any such exchange, the highest closing bid quotation with respect
to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any similar system
then in use, or if no such quotations are available, the fair
market value on the date in question of a share of such stock as
determined by a majority of the Continuing Directors in good
faith, in each case as adjusted to reflect any applicable stock
split, stock dividend, subdivision or reclassification with
respect to such stock; and (iii) in the case of property other
than stock, the fair market value of such property on the date in
question as determined in good faith by a majority of the
Continuing Directors.
(j) The term "Valuation Date" means: (i) for a Business
Combination voted upon by the shareholders of the Corporation,
the later of the day prior to the date of the shareholder vote or
the date twenty (20) days prior to the consummation of the
Business Combination; and (ii) for a Business Combination not
voted upon by shareholders, the date of the consummation of the
Business Combination.
(k) In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash
to be received" as used in subparagraphs (b)(1) and (b)(2) of
paragraph 2 of this Article NINTH shall include the shares of
Common Stock and/or the shares of any other class or series of
Capital Stock retained by the holders of such shares.
4. A majority of the Continuing Directors shall have the
power and duty to determine for the purposes of this Article
NINTH, on the basis of information known to them after reasonable
inquiry, (a) whether a person is an Interested Shareholder, (b)
the number of shares of Capital Stock or other securities
beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, (d) whether the assets that
are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value in an amount
which is ten percent (10%) or more of the lesser of (i) the Fair
Market Value of the outstanding shares of Capital Stock of the
Corporation as of such
time or (ii) the Corporation's Net Worth and (e) such other
matters as are delegated to the decision of the Continuing
Directors pursuant to any provision of this Article NINTH. Any
such determination made in good faith shall be binding and
conclusive on all parties.
5. Nothing contained in this Article NINTH shall be
construed to relieve any Interested Shareholder from any
fiduciary obligation imposed by law.
6. The fact that any Business Combination complies with the
provisions of paragraph 2 of this Article NINTH shall not be
construed to impose any fiduciary duty, obligation or
responsibility on the Board of Directors, or any member thereof,
to approve such Business Combination or recommend its adoption or
approval to the shareholders of the Corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any manner
the Board of Directors, or any member thereof, with respect to
evaluations of or actions and responses taken with respect to
such Business Combination.
7. Notwithstanding any other provisions of this Certificate
of Incorporation or the By-Laws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate
class vote may be specified by law, this Certificate of
Incorporation or the By-Laws of the Corporation), the affirmative
vote of the holders of not less than eighty percent (80%) of the
votes entitled to be cast by the holders of all then outstanding
shares of Voting Stock, voting together as a single class, shall
be required to alter, amend or repeal any provision of this
Article NINTH or to adopt any other provision inconsistent with
this Article NINTH.
TENTH: The personal liability of any Director to the
Corporation or its shareholders for monetary damages for breach
of duty as a Director is hereby limited to the amount of the
compensation received by the Director for serving the Corporation
during the year of the violation if such breach did not (a)
involve a knowing and culpable violation of law by the Director,
(b) enable the Director or an associate, as defined in
subdivision (3) of Section 33-374d of the Connecticut General
Statutes, to receive an improper personal economic gain, (c) show
a lack of good faith and a conscious disregard for the duty of
the Director to the Corporation under circumstances in which the
Director was aware that his or her conduct or omission created an
unjustifiable risk of serious injury to the Corporation, (d)
constitute a sustained and unexcused pattern of inattention that
amounted to an abdication of the Director's duty to the
Corporation, or (e) create liability under Section 33-321 of the
Connecticut General Statutes. This provision shall not limit or
preclude the
liability of a Director for any act or omission occurring prior
to the later of (i) October 1, 1989, or (ii) the date this
provision becomes effective by the filing of a certificate
amending the Certificate of Incorporation of the Corporation with
the Secretary of the State of the State of Connecticut. Any
lawful repeal or modification of this provision by the
shareholders and the Board of Directors of the Corporation shall
not adversely affect any right or protection of a Director
existing at or prior to the time of such repeal or modification.
EXHIBIT NO. 3.2
GERBER SCIENTIFIC, INC.
BY-LAWS
(with amendment approved by shareholders on 9/12/97)
ARTICLE I. MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. Shareholders' meetings shall
be held at the principal office or place of business of Gerber
Scientific, Inc. in the State of Connecticut, or at such other
place either within or outside of Connecticut as shall be
designated in the notice of the meeting.
Section 2. Annual Meeting. The Annual Meeting of
Shareholders of this Corporation shall be held on a day in July,
August, or September of each year which the President shall
designate, at which meeting the Shareholders shall elect
Directors by ballot and shall transact such other business as may
properly come before the meeting.
Section 3. Special Meetings. Special Meetings of the
Shareholders may be called at any time by the Board of Directors
or the President and shall be called by the President upon
written request of one or more Shareholders holding at least one-
tenth (1/10) of the issued and outstanding shares of stock of the
Corporation. At such meetings, the Shareholders may transact
such business as may properly come before them.
Section 4. Notice of Meetings. Notice of the time and
place of each meeting of Shareholders and the purpose thereof,
shall be mailed, postage prepaid, not less than ten (10) days nor
more than fifty (50) days before such meeting to each Shareholder
of record at his address, as the same shall appear on the books
of the Corporation. No such notice need be given to any
Shareholder who attends such meeting in person or who waives such
notice in a writing executed and filed with the Secretary of the
Corporation either before or after the meeting.
Section 5. Quorum. The holders of a majority of the issued
and outstanding shares entitled to vote present in person or by
proxy at any meeting of Shareholders shall constitute a quorum
for such meeting.
Section 6. Number of Votes for Each Shareholder. Except as
otherwise provided in the Certificate of Incorporation, each
Shareholder shall be entitled to one vote for each share of such
stock standing in his or her name on the books of the
Corporation. Except as otherwise provided in the Certificate of
Incorporation, the affirmative vote of the holders of a majority
of the issued and outstanding shares represented at such meeting
in person or by proxy shall be the act of the Shareholders.
Section 7. Record Date. The Board of Directors may fix a
day and hour, not exceeding seventy (70) days and not less than
ten (10) days immediately preceding the date fixed for the
payment of any dividend or for any meeting of the Shareholders as
the record time for the determination of Shareholders entitled to
receive such dividend or as the time as of which Shareholders be
determined, as the case may be, and only Shareholders of record
at the time so fixed shall be entitled to receive such dividend
or to notice of and to vote at such meeting.
ARTICLE II. STOCK
Section 1. Certificate of Stock. Certificates of stock
shall be in a form adopted by the Board of Directors and shall be
signed by the President or a Vice President and by the Secretary,
an Assistant Secretary or the Treasurer and shall be attested by
the Corporate Seal. All certificates shall be consecutively
numbered, and the name of the person owning the shares
represented thereby and the number of such shares and the date of
issue shall be entered on the Corporation's books. Any
certificate of stock transferred by endorsement thereon may be
surrendered or canceled and, in such event, a new certificate
shall be issued to the purchaser or assignee.
Section 2. Transfer of Stock. Regular transfer books shall
be kept by the Secretary or some other person authorized by
resolution of the Board of Directors. Shares of stock shall be
transferred only on the books of the Corporation by the holder
thereof in person or by his attorney, upon surrender of the
certificate of stock properly endorsed.
ARTICLE III. DIRECTORS
Section 1. Number, Term of Office and Classification. The
business and affairs of the Corporation shall be managed by the
Board of Directors. The number of directors (exclusive of
directors, if any, elected by the holders of one or more series
of Preferred Stock, which may at any time be outstanding, voting
separately as a class pursuant to the provisions of the
Certificate of Incorporation applicable thereto) shall not be
fewer than three (3) nor more than eleven (11), the exact number
of directors to be determined from time to time by resolution
adopted by affirmative vote of a majority of the entire Board of
Directors, or, in the absence thereof, shall be the number of
directors in office immediately after the election of directors
at the preceding annual meeting of Shareholders. The directors
(exclusive of directors, if any, elected by the holders of one or
more series of Preferred Stock voting separately as a class)
shall be divided into three classes, as provided in Article
EIGHTH of the Certificate of Incorporation, and the term of
office of each director shall be as provided therein.
Section 2. Vacancy. Subject to the rights of the holders
of any series of Preferred Stock then outstanding with respect to
directors elected by the holders of such Preferred Stock, any
directorship to be filled by reason of an increase in the number
of directorships shall be filled by the concurring vote of
directors holding a majority of the directorships in existence
prior to such increase in the number of directorships and any
other vacancy on the Board of Directors, however caused, shall be
filled for the unexpired term by the concurring vote of a
majority of the directors then in office, although less than a
quorum, or by a sole remaining director. Any director so elected
to fill a vacancy shall hold office until the next election of
the class for which such director shall have been chosen, and
until his or her successor shall have been elected and qualified.
No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Section 3. Resignation and Removal. Any director may
resign his or her office at any time, such resignation to be in
writing and to take effect from the time of its receipt by the
Corporation or at such other time as shall be fixed therein and
acceptance thereof shall not be required to make it effective.
Subject to the rights of the holders of any series of Preferred
Stock then outstanding with respect to directors elected by the
holders of such Preferred Stock, one or more or all of the
directors of the Corporation may be removed only for cause and
only by the affirmative vote of (i) the holders of at least
eighty percent (80%) of the outstanding shares of capital stock
of the Corporation entitled to vote in the election of such
directors or (ii) directors holding a majority of the
directorships.
Section 4. Nomination. No person shall be eligible for
election as a director at any annual or special meeting of
Shareholders unless such person was nominated by action of the
Board of Directors or by any Shareholder of the Corporation
entitled to vote for the election of directors at the meeting who
complies with the following notice procedures. Such Shareholder
nominations shall be made pursuant to timely notice in writing to
the Secretary of the Corporation. To be timely, a Shareholder's
notice must be received by the Secretary of the Corporation not
less than sixty days nor more than ninety days prior to the
meeting; provided, however, that in the event that less than
seventy days' notice or prior public disclosure of the date of
the
meeting is given or made to Shareholders, notice by the
Shareholder to be timely must be received by the Secretary of the
Corporation not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made. Such
Shareholder's notice shall set forth (a) as to each person whom
the Shareholder proposes to nominate for election or re-election
as a director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares
of capital stock of the Corporation which are beneficially owned
by such person and (iv) any other information relating to such
person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A, under the Securities
Exchange Act of 1934, as amended (including without limitation
such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected)
and (b) as to the Shareholder giving the notice (i) the name and
address, as they appear on the Corporation's books, of such
Shareholder and, (ii) the class and number of shares of capital
stock of the Corporation which are beneficially owned by such
Shareholder. At the request of the Board of Directors any person
nominated by the Board of Directors for election as a director
shall furnish to the Secretary of the Corporation that
information required to be set forth in a Shareholder's notice of
nomination which pertains to the nominee. The Chairman of the
meeting shall, if the facts warrant, determine and declare to the
meeting that a nomination was not made in accordance with the
procedures herein prescribed and, if the Chairman should so
determine, the Chairman shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 5. Election by Holders of Preferred Stock.
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the
Corporation shall have the right, voting separately by class or
series, to elect directors at an annual or special meeting of
Shareholders, the election, term of office, filling of vacancies
and other features of such directorships shall be governed by the
terms of the Certificate of Incorporation and the resolution or
resolutions applicable thereto adopted by the Board of Directors
pursuant to Article FOURTH thereof. Directors so elected shall
not be divided into classes unless expressly provided by such
terms, and, during the prescribed terms of office of such
directors, the Board of Directors shall consist of such directors
in addition to the number of directors determined as provided in
Section 1 of this Article III.
Section 6. Meetings. Meetings of the Board of Directors
shall be held upon call of the President or at such times and
places as the Board of Directors shall by resolution appoint.
Any
two Directors may also call meetings of the Board of Directors at
the office of the Corporation by giving five (5) days' notice of
such meeting to each Director. A majority of the directorships
constitutes a quorum. No notice of a Directors' meeting need be
given to any Director who attends such meeting in person or who
waives such notice in a writing executed and filed with the
Secretary of the Corporation either before or after the meeting.
Section 7. Indemnification and Reimbursement. The Company
shall indemnify and reimburse to the fullest extent permitted
under applicable law, any person made a party to any action, suit
or proceeding by reason of the fact that he or she or a person
whose legal representative or successor he or she is, is or was a
Director, officer or employee of the Company, for expenses,
including attorneys' fees, and such amount of any judgment, money
decree, fine, penalty or settlement of any judgment, money
decree, fine, penalty or settlement for which he or she may have
become liable, actually incurred in connection with the defense
or reasonable settlement of any such action or threatened action,
suit or proceeding, or any appeal thereof.
ARTICLE IV. OFFICERS
Section 1. Titles, Election, and Duties. The Directors, by
ballot, shall choose from among their members a Chairman of the
Board of Directors, shall appoint a President, a Treasurer, and a
Secretary, and may from time to time appoint such other officers
as they, the Directors, deem expedient. The duties of the
officers of the corporation shall be such as are imposed by these
By-laws and from time to time prescribed by the Directors.
Section 2. Limitation on Powers of Officers. Unless
authorized by the Directors, neither the President nor Treasurer
shall make any loan or any agreement on behalf of the Company
which involves a capital expenditure in excess of $50,000.00.
Unless likewise authorized, no other officer shall make any such
loan or agreement which involved a capital expenditure in excess
of $1,000.00.
Section 3. Chairman of the Board of Directors. The
Chairman of the Board of Directors shall preside at all meetings
of the Shareholders and the Board of Directors.
Section 4. President. The President shall have general
supervision over the affairs and interests of the corporation and
shall have such other authority and responsibility as may be
committed to him by the Board of Directors.
Section 5. Treasurer. The Treasurer shall keep the fiscal
accounts of the Corporation, including an account of all moneys
received or disbursed. He may endorse on behalf of the
Corporation for collection only, checks, notes and other
obligations and shall deposit the same and all moneys and
valuables in the name of, and to the credit of, the Corporation
in such banks and depositories as the Board of Directors shall
designate.
Section 6. Secretary. The Secretary shall keep the minutes
of the meetings of Shareholders and Directors and shall give
notice of all such meetings as required in these By-Laws. He
shall have custody of the seal of the Corporation and all books,
records and papers of the Corporation, except those in the
custody of the Treasurer or some other person authorized to have
custody and possession thereof by resolution of the Board of
Directors.
Section 7. Compensation. The Board of Directors shall fix
the salary or compensation for each officer.
Section 8. Term of Office. Each of such officers shall
serve for the term of one year and until his successor is duly
appointed and qualified, but any officer may be removed by the
Board of Directors at any time with or without cause and with or
without notice of hearing. Vacancies among the officers by
reason of death, resignation or other causes shall be filled by
the Board of Directors.
ARTICLE V. SEAL
Section 1. Design. The corporate seal of this Corporation
shall be a circular seal with the name of the Corporation around
the border, and the words "Connecticut" and "Seal" in the center.
ARTICLE VI. AMENDMENTS
Except as otherwise provided in the Certificate of
Incorporation or these By-Laws, these By-Laws may be amended or
repealed by:
(a) an affirmative vote of the holders of a majority of the
issued and outstanding shares represented in person or proxy at
any meeting of the Shareholders in the call for which written
notice of such proposed action shall have been given; or,
(b) an affirmative vote of directors holding a majority of
the directorships at any meeting of the Board of Directors.
EXHIBIT NO. 15
To the Board of Directors and Shareholders of
Gerber Scientific, Inc.
Re: Registration Statements on Form S-8,
File No. 2-93695, No. 33-58668,
No. 333-261777, and No. 333-42879
Registration Statement on Form S-3,
File No. 33-58670
With respect to the subject Registration Statements, we
acknowledge our awareness of the use therein of our report dated
February 17, 1999 related to our review of interim financial
information.
Pursuant to Rule 436(c) under the Securities Act, such reports
are not considered a part of a Registration Statement prepared or
certified by an accountant or a report prepared or certified by
an accountant within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/ s / KPMG LLP
KPMG LLP
Hartford, Connecticut
February 17, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and statements of earnings of Gerber Scientific,
Inc. as of and for the nine-month periods ended January 31, 1999 and 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> APR-30-1999 APR-30-1998
<PERIOD-END> JAN-31-1999 JAN-31-1998
<CASH> 16,884 25,743
<SECURITIES> 0 0
<RECEIVABLES> 109,395 93,489
<ALLOWANCES> 0 0
<INVENTORY> 80,663 70,520
<CURRENT-ASSETS> 218,382 203,163
<PP&E> 149,407 129,543
<DEPRECIATION> 63,179 62,039
<TOTAL-ASSETS> 531,407 334,265
<CURRENT-LIABILITIES> 106,555 75,006
<BONDS> 170,535 7,002
0 0
0 0
<COMMON> 23,462 23,392
<OTHER-SE> 220,819 217,178
<TOTAL-LIABILITY-AND-EQUITY> 531,407 334,265
<SALES> 445,048 310,189
<TOTAL-REVENUES> 445,048 310,189
<CGS> 260,566 171,304
<TOTAL-COSTS> 403,707 289,329
<OTHER-EXPENSES> (1,675) (3,388)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,114 266
<INCOME-PRETAX> 33,902 23,982
<INCOME-TAX> 12,400 7,700
<INCOME-CONTINUING> 21,502 16,282
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 21,502 16,282
<EPS-PRIMARY> .95 .71
<EPS-DILUTED> .93 .70
</TABLE>
