<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
GENERAL SCANNING INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
GENERAL SCANNING INC.
500 ARSENAL STREET
WATERTOWN, MASSACHUSETTS 02172
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 17, 1997
The Annual Meeting of Stockholders of General Scanning Inc., a Massachusetts
corporation (the "Company"), will be held at the Company's offices, 500
Arsenal Street, Watertown, Massachusetts, on Thursday, April 17, 1997 at 10:00
a.m., local time, to consider and act upon the following matters:
1. To elect two Class II directors to serve for the ensuing three years.
2. To ratify the appointment by the Board of Directors of Arthur Andersen
LLP to serve as the Company's independent auditors for the fiscal year
ending December 31, 1997.
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Stockholders of record at the close of business on March 3, 1997 will be
entitled to vote at the meeting or any adjournment thereof. The stock transfer
books of the Company will remain open.
By Order of the Board of
Directors,
PIERRE J. BROSENS, Clerk
Watertown, Massachusetts
March 19, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE
PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
GENERAL SCANNING INC.
500 ARSENAL STREET
WATERTOWN, MASSACHUSETTS 02172
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 17, 1997
This Proxy Statement, dated March 19, 1997, is furnished in connection with
the solicitation of proxies by the Board of Directors of General Scanning
Inc., a Massachusetts corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held at the offices of the Company, on April 17,
1997 at 10:00 a.m., local time, and at any adjournments of that meeting (the
"Annual Meeting"). All proxies will be voted in accordance with the
stockholders' instructions contained therein. If no choice is specified,
proxies will be voted in favor of the matters set forth in the accompanying
Notice of Annual Meeting. Any proxy may be revoked by a stockholder at any
time before its exercise by delivery of a written revocation or subsequently
dated proxy to the Clerk of the Company or by voting in person at the Annual
Meeting.
On March 3, 1997, the record date for the determination of stockholders
entitled to vote at the Annual Meeting, there were outstanding and entitled to
vote an aggregate of 11,902,860 shares, excluding treasury shares, of common
stock of the Company (the "Common Stock"). Stockholders are entitled to one
vote per share on all matters.
The Company's Annual Report for the fiscal year ended December 31, 1996 is
being mailed to stockholders with the mailing of this Notice and Proxy
Statement on or about March 19, 1997.
VOTES REQUIRED
Shares of Common Stock represented in person or by proxy at the Annual
Meeting (including shares which abstain from or do not vote with respect to
one or more of the matters presented at the Annual Meeting and broker non-
votes, as described below) will be tabulated by inspectors of election
appointed for the Annual Meeting and will determine whether or not a quorum is
present. A majority in interest of the outstanding shares represented at the
meeting in person or by proxy shall constitute a quorum for the transaction of
business. The inspectors of election will treat abstentions as shares that are
present and entitled to vote for purposes of determining the number of shares
that are present and entitled to vote with respect to any particular matter,
but will not count abstentions as a vote in favor of such matter. Accordingly,
an abstention from voting on a matter by a stockholder present in person or
represented by proxy at the Annual Meeting with respect to any matter
requiring a majority of the shares represented and entitled to vote has the
same legal effect as a vote "against" the matter even though the stockholder
or interested parties analyzing the results of the voting may interpret such
vote differently. If a broker holding stock in "street name" indicates on the
proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present
and entitled to vote at the Annual Meeting with respect to the matter.
Accordingly, a "broker non-vote" on a matter has no effect on the voting on
that matter. Neither an abstention nor a broker non-vote will be treated as
voting on a matter requiring a plurality of shares represented and voting.
1
<PAGE>
The affirmative vote of the holders of a plurality of the shares of Common
Stock represented and voting at the Annual Meeting is required for the
election of directors. On all other matters being submitted to shareholders,
an affirmative vote of at least a majority of the shares present, or
represented, and entitled to vote at the meeting is required for approval.
STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information as of January 31, 1997,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock based upon information provided to the
Company; (ii) each director and nominee for director; (iii) each executive
officer; and (iv) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY COMMON STOCK
OWNED(1)(2)(3)(4) OUTSTANDING(3)
----------------- --------------
<S> <C> <C>
Jean I. Montagu(5)............................ 2,426,208 20.40%
Pierre J. Brosens............................. 942,947 7.93%
Charles D. Winston............................ 411,219 3.36%
Gregory S. Baletsa............................ 75,098 *
Michael R. Kampfe(6).......................... 75,070 *
Victor Sabella................................ 71,502 *
Thomas R. Swain............................... 48,428 *
Joseph A. Verderber........................... 73,716 *
Victor H. Woolley............................. 40,000 *
Paul F. Ferrari............................... 107,000 *
James R. Turner............................... 37,000 *
Woodie C. Flowers............................. 27,400 *
Richard B. Black.............................. 27,000 *
All directors, nominees for director and
executive officers as a group (13 persons)..... 4,362,588 36.68%
</TABLE>
- --------
* Less than 1% of outstanding shares of Common Stock.
(1) The inclusion herein of shares deemed beneficially owned does not
constitute an admission of beneficial ownership of those shares. Unless
otherwise indicated, each stockholder referred to above has sole voting
and investment power with respect to the shares listed. Applicable share
of ownership is based on 11,898,860 shares of Common Stock, excluding
treasury shares, outstanding as of January 31, 1997 together with
applicable options for each stockholder. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect
to securities.
2
<PAGE>
(2) The amounts listed include the following shares of Common Stock that may
be acquired within 60 days of January 31, 1997 through the exercise of
stock options or warrants: Mr. Winston, 328,930 shares; Mr. Baletsa,
56,850 shares; Mr. Kampfe, 600 shares; Mr. Sabella, 53,500 shares; Mr.
Swain, 2,248 shares; Mr. Verderber, 54,000 shares; Mr. Woolley, 20,000
shares; Mr. Ferrari, 32,000 shares, Mr. Turner, 2,000 shares; Mr. Flowers,
27,000 shares; Mr. Black, 2,000 shares; and all directors and officers as
a group, 579,128 shares.
(3) Shares of Common Stock subject to options and warrants that are currently
exercisable within 60 days of January 31, 1997 are deemed to be
beneficially owned by the person holding such option for the purpose of
computing the percentage of ownership of such person, but are not treated
as outstanding for the purpose of computing the percentage ownership of
any other person. Unless otherwise indicated in these footnotes, each
stockholder has sole voting and investment power with respect to the
shares beneficially owned.
(4) Address: c/o General Scanning Inc., 500 Arsenal Street, Watertown, MA
02172
(5) The amount listed includes 2,418,780 shares jointly held by Mr. Montagu
and his wife.
(6) The amount listed includes 800 shares held by Mr. Kampfe in a custodial
account for the benefit of his children.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with members
of each class holding office for staggered three-year terms. There are
currently three Class I directors, two Class II directors and two Class III
directors, whose terms expire, respectively, at the 1998, 1997 and 1999 Annual
Meetings of Stockholders (in all cases subject to the election and
qualification of their successors and to their earlier death, resignation or
removal). At each Annual Meeting of Stockholders, directors are elected for a
term of three years to succeed those directors whose terms then expire. The
two Class II directors elected at the Annual Meeting will be elected to serve
until the 2000 Annual Meeting of Stockholders (subject to the election and
qualification of their successors and to their earlier death, resignation or
removal).
The persons named in the enclosed proxy will vote to elect Pierre J. Brosens
and Richard B. Black as Class II directors, unless authority to vote for the
election of either or both of the nominees is withheld by marking the proxy to
that effect. Each of the nominees is currently a Class II director of the
Company.
Each of the nominees has indicated his willingness to serve, if elected;
however, if either nominee should be unable or unwilling to stand for
election, proxies may be voted for a substitute nominee designated by the
Board of Directors.
There are no family relationships between or among any officers or directors
of the Company.
The table on the following page sets forth, for each nominee as a Class II
director and for each director of the Company whose term continues after the
Annual Meeting, his name and age, his positions and offices with the Company,
his principal occupations and business experience for the past five years, the
names of other
3
<PAGE>
publicly-held companies of which he is a director, the year since which he has
served as a director of the Company, if applicable, and the year his term as a
director of the Company will expire.
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION, DIRECTOR TERM
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE EXPIRES
- ------------------------------------- -------- -------
<S> <C> <C>
NOMINEES FOR CLASS II DIRECTORS:
Pierre J. Brosens, Sc.D., age 63
Vice Chairman of the Board of Directors of the Company since
1984; Clerk and Treasurer since 1968......................... 1968 1997
Richard B. Black, age 63
Chairman of the Board of ECRM Incorporated since 1983; Chief
Executive Officer of Maremont Corporation, Alusuisse of Amer-
ica and A.M. International prior to 1983; General Partner of
KBA Partners, L.P. since 1987; director of Oak Technology,
Inc., Morgan Group, Inc., Gabelli Funds, Inc. and Benedetto,
Gartland & Greene, Inc. ..................................... 1992 1997
CONTINUING DIRECTORS:
CLASS I DIRECTORS
Jean I. Montagu, age 63
Chairman of the Board of Directors of the Company since 1984;
President and Chief Executive Officer from 1968 to 1984...... 1968 1998
Paul F. Ferrari, age 66
Independent consultant since 1991; Vice President of Thermo
Electron Corporation from 1988 to 1991; Treasurer of Thermo
Electron Corporation from 1967 to 1988; director of
Thermedics Inc. and ThermoTrex Inc. ......................... 1969 1998
James R. Turner, age 68
Corporate Vice President of Dynatech Corporation from 1988 to
1995; also served at that corporation as Group Vice Presi-
dent, Scientific Instruments Group, and President, Dynatech
Scientific Co. .............................................. 1987 1998
CLASS III DIRECTORS
Charles D. Winston, age 55
President and Chief Executive Officer of the Company since
September 1988; management consultant from 1986 to 1988; Of-
ficer of Savin Corporation in 1986; Senior Vice President of
Federal Express Corporation from 1981 to 1985................ 1989 1999
Woodie C. Flowers, Ph.D., age 53
Pappalardo Professor of Mechanical Engineering at MIT; Pro-
fessor of Teaching Innovation at the MIT School of Engineer-
ing from 1991 to 1993; Head of the Systems Design Division at
MIT from 1989 to 1991; director of Nypro, Inc.; Member of the
National Academy of Engineering.............................. 1991 1999
</TABLE>
4
<PAGE>
BOARD AND COMMITTEE MEETINGS
The Board held seven meetings during the fiscal year ended December 31,
1996. During the fiscal year ended December 31, 1996, each director attended
at least 75% of the meetings of the Board of Directors and of all committees
of the Board of Directors on which he then served.
The Board of Directors has an Audit Committee which meets with the Company's
independent accountants and reports on such meetings to the Company's Board of
Directors. The Audit Committee reviews the performance of the independent
accountants in the annual audit and in assignments unrelated to the audit,
reviews fees of the independent accountants, discusses the Company's internal
accounting control policies and procedures and considers and recommends the
selection of the Company's independent accountants. The Audit Committee met
twice during the fiscal year ended December 31, 1996. The Audit Committee
members were during 1996 and are currently Messrs. Woodie Flowers, James
Turner and Paul Ferrari (Chairman).
The Board of Directors has a Compensation Committee which provides
recommendations to the Board of Directors regarding executive and employee
compensation and the grant of stock options under the Company's 1992 Stock
Option Plan to employee directors and officers as defined by the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and administers the
Company's bonus programs and the 1992 Stock Option Plan. The Compensation
Committee met five times during the fiscal year ended December 31, 1996. The
fiscal 1996 Compensation Committee members were Messrs. Paul Ferrari, Pierre
Brosens and Richard Black (Chairman) until April 19, 1996, and Messrs. Paul
Ferrari and Richard Black (Chairman) from April 19, 1996 until December 31,
1996. The current members of the Compensation Committee are Messrs. Paul
Ferrari and Richard Black (Chairman).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until April 19, 1996, the Compensation Committee of the Board of Directors
was composed of two outside directors, Messrs. Ferrari and Black, and one
employee director, Dr. Brosens, who served as the Company's Vice Chairman,
Treasurer and Clerk during 1996. Dr. Brosens resigned from the Compensation
Committee on April 19, 1996.
DIRECTOR COMPENSATION
During the fiscal year ended December 31, 1996, directors who were not
employees of the Company received the following directors' fees in
consideration of their services as directors of the Company: an annual
retainer of $10,000, plus $1,000 for each meeting of the board attended in
person or by telephone conference as well as reimbursement of travel expenses.
Additionally, the Chairs of the Audit Committee and of the Compensation
Committee of the Board of Directors received an annual retainer of $4,000, and
other members of these committees received an annual retainer of $2,000.
5
<PAGE>
The Company has granted to non-employee directors warrants for the purchase
of shares of Common Stock, which warrants are outstanding and exercisable as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED
WARRANTS AT DECEMBER 31, 1996
DATE OF EXERCISE PRICE -----------------------------------
DIRECTOR WARRANT PER SHARE EXERCISABLE UNEXERCISABLE
- -------- -------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Paul F. Ferrari......... 8/25/88 $1.75 17,500 0
11/26/91 2.36 12,500 0
5/15/96 20.75 2,000 0
James R. Turner......... 5/15/96 20.75 2,000 0
Woodie C. Flowers....... 11/26/91 2.36 22,500 0
9/15/92 2.50 2,500 0
5/15/96 20.75 2,000 0
Richard B. Black........ 5/15/96 20.75 2,000 0
------- --
Totals................ 63,000 0
======= ==
</TABLE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides certain information for the fiscal years ended
December 31, 1996, 1995 and 1994 concerning the compensation paid or accrued
for (i) the Company's Chief Executive Officer, and (ii) the other four most
highly compensated executive officers who were serving as executive officers
of the Company on December 31, 1996 and whose salary and bonus for fiscal year
1996 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) COMPENSATION($)(3) GRANTED (#)
- --------------------------- ---- ------------ ----------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
Charles D. Winston 1996 230,753 160,280 38,000(4) 14,650
President and Chief 1995 219,764 149,243 38,000(4) 0
Executive Officer 1994 209,777 196,987 38,000(4) 0
Jean I. Montagu 1996 178,801 94,413 6,000 0
Chairman, Board of 1995 171,515 97,769 6,000 0
Directors 1994 162,414 127,271 6,000 0
Pierre J. Brosens 1996 178,801 94,413 6,000 0
Vice Chairman, Board of 1995 171,515 97,769 6,000 0
Directors 1994 162,414 127,271 6,000 0
Victor H. Woolley 1996 140,070 53,428 6,000 0
Vice President & Chief 1995(5) 50,777 28,798 690 50,000
Financial Officer
Michael R. Kampfe 1996 130,925 95,365 5,027 3,000
Vice President & 1995 125,670 0 6,000 0
General Manager, 1994 114,959 38,674 4,977 0
Optical Scanning
Products Division(6)
</TABLE>
6
<PAGE>
- --------
(1) Salary includes amounts deferred pursuant to Section 401(k) of the
Internal Revenue Code and to the Company's payroll deferral plan.
(2) In each case, bonuses were paid in the year subsequent to the year
indicated but were in respect of, and earned in, the Company's prior
fiscal year as shown in the table pursuant to the Company's officer bonus
plan approved in advance by the Board of Directors, in accordance with a
formula based upon performance of the Company as a whole and the relevant
operating units.
(3) Amounts shown are the Company's matching contributions made under the
Company's employee benefit plan pursuant to Section 401(k) of the Internal
Revenue Code, and, in respect to 1995 and 1994, the Company's contribution
under the General Scanning Inc. Employee Stock Ownership Plan. In
addition, see note (4) in regards to Mr. Winston.
(4) In 1992, the Company's Board of Directors authorized a loan to Charles D.
Winston in the amount of $160,000 for expenses of relocation to
Massachusetts, secured by deferred income owed to Mr. Winston in a like
amount. Under the agreement, 80% of the loan was to be forgiven over a
period of four years, providing Mr. Winston remains an employee of the
Company. Amounts shown for 1996, 1995 and 1994 include $32,000 of the loan
amount forgiven and charged as compensation expense.
(5) Mr. Woolley joined General Scanning in August 1995.
(6) From 1990 through 1996, Mr. Kampfe was General Manager of the Company's
Laser Graphics Division. That division was combined into the Optical
Scanning Products Division at the end of 1996.
STOCK OPTION GRANTS IN FISCAL YEAR 1996
The following table provides information regarding options granted under the
Company's 1992 Stock Option Plan during the fiscal year ended December 31,
1996 to the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SHARES PERCENTAGE OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION ----------------------
NAME GRANTED(#)(1) FISCAL YEAR(%) SHARE($) DATE 5%($) 10%($)
---- ------------- ------------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles D. Winston...... 14,650 8.81 15.00 10/10/06 24,849 169,733
Jean I. Montagu......... 0 0 0 0
Pierre J. Brosens....... 0 0 0 0
Victor H. Woolley....... 0 0 0 0
Michael R. Kampfe....... 3,000 1.80 15.00 10/10/06 5,089 34,758
</TABLE>
- --------
(1) During the fiscal year ended December 31, 1996, the Company granted
options under the Stock Option Plan to its employees to purchase a total
of 166,250 shares of Common Stock and canceled options to purchase 6,250
shares of Common Stock. 86,250 shares granted to 43 employees on May 15,
1996 at an exercise price of $20.75 were canceled and re-issued on October
10, 1996 for the same number of shares at an exercise price of $15.00. The
closing price of the Common Stock of the Company on October 10, 1996 was
$10.25 per share.
7
<PAGE>
TEN YEAR OPTION REPRICINGS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
LENGTH OF
MARKET ORIGINAL
NUMBER OF PRICE OF EXERCISE OPTION TERM
SECURITIES STOCK AT PRICE AT NEW REMAINING
OPTIONS TIME OF TIME OF EXERCISE AT DATE OF
NAME DATE REPRICED REPRICING REPRICING PRICE REPRICING, YRS
---- -------- ---------- --------- --------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Charles D. Winston...... 10/10/96 14,650 10.25 20.75 15.00 10
Michael R. Kampfe....... 10/10/96 3,000 10.25 20.75 15.00 10
</TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996 AND FISCAL YEAR END OPTION
VALUES
The following table sets forth information regarding stock options exercised
by the named executive officers during fiscal 1996 and the value of
unexercised options held by them as of December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#) AT FY-END($)(2)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Charles D. Winston...... 64,000 $967,428 328,930/11,720 $ 3,049,610/0
Jean I. Montagu......... 0 0 0/0 0/0
Pierre J. Brosens....... 0 0 0/0 0/0
Victor H. Woolley....... 0 0 20,000/30,000 $92,500/$138,750
Michael R. Kampfe....... 48,250 $538,980 600/2,400 0/0
</TABLE>
- --------
(1) Market value of the underlying shares on the date of exercise, less the
option exercise price.
(2) Market value of shares covered by in-the-money options on December 31,
1996, less the option exercise price. Options are in-the-money if the
market value of the shares covered thereby is greater than the option
exercise price.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors was composed of two
outside directors and an inside director until April 19, 1996 and two outside
directors from April 19, 1996 until December 31, 1996. Dr. Brosens did not
participate in any vote which affected the compensation of either Mr. Montagu
or Dr. Brosens. The compensation for the Company's executive officers,
including the grant of stock options, is set by the Board of Directors, after
consideration of the Compensation Committee's recommendations.
Compensation Objectives
The Company's executive compensation programs are designed to align
compensation with increases in shareholders' value. Key objectives within the
program include the attainment of certain financial targets which would result
in significant improvement in the Company's operating results. The Company
also takes care to
8
<PAGE>
ensure that its executive compensation makes it possible to attract, retain
and reward executives who are responsible for leading the Company in achieving
or exceeding corporate performance goals.
Executive Compensation Programs
The Company's executive compensation programs, which contain no special
perquisites, consist of three principal elements: base salary, cash bonus and
stock options. The Board of Directors sets the annual base salary for
executives, after consideration of the recommendations of the Compensation
Committee. The Compensation Committee has retained the services of Hewitt
Associates, an international executive compensation consulting firm, to advise
it with respect to all executive compensation matters. Prior to making its
recommendations, the Compensation Committee reviews historical compensation
levels of the executives, evaluations of past performance and assessments of
expected future contributions of the executives. In making the determinations
regarding base salaries, the Company considers generally available information
regarding salaries prevailing in the industry but does not utilize any
particular indices.
The Company maintains incentive plans (the "IPs") under which executive
officers (including the Chief Executive Officer), other than those
participating in sales activities, are paid cash bonuses subsequent to the end
of each fiscal year. The bonuses under the IPs are dependent primarily on the
financial performance of the Company and the relevant operating units as
compared to financial performance objectives established by the Board of
Directors near the start of each fiscal year.
The IPs for fiscal 1996 set forth two performance factors consisting of
profits and utilization of operating assets. For those executives at the
corporate level, (Chairman, Vice Chairman, Chief Executive Officer and Chief
Financial Officer) the Board of Directors sets corporate wide targets. For
executives managing an operating unit, the profits and utilization of
operating assets targets are set for the relevant operating unit.
Total compensation for executive officers includes the granting of stock
options. Such options are intended to promote alignment of long-term interests
between the recipients and the stockholders whereby recipients gain only if
the price of the Company's stock increases over the fair market value at the
date of grant. In determining the amount of such grants, the Compensation
Committee evaluates the job level of the executive, the responsibilities
assumed, and the size of the awards made to the officer in prior years
relative to the Company's overall performance. Options have generally become
exercisable in equal installments over a period of four years, with the first
installment becoming exercisable on the date of grant. It has been the
Company's practice to fix the exercise price of options at 100% of the fair
market value on the date of grant; however, 86,250 shares granted to 43
employees on May 15, 1996 at an exercise price of $20.75 were canceled and re-
issued on October 10, 1996 for the same number of shares at an exercise price
of $15.00. The closing price of the Common Stock of the Company on October 10,
1996 was $10.25 per share. Therefore, the long-term value realized by
executives through option exercises can be directly linked to increases of
stockholder value.
Chief Executive Officer Compensation
The Chief Executive Officer's performance was evaluated, and his
compensation determined, in accordance with the factors described above
applicable to executive officers generally. For the fiscal year ended
9
<PAGE>
December 31, 1996, the Chief Executive Officer earned a cash bonus of
$160,280, which represented 41.0% of his total cash compensation (salary plus
cash bonus). This amount reflects increases in operating profit of 63.6% and
78.7%, excluding and including the acquisition of View Engineering, Inc.,
respectively, and a utilization of operating assets of 2.4% above target,
excluding the acquisition of View Engineering, Inc.
Compensation Deductibility
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), imposes a limit on tax deductions for annual compensation in excess
of one million dollars paid by a corporation to its chief executive officer
and the other four most highly compensated officers of a corporation. This
provision excludes certain forms of "performance based compensation" from the
compensation taken into account for the purposes of that limit. None of the
compensation paid by the Company in fiscal 1996 was subject to the limitation
on deductibility. The Compensation Committee will monitor the impact of
Section 162(m) of the Code on its compensation practices and determine what
action, if any, is appropriate.
Compensation Committee
Richard B. Black, Chairman
Paul F. Ferrari
10
<PAGE>
STOCK PERFORMANCE GRAPH
The Stock Performance Graph set forth below compares the cumulative
stockholder return on the Common Stock of the Company from September 22, 1995
(the date of initial public trading in the Company's Common Stock) to December
31, 1996, with the cumulative total return index of the Nasdaq Stock Market
(US Companies) (the "Nasdaq Composite Index") and the index of the Nasdaq
Electronic Component Stocks over the same period. The Stock Performance Graph
assumes that the value of the investment in the Company's Common Stock and
each of the comparison groups was $100 on September 22, 1995 and assumes the
reinvestment of dividends. The Company has never declared a dividend on its
Common Stock. The stock price performance depicted in the graph below is not
necessarily indicative of future price performance.
[STOCK PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GSCN $100 $ 76 $ 89
Nasdaq Composite Index 100 101 124
Nasdaq Electronic Component Stocks 100 86 149
</TABLE>
CERTAIN TRANSACTIONS
In 1992, the Company's Board of Directors authorized a loan to Charles D.
Winston in the amount of $160,000 for expenses of relocation to Massachusetts,
secured by deferred income owed to Mr. Winston in a like amount. Under the
agreement, 80% of the loan was to be forgiven over a period of four years,
providing Mr. Winston remains an employee of the Company. If he should
terminate employment, the remaining balance ($32,000 at December 31, 1996) is
due upon termination. In each of 1996, 1995, 1994 and 1993, $32,000 of the
loan was forgiven and charged as compensation expense.
11
<PAGE>
EMPLOYMENT AGREEMENTS
Agreement with Mr. Winston
In its letter offering employment to Mr. Winston dated August 19, 1988, the
Company has agreed, should Mr. Winston be terminated without cause or as a
result of a substantial change in voting control of the Company, to continue
paying him salary and medical benefits for as long as needed to find a new
occupation with essentially the same or greater annual remuneration, for up to
twelve months following termination.
Agreement with Mr. Montagu
The Company has entered into a non-competition agreement, dated February 28,
1985, which provides that, in the event of termination for any reason, Mr.
Montagu will not compete with the Company in any manner for a period of one
year. The agreement further provides that, upon termination of Mr. Montagu's
employment for any reason other than death, including resignation, the Company
will make monthly severance payments for twelve months or until October 31,
1998, whichever is the shorter period; such payments to equal the average
monthly salary during the six months preceding notice of termination, plus
customary benefits.
Agreement with Dr. Brosens
The Company has entered into a non-competition agreement, dated February 28,
1985, which provides that, in the event of termination for any reason, Dr.
Brosens will not compete with the Company in any manner for a period of one
year. The agreement further provides that, upon termination of Dr. Brosens'
employment for any reason other than death, including resignation, the Company
will make monthly severance payments for twelve months or until October 31,
1998, whichever is the shorter period; such payments to equal the average
monthly salary during the six months preceding notice of termination, plus
customary benefits.
Agreement with Mr. Verderber
In its letter offering employment to Mr. Verderber, dated April 8, 1991 the
Company has agreed, should Mr. Verderber be terminated involuntarily, to
continue paying him salary and benefits for a period of six months following
termination.
REPORT OF BENEFICIAL OWNERSHIP
Based solely on a review of reports furnished to the Company or written
representations from the Company's directors and executive officers, the
Company believes that all reports required to be filed pursuant to Section
16(a) of the Securities Exchange Act of 1934 were filed timely by the
Company's directors, executive officers and ten percent holders during the
1996 fiscal year.
12
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP served as the Company's independent auditors in 1996 and
has been appointed by the Board to continue as the Company's independent
auditors for the Company's fiscal year ending December 31, 1997. In the event
that ratification of this selection of auditors is not approved by a majority
of the shares of Common Stock voting at the Annual Meeting in person or by
proxy, the Board will review its future selection of auditors. The Board of
Directors recommends a vote FOR ratification of the appointment of Arthur
Andersen LLP as the independent auditors for the Company for the fiscal year
ending December 31, 1997.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting. The representative will have an opportunity to make a
statement and is expected to be available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly
presented to the Annual Meeting, it is the intention of the persons named in
the accompanying proxy to vote, or otherwise act, in accordance with their
judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. Brokers,
custodians and fiduciaries will be requested to forward proxy soliciting
material to the owners of stock held in their names, and the Company will
reimburse them for their reasonable out-of-pocket expenses incurred in
connection with the distribution of proxy materials.
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Watertown, Massachusetts not later than October 31, 1997 for
inclusion in the proxy statement for that meeting. In order to curtail
controversy as to the date on which a proposal was received by the Company,
proponents should submit their proposals by Certified Mail-Return Receipt
Requested.
By Order of the Board of
Directors,
Pierre J. Brosens, Clerk
March 19, 1997
THE BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
13
<PAGE>
GENERAL SCANNING INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 17, 1997
The undersigned hereby appoints Jean I. Montagu, Pierre J. Brosens or Charles
D. Winston or any of them as Proxies, or a majority of them if more than one
shall vote, with full power of substitution to vote all the shares of Common
Stock which the undersigned would be entitled to vote if personally present at
the Annual Meeting of Stockholders to be held on April 17, 1997 at 10:00 a.m.
local time at the Company's offices at 500 Arsenal Street, Watertown,
Massachusetts, or any adjournments thereof, and upon any and all matters which
may properly be brought before the meeting or any adjournments thereof, hereby
revoking all former proxies.
(CONTINUED ON OTHER SIDE)
<PAGE>
A [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
1. ELECTION OF TWO CLASS II DIRECTORS TO SERVE FOR THE ENSURING THREE YEARS.
WITHHOLD
NOMINEES FOR AUTHORITY
PIERRE J. BROSONS [_] [_]
RICHARD B. BLACK [_] [_]
FOR AGAINST ABSTAIN
2. PROPOSAL TO RATIFY THE APPOINTMENT [_] [_] [_]
BY THE BOARD OF DIRECTORS OF ARTHUR
ANDERSEN LLP TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS FOR
FISCAL YEAR ENDING DECEMBER 31, 1997.
3. IN THEIR DISCRETION. THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1) AND (2) IN
ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" SUCH PROPOSALS IF THERE IS NO
SPECIFICATION.
PLEASE SIGN AND RETURN THIS PROXY PROMPTLY
______________________________ ______________________________ ___________, 1997
Signature of Stockholder Signature of Stockholder Date
NOTE: PLEASE DATE AND SIGN exactly as your name(s) appears on this Proxy
indicating, where proper, official position or representation capacity in
which you are signing. When signing executor, administrator, trustee or
guardian, give full title as such; when shares have been issued in the
name of two or more persons, all should sign.
