<PAGE>
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or (S)240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
General Scanning Inc.
(Name of Registrant as Specified In Its Charter)
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 16, 1998
The Annual Meeting of Stockholders of General Scanning Inc., a Massachusetts
corporation (the "Company"), will be held at the offices of Bingham Dana LLP,
150 Federal Street, 15th Floor, Boston, Massachusetts, on Thursday, April 16,
1998 at 10:00 a.m., local time, to consider and act upon the following
matters:
1. To elect three Class I directors to serve for the ensuing three years.
2. To amend the Restated Articles of Organization of the Company to
increase the authorized shares of the Company's common stock from
15,000,000 to 30,000,000 shares.
3. To amend the Company's 1992 Stock Option Plan to increase the number
of shares of common stock available for grant from a total of 1,000,000 to
2,000,000 shares.
4. 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, 1998.
5. 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 2, 1998 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,
VICTOR H. WOOLLEY, Clerk
Watertown, Massachusetts
March 12, 1998
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 16, 1998
This Proxy Statement, dated March 12, 1998, 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 Bingham Dana LLP, 150
Federal Street, 15th Floor, Boston, Massachusetts, on April 16, 1998 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 and to elect the nominees of the Board of Directors to serve as Class
I directors of the Company. 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 2, 1998, 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 12,470,933 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, 1997 is
being mailed to stockholders with the mailing of this Notice and Proxy
Statement on or about March 12, 1998.
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 outstanding or 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 a matter requiring a majority of the shares
1
<PAGE>
represented and entitled to vote, but has the same legal effect as a vote
"against" a matter requiring a majority of the shares outstanding and entitled
to vote. Neither an abstention nor a broker non-vote will be treated as voting
on a matter requiring a plurality of shares represented and voting.
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. The affirmative vote of the holders of at least a
majority of the shares of Common Stock outstanding and entitled to vote is
required for approval of the proposed increase in the authorized shares of the
Company. 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, 1998,
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 whose compensation is described below under "Compensation of Executive
Officers"; 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) OUTSTANDING(3)
---------------- -------------
<S> <C> <C>
Jean I. Montagu(4)............................. 1,250,190(5) 10.03%
Dresdner RCM Global Investors LLC(6)........... 1,216,600(7) 9.76%
Pierre J. Brosens(8)........................... 780,297 6.26%
Charles D. Winston(8).......................... 226,149 1.80%
Gregory S. Baletsa(8).......................... 55,380 *
Thomas R. Swain(8)............................. 54,964 *
Joseph A. Verderber(8)......................... 58,396 *
Victor H. Woolley(8)........................... 55,120 *
Paul F. Ferrari(8)............................. 109,000 *
James R. Turner(8)............................. 29,000 *
Woodie C. Flowers(8)........................... 29,400 *
Richard B. Black(8)............................ 9,000 *
Dorothy S. Zinberg, Ph.D.(8)................... 2,000 *
Arthur R. Buckland(8).......................... 0 *
All directors, nominees for director and
executive officers as a group (14 persons).... 1,561,678 12.53%
</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
2
<PAGE>
and investment power with respect to the shares listed. Applicable share of
ownership is based on 12,467,383 shares of Common Stock, excluding treasury
shares, outstanding as of January 31, 1998 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) The amounts listed include the following shares of Common Stock that may
be acquired within 60 days of January 31, 1998 through the exercise of
stock options or warrants: Mr. Winston, 110,860 shares; Mr. Baletsa,
55,380 shares; Mr. Swain, 4,000 shares; Mr. Verderber, 16,680 shares; Mr.
Woolley, 31,920 shares; Mr. Ferrari, 16,500 shares; Mr. Turner, 4,000
shares; Mr. Black, 4,000 shares; Dr. Zinberg, 2,000 shares and all
directors and officers as a group, 289,040 shares.
(3) Shares of Common Stock subject to options and warrants that are currently
exercisable within 60 days of January 31, 1998 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.
(4)Address: 76 Walnut Place, Brookline, MA 02146
(5) The amount listed is based on shareholdings disclosed by Mr. Montagu in a
Form 4 filed with the Securities and Exchange Commission on February 9,
1998 for the month of January 1998. 105,000 of the shares indicated in the
table are held by Mr. Montagu indirectly through a corporation. Some of
the shares indicated in the table may be held jointly by Mr. Montagu and
his wife.
(6) Address: Four Embarcadero Center, San Francisco, CA 94111
(7) The amount listed is based on shareholdings reported by Dresdner RCM
Global Investors LLC ("Dresdner") in a Schedule 13G filed with the
Securities and Exchange Commission and dated January 30, 1998. In the
Schedule 13G Dresdner reports that it and certain of its affiliates hold
(i) with sole voting power 1,034,200 shares, (ii) with shared voting power
zero shares, (iii) with sole dispositive power 1,211,600 shares, and (iv)
with shared dispositive power 5,000 shares.
(8) Address: c/o General Scanning Inc., 500 Arsenal Street, Watertown, MA
02172
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, 2000 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
three Class I directors elected at the Annual Meeting will be elected to serve
until the 2001 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 Dorothy S.
Zinberg, Ph.D., Paul F. Ferrari and Arthur R. Buckland as Class I directors,
unless authority to vote for the election of any or all three of the
3
<PAGE>
nominees is withheld by marking the proxy to that effect. Mr. Ferrari is
currently a Class I director of the Company.
Each of the nominees has indicated his or her willingness to serve, if
elected; however, if any 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 below sets forth, for each nominee as a Class I director and for
each director of the Company whose term continues after the Annual Meeting,
his or her name and age, his or her positions and offices with the Company,
his or her principal occupations and business experience for the past five
years, the names of other publicly-held companies of which he or she is a
director, the year since which he or she has served as a director of the
Company, if applicable, and the year his or her 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 I DIRECTORS
Dorothy S. Zinberg, Ph.D., age 70
Lecturer and Faculty Associate in the Center for Science and
International Affairs at the Kennedy School of Government,
Harvard University since 1978................................ 1998 1998
Paul F. Ferrari, age 67
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
Arthur R. Buckland, age 49
Chairman, CP Clare Corp. since 1996; President, Chief
Executive Officer and director of CP Clare Corp. since 1993;
President and Chief Executive Officer of Four Pi Systems from
1992 to 1993; President of Lex Electronics PLC from 1991 to
1992; Senior Vice President of Schlumberger from 1982 to
1991; director of Helix Technologies Corporation............. Not Applicable
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION, DIRECTOR TERM
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE EXPIRES
- ------------------------------------- -------- -------
<S> <C> <C>
CONTINUING DIRECTORS:
CLASS III DIRECTORS
Charles D. Winston, age 56
President and Chief Executive Officer of the Company since
September 1988; management consultant from 1986 to 1988;
Officer of Savin Corporation in 1986; Senior Vice President
of Federal Express Corporation from 1981 to 1985............. 1989 1999
Woodie C. Flowers, Ph.D., age 54
Pappalardo Professor of Mechanical Engineering at MIT;
Professor of Teaching Innovation at the MIT School of
Engineering 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
CLASS II DIRECTORS
Pierre J. Brosens, Sc.D., age 64
Chairman of the Board of Directors of the Company since 1997;
Vice Chairman, Clerk and Treasurer from 1968 to 1997......... 1968 2000
Richard B. Black, age 64
President of Oak Technology, Inc. since 1998; Chairman of the
Board of ECRM Incorporated since 1983; General Partner of KBA
Partners, L.P. since 1987; director of Oak Technology, Inc.,
Morgan Group, Inc., Gabelli Funds, Inc., Benedetto Gartland,
Inc., Grand Eagle Companies and Cycle Ops Products, Inc. .... 1992 2000
</TABLE>
BOARD AND COMMITTEE MEETINGS
The Board held nine meetings during the fiscal year ended December 31, 1997.
During the fiscal year ended December 31, 1997, 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
three times during the fiscal year ended December 31, 1997. The Audit
Committee members were during 1997 and are currently Messrs. Woodie Flowers,
James Turner and Paul Ferrari (Chairman).
The Board of Directors has a Compensation Committee which approves executive
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
5
<PAGE>
bonus programs and the 1992 Stock Option Plan. The Compensation Committee met
eight times during the fiscal year ended December 31, 1997. The Compensation
Committee members were during 1997 and are currently Messrs. Paul Ferrari and
Richard Black (Chairman).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each of the Compensation Committee members, Messrs. Paul Ferrari and Richard
Black, is, and was during the fiscal year ended December 31, 1997, an outside
member of the Board.
DIRECTOR COMPENSATION
During the fiscal year ended December 31, 1997, 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.
The Board may, on a case by case basis, authorize the Company to pay
additional fees to directors for services provided to the Company.
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 $2,000.
The Company has granted to non-employee directors warrants for the purchase
of shares of Common Stock, which warrants are outstanding and exercisable as
follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING
UNEXERCISED WARRANTS
AT DECEMBER 31, 1997
DATE OF EXERCISE PRICE -------------------------
DIRECTOR WARRANT PER SHARE EXERCISABLE UNEXERCISABLE
- -------- -------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Paul F. Ferrari............... 11/26/91 2.36 12,500 0
5/15/96 20.75 2,000 0
5/16/97 13.00 2,000 0
James R. Turner............... 5/15/96 20.75 2,000 0
5/16/97 13.00 2,000 0
Woodie C. Flowers............. 11/26/91 2.36 22,500 0
9/15/92 2.50 2,500 0
Richard B. Black.............. 5/15/96 20.75 2,000 0
5/16/97 13.00 2,000 0
------ ---
Total....................... 49,500 0
====== ===
</TABLE>
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table provides certain information for the fiscal years ended
December 31, 1997, 1996 and 1995 concerning the compensation paid or accrued
for (i) the Company's Chief Executive Officer, (ii) the other four most highly
compensated executive officers who were serving as executive officers of the
Company at the end of the fiscal year ended December 31, 1997, and (iii) two
additional individuals who served as executive officers of the Company during
1997 but were not serving as executive officers at the end of the fiscal year
ended December 31, 1997.
<TABLE>
<CAPTION>
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION GRANTED COMPENSATION
POSITION YEAR ($)(1) ($)(2) ($)(3) (#) ($)(4)
------------------ ---- ------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charles D. Winston 1997 268,383 221,740 6,400 25,000 53,000(5)(6)
President and Chief
Executive Officer 1996 230,753 160,280 6,000 14,650 32,000(5)
1995 219,764 149,243 6,000 0 32,000(5)
Jean I. Montagu 1997 53,693 39,544 6,400 0 138,400(7)
Former Chairman, Board
of Directors 1996 178,801 94,413 6,000 0 0
1995 171,515 97,769 6,000 0 0
Pierre J. Brosens 1997 149,482 100,349 6,400 0 90,198(8)
Chairman, Board of
Directors 1996 178,801 94,413 6,000 0 0
1995 171,515 97,769 6,000 0 0
Victor H. Woolley 1997 146,190 84,320 6,400 9,600 0
Vice President & Chief
Financial 1996 140,070 53,428 6,000 0 0
Officer 1995(9) 50,777 28,798 690 50,000 0
Gregory S. Baletsa 1997 137,871 67,000 6,400 8,400 0
Vice President and
General Manager 1996 130,528 39,846 6,000 3,000 0
Recorder Products
Division 1995 125,298 44,784 6,000 0 0
Thomas R. Swain 1997 153,645 53,550 10,610 10,000 0
Vice President and
General Manager, 1996(10) 60,581 4,914 1,390 10,000 0
View Engineering
Division
Joseph A. Verderber 1997 154,611 52,200 6,400 8,400 0
Vice President and
General Manager, 1996 144,208 16,688 6,000 5,000 0
Laser Systems Division 1995 135,182 124,202 6,000 0 0
</TABLE>
- --------
(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 fiscal
year as shown in the table pursuant to the Company's officer bonus plan
approved by the Compensation Committee of the Board of Directors, in
accordance with a formula based upon performance of the Company as a
whole and the relevant operating units.
7
<PAGE>
(3) Amounts shown are the Company's contributions made under the Company's
employee benefit plan pursuant to Section 401(k) of the Internal Revenue
Code, and, in respect of 1995, the Company's contribution under the
General Scanning Inc. Employee Stock Ownership Plan. The amount shown for
Mr. Swain also includes an auto allowance of $5,941 in 1997 and $1,130 in
1996.
(4) The Company provides a group life insurance policy for all of its
employees. The Company does not believe that the amount of allocable
premiums paid under the policy is material.
(5) 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, as amended, the loan was to be forgiven over
the five year period ending December 31, 1997. Amounts shown for 1997,
1996 and 1995 include $32,000 of the loan amount forgiven and charged as
compensation expense.
(6) During 1997 the Company purchased a life insurance policy on the life of
Charles D. Winston with a death benefit of $1,250,000. The Company and
Mr. Winston have entered into a split dollar compensation agreement under
which one half of the death benefit will be paid to the beneficiary
designated by Mr. Winston and one half of the death benefit will be paid
to the Company. The split dollar compensation agreement also provides for
Mr. Winston to bear a share of each annual premium under the policy. Upon
the surrender or cancellation of the policy the Company will receive an
amount equal to the premium payments made by the Company and not
reimbursed by Mr. Winston (net of loans and withdrawals by the Company),
and Mr. Winston will receive any remaining proceeds from the policy. The
amount shown for 1997 includes the $21,000 premium paid by the Company
during 1997 without reduction for any portion of the premium to be borne
by Mr. Winston.
(7) Jean I. Montagu's employment with the Company ended effective April 17,
1997. The amount shown for 1997 represents severance payments made by the
Company to Mr. Montagu under the non-competition agreement described
below under "Termination of Employment and Change in Control
Arrangements--Agreement with Mr. Montagu".
(8) Pierre J. Brosens resigned his employment with the Company effective
September 30, 1997, although he continues to serve as Chairman of the
Board of Directors. The amount shown for 1997 represents (i) $4,500 in
directors fees paid to Dr. Brosens after his resignation and (ii) $85,698
in severance payments made by the Company to Dr. Brosens under the non-
competition agreement described below under "Termination of Employment
and Change in Control Arrangements--Agreement with Dr. Brosens".
(9) Victor H. Woolley joined General Scanning in August 1995.
(10) Thomas R. Swain joined General Scanning in August 1996.
8
<PAGE>
STOCK OPTION GRANTS IN FISCAL YEAR 1997
The following table provides information regarding options granted under the
Company's 1992 Stock Option Plan during the fiscal year ended December 31,
1997 to the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SHARES PERCENTAGE OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN FISCAL PRICE PER EXPIRATION ----------------------
NAME GRANTED(#) YEAR(%) SHARE($) DATE 5%($) 10%($)
---- ---------- ------------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles D. Winston...... 25,000 8.7 13.375 06/04/07 210,287 532,908
Jean I. Montagu......... 0 0 0 0
Pierre J. Brosens....... 0 0 0 0
Victor H. Woolley....... 9,600 3.4 13.375 06/04/07 80,746 204,634
Gregory S. Baletsa...... 8,400 2.9 13.375 06/04/07 70,652 179,054
Thomas R. Swain......... 10,000 3.5 9.125 03/19/07 57,390 145,430
Joseph A. Verderber..... 8,400 2.9 13.375 06/04/97 70,652 179,054
</TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997 AND FISCAL YEAR END OPTION
VALUES
The following table sets forth information regarding stock options exercised
by executive officers named in the Summary Compensation Table during fiscal
1997 and the value of unexercised options held by them as of December 31,
1997.
<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...... 226,000 $3,942,358 110,860/28,790 $1,533,560/$ 97,278
Jean I. Montagu......... 0 0 0/0 0/0
Pierre J. Brosens....... 0 0 0/0 0/0
Victor H. Woolley....... 0 0 31,920/27,680 $ 314,940/$234,760
Gregory S. Baletsa...... 3,750 $ 83,438 55,380/8,520 $ 793,442/$ 30,110
Thomas R. Swain......... 2,496 $ 19,778 4,000/14,496 $ 9,000/$ 84,055
Joseph A. Verderber..... 40,000 $1,025,600 16,680/9,720 $ 204,580/$ 32,790
</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,
1997, 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.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors was composed of two
outside directors during 1997. The compensation for the Company's executive
officers, including the grant of stock options, is set by the Compensation
Committee of the Board of Directors.
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 financial targets which would result in
significant improvement in the Company's operating results. The Company also
takes care to 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 Compensation Committee of the Board of Directors sets the
annual base salary for executives. The Compensation Committee reviews with
respect to each executive historical compensation levels, evaluations of past
performance and assessments of expected future contributions. 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 1997 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. Therefore, the long-term value realized by
executives through option exercises can be directly linked to increases in
stockholder value.
10
<PAGE>
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
December 31, 1997, the Chief Executive Officer earned a cash bonus of
$221,740, which represented 45% of his total cash compensation (salary plus
cash bonus). This amount reflects an increase in operating profit of 32% and
an increase in diluted income per common share of 39%, both in 1997 over 1996
excluding a one-time charge of acquired in-process research and development
related to the purchase of Reel-Tech, Inc. in 1997 and expenses related to the
merger with View Engineering, Inc. in 1996.
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 1997 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
11
<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, 1997, 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.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG GSCN, NASDAQ COMPOSITE INDEX AND NASDAQ ELECTRONIC COMPONENT STOCKS
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period NASDAQ NASDAQ ELECTRONIC
(Fiscal Year Covered) GSCN COMPOSITE COMPONENT INDEX
- --------------------- ---------- --------- -----------------
<S> <C> <C> <C>
Measurement Pt- 9/22/95 $100 $100 $100
FYE 12/31/95 $ 76 $101 $ 86
FYE 12/31/96 $ 89 $124 $149
FYE 12/31/97 $130 $153 $157
</TABLE>
<TABLE>
<CAPTION> 9/22/95 12/31/95 12/31/96 12/31/97
------- -------- -------- --------
<S> <C> <C> <C> <C>
GSCN $100 $ 76 $ 89 $130
Nasdaq Composite Index 100 101 124 153
Nasdaq Electronic Component Index 100 86 149 157
</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, as amended, the loan was to be forgiven over the five year period
ended December 31, 1997. In each of 1997, 1996, 1995, 1994 and 1993 $32,000 of
the loan amount was forgiven and charged as compensation expense. There was no
balance remaining at December 31, 1997.
12
<PAGE>
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
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. Mr. Montagu's employment with the Company ended effective
April 17, 1997 and Mr. Montagu is entitled to receive severance payments until
April 1998. See "Compensation of Executive Officers" above for information on
amounts paid to Mr. Montagu under the non-competition agreement since his
employment with the Company ended in 1997.
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. Dr. Brosens resigned his employment with the Company
effective September 30, 1997 and is entitled to receive severance payments
until September 1998. See "Compensation of Executive Officers" above for
information on amounts paid to Dr. Brosens under the non-competition agreement
since his resignation in 1997.
Agreement with Mr. Winston
During 1997 the Company purchased a life insurance policy on the life of Mr.
Winston with a death benefit of $1,250,000. The Company and Mr. Winston have
entered into a split dollar compensation agreement under which one half of the
death benefit will be paid to the beneficiary designated by Mr. Winston and
one half of the death benefit will be paid to the Company. The split dollar
compensation agreement will terminate upon termination of Mr. Winston's
employment with the Company for reasons other than his death. Upon any such
termination and payment from the insurer to the Company of an amount equal to
the aggregate premiums paid by the Company and not reimbursed by Mr. Winston
under the agreement, Mr. Winston will have all remaining right, title, and
interest in the policy, including any accumulated cash value.
Key Employee Retention Agreements
On May 1, 1997, the Company's Board of Directors adopted a Key Officer and
Manager Retention Program to assist the Company in retaining the commitment of
key officers and managers. Pursuant to the program, the Company entered into
Key Employee Retention Agreements ("Retention Agreements") with each of the
executive officers for whom compensation information is provided above (other
than Dr. Brosens and Mr. Montagu).
13
<PAGE>
The Retention Agreements have a term of one year, renewable for successive
one-year terms, unless a Change in Control, as defined, occurs during any such
one-year period, in which case the term extends for a period of not less than
two years after the last day of the month in which such Change in Control
occurs. Each Retention Agreement provides that, in the event the participating
employee's employment with the Company is terminated, or the participating
employee resigns, under certain conditions following a Change in Control, the
Company will make a lump sum severance payment to the employee. Subject to
various adjustments provided in the Retention Agreements, the severance
payment will equal four times the sum of (i) the employee's annual salary
immediately prior to either the Change in Control or the event that resulted
in termination of the employee's employment, whichever is higher, plus (ii)
the employee's average annual bonus for the three fiscal years preceding
either the Change in Control or the event that resulted in termination of the
employee's employment, whichever is higher. In addition, the Company will make
a lump sum cash payment to the employee equal to the estimated cost of
providing life, disability, accident and health insurance benefits to the
employee for a period of four years.
The payments under an employee's Retention Agreement may be substantially
reduced in the event of a Change in Control that is approved or recommended by
a majority of certain "continuing" members of the Board of Directors. The
Company has agreed to make additional payments to offset certain taxes to
which an employee may be subject with respect to payments under a Retention
Agreement.
A Change in Control consists of any of (i) certain changes in the
composition of the Company's Board of Directors, (ii) the acquisition by
certain persons of beneficial ownership of 20% or more of the outstanding
voting securities of the Company, (iii) a change in control of the Company
required to be reported on specified forms under the Exchange Act, or (iv)
adoption of a plan of liquidation of the Company or an agreement to sell
substantially all of the Company's assets.
Severance Agreements
The Company has entered into a severance agreement with each of the
executive officers for whom compensation information is provided above. In
general, these agreements provide that the Company will continue to pay salary
and provide benefits to a terminated executive officer for up to twelve months
following the termination of his or her employment with the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 Exchange Act were filed timely by the Company's directors,
executive officers and ten percent holders during the 1997 fiscal year.
14
<PAGE>
PROPOSED AMENDMENT TO THE COMPANY'S RESTATED ARTICLES OF ORGANIZATION
TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
On January 28, 1998, the Board of Directors of the Company unanimously
adopted a resolution recommending that the Company's Restated Articles of
Organization be amended to increase the total number of shares of Common Stock
which the Company shall have authority to issue from 15,000,000 shares, par
value $0.01 per share, to 30,000,000 shares, par value $0.01 per share. The
Board of Directors believes that the adoption of the proposed amendment would
be advantageous to the Company and its stockholders.
INCREASE IN NUMBER OF SHARES OF COMMON STOCK
If approved by the stockholders, the amendment will authorize the Company to
issue an additional 15,000,000 shares of Common Stock, par value $0.01 per
share. The Restated Articles of Organization of the Company currently
authorize the issuance of 15,000,000 shares of Common Stock, $0.01 par value
per share, and 1,000,000 shares of Preferred Stock, par value $0.01 per share.
As of January 31, 1998, there were a total of 12,467,383 shares of Common
Stock outstanding or reserved for issuance, and 366,073 shares held by the
Company as treasury stock. This total number of shares includes shares
reserved for issuance under the Company's 1981 and 1992 Stock Option Plans and
1995 Directors' Warrant Plan. As of the date of this Proxy Statement, there
are no shares of Preferred Stock issued or outstanding.
The proposed amendment would not alter the terms of the Company's Common
Stock or the rights of holders of such Common Stock. Holders of Common Stock
have no preemptive or other rights to subscribe for additional shares from the
Company. The authorization of additional shares of Common Stock will not, by
itself, have any effect on the rights of the holders of existing Common Stock.
Depending on the circumstances, however, issuance of additional shares of
Common Stock may dilute the voting power and equity ownership of existing
stockholders. Issuance of additional shares of Common Stock may also have a
dilutive effect on earnings per share depending upon the specific events
associated with a particular transaction.
APPRAISAL RIGHTS
Under the applicable provisions of the Massachusetts Business Corporation
Law, the Company's stockholders have no appraisal rights with respect to the
proposed amendment.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes that the number of authorized shares of
Common Stock should be increased by 15,000,000 shares to provide additional
shares for use for such corporate purposes as may be approved by the Board of
Directors, which is authorized under the Company's By-laws to issue shares of
authorized stock without further stockholder approval. Such corporate purposes
may include raising capital through the sale of Common Stock (or securities
convertible into Common Stock), participation in joint ventures and other
strategic relationships, stock dividends or stock splits, issuance under the
terms of employee benefit plans such as stock option plans, and the
acquisition of other businesses or properties. The Company has no present
agreements, understandings or arrangements for issuance of the additional
shares of Common Stock that would be authorized
15
<PAGE>
by the proposed amendment. The Board of Directors will determine when to issue
any of the additional shares to be authorized by the proposed amendment, as
well as the terms of any such issue. The Board believes that the availability
of additional authorized shares of Common Stock would afford the Company
further flexibility in considering and implementing future transactions
including, among other things, transactions of the types described in this
paragraph.
The Board of Directors unanimously recommends a vote FOR the proposed
amendment.
PROPOSED AMENDMENT TO THE COMPANY'S 1992 STOCK OPTION PLAN
TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
AVAILABLE UNDER THE PLAN
On January 28, 1998, the Board of Directors of the Company unanimously
adopted a resolution recommending that the number of shares of Common Stock
available for grant under the Company's 1992 Stock Option Plan (the "1992
Option Plan") be increased from a total of 1,000,000 to 2,000,000 shares.
THE 1992 OPTION PLAN
In 1992, the Company adopted the 1992 Option Plan designed to qualify as an
incentive stock option plan under Section 422 of the Code. The Compensation
Committee of the Board of Directors administers the 1992 Option Plan,
including the selection of the individuals to receive options and the terms
thereof. The 1992 Option Plan permits the grant to employees, directors,
consultants and advisors to any of the Company and its subsidiaries, either as
incentive stock options (if granted to an employee) or as nonstatutory
options, of options to purchase up to an aggregate of 1,000,000 shares of
Common Stock. As of December 31, 1997, options have been granted and are
outstanding under the 1992 Option Plan for a total of 657,416 shares of Common
Stock, all of which were granted as incentive stock options with the exception
of a 50,000 option grant to an officer in 1995, of which options for 265,175
shares were then exercisable. An aggregate of 175,611 shares are available for
future option grants. The reported closing price of the Company's Common Stock
underlying the options granted under the 1992 Option Plan on the Nasdaq Stock
Market on February 24, 1998 was $19 5/8 per share.
Under the 1992 Option Plan, the exercise price of incentive stock options
must be not less than 100% of the fair market value of the Common Stock at the
date of grant, and the aggregate fair market value (determined at the time of
grant) of shares issuable pursuant to such options which first become
exercisable in any calendar year by an employee or officer may not exceed
$100,000. An incentive stock option may be granted to a person who at the time
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company only if the option price thereunder is at
least 110% of the market value of the Common Stock on the grant date. Stock
options granted under the 1992 Option Plan generally will expire on the tenth
anniversary of grant (two days after the tenth anniversary of grant in the
case of nonstatutory options) or 30 days following any earlier termination of
association with the Company (90 days in the event of termination due to
death) and become vested, i.e., exercisable, as determined in the discretion
of the Committee at grant.
16
<PAGE>
As of December 31, 1997, approximately 908 employees, 5 directors of the
Company who are not executive officers of the Company and 7 executive officers
of the Company were eligible to participate in the 1992 Option Plan. Options
outstanding under the 1992 Option Plan have terms ending from 2002 to 2007.
Options outstanding under the 1992 Option Plan generally vest over a period of
4 years from the date of grant.
The following table sets forth the number of options to purchase Common
Stock granted under the 1992 Option Plan through December 31, 1997 to each of:
(i) the executive officers whose compensation is described under "Compensation
of Executive Officers" above, (ii) all current executive officers as a group,
(iii) all current directors who are not executive officers as a group, (iv)
each nominee for election as a director and (v) all employees, including all
current officers who are not executive officers, as a group:
OPTIONS GRANTED UNDER THE 1992 OPTION PLAN
<TABLE>
<CAPTION>
NUMBER
OPTIONEE OF OPTIONS
- -------- ----------
<S> <C>
Charles D. Winston................................................. 116,650
President and Chief Executive Officer
Jean I. Montagu.................................................... 0
Former Chairman, Board of Directors
Pierre J. Brosens.................................................. 0
Chairman, Board of Directors
Victor H. Woolley.................................................. 59,600
Vice President and Chief Financial Officer
Gregory S. Baletsa................................................. 11,400
Vice President and General Manager, Recorder Products Division
Thomas R. Swain.................................................... 20,992
Vice President and General Manager, View Engineering Division
Joseph A. Verderber................................................ 13,400
Vice President and General Manager, Laser Systems Division
Paul F. Ferrari.................................................... 0
Nominee for election as a director
Dorothy S. Zinberg................................................. 0
Nominee for election as a director
Arthur R. Buckland................................................. 0
Nominee for election as a director
All current executive officers as a group.......................... 315,042
All current directors who are not executive officers as a group.... 0
All employees, including all current officers who are not executive
officers, as a group.............................................. 546,662
</TABLE>
17
<PAGE>
TAX CONSEQUENCES
An employee who is granted an incentive stock option will generally
recognize no income or gain for tax purposes on the grant or exercise of the
incentive stock option. However, the excess of the fair market value of the
shares on the date of exercise (or, if later and provided the employee does
not elect to have any applicable vesting requirements disregarded for tax
purposes, the date the shares become transferable or are no longer subject to
a substantial risk of forfeiture (i.e., "vested" for purposes of Section 83 of
the Code)) over the exercise price is included in alternative minimum taxable
income for purposes of the "alternative minimum tax" provisions of the Code.
If stock purchased pursuant to the exercise of an incentive stock option is
sold more than two years from the date the option is granted and more than one
year from the date of exercise, the gain realized on the sale of the stock
(the difference between the exercise price of the option and the amount
realized on the sale) will be treated as long-term capital gain rather than as
ordinary income. Should the employee dispose of the shares before the later of
those two dates, any gain realized will be treated as ordinary income to the
extent it does not exceed the gain which the employee would have realized had
he sold the shares immediately upon exercising the option. Currently, the
maximum individual marginal tax rate for ordinary income is 39.6% and for
capital gain is 28% if the holding period is at least one year and 20% if the
holding period is at least 18 months.
The 1992 Option Plan is intended to be an incentive stock option plan within
the meaning of Section 422 of the Code, but not all options granted thereunder
are required to be or to remain incentive options. Nonstatutory options are
taxed in accordance with Section 83 of the Code and regulations thereunder. An
employee granted a nonstatutory option will not recognize any income on grant
but will recognize income at the date of exercise or, if later and provided
the employee does not elect to have any vesting restrictions disregarded for
tax purposes, when the shares purchased pursuant to the option become vested
for purposes of Section 83 of the Code. The income recognized (i.e., the
difference between the exercise price of the option and the fair market value
of the shares at the time the employee recognizes the income) will be ordinary
income to the employee.
In general, the Company can deduct as a business expense for tax purposes
only an amount equal to the ordinary income, if any, recognized by an employee
upon his sale of Common Stock purchased pursuant to an incentive stock option,
as well as the ordinary income recognized by an optionee with respect to the
exercise of a nonstatutory option. Under current accounting practice,
generally no charge to the expense of the Company has resulted from the grant
or exercise of an incentive stock option or a nonstatutory option granted
pursuant to the 1992 Option Plan because the exercise price of the stock
options has equaled or exceeded the fair market value of the Common Stock on
the date of grant.
APPRAISAL RIGHTS
Under the applicable provisions of the Massachusetts Business Corporation
Law, the Company's stockholders have no appraisal rights with respect to the
proposed amendment.
18
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Company is dependent upon a number of scientific, management and
production personnel. The loss of the services of one or more key individuals
may have a material adverse effect on the Company. The Company's success will
also depend on its ability to attract and retain other highly qualified
scientific, management and production personnel. The Board of Directors
believes that the proposed increase in the number of shares of Common Stock
authorized for issuance under the 1992 Option Plan will assist the Company in
retaining and attracting key officers and managers.
Options under the 1992 Option Plan are granted by the Compensation Committee
of the Board of Directors, which has not yet granted any options relating to
the additional shares of Common Stock to be authorized under the Plan pursuant
to the proposed amendment. Accordingly, it is not possible at the date of this
Proxy Statement to determine the persons who will receive options to purchase
the additional shares to be authorized under the Plan by the proposed
amendment.
The Board of Directors unanimously recommends a vote FOR the proposed
increase in the number of shares available for grant under the 1992 Option
Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP served as the Company's independent auditors in 1997 and
has been appointed by the Board to continue as the Company's independent
auditors for the Company's fiscal year ending December 31, 1998. 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, 1998.
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.
19
<PAGE>
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Watertown, Massachusetts not later than October 31, 1998 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,
Victor H. Woolley, Clerk
March 12, 1998
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.
20
<PAGE>
APPENDIX A
GENERAL SCANNING INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 16, 1998
The undersigned hereby appoints Charles D. Winston and Victor H. Woolley or
either of them as Proxies with full power of substitution to vote all the shares
of common stock of General Scanning Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of the Company to be held on April 16, 1998 at 10:00 a.m. local
time at the offices of Bingham Dana LLP, 150 Federal Street, Boston,
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>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
GENERAL SCANNING INC.
APRIL 16, 1998
Please Detach and Mail in the Envelope Provided
[X] PLEASE MARK
YOUR VOTES
AS IN THIS
EXAMPLE.
<TABLE>
<S> <C> <C> <C>
FOR WITHHOLD
ALL NOMINEES AUTHORITY NOMINEES:
1. ELECTION OF THREE CLASS (EXCEPT AS FOR ALL Dorothy S. Zinberg, Ph.D.
I DIRECTORS TO SERVE FOR MARKED TO THE NOMINEES Paul F. Ferrari
THE ENSUING THREE YEARS. CONTRARY LISTED AT Arthur R. Buckland
BELOW) RIGHT
[_] [_]
</TABLE>
INSTRUCTIONS: To withhold your vote for any individual nominee,
write that nominee(s) name on the line provided below.
- -----------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
2. PROPOSAL TO AMEND THE FOR AGAINST ABSTAIN
RESTATED ARTICLES OF [_] [_] [_]
ORGANIZATION OF THE
COMPANY TO INCREASE THE
AUTHORIZED SHARES OF THE
COMPANY'S COMMON STOCK
FROM 15,000,000 TO
30,000,000 SHARES.
3. PROPOSAL TO AMEND THE
COMPANY'S 1992 STOCK [_] [_] [_]
OPTION PLAN TO INCREASE
THE NUMBER OF SHARES OF
COMMON STOCK AVAILABLE FOR
GRANT FROM A TOTAL OF
1,000,000 TO 2,000,000
SHARES.
4. PROPOSAL TO RATIFY THE
APPOINTMENT OF ARTHUR [_] [_] [_]
ANDERSEN LLP TO SERVE AS
THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31,
1998.
</TABLE>
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1), (2), (3)
AND (4) IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" SUCH PROPOSALS IF
THERE IS NO SPECIFICATION.
PLEASE SIGN AND RETURN THIS PROXY PROMPTLY
<TABLE>
<S> <C> <C>
- ---------------------------- ------------------------ Date _________ , 1998
Signature of Stockholder Signature of Stockholder
</TABLE>
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 as 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.
<PAGE>
APPENDIX B
GENERAL SCANNING, INC.
1992 Stock Option Plan
----------------------
1. Definitions. As used in this 1992 Stock Option Plan of General Scanning,
-----------
Inc., the following terms shall have the following meanings:
Code means the Internal Revenue Code of 1986, as amended.
----
Committee means a committee comprised of two or more directors of the Company,
---------
appointed by the Board of Directors of the Company, responsible for the
administration of the Plan, as provided in Section 4. The entire Board of
Directors of the Company may serve as the Committee, if the Board of Directors
so elects.
Company means General Scanning, Inc., a Massachusetts corporation.
-------
Employers means the Company and its Related Corporations. Employer means any
--------- --------
one of the Employers.
Grant Date means the date on which an Option is granted, as specified in
----- ----
Section 7.
Incentive Option means an Option that satisfies the requirements of Section
--------- ------
422 of the Code.
Market Value means, with respect to a certain date, the fair market value of a
------ -----
share of Stock on such date as determined by the Committee.
Nonstatutory Option means an Option that will not be treated as an Incentive
------------ ------
Option.
Option means an option to purchase shares of the Stock granted under the Plan,
------
which can be either an Incentive Option or a Nonstatutory Option.
Option Agreement means an agreement between the Company and an Optionee,
------ ---------
setting forth the terms and conditions of an Option.
Optionee means a person eligible to receive an Option, as provided in Section
--------
6, to whom an Option shall have been granted under the Plan.
Plan means this 1992 Stock Option Plan of the Company.
----
<PAGE>
-2-
Related Corporation means, with respect to the Company, any corporation which
------- -----------
is a parent corporation of the Company, as defined in Section 425(e) of the
Code, or a subsidiary corporation of the Company, as defined in Section 425(f)
of the Code.
Stock means the Common Stock, $1.00 par value per share, of the Company.
-----
2. Purpose. The Plan is intended to encourage ownership of the Stock by
-------
employees, directors, advisers and consultants of the Employer and is intended
to provide additional incentive for them to promote the success of the business
of the Employers. The Plan is intended to be an incentive stock option plan
within the meaning of Section 422 of the Code, but not all Options granted
hereunder are required to be or to remain Incentive Options.
3. Term of the Plan. Options under the Plan may be granted on or after
---- -- --- ----
January 1, 1992 but not later than December 31, 2001.
4. Administration. The Plan shall be administered by the Committee. No
--------------
member of the Committee shall have received an Option during service on the
Committee or during the one-year period preceding such service. Subject to the
provisions of the Plan, the Committee shall have complete authority, in its
discretion, to make the following determinations with respect to each Option to
be granted by the Company to any employee of the Employers: (a) whether the
Option will be an Incentive Option or a Nonstatutory Option; (b) the key
employee to receive the Option; (c) the time of granting the Option; (d) the
number of shares subject to the Option; (e) the option price for any
Nonstatutory Option; (f) the option period for any Option; and (g) the
restrictions, if any, to be imposed upon transfer of shares of the Stock
purchased by the Optionee upon the exercise of the Option. The Committee shall
have complete authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the terms and provisions of
the respective Option Agreements (which need not be identical), and to make all
other determinations necessary or advisable for the administration of the Plan.
The Committee's determination on the matters referred to in this Section 4 shall
be conclusive.
5. Stock Subject to the Plan. The Plan covers 50,000 shares of Stock,
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subject, however, to the provisions of Section 15. The number of shares
- ------- -------
purchased pursuant to the exercise of Options granted under the Plan
<PAGE>
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and the number of shares subject to outstanding Options granted under the Plan
- ---
shall be charged against the shares covered by the Plan; but shares subject to
Options which terminated without being exercised shall not be so charged. Shares
to be issued upon the exercise of Options granted under the Plan may be either
authorized but unissued shares or shares held by the Company in its treasury. If
any Option expires or terminates for any reason without having been exercised in
full, the shares not purchased thereunder shall again be available for Options
thereafter to be granted.
6. Eligibility. An Incentive Option may be granted only to an employee of
-----------
one or more of the Employers. A Nonstatutory Option may be granted to an
employee or a director of, or a consultant or advisor to, one or more of the
Employers. Any person who, within the meaning of Section 422(b)(6) of the Code,
is deemed to own stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (or of a Related Corporation) shall
be eligible to receive an Incentive Option only if the option price thereunder
is at least 110% of the Market Value of the Stock on the Grant Date.
7. Time of Granting Options. The granting of Options shall take place at
---- -- -------- -------
the time specified by the Committee. Only if expressly so provided by the
Committee shall the Grant Date be the date on which an Option Agreement shall
have been duly executed and delivered by the Company and the Optionee.
8. Option Price. The option price under each Incentive Option shall not be
------ -----
lower than the Market Value on the Grant Date.
9. Maximum Size of Incentive Options. The aggregate Market Value of Stock
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for which Incentive Options become exercisable by an Optionee for the first time
in any calendar year shall not exceed $100,000. To the extent that such
aggregate Market Value exceeds $100,000, those options intended to be Incentive
Options shall be treated as Nonstatutory Options. For purposes of this Section
9, all Incentive Options granted to an Optionee by the Company shall be
considered in the order in which they were granted, and the Market Value shall
be determined as of the Grant Dates.
10. Exercise of Option. An Optionee may exercise an Option, to the extent
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vested, at any time after the Option vests in whole or in part. If the Option
is an Incentive Option, it will expire if not exercised before the tenth
<PAGE>
-4-
anniversary of the Grant Date, and if the Option is a Nonstatutory Option, it
will expire if not exercised before the day which is two days after the tenth
anniversary of the Grant Date. The Optionee shall give written notice of
exercise to the chief financial officer of the Company. The Optionee shall
enclose a personal check equal to the option price or shares of stock with a
Market Value on the purchase date equal to the option price. The Company shall
deliver or cause to be delivered to the Optionee a certificate for the number of
shares then being purchased by him. If any law or applicable regulation of the
Securities and Exchange Commission or other body having jurisdiction in the
premises shall require the Company or the Optionee to take any action in
connection with shares being purchased upon exercise of the option, exercise of
the option and delivery of the certificate or certificates for such shares shall
be postponed until completion of the necessary action, which shall be taken
promptly by the Company or the Optionee, as applicable. Each outstanding Option
shall be reduced by one share for each share of the Stock purchased upon
exercise of the Option.
11. Purchase for Investment; Registration. Unless the shares to be issued
-------- --- ---------- ------------
upon exercise of an Option have been effectively registered under the Securities
Act of 1933 as now in force or hereafter amended, the Company shall be under no
obligation to issue any shares covered by any Option unless the person who
exercises the Option, in whole or in part, shall give a written representation
to the Company, satisfactory in form and substance to its counsel and upon which
the Company may reasonably rely, that he or she is acquiring such shares as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares. Each certificate representing a share of Stock
issued pursuant to the exercise of an Option may bear a reference to any
investment representation made in accordance with this Section 11 and to the
fact that no registration statement has been filed with the Securities and
Exchange Commission in respect to that Stock.
12. Withholding; Notice of Disposition of Stock Prior to Expiration of
----------- ------ -- ----------- -- ----- ----- -- ---------- --
Specified Holding Period.
- --------- ------- ------
12.1. Whenever shares are to be issued upon exercise of an Option,
the Company shall have the right to require, as a condition to the exercise
of the Option, that the Optionee remit to the Company an amount sufficient
to satisfy Federal, state, local or other withholding tax requirements
(whether so required to secure for the Company an otherwise available tax
deduction or otherwise) if and to the extent
<PAGE>
-5-
required by law prior to the delivery of any certificate or certificates
for such shares.
12.2. The Company may require as a condition to the issuance of
shares covered by any Incentive Option that the person exercising the
Option give a written representation to the Company, satisfactory in form
and substance to its counsel and upon which the Company may reasonably
rely, that he or she will report to the Company any disposition of those
shares prior to the expiration of the holding periods specified by Section
422(a)(1) of the Code. If and to the extent that the disposition imposes
upon the Company federal, state, local or other withholding tax
requirements, or any such withholding is required to secure for the Company
an otherwise available tax deduction, the Company shall have the right to
require that the person making the disposition remit to the Company an
amount sufficient to satisfy those requirements.
13. Transferability of Options. Options shall not be transferable,
--------------- -- -------
otherwise than by will or the laws of descent and distribution, and may be
exercised during the life of the Optionee only by the Optionee.
14. Termination of Employment or Service. If an Optionee's employment by
----------- -- ---------- -- -------
one or more of the Employers terminates for any reason, including without
limitation by reason of voluntary severance, involuntary severance, retirement,
transfer or in connection with a transaction which causes his or her employer
corporation to cease to be a Related Corporation of the Company, but not by
reason of death, the Option shall expire as of the close of business on the
thirtieth day after such termination, and the Option may be exercised until the
date of expiration, to the extent exercisable on the date of termination. If an
Optionee dies, any Option held by that Optionee may be exercised by the
Optionee's executor or administrator at any time within the shorter of the
option period or ninety days after the date of death, but only to the extent
exercisable at death. Military or sick leave shall not be deemed termination of
employment; provided that it does not exceed the longer of ninety days or the
period during which the absent employee's re-employment rights are guaranteed by
statute or by contract.
15. Adjustment of Number of Shares. Each Option Agreement shall provide
---------- -- ------ -- ------
that in the event of any stock dividend payable in the Stock or any split-up or
contraction in the number of shares of the Stock occurring after the date of the
agreement and prior to the exercise in full of the Option, the
<PAGE>
-6-
number of shares for which the Option may thereafter be exercised shall be
proportionately adjusted. Each Option Agreement shall also provide that in case
of any reclassification or change of outstanding shares of the Stock or in case
of any consolidation or merger of the Company with or into another company or in
case of any sale or conveyance to another company or entity of the property of
the Company as a whole, shares of stock or other securities equivalent in kind
and value to those shares which a holder would have received if he or she had
held the full number of shares of the Stock subject to the Option immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance and had continued to hold those shares (together with all other
shares, stock and securities thereafter issued in respect thereof) to the time
of the exercise of the Option shall thereupon be subject to the Option. Each
Option Agreement shall further provide that upon dissolution or liquidation of
the Company, the Option shall terminate, but the Optionee (if at the time in the
employ of the Company or any of its subsidiaries) shall have the right,
immediately prior to such dissolution or liquidation, to exercise the Option to
the full extent not theretofore exercised. No fraction of a share shall be
purchasable or deliverable, but in the event any adjustment of the number of
shares covered by the Option shall cause such number to include a fraction of a
share, such fraction shall be adjusted to the nearest smaller whole number of
shares. In the event of changes in the outstanding Common Stock by reason of any
stock dividend, split-up, contraction, reclassification, or change of
outstanding shares of the Stock of the nature contemplated by this Section 15,
the number of shares of the Stock available for the purpose of the Plan as
stated in Section 5 shall be correspondingly adjusted.
16. Limitation of Rights in Option Stock. The Optionee shall have no
---------- -- ------ -- ------ -----
rights as stockholder in respect of shares as to which his or her Option shall
not have been exercised, certificates issued and delivered and payment as herein
provided made in full, and shall have no rights with respect to such shares not
expressly conferred by this Plan.
17. Stock Reserved. The Company shall at all times during the term of the
----- --------
Options reserve and keep available such number of shares of the Stock as will be
sufficient to satisfy the requirements of this Plan and shall pay all other fees
and expenses necessarily incurred by the Company in connection therewith.
18. Termination and Amendment of Plan. The Board of Directors of the
----------- --- --------- -- ----
Company may at any time terminate the Plan or make such
<PAGE>
-7-
modifications of the Plan as it shall deem advisable. No termination or
amendment of the Plan may, without the consent of the Optionee to whom any
Option shall theretofore have been granted, adversely affect the rights of that
Optionee under that Option.
