<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:
[X] Preliminary Proxy Statement
[ ] 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, 15/th/ 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,
15/th/ 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 [__________] 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 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
<PAGE>
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.
-2-
<PAGE>
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 Common
Beneficially Owned/(1)(2)(3)/ Stock Outstanding/(3)/
------------------ -----------------
<S> <C> <C>
Jean I. Montagu/(4)/ 1,085,890/(5)/ 8.71%
Dresdner RCM Global Investors LLC/(6)/ 1,216,600/(7)/ 9.76%
Pierre J. Brosens/(8)/ 796,797 6.40%
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) 1,578,178 12.66%
- --------
</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 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.
-3-
<PAGE>
/(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 October 6,
1997 for the month of September 1997 and in Form 144's filed with the
Securities and Exchange Commission from October 1997 to January 1998.
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 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
-4-
<PAGE>
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
Business Experience and Directorships Since Term Expires
- ------------------------------------- ----- ------------
<S> <C> <C>
NOMINEES FOR CLASS I DIRECTORS
Dorothy S. Zinberg, Ph.D., age 70 1998 1998
Lecturer and Faculty Associate
in the Center for Science and
International Affairs at the
Kennedy School of Government,
Harvard University since 1978.
Paul F. Ferrari, age 67 1969 1998
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.
Arthur R. Buckland, age 49 Not Applicable
Chairman, CP Clare Corp. since
1996; President, Chief Executive
Officer and director of CP Clare
Corp. since 1993; President and
Chief Executive Officer of Pi
Systems from 1992 to 1993;
director of Helix Technologies
Corporation.
CONTINUING DIRECTORS:
CLASS III DIRECTORS
Charles D. Winston, age 56 1989 1999
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.
Woodie C. Flowers, Ph.D., age 54 1991 1999
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.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Principal Occupation, Director
Business Experience and Directorships Since Term Expires
- ------------------------------------- ----- ------------
CLASS II DIRECTORS
<S> <C> <C>
Pierre J. Brosens, Sc.D., age 64 1968 2000
Chairman of the Board of Directors
of the Company since 1997; Vice
Chairman, Clerk and Treasurer from
1968 to 1997.
Richard B. Black, age 64 1992 2000
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.
</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 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.
-6-
<PAGE>
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 $2,000.
The Company has granted to non-employee directors warrants for the
purchase of shares of Common Stock, which warrants are outstanding and
exercisable as follows:
<TABLE>
<CAPTION>
Number of Shares
Underlying Unexercised
Warrants at December 31, 1997
Date of Exercise Price -------------------------------
Director Warrant Per Share Exercisable Unexercisable
- ------------------- -------- -------------- ---------------- -------------
<S> <C> <C> <C> <C>
Paul F. Ferrari 11/26/91 2.36 12,500 0
5/15/96 20.75 2,000 0
5/16/97 13.00 2,000 0
James R. Turner 5/15/96 20.75 2,000 0
5/16/97 13.00 2,000 0
Woodie C. Flowers 11/26/91 2.36 22,500 0
9/15/92 2.50 2,500 0
Richard B. Black 5/15/96 20.75 2,000 0
5/16/97 13.00 2,000 0
------ -
Total 49,500 0
====== =
</TABLE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table provides certain information for the fiscal years
ended December 31, 1997, 1996 and 1995 concerning the compensation paid or
accrued for (i) the Company's Chief Executive Officer, (ii) the other four most
highly compensated executive officers who were serving as executive officers of
the Company at the end of the fiscal year ended December 31, 1997, and (iii) two
additional individuals who served as executive officers of the Company during
1997 but were not serving as executive officers at the end of the fiscal year
ended December 31, 1997.
<TABLE>
<CAPTION>
All Other
Other Annual Options Compensation
Name and Principal Position Year Salary($)/(1)/ Bonus($)/(2)/ Compensation ($)/(3)/ Granted (#) ($)/(4)/
- --------------------------- ---------- -------------- ------------- --------------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Charles D. Winston 1997 268,383 221,740 6,400 25,000 53,000/(5)(6)/
President and Chief 1996 230,753 160,280 6,000 14,650 32,000/(5)/
Executive Officer 1995 219,764 149,243 6,000 0 32,000/(5)/
Jean I. Montagu 1997 53,693 39,544 6,400 0 138,400/(7)/
Former Chairman, 1996 178,801 94,413 6,000 0 0
Board of Directors 1995 171,515 97,769 6,000 0 0
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
All Other
Other Annual Options Compensation
Name and Principal Position Year Salary($)/(1)/ Bonus($)/(2)/ Compensation ($)/(3)/ Granted (#) ($)/(4)/
- --------------------------- ---------- -------------- ------------- --------------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Pierre J. Brosens 1997 149,482 100,349 6,400 0 90,198/(8)/
Chairman, 1996 178,801 94,413 6,000 0 0
Board of Directors 1995 171,515 97,769 6,000 0 0
Victor H. Woolley 1997 146,190 84,320 6,400 9,600 0
Vice President & 1996 140,070 53,428 6,000 0 0
Chief Financial 1995/(9)/ 50,777 28,798 690 50,000 0
Officer
Gregory S. Baletsa 1997 137,871 67,000 6,400 8,400 0
Vice President and 1996 130,528 39,846 6,000 3,000 0
General Manager 1995 125,298 44,784 6,000 0 0
Recorder Products
Division
Thomas R. Swain 1997 153,645 53,550 10,610 10,000 0
Vice President and 1996/(10)/ 60,581 4,914 1,390 10,000 0
General Manager,
View Engineering
Division
Joseph A. Verderber 1997 154,611 52,200 6,400 8,400 0
Vice President and 1996 144,208 16,688 6,000 5,000 0
General Manager, 1995 135,182 124,202 6,000 0 0
Laser Systems
Division
</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.
/(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 for 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
-8-
<PAGE>
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 resigned his employment with the Company 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) $85,698
in severance payments made by the Company to Dr. Brosens under the non-
competition agreement described below under "Termination of Employment
and Change in Control Arrangements--Agreement with Dr. Brosens".
/(9)/ Victor H. Woolley joined General Scanning in August 1995.
/(10)/ Thomas R. Swain joined General Scanning in August 1996.
STOCK OPTION GRANTS IN FISCAL YEAR 1997
The following table provides information regarding options granted under
the Company's 1992 Stock Option Plan during the fiscal year ended December 31,
1997 to the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term
---------------------------------------------------------- -------------------------------
Number Percentage
of Shares of Total
Underlying Options Granted Exercise
Options to Employees in Price Per Expiration
Name Granted(#) Fiscal Year (%) Share ($) 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>
-9-
<PAGE>
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
Shares Underlying Unexercised In-the-Money Options
Acquired on Value Options at FY-End (#) at FY-End($)/(2)/
Name Exercise (#) Realized ($)/(1)/ Exercisable/Unexercisable Exercisable/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.
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
-10-
<PAGE>
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.
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.
<TABLE>
<S> <C> <C> <C> <C>
9/22/95 12/31/95 12/31/96 12/31/97
Company 100 76 89 130
Nasdaq Composite Index 100 101 124 153
Nasdaq Electronic Component Stocks 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.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
Agreements 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.
During 1997 the Company purchased a life insurance policy for 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.
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. See "Compensation of Executive Officers" above for
information on amounts paid to Mr. Montagu under the non-competition agreement
since his resignation 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'
-12-
<PAGE>
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. See "Compensation of Executive Officers" above for
information on amounts paid to Dr. Brosens under the non-competition agreement
since his resignation in 1997.
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).
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.
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.
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
-13-
<PAGE>
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 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.
-14-
<PAGE>
THE 1992 OPTION PLAN
In 1992, the Company adopted the 1992 Option Plan designed to qualify as an
incentive stock option plan under Section 422A of the Code. The Board of
Directors has appointed a Compensation Committee of the Board of Directors to
administer the 1992 Option Plan, including the selection of the individuals to
receive options and the terms thereof. The 1992 Option Plan permits the grant
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 if the option price thereunder is at least 110%
of the market value of the Common Stock on the grant date. The term of stock
options granted under the 1992 Option Plan may not exceed 10 years.
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>
Optionee Number 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
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
Optionee Number of Options
- ----------------------------------------------------------------------- ------------------------------------
<S> <C>
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>
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. Currently, the maximum individual 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. 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.
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
(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 stock 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.
-16-
<PAGE>
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 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.
-17-
<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.
-18-
<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. at the offices of Bingham Dana LLP, 150 Federal Street, Boston,
Massachusetts, or any adjournment thereof, and upon any and all matters which
may properly be brought before the meeting or any adjournments thereof, hereby
revoking all former proxies.
1. ELECTION OF THREE CLASS I DIRECTORS TO SERVE FOR THE ENSUING THREE YEARS.
WITHHOLD
FOR AUTHORITY
Dorothy S. Zinberg, Ph.D. [_] [_]
Paul F. Ferrari [_] [_]
Arthur R. Buckland [_] [_]
2. PROPOSAL 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.
FOR AGAINST ABSTAIN
[_] [_] [_]
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.
FOR AGAINST ABSTAIN
[_] [_] [_]
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.
FOR AGAINST ABSTAIN
[_] [_] [_]
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
<PAGE>
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.
Dated____________________________, 1998
----------------------------------
Signature of Shareholder
----------------------------------
Signature of Shareholder
PLEASE DATE AND SIGN exactly as your name(s)
appears below 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.
-2-
<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,
----- ------- -- --- ----
subject, however, to the provisions of Section 15. The number of shares
- ------- -------
purchased pursuant to the exercise of Options granted under the Plan
<PAGE>
-3-
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 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
-------- -- ------
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
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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.
