UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.              )

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		o		Soliciting Material Pursuant to §240.14a-12

Gerber Scientific, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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August 22, 2008

 

Dear Shareholder:

 

You are cordially invited to attend the 2008 Annual Meeting of Shareholders of Gerber Scientific, Inc., which will be held at 2:30 p.m., local time, on Thursday, September 25, 2008, at our corporate headquarters in South Windsor, Connecticut. The Notice of Annual Meeting and Proxy Statement that accompany this letter describe the matters to be voted on at the meeting. In addition, our management will make a presentation on the year’s operating results and recent developments affecting your company. We hope you will be able to attend and participate in the meeting.

 

Whether or not you plan to attend, it is important that your shares be represented and voted at the meeting. As a shareholder of record, you may vote your shares by submitting your proxy by proxy card, over the Internet or by telephone. You may also vote your shares in person at the Annual Meeting.

 

On behalf of your Board of Directors, I would like to thank you for your continued support and interest in Gerber Scientific.

 

Sincerely,

 

 

Marc T. Giles
President and Chief Executive Officer

GERBER SCIENTIFIC, INC.
83 GERBER ROAD WEST
SOUTH WINDSOR, CONNECTICUT 06074

 

 

Notice of Annual Meeting of Shareholders

to be held on September 25, 2008 at 2:30 p.m.

 

The Annual Meeting of Shareholders of Gerber Scientific, Inc. will be held on Thursday, September 25, 2008, at 2:30 p.m., local time, at the corporate headquarters of Gerber Scientific, 83 Gerber Road West, South Windsor, Connecticut. The Annual Meeting has been called for the following purposes:

 

1. to consider and vote upon the election of the seven nominees to the Board of Directors named in the accompanying Proxy Statement;

 

2. to consider and vote upon the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal 2009;

 

3. to consider and vote upon an amendment to the Gerber Scientific, Inc. 2006 Omnibus Incentive Plan to increase by 1,500,000 shares the number of shares of the Company’s common stock available for issuance under the plan; and

 

4. to transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

 

Only shareholders of record at the close of business on August 8, 2008 will be entitled to notice of, and to vote at, the Annual Meeting or any adjournment or postponement thereof.

 

Your vote is very important to us. Whether or not you plan to attend the meeting in person, your shares should be represented and voted. If you wish to vote without attending the Annual Meeting, you should complete, sign, date and promptly return the enclosed proxy card in the postage-paid envelope that we have included for your convenience. Alternatively, you may submit your proxy through the Internet or by telephone as indicated on the enclosed proxy card. No postage is required if you mail your proxy in the United States. Even if you plan to attend the Annual Meeting, we would appreciate receiving your voting instructions before that date. Submitting your proxy card or your proxy through the Internet or by telephone before the Annual Meeting will not preclude you from voting in person at the Annual Meeting if you should decide to attend.

 

All shareholders are invited to attend the Annual Meeting. No ticket is required for admittance. If you have any questions regarding this Notice of Annual Meeting or if you have special needs which require assistance, please call us at 1-800-811-4707, extension 8206, and we will be happy to assist you.

 

By Order of the Board of Directors,

 

 

 

William V. Grickis, Jr.
Secretary

 

South Windsor, Connecticut

August 22, 2008

GERBER SCIENTIFIC, INC.
83 GERBER ROAD WEST
SOUTH WINDSOR, CONNECTICUT 06074

 

Annual Meeting of Shareholders
to be held on September 25, 2008 at 2:30 p.m.

 

 

PROXY STATEMENT

 

 

GENERAL INFORMATION

 

Gerber Scientific, Inc. (“Gerber Scientific” or the “Company”) is furnishing this Proxy Statement in connection with the solicitation of proxies by the Company’s Board of Directors (the “Board”) for use at the Annual Meeting of Shareholders to be held on Thursday, September 25, 2008, at 2:30 p.m., local time, at the Company’s corporate headquarters, 83 Gerber Road West, South Windsor, Connecticut, 06074. For your convenience, we have included directions to our corporate headquarters in Appendix A to this Proxy Statement.

 

This Proxy Statement and the enclosed proxy card are first being mailed to the Company’s shareholders on or about August 22, 2008.

 

The Annual Meeting has been called for shareholders (1) to consider and vote upon the election of seven nominees to the Board, (2) to consider and vote upon a proposal to ratify the appointment of the Company’s independent registered public accounting firm for fiscal 2009, (3) to consider and vote upon an amendment to the Gerber Scientific, Inc. 2006 Omnibus Incentive Plan (the “Plan”) to increase by 1,500,000 shares the number of shares of the Company’s common stock available for issuance under the Plan and (4) to transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

 

Proxy Solicitation

 

The Company will pay the cost of this proxy solicitation. In addition to the solicitation of proxies by use of the mails, officers and other employees of the Company and its subsidiaries may solicit proxies by personal interview, telephone, facsimile, e-mail and telegram. None of these individuals will receive compensation for such services, which will be performed in addition to their regular duties. The Company will make arrangements with brokerage firms, banks, custodians, nominees and other fiduciaries to forward proxy solicitation materials for shares held of record by them to the beneficial owners of such shares. The Company will reimburse such persons for their reasonable out-of-pocket expenses in forwarding such materials. The Company will use the services of Georgeson Inc. to aid in the solicitation of proxies at a fee of $11,500 plus reimbursement of out-of-pocket expenses. The total cost to the Company of such solicitation is not expected to exceed $20,000. The Company has agreed to indemnify Georgeson Inc. against any losses, claims, damages, liabilities or expenses such firm may incur in providing these services.

 

A list of shareholders entitled to notice of the Annual Meeting will be open to the examination of any shareholder during regular business hours beginning on August 25, 2008 at the Company’s corporate headquarters, 83 Gerber Road West, South Windsor, Connecticut, and at the time and place of the Annual Meeting during the whole time of the Annual Meeting.

Voting Procedures

 

 

 

 

Annual Report to Shareholders

 

A copy of the Company’s annual report to shareholders for the 2008 fiscal year accompanies this Proxy Statement. The Company has filed an annual report on Form 10-K for fiscal year 2008 with the SEC, which forms a part of the 2008 annual report to shareholders. Shareholders separately may obtain, free of charge, a copy of the 2008 Form 10-K, without exhibits, by writing to Gerber Scientific, Inc., 83 Gerber Road West,

South Windsor, Connecticut 06074, Attention: Corporate Secretary. The 2008 Form 10-K is also available through the Company’s website at www.gerberscientific.com. The annual report to shareholders and the 2008 Form 10-K are not proxy soliciting materials.

 

Delivery of Annual Meeting Documents

 

Pursuant to SEC rules, we intend to send a single annual report to shareholders and Proxy Statement to any household where two or more shareholders reside unless we have received contrary instructions from the shareholders. This practice eliminates unnecessary mailings delivered to your home and helps to reduce the Company’s expenses. Each shareholder will continue to receive a separate proxy card.

 

If your household receives a single set of Annual Meeting documents for this year, and you would prefer to receive the duplicate copy, please contact the Corporate Secretary, either by calling (860) 644-1551 or by writing to the Corporate Secretary, care of Gerber Scientific, 83 Gerber Road West, South Windsor, Connecticut 06074. The Company will provide you with a duplicate copy promptly. If you share an address with another shareholder of the Company and you would prefer to receive a separate set of Annual Meeting documents in the future, or both of you would prefer to receive only a single set of the Company’s Annual Meeting documents, please contact the Corporate Secretary at the above telephone number or address.

SECURITY OWNERSHIP

 

The following tables present information regarding beneficial ownership of the Company’s common stock as of June 30, 2008. This information has been presented in accordance with the rules of the SEC and is not necessarily indicative of beneficial ownership for any other purpose. Under SEC rules, beneficial ownership of a class of capital stock as of any date includes any shares of that class as to which a person, directly or indirectly, has or shares voting power or investment power as of that date and also any shares as to which a person has the right to acquire sole or shared voting or investment power as of or within 60 days after that date through the exercise of any stock option, warrant or other right, without regard to whether such right expires before the end of such 60-day period or continues thereafter. If two or more persons share voting power or investment power with respect to specific securities, all of such persons may be deemed to be the beneficial owners of such securities. Information with respect to persons other than the holders listed in the tables below that share beneficial ownership with respect to the securities shown is set forth following the applicable table.

 

There were 23,839,163 shares of common stock outstanding as of June 30, 2008.

 

Principal Shareholders

 

The following table presents, as of June 30, 2008, information based upon the Company’s records and filings with the SEC regarding each person, other than a Director, Director nominee or executive officer of the Company, known to the Company to be the beneficial owner of more than 5% of the common stock:

 

 

The percentage of beneficial ownership as to any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power as of or within 60 days after that date, by the sum of the number of shares outstanding as of that date plus the number of shares as to which such person has the right to acquire voting or investment power as of or within 60 days after that date. Consequently, the denominator for calculating beneficial ownership percentages may be different for each beneficial owner.

 

The information concerning Zesiger Capital Group LLC is based upon a Schedule 13G filed with the SEC on February 11, 2008. Zesiger Capital Group LLC reports that it has sole voting power with respect to 1,583,500 of the reported shares and sole investment power with respect to all of the reported shares. Zesiger Capital Group LLC disclaims beneficial ownership of such shares on the basis that such shares are held in discretionary accounts managed by it.

The information concerning Mario J. Gabelli and affiliates is based upon an amendment to Schedule 13D filed with the SEC on December 5, 2007. In addition to Mr. Gabelli, each of the following entities that Mr. Gabelli controls or for which he acts as chief investment officer is a reporting person on the Schedule 13D/A: GGCP, Inc. (“GGCP”); GAMCO Investors, Inc. (“GAMCO Investors”); Gabelli Funds, LLC (“Gabelli Funds”); GAMCO Asset Management, Inc. (“GAMCO”); Gabelli Advisers, Inc. (“Gabelli Advisers”); Gabelli Securities, Inc. (“GSI”); Gabelli & Company, Inc.; MJG Associates, Inc.; Gabelli Foundation, Inc. (“Foundation”); and LICT Corporation. According to the Schedule 13D/A, the Gabelli Funds have beneficial ownership of 526,500 of the reported shares, GAMCO has beneficial ownership of 1,396,914 of the reported shares and Gabelli Advisers has beneficial ownership of 10,000 of the reported shares. Mr. Gabelli is deemed to have beneficial ownership of the shares owned beneficially by each of the foregoing entities. GSI is deemed to have beneficial ownership of the shares beneficially owned by Gabelli & Company, Inc. GAMCO Investors and GGCP are deemed to have beneficial ownership of the shares owned beneficially by each of the foregoing persons other than Mr. Gabelli and the Foundation.

 

The information concerning FMR LLC is based upon a Schedule 13G filed with the SEC on February 13, 2008. FMR LLC reports that it is a parent holding company and has sole voting power with respect to 843,090 of the reported shares and sole power to dispose of all of the reported shares. Fidelity Management & Research Company (“Fidelity”), a wholly-owned subsidiary of FMR LLC, is the beneficial owner of 570,600 of the reported shares as a result of its status as an investment adviser to certain investment companies holding shares of the Company’s common stock. Edward C. Johnson III and FMR LLC have control of Fidelity and have sole power to dispose of the 570,600 shares reported as beneficially owned by Fidelity. In addition, Pyramis Global Advisors Trust (“Pyramis”), an indirect wholly-owned subsidiary of FMR LLC, is the beneficial owner of 960,490 of the reported shares as a result of its status as investment manager of institutional accounts holding shares of the Company’s common stock. Edward C. Johnson III and FMR LLC control Pyramis and have sole power to dispose of 960,490 shares and sole power to vote 843,090 shares reported as beneficially owned by Pyramis.

 

The information concerning Dimensional Fund Advisors LP is based upon an amendment to Schedule 13G filed with the SEC on February 6, 2008. Dimensional Fund Advisors LP reports that it is an investment adviser registered under the Investment Advisers Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940 and serves as investment manager to certain other commingled group trusts and separate accounts. Dimensional Fund Advisors LP reports that, in its role as investment adviser or manager, it possesses investment and/or voting power over all of the reported shares, but that all of the shares shown are owned by the investment companies, trusts and separate accounts and that it disclaims beneficial ownership of such securities.

 

The information concerning Royce & Associates, LLC is based upon an amendment to Schedule 13G filed with the SEC on January 30, 2008. Royce & Associates, LLC reports that it has sole voting and investment power with respect to all of the reported shares.

 

The information concerning Barclays Global Investors, NA (“Barclays NA”) is based upon a Schedule 13G filed with the SEC on February 5, 2008. The shares of common stock shown as beneficially owned by Barclays NA include shares that are reported as held by the following entities in trust accounts for the economic benefit of the beneficiaries of those accounts: Barclays NA; Barclays Global Fund Advisors; Barclays Global Investors, Ltd.; Barclays Global Investors Japan Trust and Banking Company Limited; Barclays Global Investors Japan Limited; Barclays Global Investors Canada Limited; Barclays Global Investors Australia Limited; and Barclays Global Investors (Deutschland) AG. Barclays NA reports that each of the foregoing entities has the sole voting and investment power with respect to the shares reported as held by that entity.

 

Investment in Gerber Scientific by Directors and Executive Officers

 

The following table presents, as of June 30, 2008, information regarding the beneficial ownership of the Company’s common stock by the following persons:

 

 

 

 

 

 

The percentage of beneficial ownership as to any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power as of or within 60 days after that date, by the sum of the number of shares outstanding as of that date plus the number of shares as to which such person has the right to acquire voting or investment power as of or within 60 days after that date. Consequently, the denominator for calculating beneficial ownership percentages may be different for each beneficial owner.

 

The shares shown as beneficially owned by Mr. Aiken include 12,000 shares that Mr. Aiken has the right to purchase as of or within 60 days after June 30, 2008 pursuant to the exercise of stock options and 45,109 shares deliverable to Mr. Aiken pursuant to the Gerber Scientific, Inc. Agreement for Deferment of Director Fees (the “Agreement for Deferment of Director Fees”), or deliverable to Mr. Aiken after he ceases to serve as a Director pursuant to the Gerber Scientific, Inc. Non-Employee Director’s Stock Grant Plan (the “Non-Employee Director’s Stock Grant Plan”).

 

The shares shown as beneficially owned by Mr. Arthurs include 91,766 shares that Mr. Arthurs has the right to purchase as of or within 60 days after June 30, 2008 pursuant to the exercise of stock options.

 

The shares shown as beneficially owned by Mr. Giles include 66,667 shares that Mr. Giles has the right to purchase as of or within 60 days after June 30, 2008 pursuant to the exercise of stock options.

 

The shares shown as beneficially owned by Mr. Hancock include 87,025 shares that Mr. Hancock has the right to purchase as of or within 60 days after June 30, 2008 pursuant to the exercise of stock options.

 

The shares shown as beneficially owned by Mr. Jepsen include 21,933 shares deliverable to Mr. Jepsen after he ceases to serve as a Director pursuant to the Non-Employee Director’s Stock Grant Plan.

 

The shares shown as beneficially owned by Mr. Larson include 1,667 shares that Mr. Larson has the right to purchase as of or within 60 days after June 30, 2008 pursuant to the exercise of stock options.

 

The shares shown as beneficially owned by Dr. Ledford are deliverable to Dr. Ledford after he ceases to serve as a Director pursuant to the Non-Employee Director’s Stock Grant Plan.

The shares shown as beneficially owned by Mr. Lord include 19,164 shares deliverable to Mr. Lord after he ceases to serve as a Director pursuant to the Non-Employee Director’s Stock Grant Plan.

 

The shares shown as beneficially owned by Ms. St. Mark include 12,000 shares that Ms. St. Mark has the right to purchase as of or within 60 days after June 30, 2008 pursuant to the exercise of stock options and 33,937 shares deliverable to Ms. St. Mark pursuant to the Agreement for Deferment of Director Fees or deliverable to her after she ceases to serve as a Director pursuant to the Non-Employee Director’s Stock Grant Plan.

 

The shares shown as beneficially owned by Mr. Vereen include 12,000 shares that Mr. Vereen has the right to purchase as of or within 60 days after June 30, 2008 pursuant to the exercise of stock options, 1,000 shares held of record by a trust for which Mr. Vereen serves as trustee, and 28,678 shares deliverable to Mr. Vereen after he ceases to serve as a Director pursuant to the Non-Employee Director’s Stock Grant Plan.

 

Mr. Zager terminated his employment with the Company on July 22, 2007. Accordingly, the information included above is based on the Company’s records and Mr. Zager’s filings with the SEC since that date.

 

The shares shown as beneficially owned by all Directors and executive officers as a group include a total of 391,292 shares that all Directors and executive officers as a group have the right to purchase as of or within 60 days after June 30, 2008 pursuant to the exercise of stock options and a total of 167,985 shares deliverable to Directors pursuant to the Agreement for Deferment of Director Fees or pursuant to the Non-Employee Director’s Stock Grant Plan.

 

AGENDA ITEM 1:

 

ELECTION OF DIRECTORS

 

Nominees for Election as Directors

 

As proposal 1 for the Annual Meeting, shareholders are asked to consider and vote upon the election of the seven nominees to the Board identified below.

 

The Company’s Restated Certificate of Incorporation provides that all Directors will stand for election for one-year terms ending at the Annual Meeting.

 

The Company’s Amended and Restated By-Laws provide that the Board will consist of not fewer than three or more than eleven Directors, with the actual number to be determined by Board resolution from time to time. The number of Directors currently constituting the entire Board is seven.

 

The Board has nominated Donald P. Aiken, Marc T. Giles, Edward G. Jepsen, Randall D. Ledford, John R. Lord, Carole F. St. Mark and W. Jerry Vereen as nominees for election as Directors of the Company for a one-year term, until the next Annual Meeting of Shareholders or until their respective successors are elected and qualified. Each of the nominees is an incumbent Director.

 

The nominees have indicated that they are willing and able to serve as Directors if elected. If any of such nominees should become unable or unwilling to serve, the proxies intend to vote for such substitute nominees as may be designated by the Board upon the recommendation of the Nominating and Corporate Governance Committee of the Board.

 

Approval of Nominees

 

Approval of the nominees named above requires the affirmative vote of a plurality of the votes cast at the Annual Meeting. Votes may be cast for or withheld with respect to any or all nominees. Unless authority to do so is withheld, it is the intention of the persons named in the proxy to vote such proxy for the election of each of the nominees. You may not cumulate your votes in the election of Directors.

 

The Board unanimously recommends a vote FOR the election of each of the nominees named above to serve as Directors.

 

Information About the Nominees

 

Biographical information concerning each of the nominees as of June 30, 2008 is presented below.

 

Donald P. Aiken, age 64, has served as a Director since 1997 and has served as Chairman of the Board of the Company since February 1, 2004. Mr. Aiken is retired. From August 2003 through December 2005, Mr. Aiken served as a director of ABB Lummus Global, a subsidiary of ABB Ltd., a provider of engineering, procurement and construction-related services for customers in the oil and gas, petrochemical and refining, and power industries. Mr. Aiken also served as a consultant to ABB, Inc., a provider of power and automation technologies for utility and other industrial customers, from February 2004 through December 2005. He served as President and Chief Executive Officer of ABB, Inc. from February 2001 to January 2004. Mr. Aiken serves on the board of directors of Xerium Technologies, Inc., a manufacturer and supplier of products used in the production of paper.

 

Marc T. Giles, age 52, has served as a Director and President and Chief Executive Officer of Gerber Scientific since November 2001. Mr. Giles began his career with Gerber Scientific in November 2000 as a Senior Vice President of the Company and President of Gerber Technology, Inc. Before joining Gerber Scientific, Mr. Giles spent twelve years with FMC Corp., a producer of machinery and chemicals for industry and agriculture, where he served in a number of senior positions in sales and marketing management, strategy development, mergers and acquisitions, and general management. Mr. Giles serves as a director on the boards of Lydall Inc., a provider of specialty engineered products for the thermal/acoustical and filtration/separation markets, and the Connecticut Business & Industry Association.

 

Edward G. Jepsen, age 65, has served as a Director since 2003. Mr. Jepsen is retired. Mr. Jepsen was the Executive Vice President and Chief Financial Officer of Amphenol Corporation from November 1988 until December 31, 2004. Amphenol Corporation is a manufacturer of electronic interconnect components. Mr. Jepsen is a member of the board of directors of Amphenol Corporation and is a director of and chairman

of the audit and finance committee and member of the compensation committee of ITC Holdings Corp., an investor in electricity transmission infrastructure improvements. Mr. Jepsen is Chair of the Company’s Audit and Finance Committee and serves on its Management Development and Compensation Committee.

 

Randall D. Ledford, Ph.D., age 58, has served as a Director since 2003. Dr. Ledford has served since 1997 as Senior Vice President and Chief Technology Officer of Emerson Electric Company and as President of Emerson Venture Capital. Emerson Electric is engaged principally in the worldwide design, manufacture and sale of a broad range of electrical, electromechanical and electronic products and systems. Dr. Ledford serves on the Company’s Audit and Finance Committee and its Nominating and Corporate Governance Committee.

 

John R. Lord, age 64, has served as a Director since 2003. Mr. Lord served as the non-executive chairman of Carrier Corporation from January 2000 until April 2006. Mr. Lord was President and Chief Executive Officer of Carrier Corporation from April 1995 until his retirement in January 2000. Carrier Corporation, a division of United Technologies Corp., is the world’s largest manufacturer of air conditioning, heating and refrigeration equipment. Mr. Lord currently serves as a director of Amphenol Corporation, a manufacturer of electronic interconnect components. Mr. Lord serves as Chair of the Company’s Management Development and Compensation Committee and on its Audit and Finance Committee.

 

Carole F. St. Mark, age 65, has served as a Director since 1997. Ms. St. Mark is the founder and President of Growth Management LLC, a business development and strategic management company. Before her association with Growth Management LLC, Ms. St. Mark was employed by Pitney Bowes, Inc., a provider of office equipment and services, from 1980 to 1997, during which period she served in several senior positions, including President and Chief Executive Officer of Pitney Bowes Business Services. Ms. St. Mark serves as Chair of the Company’s Nominating and Corporate Governance Committee and on its Management Development and Compensation Committee.

 

W. Jerry Vereen, age 67, has served as a Director since 1994. Mr. Vereen has served since 1976 as President of Riverside Manufacturing Company and its subsidiaries and also serves as that company’s Chairman and Chief Executive Officer. Riverside Manufacturing Company is primarily engaged in manufacturing and selling uniforms and business apparel to businesses and government agencies worldwide. Mr. Vereen serves on the board of directors of Georgia Power Company, where he also serves on the executive committee, the controls and compliance committee, and the nuclear committee, of which he is chairman. He is a past chairman and current director of the American Apparel and Footwear Association, and past chairman and current member of the board of directors of the International Apparel Federation, which is headquartered in Amsterdam, Netherlands. Mr. Vereen is also a director of the National Association of Uniform Manufacturers and Distributors. Mr. Vereen serves on the Company’s Audit and Finance Committee, Nominating and Corporate Governance Committee and Management Development and Compensation Committee.

 

Board of Directors and Committees of the Board of Directors

 

The Board currently has a standing Audit and Finance Committee, a standing Management Development and Compensation Committee, and a standing Nominating and Corporate Governance Committee. The Board held 12 meetings during the Company’s 2008 fiscal year, which ended on April 30, 2008. During fiscal 2008, each Director attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by each committee of the Board on which such Director served during the period for which such Director served.

 

Director Independence.  The Board has affirmatively determined that all of the current Directors, other than Marc T. Giles, are “independent” of the Company within the meaning of rules of the NYSE, on which the Company’s common stock is listed. For a Director to be “independent” under the NYSE rules, the Board must affirmatively determine that the Director has no material relationship with the Company, either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company. The Board has adopted a categorical independence standard. Under this standard, a Director will not fail to qualify as independent solely because the Director served as an employee of any company that has made payments to, or received payments from, the Company for property or services in an amount which in any of the last three

fiscal years does not exceed the greater of $750,000 or 2% of such other company’s consolidated gross revenues. In making its independence determinations, the Board considered the fact that, during fiscal 2008, a company with which W. Jerry Vereen is affiliated purchased goods from the Company for a total purchase price of $91,000 in transactions that were in the ordinary course of business. The Board did not consider this relationship to affect Mr. Vereen’s independence due to the relatively small monetary amounts of the transactions and the fact that the transactions were made in the ordinary course of business.

 

Consistent with the NYSE rules, the Company’s Corporate Governance Principles require the Company’s independent Directors to meet in executive session at every Board or committee meeting without any management Director or other member of management present. The Chair of the Board, who is currently Mr. Aiken, presides over each executive session.

 

Audit and Finance Committee.  The Audit and Finance Committee, which held 12 meetings during fiscal 2008, currently consists of Mr. Jepsen, who is the Chair, Dr. Ledford, Mr. Lord and Mr. Vereen. The Board has determined that each member of this committee satisfies the NYSE’s director independence standards. The Board also has determined that Edward G. Jepsen is an “audit committee financial expert,” as such term is defined in the SEC’s rules, and is independent of management within the meaning of the NYSE’s rules. This committee is responsible, among its other duties, for engaging, overseeing, evaluating and replacing the Company’s independent registered public accounting firm, pre-approving all audit and non-audit services by the independent registered public accounting firm, reviewing the scope of the audit plan and the results of the audit with management and the independent registered public accounting firm, reviewing the internal audit function, reviewing the adequacy of the Company’s system of internal accounting controls and disclosure controls and procedures, reviewing the financial statements and other financial information included in the Company’s annual and quarterly reports filed with the SEC, and exercising oversight with respect to the Company’s policies and procedures regarding adherence with legal requirements and risk management process.

 

Management Development and Compensation Committee.  The Management Development and Compensation Committee, which held nine meetings during fiscal 2008, currently consists of Mr. Lord, who is the Chair, Ms. St. Mark, Mr. Jepsen and Mr. Vereen. The Board has determined that each member of this committee satisfies the NYSE’s director independence standards.

 

The two primary purposes of the Management Development and Compensation Committee are to evaluate and develop executive talent for the Company and to conduct reviews of the Company’s executive compensation strategies and oversee the Company’s overall compensation programs.

 

The specific functions and responsibilities of the Management Development and Compensation Committee are set forth in the Committee’s charter. Under its charter, the Committee’s responsibilities include, among other things:

 

 

 

Under its charter, the Committee has the right to delegate some or all aspects of its authority and responsibilities to subcommittees of the Committee. During fiscal 2008, the Committee delegated oversight of the Company’s pension, 401(k) and nonqualified supplemental employee retirement plans to executive-led Investment and Benefits Committees. The Committee did not otherwise delegate any of its responsibilities, including its responsibilities in approving equity grants to Company employees generally.

 

As discussed in the “Compensation Discussion and Analysis” below, the CEO, Mr. Giles, annually reports to the Committee his review and evaluation of each of the other executive officers of the Company, including the named executive officers set forth in the Fiscal 2008 Summary Compensation Table below. Mr. Giles also recommends to the Committee the base salaries, or base salary increases (as the case may be), for each such executive, as well as the size of annual equity grants, if any, to be awarded to each officer. In addition, although the Committee as a whole reviews and approves the performance targets to be used each year for purposes of the Company’s annual incentive compensation plan, Mr. Giles and the Company’s Vice President, Global Human Resources collectively recommend to the Committee the “threshold” level of performance that must be reached prior to any payments under the plan, as well as the “maximum” amounts that can be earned pursuant to the plan. With respect to all of these recommendations, however, the Committee has the final review and approval. The Company’s Vice President, Global Human Resources serves as management’s liaison to the Committee and works with the Committee Chair to prepare the agendas for its regularly scheduled and, if applicable, special meetings.

 

Under the Committee’s charter, the Committee has the sole authority to retain, amend the engagement of and terminate any compensation consultant used to assist in the evaluation of CEO or executive officer compensation. As discussed in the “Compensation Discussion and Analysis” below, the Committee retained Hewitt Associates (“Hewitt”) in fiscal 2008 to conduct a peer group study to determine how the Company’s executive compensation compared with executive compensation paid by comparable businesses. At the request of the Committee, Hewitt reviewed the proxy compensation data for 21 U.S.-based peer companies, as chosen by the Committee, and adjusted all of the data to be comparable based on the Company’s revenue. As further described in the “Compensation Discussion and Analysis,” as a result of this study, the Committee asked the Vice President, Global Human Resources to propose a new equity program structure, with Hewitt providing guidance and oversight and the Committee retaining final authority for both Hewitt’s consulting services and the design of the program. In accordance with this request by the Committee, the Vice President, Global Human Resources proposed, Hewitt endorsed and the Committee approved a plan to double the executive long-term incentives over a three-year period and to implement, for members of the senior management team, a shift to grants of stock options and restricted stock, in lieu of grants of stock options only.

 

Nominating and Corporate Governance Committee.  The Nominating and Corporate Governance Committee, which held five meetings during fiscal 2008, currently consists of Ms. St. Mark, who is the Chair, Dr. Ledford and Mr. Vereen. The Board has determined that each member of this committee satisfies the NYSE’s director independence standards. This committee is responsible for recommending candidates to the Board for election to the Board and for making recommendations to the Board regarding corporate governance matters, including matters relating to Board size, membership qualifications and the composition of Board committees.

 

The written charters governing the Audit and Finance Committee, the Management Development and Compensation Committee, and the Nominating and Corporate Governance Committee, as well as the Company’s Corporate Governance Principles, are posted on the governance page of the Company’s website at www.gerberscientific.com. You may also obtain a copy of any of these documents without charge by writing to Gerber Scientific, Inc., 83 Gerber Road West, South Windsor, Connecticut 06074, Attention: Corporate Secretary.

Director Nomination Process

 

The Board has, by resolution, adopted a Director nominations policy. The purpose of the nominations policy is to describe the process by which candidates for possible inclusion in the Company’s recommended slate of Director nominees are selected. The nominations policy is administered by the Nominating and Corporate Governance Committee.

 

The Board does not currently prescribe any minimum qualifications for Director candidates. Consistent with the criteria for the selection of Directors approved by the Board, the Nominating and Corporate Governance Committee will take into account the Company’s current needs and the qualities needed for Board service, including experience and achievement in business, finance, technology or other areas relevant to the Company’s activities; reputation, ethical character and maturity of judgment; diversity of viewpoints, backgrounds and experiences; absence of conflicts of interest that might impede the proper performance of the responsibilities of a Director; independence under SEC and NYSE rules; service on other boards of directors; sufficient time to devote to Board matters; and ability to work effectively and collegially with other Board members. In the case of incumbent Directors whose terms of office are set to expire, the Nominating and Corporate Governance Committee will review such Directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any transactions of such Directors with the Company during their term. For those potential new Director candidates who appear upon first consideration to meet the Board’s selection criteria, the Nominating and Corporate Governance Committee will conduct appropriate inquiries into their background and qualifications and, depending on the result of such inquiries, arrange for in-person meetings with the potential candidates.

 

The Nominating and Corporate Governance Committee may use multiple sources for identifying Director candidates, including its own contacts and referrals from other Directors, members of management, the Company’s advisors, and executive search firms. The Nominating and Corporate Governance Committee will consider Director candidates recommended by shareholders and will evaluate such Director candidates in the same manner in which it evaluates candidates recommended by other sources. In making recommendations for Director nominees for the Annual Meeting of Shareholders, the Nominating and Corporate Governance Committee will consider any written recommendations of Director candidates by shareholders received by the Corporate Secretary of the Company not later than 120 days before the anniversary of the previous year’s Annual Meeting of Shareholders. Recommendations must include the candidate’s name and contact information and a statement of the candidate’s background and qualifications, and must be mailed to Gerber Scientific, Inc., 83 Gerber Road West, South Windsor, Connecticut 06074, Attention: Corporate Secretary.

 

The nominations policy is intended to provide a flexible set of guidelines for the effective functioning of the Company’s Director nominations process. The Nominating and Corporate Governance Committee anticipates that modifications to the nominations policy may be necessary from time to time as the Company’s needs and circumstances evolve, and as applicable legal or listing standards change. The Nominating and Corporate Governance Committee may amend the nominations policy at any time, in which case the most recently amended version of the policy will be made available on the governance page of the Company’s website at www.gerberscientific.com.

 

Director Attendance at the Annual Meeting of Shareholders

 

The Board has adopted a policy that all Directors should attend the Annual Meeting of Shareholders. All seven members of the Board at the time of the 2007 Annual Meeting of Shareholders attended that Annual Meeting.

Communications With the Board of Directors

 

The Board welcomes communications from its shareholders and other interested parties, and has adopted a procedure for receiving and addressing those communications. Interested parties may send written communications to the full Board, the non-management Directors as a group or any individual Director by addressing such communications to the attention of the Corporate Secretary at the following address: Gerber Scientific, Inc., 83 Gerber Road West, South Windsor, Connecticut 06074. The Corporate Secretary will review and forward all such communications to the intended recipient.

 

Complaint Process

 

The Company has established formal procedures for receiving and handling complaints regarding accounting, auditing and internal controls matters. The Company has a telephone hotline for employees to submit their concerns regarding violations or suspected violations of law and for reporting questionable accounting or auditing matters and other accounting, internal accounting controls or auditing matters on a confidential, anonymous basis. Employees or others may report any concerns regarding these matters by calling 1-866-384-4277, by filing a report on www.ethicspoint.com, or by writing to the addresses provided in the Company’s Policy for Handling Complaints, which is posted on the governance page of the Company’s website at www.gerberscientific.com. Any concerns regarding accounting or auditing matters reported through this process are communicated to the Chair of the Audit and Finance Committee.

 

DIRECTOR COMPENSATION

 

The Company currently has six non-employee Directors and one director, Mr. Giles, who is an employee.

 

Fees

 

Directors who are not employees of the Company receive an annual fee of $40,000 for their service on the Board. Effective on March 5, 2008, the Chair of the Audit and Finance Committee receives an additional annual fee of $5,000. In addition to their annual fees, non-employee Directors generally receive fees of $1,500 for each Board meeting attended, $1,500 for each committee meeting attended or, for any Director who serves as Chair of a committee, $3,000 for each committee meeting attended. Meeting attendance fees are paid whether attendance is in person or by conference telephone. Although the Chairman of the Board attends the committee meetings, he does not receive fees for his attendance. All fees for Board and committee service are paid in cash. Directors who are also employees of the Company receive no fees for their service on the Board. All Directors are entitled to reimbursement for their reasonable out-of-pocket travel expenditures.

 

Equity Grants

 

The Non-Employee Director’s Stock Grant Plan credits non-employee Directors annually with 5,000 shares of the Company’s common stock. One quarter of these shares, or 1,250 shares, are credited to a Director’s account on the last business day of each calendar quarter. Delivery of such shares is deferred until the Director ceases to serve as a Director. All shares are issued under the Gerber Scientific, Inc. 2006 Omnibus Incentive Plan and are fully vested upon grant.

 

Chairman’s Fee

 

Mr. Aiken serves as Chairman of the Board. In addition to receiving the compensation for service as a Director described above, Mr. Aiken receives a fee of $12,500 per month for his services as Chairman.

 

Deferrals

 

Under the Agreement for Deferment of Director Fees, each non-employee Director may elect to defer all or part of the Director’s annual cash fees and Board and committee meeting cash attendance fees until a future date selected by the Director. Until the termination of the Gerber Scientific, Inc. 1992 Non-Employee Director Stock Option Plan in August 2002, a Director could elect to have the deferral held in cash, on which interest accrues at market rates, or in shares of the common stock issued under that plan. From August 2002 until the Agreement for Deferment of Director Fees was amended in January 2006, deferred amounts were held in cash, on which interest accrued at market rates. In January 2006, the Agreement for Deferment of Director Fees was amended to provide non-employee Directors with the option, from and after January 1, 2006, to have amounts deferred held in shares of common stock or in cash, on which interest accrues at market rates. A total of 100,000 shares of common stock may be issued pursuant to the Agreement for Deferment of Director Fees to be credited to a Director’s share account established in accordance with the Agreement. These arrangements remain in effect notwithstanding the termination of the 1992 Non-Employee Director Stock Option Plan.

The following table shows the compensation paid to or earned by the non-employee Directors for fiscal 2008.

 

Fiscal 2008 Director Compensation Table

 

 

 

 

 

 

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Executive Compensation Objectives

 

The primary objective of the Gerber Scientific executive compensation program is to attract, retain and motivate high-quality talent. We expect our executives to continue the Company’s growth in revenue and earnings, and we reward them for attaining related performance goals. Each member of our senior management, which includes the five named executive officers set forth in the Fiscal 2008 Summary Compensation Table below, who are referred to as the “named executive officers,” receives a total compensation package that is primarily performance-based.

 

In addition, we structure executive compensation to:

 

 

“Total Compensation” Philosophy

 

In determining any element of a named executive officer’s compensation, we believe the Management Development and Compensation Committee, which we refer to as the “Committee,” must consider the total compensation package for our review to be effective. The total package includes salary, annual incentive compensation and long-term equity. We also consider retention-focused compensation, such as the Company’s benefits program and any compensation payable upon the executive’s termination. The elements of the Company’s executive compensation are discussed in more detail under “Elements of Our Executive Compensation Program” below.

 

Genesis of Current Executive Compensation Program

 

In 2004, we initiated a comprehensive review and redesign of the Company’s executive compensation program. We began by comparing the Company’s program to other programs within a peer group of companies. In particular, we set out to:

 

 

Although we began our review in 2004, we did not fully implement the re-designed program until the Company’s shareholders approved the Gerber Scientific, Inc. 2006 Omnibus Incentive Plan in September 2006. The Committee believes the review met each of the three key objectives set forth above, and used the results in making compensation decisions for fiscal years 2005 through 2008.

 

Fiscal 2008 Review of Executive Compensation Program and Peer Group

 

During fiscal 2008, the Committee engaged Hewitt Associates to conduct a new peer group study to determine how our executive compensation compared with the executive compensation of comparable businesses. At the Committee’s request, Hewitt reviewed proxy data for 21 U.S.-based peer companies. The Committee chose these data sources because they represent mid-sized, technology-based, manufacturing companies or divisions of larger manufacturing companies with business units comparable to those of the Company. We view many of these companies and business units as our competitors for talent. In light of some significant differences in scale among the companies, however, Hewitt adjusted all of the data to be

comparable based on Gerber Scientific’s revenue. The following 21 companies were included in the peer group for Marc T. Giles, our CEO, and our other corporate executives, including the other named executive officers:

 

 

The study was completed in the summer of 2007. The study’s primary findings concerning the Company’s executive compensation were that:

 

 

Although the Committee requested Hewitt to review the compensation paid by Gerber Scientific as compared to the market, we do not specifically “benchmark” our executive compensation or strive to pay our executive officers, including the named executive officers, at a particular level of compensation, whether by element or in total. Instead, the Committee used the information to understand what constitutes the median, or the 50^th percentile, in executive compensation, by element as well as total compensation, among the companies with which we compete for our executives, and to obtain a general understanding of current compensation practices. Other factors, as described below under “Other Considerations in Setting of Executive Compensation,” affect amounts actually paid to our executives.

 

Upon reviewing the results of the study, the Committee, the Vice President, Global Human Resources and the CEO, with regard to executives who report directly to the CEO, agreed that base pay did not need to be addressed systematically, although action with respect to individual executives might be appropriate over time. They further agreed that the annual incentive structure and target payouts were appropriate and that a combination of realistic objectives and strong performance would bring payouts into an appropriate range. The Committee asked the Vice President, Global Human Resources to propose a new equity program structure, with Hewitt providing guidance and oversight and the Committee retaining final authority for both Hewitt’s consulting services and the design of the program.

 

As a result of this request by the Committee, the Vice President, Global Human Resources proposed, Hewitt endorsed and the Committee approved a plan to double the executive long-term incentives over a three-year period. The initial grants under this program were made in December 2007. The major change from previous practice was to shift grants to members of the senior management team (consisting of executives who report directly to the CEO), including each of the named executive officers, from all stock options to a mix of stock options and restricted stock.

 

The shift toward restricted stock was consistent with the Hewitt study results. The Committee also felt that restricted stock provided greater perceived value to recipients compared to the number of stock options that could be awarded for the same total charge to earnings. Moreover, the Committee considered that restricted stock has downside risk of loss of value similar to the downside risk faced by shareholders, and that this provides for greater alignment between the interests of management and shareholders. The Committee decided, however, to maintain a significant stock option component, because this form of equity-based compensation requires an increase in the stock price to produce value for the executive, thereby creating a stronger pay for performance link.

The ultimate implementation of this three-year plan is at the Committee’s discretion and is dependent on the Company’s satisfaction of business objectives identified in the Company’s three-year business plan reviewed by the Board of Directors. If this program is fully implemented, it is currently anticipated that the program would bring the long-term compensation component of total executive compensation into line with the market, as identified in the Hewitt study.

 

Information about equity grants made to the named executive officers is provided under “Long-Term Equity Incentive Compensation” below.

 

Other Considerations in Setting of Executive Compensation

 

In addition to the peer group information described above, the Committee also considers the following when setting executive compensation:

 

 

We discuss the material considerations affecting the fiscal 2008 compensation paid to our named executive officers below.

 

Elements of Our Executive Compensation Program

 

For fiscal 2008, the Company’s executive compensation program for the named executive officers consisted of the five basic components listed below:

 

 

Base Salary

 

Generally, base salary increases reflect an individual executive’s performance and keep the executive’s base salary competitive for retention purposes. In approving base salary increases for fiscal 2008, the Committee reviewed the factors set forth above under “Other Considerations in Setting of Executive Compensation” for each named executive officer. In total, fiscal 2008 represented a good performance year, as the Company improved revenue by 11.3% and diluted earnings per share by 5.2%. In recognition of this

performance, and considering that our comprehensive executive compensation review indicated that the Company’s executive base salaries were within range of the market, the Committee approved the following:

 

 

2008 Annual Incentive Compensation Plan

 

Annual incentive compensation is a primary component of our performance-driven compensation program. We find it particularly productive to match incentive-based pay to the Company’s annual strategic goals. This allows us to adapt our executive compensation to evolving business plans. In recent years, we have identified improved earnings and cash flow as our annual strategic goals tied to incentive compensation. In fiscal 2006, we targeted improved earnings and cash flow, as we have done historically. We also added revenue as a new performance metric. We continued this practice in fiscal 2008. The Committee believes this reflects the Company’s increasingly solid financial base and the importance of future growth. As a result, the following factors and respective weightings determined the amount of annual incentive payouts for the named executive officers, as well as our other participating managers generally, for fiscal 2008:

 

 

In approving the performance targets for each metric for fiscal 2008, the Committee reviewed the Company’s budget for the fiscal year, which is set collectively by our senior management and approved by the Board of Directors. We then set the targets as a percentage of the Company’s budget with respect to each metric. No payments would be made under the incentive plan unless the Company achieved its minimum EBIT target. The performance targets were the same for all managers in the bonus program, regardless of their rank.

 

The Company believes that the performance targets approved by the Committee for purposes of the fiscal 2008 annual incentive compensation plan, including the minimum Company EBIT target that had to be met before there could be any payouts pursuant to the plan, are confidential information. Competitors in our industries, as we do, study proxy statements and other public records carefully for information that may be helpful in developing competitive strategies. Some competitors have even used information from our public disclosures as part of their sales representatives’ presentations to customers. Moreover, shifting targets can reflect a change in strategy. We believe that revealing details of our annual incentive compensation plans, over a period of years, would give competitors an advantage and therefore be a disservice to our shareholders.

 

Given the Company’s results over the last several years, the targets approved by the Committee are generally difficult to meet, although some business units have demonstrated stronger performance than others. Over the past three fiscal years, including fiscal 2008, our average annual incentive compensation payouts for the plan, including payouts to the named executive officers, as a whole have been slightly less than our targets. This has also been true of payouts based on the results of each of our business units.

 

Each year, the Committee also approves the target payout for each participant in the incentive compensation plan. This target is expressed as a percentage of base salary, measured as of the end of the fiscal year. In setting the target payout for each named executive officer, the Committee primarily considered the

peer group information from 2004. Possible payouts for each named executive officer ranged from zero to two times the target payout. In fiscal 2008, the target payout for each named executive officer was as follows:

 

 

Messrs. Zager and Elia were not eligible to participate in the fiscal 2008 annual incentive plan due to the timing of their departure and hire, respectively. Messrs. Giles and Arthurs are considered “corporate” employees, and thus their annual incentive compensation is measured on Company performance alone. Messrs. Larson and Hancock are considered “business unit employees,” and, as a result, their annual incentive compensation is determined to be 50% based on Company performance and 50% based on their business unit performance.

 

The chart set forth below shows, for each named executive officer: (1) his target payout (expressed as a percentage of base salary); (2) the cumulative performance results for fiscal 2008; (3) the percentage of the executive’s bonus earned; (4) the executive’s end-of-year base salary (reflecting the annual salary increases during fiscal 2008); and (5) the actual bonus payout. The formula for determining these amounts is as follows:

 

Target % × Bonus % = % Earned

 

% Earned × Base $ = $ Earned

 

 

For additional information about our fiscal 2008 annual incentive compensation plan, including bonus percentages and actual payouts, see the footnotes to the Fiscal 2008 Summary Compensation Table below.

 

Change to Fiscal 2009 Annual Incentive Compensation Plan

 

For fiscal 2009, the Committee has determined to simplify the annual incentive compensation plan and focus more on cash management, as recommended by the CEO. Accordingly, each corporate participant’s annual bonus, if any, will be based 70% on EBIT and 30% on certain working capital components as a percentage of sales. Each business unit participant’s annual bonus, if any, will be based 40% on EBIT, 30% on certain working capital components as a percentage of sales and 30% on business unit EBIT. The Committee believes this bonus formula will encourage our senior executives to take advantage of opportunities to use cash more efficiently in the operation of the business.

 

Special Incentive Bonus

 

In addition to the fiscal 2008 annual incentive compensation plan, the Committee determined, mid-year, to offer a special incentive bonus program to business unit presidents, including each of Messrs. Hancock and Larson, to reward them for reducing inventory. Generally, each executive was entitled to earn 10% of his base salary if the inventory within the executive’s business unit was reduced by a targeted amount. Because the Gerber Technology business unit achieved the inventory reduction target, Mr. Hancock earned the 10% special bonus. No other eligible named executive officer earned the special incentive bonus.

Long-Term Equity Incentive Compensation

 

Types and Amounts of Equity Grants

 

The Company’s long-term equity incentive compensation for each of the named executive officers generally takes the form of stock option awards and restricted stock grants. We view stock options as inherently performance-based, as our named executive officers are rewarded only if our stock price increases. As discussed above, we have added restricted stock grants to the equity mix because we believe those awards provide greater perceived value to recipients compared to the number of stock options that could be awarded for the same total charge to earnings, and because the awards include downside risk. Mr. Giles began receiving a portion of his equity compensation in restricted stock grants in fiscal 2007. In fiscal 2008, we extended restricted stock grants to the senior management team, including the other named executive officers. Restricted stock also provides a strong retention tool to help ensure management continuity. For these reasons, the Committee believes that adding restricted stock to the Company’s equity incentive offerings will be in the long-term best interests of shareholders.

 

From year to year, the size of equity grant awards to the named executive officers is determined by the factors set forth under “Other Considerations in Setting of Executive Compensation” above. Specifically, for fiscal 2008, grant sizes were determined primarily by the Committee’s review of the named executive officer’s individual performance over the prior fiscal year, which, for each named executive officer other than Mr. Giles, included Mr. Giles’s review of the executive’s performance and recommendation as to the size of the award. In addition, we considered each officer’s career potential at the Company and our general competitive review.

 

Mr. Giles’s fiscal 2008 equity grant was increased as compared to fiscal 2007 based on strong performance and market data indicating that his long-term compensation was significantly below range. The equity grant for Mr. Elia was primarily based on the competitive market for recruiting Chief Financial Officers. The equity grants for the business unit presidents were determined based on the information from the fiscal 2008 Hewitt study showing our long-term grants were below market. In addition, the Committee considered the individual contributions of each of these executives during the prior fiscal year. In particular, the Committee considered, for Mr. Hancock, his leadership in moving Gerber Technology more aggressively into industrial markets; for Mr. Arthurs, the continuing growth of the Company in Asia under his guidance; and for Mr. Larson, the development of a more effective strategy for Gerber Coburn.

 

For specific information on the equity grants made to our named executive officers during fiscal 2008, see the Fiscal 2008 Grants of Plan-Based Awards table below.

 

Timing of Equity Grants

 

Our equity plan provides that stock options must be granted with exercise prices at not less than the fair market value of the Company’s common stock on the effective date of grant. The effective date of any equity grant is typically the date the grant is approved by the Committee. However, if the equity grant is approved by the Committee during a period after quarterly results are known to the Committee, but not to the public, the effective date of the equity grant generally will be the first date of the next open trading window under our insider trading guidelines. The Company has generally followed this practice, and the Committee has now made it official policy, to ensure that the price of our common stock on the effective date of grant reflects all information, which in turn ensures fair treatment of all current and potential shareholders.

 

Pension Plan and SERP

 

We maintain a tax-qualified, noncontributory defined benefit plan for our U.S. employees who were hired prior to May 1, 2004, which includes each of the named executive officers other than Messrs. Zager, Elia and Larson. (Employees hired after May 1, 2004 are eligible to participate in the Company’s 401(k) plan, but not in the defined benefit plan.) We also maintain a SERP, which provides retirement benefits in excess of the limitations set forth in the qualified plan to each of the senior executives participating in the qualified pension plan. Although we initially implemented the pension plan and SERP for competitive reasons, and to be a more attractive employer for retirement benefit purposes, the Company discontinued the defined benefit pension plan for new employees due to cost considerations and a growing preference among recruits for defined contribution

programs. For more information about our defined benefit plan and SERP, see the Pension Benefits table, and accompanying narrative, below.

 

Severance Arrangements

 

Each of our named executive officers is entitled to receive defined payments and benefits upon certain terminations pursuant to our Severance Policy for Senior Officers, as amended effective in September 2006. In addition, pursuant to his change in control agreement with the Company, each named executive officer is entitled to receive certain payments and benefits under a “double trigger” arrangement requiring a termination event occurring within a specified period following a change in control of the Company. We provide these payments to be competitive with our peer companies, as well as to recruit and retain our executives. The benefits also help align executive and shareholder interests, if a change in control becomes in the interest of shareholders. With respect to payments and benefits payable to the named executive officers upon a termination following a change in control, the Committee believed that a “double trigger” was more appropriate than a “single trigger” arrangement providing for a payout solely upon a change in control, since the purpose of such a benefit is to provide employment protection to these officers, a concern that is not necessarily present upon a change in control alone. Moreover, a change in control agreement is designed to facilitate management continuity during an ownership transition, as a new owner of the Company may want to retain the management team. The Committee believes that a “single trigger” agreement could make this objective more difficult to achieve.

 

In August 2007, the Committee approved some amendments to the change in control agreements. As a result of the amendments, some of the benefits previously offered to our named executive officers upon termination following a change in control, including tax gross up payments, were eliminated. The Committee made these changes to better align the Company’s change in control agreements with those of our peer companies.

 

For a more detailed discussion of these severance and change in control arrangements, as well as acceleration of some equity grant arrangements upon termination as provided pursuant to our equity plans, including estimates of the amounts payable to each named executive officer, see “Potential Payments Upon Termination and Change in Control” below.

 

Tax and Accounting Considerations

 

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation over $1,000,000 paid for any fiscal year to the company’s Chief Executive Officer and its other three most highly compensated executive officers as of the end of the fiscal year. However, the statute exempts qualifying performance-based compensation from the deduction limit if certain requirements are met. The Committee designs the annual incentive compensation portion of our named executive officers’ compensation packages to allow full deductibility pursuant to Section 162(m). The Committee intends to continue to design compensation programs that strongly consider tax consequences, including protecting full deductibility under Section 162(m).

 

In addition, as discussed above under “Long-Term Equity Incentive Compensation,” in fiscal year 2008, the Committee determined it advisable to grant restricted stock, along with options, due in part to the Committee’s belief that, as a result of the adoption of FAS 123R, restricted stock provides a greater perceived value to recipients compared to the number of stock options that could be awarded for the same total charge to earnings.

 

Management Development and Compensation Committee Report

 

The Management Development and Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on this review and discussion, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company’s annual report on Form 10-K for fiscal 2008.

 

Respectfully submitted,

 

Management Development and Compensation

Committee

 

John R. Lord (Chair)

Edward G. Jepsen

Carole F. St. Mark

W. Jerry Vereen

 

Summary Compensation Table

 

Fiscal 2008 Summary Compensation Table

 

 

 

 

 

 

 

Grants of Plan-Based Awards Table

 

Fiscal 2008 Grants of Plan-Based Awards

 

 

 

 

 

Outstanding Equity Awards at Fiscal Year-End Table

 

Fiscal 2008 Outstanding Equity Awards at Fiscal Year-End

 

 

 

 

 

Option Exercises and Stock Vested Table

 

Fiscal 2008 Option Exercises and Stock Vested

 

 

 

 

Pension Benefits Table

 

The Company maintains a tax-qualified, noncontributory pension plan for all U.S. employees who were hired before May 1, 2004. In addition, to provide additional retirement benefits to our more highly paid executives in excess of the compensation limitations and maximum benefit accruals for tax-qualified plans imposed by the Internal Revenue Code, the Company maintains a nonqualified supplemental employment retirement plan (“SERP”). Benefits under the SERP are also provided by the Company on a noncontributory basis. Employees hired on or after May 1, 2004 are not eligible for the pension plan or SERP and are entitled to participate only in the Company’s 401(k) plan. Messrs. Giles, Arthurs and Hancock participate in both the qualified plan and the SERP. Mr. Larson, who was hired after May 1, 2004, is not eligible to participate in the qualified plan or SERP. Messrs. Zager and Elia, who were each also hired after May 1, 2004, similarly were not eligible to participate in these plans.

 

For each eligible named executive officer, benefits pursuant to the tax-qualified pension plan are generally based on the executive’s credited years of service and his “final average compensation.” “Final average compensation” is equal to the average of the executive’s base salary for the five consecutive calendar years during the last ten calendar years prior to termination or retirement, whichever occurs first, in which such average was the highest, multiplied by 1.5%, which is the annual benefit accrual rate. The maximum annual compensation that can be taken into account for plan purposes, as well as the maximum annual benefit that can be accrued under the plan, is limited by Internal Revenue Service regulations. Benefits are then reduced by an offset for social security benefits. Thus, the formula for calculating the normal retirement pension benefit pursuant to the pension plan is as follows:

 

final average compensation × years of service × 1.5%

This result is then reduced by the named executive officer’s expected social security benefit, as follows:

 

social security benefit × years of service × 1.67%

 

Pension plan benefits are vested after five years of continued service with the Company. Each of the named executive officers participating in the pension plan has five years or more of continued service with the Company and thus is fully vested under the plan. In addition, pension plan benefits are actuarially reduced for participants who retire on or after age 55 (which constitutes early retirement). Mr. Hancock is the only named executive officer eligible for early retirement pursuant to the pension plan. Upon early retirement, the plan provides that a participant would be entitled to the participant’s accrued benefit under the plan, reduced by 7% for each year (pro rated for months) by which the commencement of benefit payments precedes his normal retirement date. The plan further provides, however, that no actuarial reduction is to be made to the accrued benefits upon early retirement if the employee’s age and years of service total 85. No named executive meets this threshold and thus may not retire early pursuant to the pension plan without a reduction in benefits.

 

Pursuant to the SERP, each named executive officer who participates is entitled to receive benefits equal to the benefits that would have been accrued under the tax-qualified pension plan if the maximum limitations on compensation that could be considered, and the annual benefit that could be accrued, under that plan did not apply, reduced by the amount of benefit actually accrued under the tax-qualified pension plan. Benefits under the SERP will be paid to each participating officer at the same time the officer elects, or is entitled, to receive his accrued benefits pursuant to the pension plan, and in the same form and manner as elected by the officer.

 

Upon retirement at normal retirement age of 65, or upon disability prior to age 65 (in which case there would be no adjustment for early retirement), each named executive officer generally will be entitled to receive his accrued pension benefits in either (1) monthly payments for the life of the officer, or (2) a lump sum payment (provided that the officer’s vested benefit is at least $5,000 and less than $15,000), as elected by the named executive officer at the time of his application to receive pension benefits. Beneficiaries may also elect guarantee payments beyond their death for ten years or for the life of their spouse. Such an election results in an actuarially reduced monthly payment. If the benefits payable to a named executive officer do not exceed $5,000, the officer is required to receive such amount in a lump sum payment.

 

In the event of the named executive officer’s death prior to normal retirement age, if and only if the officer is married at such time, the officer’s spouse is generally entitled to receive a reduced pre-retirement survivor annuity in the amounts set forth in the pension plan.

 

The table below illustrates the estimated present value of the accumulated benefit under these retirement plans. The value of each plan is designated separately. The calculation assumes that the named executive officer retires at age 65 (including Mr. Hancock, although he is eligible for early retirement), which is the normal retirement age as defined under the pension plan and SERP, and uses compensation levels as of April 30, 2008.

 

 

 

Potential Payments Upon Termination and Change in Control

 

Each of Messrs. Giles, Elia, Arthurs, Larson and Hancock is entitled to receive termination benefits that are not available to our employees generally. These benefits are provided pursuant to (1) our Severance Policy for Senior Officers, as amended by the Company effective in September 2006, and (2) change in control agreements, as amended by the Company in August 2007. In addition, our equity plans provide for accelerated or continued vesting of unvested equity awards upon various termination events.

 

Mr. Zager resigned from the Company as Executive Vice President and Chief Financial Officer effective June 22, 2007. Mr. Zager did not receive any severance or termination payments other than those to which he was entitled as of the date of termination or as are available generally to all of our employees.

 

Messrs. Giles, Elia, Arthurs, Larson and Hancock

 

Severance Policy for Senior Executives

 

Pursuant to the severance policy, upon termination of the executive officer for any reason other than death, disability, retirement or by the Company for “cause” (as defined under “Change in Control Agreements” immediately below), each such officer is entitled to the following:

 

 

Notwithstanding the above, if the officer is entitled to payments or benefits pursuant to his change in control agreement, as discussed immediately below, the officer will not be entitled to any payments or benefits pursuant to the severance policy, with the result that the officer may not receive benefits pursuant to both the severance policy and the change in control agreement. In addition, the severance policy provides that if the officer obtains full-time employment with a company that is not a competitor of the Company, the officer will receive, in lieu of the above benefits, a lump sum payment equal to 50% of the remaining amount of base salary that would have been payable to the officer pursuant to the severance policy. In the event of the officer’s death after termination due to the circumstances described above, the severance policy requires that the Company pay to the officer’s estate or beneficiary the severance benefits described above, so long as the estate or beneficiary satisfies the conditions that would have been applicable to the officer, as described immediately below.

To receive the foregoing termination benefits, the named executive officer must release the Company from any and all claims. In addition, the Company’s obligation to make the above payments, or make available the above benefits, will cease in the event the officer:

 

 

Change in Control Agreements

 

Pursuant to change in control agreements entered into with each of Messrs. Giles, Arthurs, Larson and Hancock in August 2007, and with Mr. Elia in April 2008, each officer is entitled to the following upon termination of employment with the Company occurring within two years of a “change in control,” unless such termination is a result of death, disability, retirement, termination by the executive for other than “good reason” or by the Company for “cause” (each term as generally defined below):

 

 

For purposes of the above severance payment, “annual incentive bonus payment in effect as of the termination date” means the target amount of the annual incentive bonus payment for the year in which the notice of termination is given.

 

Upon the executive’s termination for death, disability, retirement, for other than good reason or by the Company for cause, the executive is not entitled to any termination or severance benefits under the change in control agreement. The executive will be entitled, however, to the payments described immediately above, if any, pursuant to the severance policy, as well as any applicable acceleration of outstanding equity awards, as described immediately below under “Equity Plans.”

 

In exchange for the above payments or benefits, pursuant to the change in control agreements, each officer agreed that in the event of a “potential change in control” (as generally defined below), the officer would not voluntarily terminate his employment with the Company under the earlier to occur of (1) six months after the occurrence of the potential change in control, or (2) the occurrence of a change in control of the Company.

In addition, as a condition of receipt of the above termination benefits, the executive must sign a general release in favor of the Company which releases the Company from all future claims, as well as certifies the executive’s agreement to be bound by the confidentiality and non-compete provisions required by the agreement for a period of one year following termination. The executive’s compliance with the confidentiality provision, however, is not a requirement to his receipt of any severance payments and other benefits under the change in control agreement.

 

The Company agreed to require any successor to the Company’s business expressly to assume the obligations of the severance agreements. If any such successor to the Company does not agree to assume the severance obligations and related payments, the executive is entitled to compensation from the Company in the same amount and on the same terms as he would be entitled under the severance agreements in the event of termination for good reason following a change in control.

 

Pursuant to the severance agreements, the following terms have the meanings indicated below:

 

“Good reason” is generally defined to mean any of the following events:

 

 

 

 

“Change in control” is generally defined to mean any of the following events:

 

 

“Potential change in control” is generally defined to mean any of the following events:

 

 

“Cause” is generally defined to mean the willful and continued failure by the executive to substantially perform his duties with the Company, or the willful engagement by the executive in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise.

 

Equity Plans

 

Each of Messrs. Giles, Elia, Arthurs, Larson and Hancock holds outstanding unvested stock options or restricted stock awards that are subject to acceleration upon the termination events described immediately below. These outstanding awards were issued pursuant to our 2003 Employee Stock Option Plan and our 2006 Omnibus Incentive Plan.

 

Under these plans, outstanding unvested stock options and shares of restricted stock held by the executives will accelerate and vest in full upon the executive’s termination due to death or disability, or upon a change in control of the Company. In addition, under the 2003 Employee Stock Option Plan only, the executive is entitled to an additional two years of continued vesting for any unvested stock options upon the executive’s retirement.

 

Estimated Payments

 

The table below sets forth the estimated payments to each of Messrs. Giles, Elia, Arthurs, Larson and Hancock upon the termination events described immediately above. The estimated payments are based on the assumption that the termination event occurred on April 30, 2008, the last day of our most recently completed fiscal year, and the stock price of our common stock was $9.27, which was the closing price of our common stock as reported on the NYSE on April 30, 2008. The estimates below are based on these assumptions, as required by SEC rules, while the actual amounts to be paid to each officer will be determinable only upon the occurence of the actual termination event. In addition, the amounts set forth in the table below do not include any other payments that are available to our employees generally on a non-discriminatory basis, or otherwise due and owing to the executive through the date of termination.

 

 

 

 

Compensation Committee Interlocks and Insider Participation

 

At the beginning of fiscal 2008, W. Jerry Vereen served as Chair and John R. Lord and Carole F. St. Mark served as members of the Management Development and Compensation Committee. Mr. Lord became Chair of the Committee on September 20, 2007, replacing Mr. Vereen, who continued to serve on the Committee. Edward G. Jepsen was appointed to the Committee on March 5, 2008. No member of the Committee during fiscal 2008 is or was an officer or other employee of the Company or any of its subsidiaries. No executive officer of the Company or any of its subsidiaries served as a member of the compensation committee, or committee performing similar functions, or board of directors of any other entity which had an executive officer serving as a member of the Company’s Board or Management Development and Compensation Committee during fiscal 2008.

 

Equity Compensation Plan Information

 

The table below provides information relating to the Company’s equity compensation plans as of April 30, 2008. As of that date, the Gerber Scientific, Inc. 2006 Omnibus Incentive Plan, the Gerber Scientific, Inc. Non-Employee Director’s Stock Grant Plan and the Agreement for Deferment of Director Fees were the three equity compensation plans that were in effect pursuant to which the Company may make future awards. In addition, options to purchase common stock and restricted stock awards remained outstanding as of that date under the Gerber Scientific, Inc. 1992 Employee Stock Plan, the Gerber Scientific, Inc. 1992 Non-Employee Director Stock Option Plan, the Gerber Scientific, Inc. 2003 Employee Stock Option Plan and the Gerber

Scientific, Inc. 2005-2006 Executive Annual Incentive Bonus Plan. All of the foregoing plans were approved by the Company’s shareholders.