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 10, 2009

 

Dear fellow shareholder:

 

You are cordially invited to attend the 2009 Annual Meeting of Shareholders of Gerber Scientific, Inc., which will be held at 1:00 p.m., local time, on Thursday, September 17, 2009, 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 operating results for fiscal 2009 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.

 

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 17, 2009 at 1:00 p.m.

 

The Annual Meeting of Shareholders of Gerber Scientific, Inc. (“Gerber”) will be held on Thursday, September 17, 2009, at 1:00 p.m., local time, at Gerber’s corporate headquarters, 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 Gerber’s independent registered public accounting firm for fiscal 2010;

 

3. to consider and vote upon an amendment to the Gerber Scientific, Inc. 2006 Omnibus Incentive Plan to increase by 1,250,000 shares the number of shares of Gerber’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 July 31, 2009 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 10, 2009

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be Held on September 17, 2009: This Proxy Statement and our 2009 Annual Report to Shareholders are available at www.gerberscientific.com/investors/annuals.htm.

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

 

Annual Meeting of Shareholders
to be held on September 17, 2009 at 1:00 p.m.

 

 

PROXY STATEMENT

 

 

GENERAL INFORMATION

 

Gerber Scientific, Inc., or “Gerber,” is furnishing this Proxy Statement in connection with the solicitation of proxies by Gerber’s Board of Directors, or the “Board,” for use at the Annual Meeting of Shareholders to be held on Thursday, September 17, 2009, at 1:00 p.m., local time, at Gerber’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 Gerber’s shareholders on or about August 11, 2009.

 

The Annual Meeting has been called for shareholders (1) to consider and vote upon the election of seven nominees to the Board named in this Proxy Statement, (2) to consider and vote upon a proposal to ratify the appointment of PricewaterhouseCoopers LLP as Gerber’s independent registered public accounting firm for fiscal 2010, (3) to consider and vote upon an amendment to the Gerber Scientific, Inc. 2006 Omnibus Incentive Plan, which we refer to as the “Plan,” to increase by 1,250,000 shares the number of shares of Gerber’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

 

Gerber 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 Gerber 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. Gerber 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. Gerber will reimburse such persons for their reasonable out-of-pocket expenses in forwarding such materials. Gerber 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 Gerber of such solicitation is not expected to exceed $20,000. Gerber 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 13, 2009 at Gerber’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 Gerber’s annual report to shareholders for the 2009 fiscal year accompanies this Proxy Statement. Gerber has filed an annual report on Form 10-K for fiscal year 2009 with the SEC, which forms a part of the 2009 annual report to shareholders. Shareholders separately may obtain, free of charge, a copy of the 2009 Form 10-K, without exhibits, by writing to Gerber Scientific, Inc., 83 Gerber Road West, South Windsor, Connecticut 06074, Attention: Corporate Secretary. The 2009 Form 10-K is also available through

Gerber’s website at www.gerberscientific.com. The annual report to shareholders and the 2009 Form 10-K are not proxy soliciting materials.

 

Delivery of Annual Meeting Documents

 

In accordance with 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 Gerber’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, Inc., 83 Gerber Road West, South Windsor, Connecticut 06074. Gerber will provide you with a duplicate copy promptly. If you share an address with another shareholder of Gerber 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 Gerber’s Annual Meeting documents, please contact the Corporate Secretary at the telephone number or address above.

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be Held on September 17, 2009: This Proxy Statement and our 2009 Annual Report to Shareholders are available at www.gerberscientific.com/investors/annuals.htm.

 

SECURITY OWNERSHIP

 

The following tables present information regarding beneficial ownership of Gerber’s common stock as of June 30, 2009. 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 24,608,644 shares of common stock outstanding as of June 30, 2009.

 

Principal Shareholders

 

The following table presents, as of June 30, 2009, information based upon Gerber’s records and filings with the SEC regarding each person, other than a Director, Director nominee or executive officer of Gerber, known to Gerber 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 Mario J. Gabelli and affiliates is based upon an amendment to Schedule 13D filed with the SEC on March 11, 2009. 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.; GAMCO Investors, Inc.; Gabelli Funds, LLC; GAMCO Asset Management, Inc.; and Teton Advisors, Inc.. According to the Schedule 13D/A, Gabelli Funds, LLC has beneficial

ownership of 591,000 of the reported shares, GAMCO Investors, Inc. has beneficial ownership of 1,492,863 of the reported shares and Teton Advisers, Inc. has beneficial ownership of 163,400 of the reported shares. Mr. Gabelli is deemed to have beneficial ownership of the shares owned beneficially by each of the foregoing entities. GAMCO Investors, Inc. and GGCP, Inc. are deemed to have beneficial ownership of the shares owned beneficially by each of the foregoing persons other than Mr. Gabelli.

 

The information concerning Zesiger Capital Group LLC is based upon an amendment to Schedule 13G filed with the SEC on February 10, 2009. Zesiger Capital Group LLC reports that it has sole voting power with respect to 1,588,000 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 that it manages.

 

The information concerning Barclays Global Investors, NA is based upon a Schedule 13G filed with the SEC on February 5, 2009. The shares of common stock shown as beneficially owned by Barclays Global Investors, 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 Global Investors, NA; Barclays Global Fund Advisors; Barclays Global Investors, Ltd.; Barclays Global Investors Japan Limited; Barclays Global Investors Canada Limited; Barclays Global Investors Australia Limited; and Barclays Global Investors (Deutschland) AG. Barclays Global Investors, 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.

 

The information concerning Dimensional Fund Advisors LP is based upon an amendment to Schedule 13G filed with the SEC on February 9, 2009. 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 FMR LLC is based upon a Schedule 13G filed with the SEC on February 17, 2009. FMR LLC reports that it is a parent holding company and has sole voting power with respect to 828,500 of the reported shares and sole power to dispose of all of the reported shares. Fidelity Management & Research Company, or “Fidelity,” a wholly-owned subsidiary of FMR LLC, is the beneficial owner of 504,400 of the reported shares as a result of its status as an investment adviser to certain investment companies holding shares of Gerber’s common stock. Edward C. Johnson III and FMR LLC have control of Fidelity and have sole power to dispose of the 504,400 shares reported as beneficially owned by Fidelity. In addition, Pyramis Global Advisors Trust, an indirect wholly-owned subsidiary of FMR LLC, is the beneficial owner of 945,900 of the reported shares as a result of its status as investment manager of institutional accounts holding shares of Gerber’s common stock. Edward C. Johnson III and FMR LLC control Pyramis Global Advisors Trust and have sole power to dispose of 945,900 shares and sole power to vote 828,500 shares reported as beneficially owned by Pyramis Global Advisors Trust.

 

The information concerning Royce & Associates, LLC is based upon an amendment to Schedule 13G filed with the SEC on January 26, 2009. Royce & Associates, LLC reports that it has sole voting and investment power with respect to all of the reported shares.

 

Investment in Gerber by Directors and Executive Officers

 

The following table presents, as of June 30, 2009, information regarding the beneficial ownership of Gerber’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 9,000 shares that Mr. Aiken has the right to purchase as of or within 60 days after June 30, 2009 pursuant to the exercise of stock options and 50,109 shares deliverable to Mr. Aiken pursuant to the Gerber Scientific, Inc. Agreement for Deferment of Director Fees, which we refer to as 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, which we refer to as the “Non-Employee Director’s Stock Grant Plan.”

 

The shares shown as beneficially owned by Mr. Giles include 121,666 shares that Mr. Giles has the right to purchase as of or within 60 days after June 30, 2009 pursuant to the exercise of stock options.

 

The shares shown as beneficially owned by Mr. Hancock include 107,025 shares that Mr. Hancock has the right to purchase as of or within 60 days after June 30, 2009 pursuant to the exercise of stock options.

 

The shares shown as beneficially owned by Mr. Jepsen include 26,933 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 11,666 shares that Mr. Larson has the right to purchase as of or within 60 days after June 30, 2009 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 24,164 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 Mr. Lovass include 36,667 shares that Mr. Lovass has the right to purchase as of or within 60 days after June 30, 2009 pursuant to the exercise of stock options.

The shares shown as beneficially owned by Ms. St. Mark include 9,000 shares that Ms. St. Mark has the right to purchase as of or within 60 days after June 30, 2009 pursuant to the exercise of stock options and 38,937 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 9,000 shares that Mr. Vereen has the right to purchase as of or within 60 days after June 30, 2009 pursuant to the exercise of stock options, 1,000 shares held of record by a trust for which Mr. Vereen serves as trustee, and 33,678 shares deliverable to Mr. Vereen 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 all Directors and executive officers as a group include a total of 529,404 shares that all Directors and executive officers as a group have the right to purchase as of or within 60 days after June 30, 2009 pursuant to the exercise of stock options and a total of 197,985 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.

 

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

 

Gerber’s Amended and Restated By-Laws provide that the Board will consist of not fewer than three or more than 11 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 Gerber 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, 2009 is presented below.

 

Donald P. Aiken, age 65, has served as a Director since 1997 and has served as Chairman of the Board of Gerber 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 served on the board of directors of Xerium Technologies, Inc., a manufacturer and supplier of products used in the production of paper, until December 2008.

 

Marc T. Giles, age 53, has served as Director, President and Chief Executive Officer of Gerber since November 2001. Mr. Giles began his career with Gerber in November 2000 as a Senior Vice President of Gerber and President of Gerber Technology, Inc. Before joining Gerber, 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 66, 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 Gerber’s Audit and Finance Committee and serves on its Management Development and Compensation Committee.

 

Randall D. Ledford, Ph.D., age 59, 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 Gerber’s Audit and Finance Committee and its Nominating and Corporate Governance Committee.

 

John R. Lord, age 65, 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 Gerber’s Management Development and Compensation Committee and on its Audit and Finance Committee.

 

Carole F. St. Mark, age 66, 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 Gerber’s Nominating and Corporate Governance Committee and on its Management Development and Compensation Committee.

 

W. Jerry Vereen, age 68, 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 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 Gerber’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 13 meetings during Gerber’s 2009 fiscal year, which ended on April 30, 2009. During fiscal 2009, 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 Gerber within the meaning of rules of the NYSE, on which Gerber’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 Gerber, either directly or as a partner, shareholder or officer of an organization that has a relationship with Gerber. 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, Gerber 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 2009, a company with which W. Jerry Vereen is affiliated purchased goods from Gerber for a total purchase price of $50,390 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, Gerber’s Corporate Governance Principles require Gerber’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 four meetings during fiscal 2009, 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 Gerber’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 Gerber’s system of internal accounting controls and disclosure controls and procedures, reviewing the financial statements and other financial information included in Gerber’s annual and quarterly reports filed with the SEC, and exercising oversight with respect to Gerber’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 seven meetings during fiscal 2009, 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 Gerber and to conduct reviews of Gerber’s executive compensation strategies and oversee Gerber’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 2009, the Committee delegated oversight of Gerber’s pension, 401(k) and nonqualified supplemental employee retirement plans to the executive-led Investment and Benefits Committees. The Committee did not otherwise delegate any of its responsibilities, including its responsibilities in approving equity grants to Gerber 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 Gerber’s other executive officers including the named executive officers set forth in the “Fiscal 2009 Summary Compensation Table” below. Mr. Giles also recommends to the Committee the base salaries or base salary increases 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 Gerber’s annual incentive compensation plan, Mr. Giles and Gerber’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. Gerber’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, or “Hewitt,” in fiscal 2008 to conduct a peer group study to determine how Gerber’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 Gerber’s revenue. As further described in the “Compensation Discussion and Analysis” below, 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 two meetings during fiscal 2009, 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 Gerber’s Corporate Governance Principles, are posted on the governance page of Gerber’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 Gerber’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 Gerber’s current needs and the qualities needed for Board service, including experience and achievement in business, finance, technology or other areas relevant to Gerber’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 Gerber during their term, including the number of meetings attended, level of participation, quality of performance, and any transactions of such Directors with Gerber 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, Gerber’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 Gerber 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 Gerber’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 Gerber’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 Gerber’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 2008 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

 

Gerber has established formal procedures for receiving and handling complaints regarding accounting, auditing and internal controls matters. Gerber 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 Gerber’s Policy for Handling Complaints, which is posted on the governance page of Gerber’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.

 

Financial Code of Ethics and Code of Business Conduct and Ethics

 

Gerber has adopted a Financial Code of Ethics applicable to its Chief Executive Officer and other senior financial officers, who include Gerber’s principal financial officer, principal accounting officer or controller, and persons performing similar functions. The Financial Code of Ethics, which constitutes a “code of ethics” as defined by Item 406 of the SEC’s Regulation S-K, is posted on Gerber’s website at www.gerberscientific.com. In addition, Gerber has adopted a Code of Business Conduct and Ethics applicable to all Directors, officers and employees. The Code of Business Conduct and Ethics sets forth Gerber’s policies and expectations with respect to the conduct and ethical standards expected of covered individuals, and is also posted on Gerber’s website at www.gerberscientific.com. Copies of these documents may be obtained by any shareholder without charge by writing to Gerber Scientific, Inc., 83 Gerber Road West, South Windsor, Connecticut 06074, Attention: Corporate Secretary. To the extent required by SEC and NYSE rules, Gerber intends to disclose any amendments to the Financial Code of Ethics and any waiver of a provision of the Financial Code of Ethics for the benefit of its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on Gerber’s website within four business days following any such amendment or waiver, or within any other period that may be required under SEC or NYSE rules from time to time.

 

DIRECTOR COMPENSATION

 

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

 

Cash Fees

 

Directors who are not employees of Gerber receive an annual fee of $40,000 for their service on the Board. 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 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 Gerber receive no fees for their service on the Board. All Directors are entitled to reimbursement for their reasonable out-of-pocket travel expenditures incurred in attending Board committee meetings.

 

Equity Grants

 

The Non-Employee Director’s Stock Grant Plan credits non-employee Directors annually with 5,000 shares of Gerber’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 Gerber 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 Gerber common stock or in cash, on which interest accrues at market rates. A total of 100,000 shares of Gerber common stock may be issued pursuant to the Agreement for Deferment of Director Fees to be credited to a Director’s 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 2009.

 

Fiscal 2009 Director Compensation Table

 

 

 

 

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Executive Compensation Objectives

 

The primary objective of the Gerber executive compensation program is to attract, retain and motivate high-quality talent. We expect our executives to effectively manage Gerber’s resources, maintain its fiscal integrity and enhance its long-term growth potential. We reward them for attaining specific short-term performance goals and provide equity to reward long-term performance. Each member of our senior management team, which includes the five named executive officers set forth in the “Fiscal 2009 Summary Compensation Table” following this Compensation Discussion and Analysis, who are referred to as the “named executive officers,” receives a total compensation package that is primarily performance-based.

 

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. The Committee also considers retention-focused compensation, such as Gerber’s benefits program, and any compensation payable upon the executive’s termination. The elements of Gerber’s executive compensation are discussed in more detail under “Elements of Our Executive Compensation Program” below. In general, the Committee considers the following factors when setting executive compensation:

 

 

Genesis of Current Executive Compensation Program

 

In 2004, we initiated a comprehensive review and redesign of Gerber’s executive compensation program. We began by comparing Gerber’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 Gerber’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 2009.

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 Gerber. 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’s annual 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 Gerber’s executive compensation showed that:

 

 

Although the Committee requested Hewitt to review the compensation paid by Gerber as compared to the market, we do not strive to pay our executive officers, including the named executive officers, at a specific percentile of the market, whether by element or in total. Instead, the Committee used the information to understand what constitutes the median 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. The Hewitt data showed that our short-term and long-term incentives were not in line with our peer groups. The Committee concluded that our short-term incentives could be closer to the median of our peers if Gerber’s performance improved against the applicable performance targets, but that a more comprehensive plan was needed to improve our long-term incentives as compared to the market. A three-year plan, tied to Gerber’s performance, was introduced to improve long-term incentive compensation. 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. Moreover, the survey showed that the relative pay among senior officers, including our CEO and other named executive officers, was relatively balanced as compared to that of our peers. Within these positions, experience and size of the business are factors to be considered. 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 made 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 the shift 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 Gerber’s satisfaction of business objectives identified in Gerber’s three-year business plan reviewed by the Board of Directors. If this program is fully implemented, the program would bring the long-term compensation component of total executive compensation into line with the long-term compensation practices of our peers, as identified in the Hewitt study. In light of the company’s business performance in fiscal 2009 and the current stock price, we believe it is unlikely that the plan will be fully implemented.

 

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 2009 compensation paid to our named executive officers below.

 

Elements of Our Executive Compensation Program

 

For fiscal 2009, Gerber’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 for the prior fiscal year and are intended keep the executive’s base salary competitive for retention purposes. In approving base salary increases for fiscal 2009, 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 Gerber improved revenue by 11.3% and improved diluted earnings per share by 5.2%. Performance is reviewed at the August meeting of the Committee based on the preceding fiscal year performance and changes are implemented in September. In recognition of this performance, and in consideration of the additional factors noted below, the Committee approved the following:

 

 

In December 2008, each of the named executives took a voluntary pay cut as part of an initiative to reduce costs in response to adverse economic conditions. Mr. Giles took a temporary 15% reduction in his base salary, which continued throughout fiscal 2009 and into fiscal 2010. Each of the other named executives took a similar 10% reduction in base salary.

 

2009 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 Gerber’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.

 

For fiscal 2009, the Committee determined to simplify the annual incentive compensation plan and focus more on cash management and increasing margins, as recommended by the CEO. Accordingly, each corporate participant’s annual bonus, if any, was based 70% on corporate earnings before interest and taxes, or “EBIT,” and 30% on certain working capital components as a percentage of sales. Each business unit participant’s annual bonus, if any, was based 40% on corporate EBIT, 30% on certain working capital components as a percentage of sales and 30% on business unit EBIT. The Committee believed that this bonus formula would encourage our senior executives to take advantage of opportunities to use cash more efficiently in the operation of the business.

In approving the performance targets for each metric for fiscal 2009, the Committee reviewed Gerber’s budget for the fiscal year, which is set by our senior management and approved by the Board of Directors. The Committee then set the targets as a percentage of Gerber’s budget with respect to each metric. No payments would be made under the incentive plan unless Gerber achieved its minimum EBIT target. The performance targets were the same for all managers in the bonus program, regardless of their rank.

 

Gerber believes that the performance targets approved by the Committee for purposes of the fiscal 2009 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 would therefore be a disservice to our shareholders.

 

As demonstrated by Gerber’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 2009, our average annual incentive compensation payouts for the plan, including payouts to the named executive officers as a whole, have been significantly 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 2009, the target payout for each named executive officer was as follows:

 

 

While all corporate officers are considered “corporate” employees for equity grants, for non-equity incentives, Messrs. Giles and Elia are considered “corporate” employees, and thus their annual incentive compensation is measured on company performance alone. Messrs. Lovass, Larson and Hancock are considered “business unit employees,” and, as a result, their annual incentive compensation is determined based 50% on company performance and based 50% on the performance of their respective business units.

 

Due to the global recession and disruptions in the credit markets, Gerber did not reach its performance goals and no bonus payments were earned. While the Committee has discretion to pay bonuses for other reasons despite the company’s failure to attain the performance goals, it chose not to do so.

 

The chart set forth below shows, for each named executive officer:

 

 

The formula for determining these amounts is as follows:

 

Target % × Bonus % = % Earned

 

% Earned × Base $ = $ Earned

 

 

For additional information about our fiscal 2009 annual incentive compensation plan, including bonus percentages and actual payouts, see the footnotes to the “Fiscal 2009 Summary Compensation Table” following this Compensation Discussion and Analysis.

 

Change to Fiscal 2010 Annual Incentive Compensation Plan

 

For fiscal 2010, the Committee determined to continue to focus on profit and cash generation, as recommended by the CEO. Accordingly, each corporate participant’s annual bonus, if any, will be based 75% on corporate EBIT and 25% on certain working capital components. The Committee believes that the mix of EBIT and working capital components selected for fiscal 2010 most accurately reflects management’s goals of focusing on profit and cash generation. Unlike the fiscal 2009 metrics, the bonus payouts for fiscal 2010 for all participants will be based solely on corporate performance without regard to business unit performance. This change reflects the financial pressures on the business as a whole and the desire to determine annual incentive compensation based on Gerber’s needs over the needs of individual business units.

 

Long-Term Equity Incentive Compensation

 

Types and Amounts of Equity Grants

 

Gerber’s long-term equity incentive compensation for each of the named executive officers 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. We believe that restricted stock also provides a strong retention tool to help ensure management continuity. For these reasons, the Committee believes that adding restricted stock to Gerber’s equity incentive offerings is 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 2009, 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 Gerber, the level of responsibility of each officer and our general competitive review. All grants were based on the three-year plan discussed above to bring our executives closer to the market in long-term compensation.

 

Mr. Giles’s fiscal 2009 equity grant was increased as compared to fiscal 2008 based on strong performance in fiscal 2008 and the fact that his long-term incentive compensation remains significantly below the median of our peer companies as indicated by the Hewitt study. The equity grant for Mr. Elia was primarily based on the competitive market for chief financial officers observed by Gerber in recruiting Mr. Elia,

as well as his strong start as our CFO. The equity grants for the business unit presidents were determined primarily based on the fact that the Hewitt study shows our long-term incentive compensation remains below the median of our peer companies. In addition, the Committee considered the individual contributions and circumstances of each of these executives during the prior fiscal year. In particular, the Committee considered, for Mr. Hancock, his new responsibilities in managing the shared Customer Service organization and granted a larger portion of his equity award in the form of restricted stock, due to his expected retirement in a few years. The use of a greater amount of restricted stock for Mr. Hancock was deemed appropriate as restricted stock has a greater perceived short-term value to recipients than stock options. For Mr. Larson, the Committee considered the continued improvement of Spandex’s performance. For Mr. Lovass, the Committee considered the added responsibility of a larger business unit.

 

For specific information on the equity grants made to our named executive officers during fiscal 2009, see the “Fiscal 2009 Grants of Plan-Based Awards Table” following this Compensation Discussion and Analysis.

 

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 Gerber’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. Gerber has generally followed this practice, and the Committee has now made it official policy, to seek 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. The Committee has adopted a practice of granting all regular annual equity awards on the date of the annual meeting of shareholders to avoid effective dates being different from grant dates for awards.

 

Pension Plan and SERP

 

Through fiscal 2009, the company maintained 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. Elia and Larson. (Employees hired on or after May 1, 2004 are eligible to participate in Gerber’s 401(k) plan, but not in the defined benefit plan.) We also maintained a supplemental executive retirement plan, or “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, Gerber 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, following this Compensation Discussion and Analysis.

 

Effective April 30, 2009, Gerber froze both the tax-qualified, noncontributory defined benefit plan and the SERP due to cost and cash flow considerations as well as internal equity since only two-thirds of our U.S. employees were covered by these pension plans. All participants, including the named executives, will keep all of the benefits they have already earned, but will not accrue new benefits. While it would be possible to allow participants to begin accruing additional benefits in the future, we do not currently expect to do so. In addition, effective January 1, 2009, Gerber temporarily suspended matching contributions to participant accounts in Gerber’s 401(k) plan.

 

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 September 2006. In addition, pursuant to each officer’s change in control agreement with Gerber, 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 Gerber. 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 Gerber 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 Gerber’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 the description of “Potential Payments Upon Termination and Change in Control” following this Compensation Discussion and Analysis.

 

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 in any fiscal year to the company’s chief executive officer and its other three most highly compensated executive officers (other than its principal financial officer) as of the end of the fiscal year. The statute, however, 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 2009, 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 SFAS 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 in Gerber’s Annual Report on Form 10-K for fiscal 2009.

 

Respectfully submitted,

 

Management Development and Compensation Committee

 

John R. Lord (Chair)

Edward G. Jepsen

Carole F. St. Mark

W. Jerry Vereen

The following summary compensation table presents information about compensation that was earned by or paid to Gerber’s chief executive officer, chief financial officer and each of Gerber’s other three most highly compensated executive officers serving with us at April 30, 2009. We refer to these five executive officers in this Proxy Statement as the “named executive officers.”

 

Fiscal 2009 Summary Compensation Table

 

 

 

 

 

 

 

The following table presents information with respect to the grants of plan-based awards by Gerber to the named executive officers during fiscal 2009.

 

Fiscal 2009 Grants of Plan-Based Awards Table

 

 

 

 

The following table presents information with respect to the outstanding equity awards at 2009 fiscal year-end for the named executive officers.

 

Fiscal 2009 Outstanding Equity Awards at Fiscal Year-End Table

 

 

 

 

 

The following table presents information with respect to the options exercised and stock awards vested during the 2009 fiscal year for the named executive officers.

 

Fiscal 2009 Option Exercises and Stock Vested Table

 

 

 

 

Pension Benefits Table

 

Gerber 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 some of 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, we maintain a nonqualified supplemental employment retirement plan. Benefits under the SERP are also provided by Gerber on a noncontributory basis. Employees hired on or after May 1, 2004 are not eligible for the pension plan or the SERP and are entitled to participate only in the company’s 401(k) plan. Messrs. Giles, Lovass and Hancock participate in both the qualified plan and the SERP. Messrs. Elia and Larson, who were hired after May 1, 2004, are not eligible to participate in the qualified plan or the SERP.

 

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. 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 time the officer elects, 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.

 

Gerber froze its tax-qualified, noncontributory pension plan and SERP effective April 30, 2009. As a result, no additional benefit will accrue to any participant, including the participating named executive officers, in either the qualified plan or the SERP. All participants, including the participating named executive officers, will remain eligible to retire early without a reduction in benefit when each participant’s combined age and years of service totals 85.

 

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, 2009.

 

 

 

Potential Payments Upon Termination and Change in Control

 

Each of Messrs. Giles, Elia, Lovass, 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 Gerber effective in September 2006, and (2) change in control agreements, as amended by Gerber in August 2007. In addition, our equity plans provide for accelerated or continued vesting of unvested equity awards upon various termination events.

 

Messrs. Giles, Elia, Lovass, 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 Gerber 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 Gerber, 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 Gerber 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 Gerber from any and all claims. In addition, Gerber’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, Lovass, 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 Gerber 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 Gerber 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 Gerber 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 Gerber until 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 Gerber.

 

In addition, as a condition of receipt of the above termination benefits, the executive must sign a general release in favor of Gerber which releases Gerber 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.

 

Gerber has agreed to require any successor to its business expressly to assume the obligations of the severance agreements. If any such successor to Gerber does not agree to assume the severance obligations and related payments, the executive is entitled to compensation from Gerber 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 Gerber, or the willful engagement by the executive in conduct that is demonstrably and materially injurious to Gerber, monetarily or otherwise.

 

Equity Plans

 

Each of Messrs. Giles, Elia, Lovass, 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 Gerber. 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, Lovass, 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, 2009, the last day of our most recently completed fiscal year, and the stock price of our common stock was $3.95, which was the closing price of our common stock as reported on the NYSE on April 30, 2009. 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 occurrence 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

 

Throughout fiscal 2009, John R. Lord served as Chair and Edward G. Jepsen, Carole F. St. Mark and W. Jerry Vereen served as members of the Management Development and Compensation Committee. No member of the Committee during fiscal 2009 is or was an officer or other employee of Gerber or any of its subsidiaries. No executive officer of Gerber 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 Gerber’s Board or Management Development and Compensation Committee during fiscal 2009.

 

Transactions With Related Persons

 

The Board has vested in the Audit and Finance Committee the responsibility for reviewing and approving Gerber’s transactions in which a Director, nominee for Director, executive officer, greater than 5% shareholder, or an immediate family member of any of the foregoing persons has a direct or indirect material interest, as well as any other material related-party transactions. Transactions involving executive compensation are subject to oversight and approval by the Management Development and Compensation Committee. The Nominating and Corporate Governance Committee is charged with considering questions of possible conflicts of interest of Board members and Gerber’s executive officers.

 

In reviewing a related-party transaction, the Audit and Finance Committee will, after reviewing all material information regarding the transaction, take into account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.

 

REPORT OF THE AUDIT AND FINANCE COMMITTEE

 

The Audit and Finance Committee of the Board currently consists of four members: Edward G. Jepsen, who serves as Chair, Randall D. Ledford, John R. Lord and W. Jerry Vereen. Each member of the Committee is “independent” under the rules of the New York Stock Exchange as currently in effect. In addition, the Board has determined that each of the Committee members is financially literate and that Edward G. Jepsen qualifies as an “audit committee financial expert,” as that term is defined in Item 407(d)(5) of Regulation S-K promulgated by the SEC.

 

The Committee operates under a written charter. The Committee reviews and evaluates its charter at least annually and reports and makes recommendations to the Board with respect to any amendments or modifications of the charter. The charter was last amended in March 2008 to address legislative and regulatory requirements.

 

Management is responsible for Gerber’s financial reporting process, the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and the design and operation of Gerber’s system of internal control over financial reporting and procedures to ensure compliance with accounting standards and applicable laws and regulations. Gerber’s independent registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”), is responsible for performing an independent integrated audit of Gerber’s consolidated financial statements and internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) and to issue a report on such financial statements and internal control. The Committee’s responsibility is, in an oversight role, to monitor, oversee and review these processes.

 

In connection with the Committee’s responsibilities, the Committee reviewed Gerber’s audited financial statements for the fiscal year ended April 30, 2009 and discussed these financial statements and the assessment of internal control over financial reporting with Gerber’s management and the independent registered public accounting firm.

 

The Committee also reviewed and discussed with Gerber’s independent registered public accounting firm the matters required by Statement on Auditing Standards No. 61 (Codification of Statements on Auditing Standards, AU § 380), as amended (Communication with Audit Committees), as adopted by the Public Company Accounting Oversight Board.

 

The Committee discussed with PwC the matters required to be discussed by the New York Stock Exchange, the Securities and Exchange Commission, the Public Company Accounting Oversight Board and the American Institute of Certified Public Accountants.

 

Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) requires independent registered public accounting firms to disclose annually in writing all relationships that in their professional opinion may reasonably be thought to bear on independence, to confirm their independence and to engage in a discussion of independence. The Committee received from PwC the written disclosures and the letter required by Independence Standards Board Standard No. 1 concerning PwC’s independence. The Committee discussed with PwC the independence of such firm, a discussion that encompassed, among other matters, whether PwC’s provision of non-audit-related services to Gerber is compatible with maintaining the firm’s independence.

 

Based upon the reviews and discussions with management and PwC referred to above, and the receipt of an unqualified opinion from PwC dated July 7, 2009, the Committee recommended to the Board that the financial statements be included in Gerber’s Annual Report on Form 10-K for the fiscal year ended April 30, 2009 for filing with the Securities and Exchange Commission.

 

Respectfully submitted,

 

Audit and Finance Committee

 

Edward G. Jepsen (Chair)
Randall D. Ledford
John R. Lord
W. Jerry Vereen

 

AGENDA ITEM 2:

 

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

As proposal 2 for the Annual Meeting, shareholders are asked to consider and vote upon the ratification of the appointment of PricewaterhouseCoopers LLP, or “PwC,” as Gerber’s independent registered public accounting firm for fiscal 2010. PwC served as Gerber’s independent registered public accounting firm for fiscal 2009 and has been appointed as Gerber’s independent registered public accounting firm for fiscal 2010. The Board is submitting this appointment for shareholder ratification at the Annual Meeting. Representatives of PwC are expected to be present at the Annual Meeting and will be afforded the opportunity to make a statement if they so desire and to respond to appropriate questions.

 

Our governing documents do not require that the shareholders ratify the appointment of PwC as our independent registered public accounting firm. We are seeking ratification because we believe it is a good corporate governance practice. If our shareholders do not ratify the appointment, the Audit and Finance Committee will reconsider whether to retain PwC, but may retain PwC as Gerber’s independent registered public accounting firm. Even if the appointment is ratified, the Audit and Finance Committee in its discretion may change the appointment at any time during the year if it determines that a change would be in the best interests of Gerber and its shareholders.

 

The Board unanimously recommends a vote FOR approval of the ratification of the appointment of PricewaterhouseCoopers LLP as Gerber’s independent registered public accounting firm for the 2010 fiscal year.

 

Fees

 

The following table sets forth the aggregate fees for services rendered by PwC to Gerber for the 2009 and 2008 fiscal years:

 

 

The Audit and Finance Committee of the Board has considered whether the services provided by PwC, other than audit services, were compatible with maintaining PwC’s independence.

 

Audit Services.  The audit services shown above were incurred principally for services rendered in connection with the audit of Gerber’s consolidated financial statements and internal control over financial reporting and associated filings with the SEC and other U.S. and foreign regulatory agencies.

 

Audit-Related Services.  Audit-related fees include fees incurred for assurance and related services that are traditionally performed by independent registered public accounting firms. The audit-related fees shown above for fiscal 2008 were incurred in connection with certain due diligence assistance.

 

Tax Services.  Tax services include services performed by the tax departments of PwC, except those services related to audits. The tax service fees shown above were incurred in connection with assistance in the preparation of certain of Gerber’s international subsidiary tax returns and corporate tax planning and advisory services.

 

All Other Services.  Amounts shown as fees for “all other services” primarily represent licensing fees for the use of proprietary software of PwC.

Pre-Approval Policy

 

The Audit and Finance Committee pre-approves all audit and permissible non-audit services provided by Gerber’s independent registered public accounting firm. Non-audit services include audit-related, tax and other services.

 

The Audit and Finance Committee has established a policy that provides for the general pre-approval of specific types of services. Pre-approval under this policy is generally provided for up to one year, is detailed as to the particular services or categories of services that are pre-approved, and specifies fee limits for each service or category of service. The independent registered public accounting firm and management are required to report periodically to the Audit and Finance Committee regarding the services provided by, and fees payable to, the independent registered public accounting firm in accordance with this pre-approval.

 

During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the general pre-approval. In those instances, the pre-approval policy requires specific pre-approval of the additional services before such firm is engaged to perform the services. In accordance with the policy, the Audit and Finance Committee has delegated to its Chair the authority to address any requests for pre-approval of services between Committee meetings. The Chair must report any pre-approval decisions to the Audit and Finance Committee at its next scheduled meeting.

 

AGENDA ITEM 3:

 

APPROVAL OF AMENDMENT TO THE GERBER SCIENTIFIC, INC. 2006 OMNIBUS INCENTIVE PLAN

 

As proposal 3 for the Annual Meeting, shareholders are asked to consider and vote upon an amendment to the Gerber Scientific, Inc. 2006 Omnibus Incentive Plan, which we refer to as the “Plan,” to increase the total number of shares of common stock available for issuance under the Plan by 1,250,000 shares. We refer to this proposed amendment as the “2009 plan amendment.” Gerber is seeking shareholder approval of the 2009 plan amendment to comply with NYSE shareholder approval requirements applicable to equity plans.

 

2009 Plan Amendment

 

The Board unanimously approved the 2009 plan amendment, subject to shareholder approval, effective on June 17, 2009 upon the recommendation of the Management Development and Compensation Committee, which also approved the 2009 plan amendment. If approved by shareholders at the Annual Meeting, the 2009 plan amendment will be effective at the time of shareholder approval.

 

Gerber’s shareholders approved the Plan at the Annual Meeting held on September 21, 2006. At the Annual Meeting held on September 25, 2008, Gerber’s shareholders approved an amendment to the Plan to increase the total number of shares of common stock available for issuance under the Plan by 1,500,000 shares to 3,000,000 shares.

 

The only change to the Plan proposed for approval by shareholders at this Annual Meeting is an increase in the number of shares of common stock that may be issued under the Plan. The 2009 plan amendment does not alter the considerations of the Management Development and Compensation Committee with respect to grants under the Plan to officers and other employees, or of the Nominating and Corporate Governance Committee with respect to grants to non-employee Directors. Because the grant of awards under the Plan is within the discretion of the applicable committee, it is not possible to determine at this time the amount of any future awards under the Plan that may be made to any participants. As of the date of this Proxy Statement, however, Gerber has no commitments to grant awards with respect to the proposed additional shares of common stock authorized under the 2009 plan amendment.

 

You are urged to read this entire proposal and the complete Plan document. We believe that the 2009 plan amendment is necessary to recruit and retain key employees critical to Gerber’s success, and thus is in the best interests of Gerber’s shareholders. As of July 31, 2009, 991,584 shares remained available for future awards under the Plan. Gerber grants awards under the Plan to a wide range of employees and believes that the Plan is an important factor in attracting and retaining the best employees and aligning employees’ long-term interests with the interests of our shareholders.

 

The Board unanimously recommends a vote FOR approval of the amendment to the Gerber Scientific, Inc. 2006 Omnibus Incentive Plan to increase the total number of shares of common stock available for issuance under the Plan by 1,250,000 shares.

 

Summary of Plan

 

The material terms of the Plan, as the Plan is proposed to be amended by the 2009 plan amendment, are summarized below. The summary below is qualified in all respects by reference to the text of the Plan, as proposed to be amended, which is attached to this Proxy Statement as Appendix B.

 

Purpose and Eligibility.  The purpose of the Plan is to provide a means whereby employees and Directors of Gerber develop a sense of proprietorship and personal involvement in the development and financial success of Gerber, and to encourage them to devote their best efforts to the business of Gerber, thereby advancing the interests of Gerber and its shareholders. A further purpose of the Plan is to provide a means through which Gerber may attract able individuals to become employees or serve as Directors of Gerber and to provide a means whereby those individuals can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of Gerber.

Awards may be granted under the Plan to officers, Directors (including non-employee Directors) and other employees of Gerber, as well as to employees of any of Gerber’s subsidiaries and any other affiliates of Gerber designated as qualifying affiliates by the Management Development and Compensation Committee. Only officers and other employees of Gerber or any of Gerber’s subsidiaries are eligible to receive incentive stock options. As of July 31, 2009, approximately 2,179 persons were eligible to participate in the Plan.

 

As of July 31, 2009, the closing price of the common stock as reported on the NYSE was $3.13 per share.

 

Effective Date and Term.  The Plan became effective on May 23, 2006 and will expire on May 23, 2016 unless it is earlier terminated by the Board.

 

Administration, Amendment and Termination.  The Plan is generally administered by the Management Development and Compensation Committee. Subject to the Board’s final and ultimate authority with respect to the interpretation and administration of the Plan, the Management Development and Compensation Committee has the authority to interpret the terms and intent of the Plan and any award agreement, to select award recipients, to determine eligibility for awards and the terms and conditions of awards to participants other than non-employee Directors, and to make all other determinations necessary or advisable for the Plan’s administration. The Board or the Nominating and Corporate Governance Committee determines the terms of all Plan awards to non-employee Directors.

 

The Management Development and Compensation Committee may delegate to any of the following such administrative duties or powers as it may deem advisable:

 

 

The Management Development and Compensation Committee may, by resolution, authorize one or more officers of Gerber, each of whom must be a Director, to designate employees to be recipients of awards or to determine the amount and number of any such awards. Such officers, however, may not grant awards to an employee who is an officer or Director of Gerber or is a more than ten percent beneficial owner of any class of Gerber’s equity securities that is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as determined by the Board in accordance with Section 16 of the Securities Exchange Act of 1934. The resolution of the Management Development and Compensation Committee providing for authorization to such officers must set forth the total amount and number of awards such officers may grant. The officers must report periodically to the Management Development and Compensation Committee regarding the nature and scope of the awards granted pursuant to the authority delegated to them.

 

The Management Development and Compensation Committee generally may alter, amend, modify, suspend or terminate the Plan and any award agreement in whole or in part at any time, except that no such action may adversely affect in a material way any outstanding award without the written consent of the award holder. In addition, no such action may amend the Plan without the approval of shareholders if the amendment is required to be submitted for shareholder approval by applicable law, rule or regulation, including rules of the NYSE. The rules of the NYSE require that, with limited exemptions, shareholders must be given the opportunity to vote on all material revisions to equity compensation plans, including any revision, such as the 2009 amendment, which would materially increase the number of shares available for issuance under the applicable plan.

 

Awards.  Awards under the Plan may be made in the form of:

 

 

 

Any of the foregoing awards may be made subject to attainment of performance goals over a performance period of up to one or more years.

 

An incentive stock option is an option that meets the requirements of Section 422 of the Internal Revenue Code, and a non-qualified stock option is an option that does not meet those requirements. A stock appreciation right, or “SAR,” is a right to receive upon exercise, in the form of common stock, cash or a combination thereof, the excess of the fair market value of one share of common stock on the exercise date over the grant price of the SAR. Restricted stock is an award of common stock on which are imposed restrictions that subject the shares to a substantial risk of forfeiture, as defined in Section 83 of the Internal Revenue Code. Restricted stock units are awards that represent a conditional right to receive shares of common stock in the future and that may be made subject to the same types of restrictions and risk of forfeiture as restricted stock. Performance shares are awards of common stock, the value for which at the time the common stock is payable is determined by the extent to which the applicable performance criteria have been met. Performance units are similar to performance shares, except that the award is based upon cash value instead of shares of common stock. Unrestricted shares are awards of shares of common stock that are free of restrictions other than those imposed under federal or state securities laws.

 

Shares Subject to the Plan.  Approval of the 2009 amendment will increase by 1,250,000 shares the total number of shares available for issuance under the Plan. Subject to adjustment as described below, and assuming approval of the 2009 amendment by Gerber’s shareholders at the Annual Meeting, a total of 4,250,000 shares of common stock will be authorized for issuance under the Plan, including shares related to awards granted under prior stock incentive plans, as described below. The authorized shares include 161,267 shares that remained available for issuance under the Gerber Scientific, Inc. 2003 Employee Stock Option Plan, the Gerber Scientific, Inc. Non-Employee Director’s Stock Grant Plan and the Gerber Scientific, Inc. 2005-2006 Executive Annual Incentive Bonus Plan, but were not subject to outstanding awards, as of the date of shareholder approval of the Plan on September 21, 2006. No additional awards will be made under such prior plans. As of July 31, 2009, 2,014,480 shares were subject to outstanding awards under the Plan and 991,584 shares remained available for future awards under the Plan. Shares issued under the Plan may be authorized but unissued shares or treasury shares.

 

Any shares related to awards granted under the Plan or the foregoing prior plans that:

 

 

will again be available for grant under the Plan pursuant to new awards.

 

If the option price of any option granted under the Plan or the tax withholding requirements with respect to any award granted under the Plan are satisfied by tendering shares of common stock to Gerber (by either actual delivery or by attestation), the tendered shares will again be available for grant under the Plan. Further, if an SAR is exercised and settled in shares, the difference between the total shares exercised and the net shares delivered will again be available for grant, so that only the number of shares issued upon exercise of an SAR will be counted against the shares available for issuance.

 

The Plan has a number of additional limitations on the shares reserved for issuance or amount of awards that may be granted. A maximum of 3,000,000 shares may be issued pursuant to incentive stock options. Annual award limits will apply to grants of awards intended to qualify as performance-based compensation for

purposes of Section 162(m) of the Internal Revenue Code. No participant may be awarded options or SARs for more than 300,000 shares in any fiscal year. A maximum of 150,000 shares of restricted stock or 150,000 shares represented by restricted stock units, or the grant of such an award equal to the value of a maximum of 150,000 shares, may be awarded to any participant in any fiscal year. A maximum of 150,000 performance units or performance shares, or the grant of such an award equal to the value of a maximum of 150,000 shares, may be awarded to any participant in any fiscal year. A maximum amount of $1,500,000 may be awarded or credited with respect to cash-based or other stock-based awards to any participant in any fiscal year. The foregoing limitations are subject to adjustment as described below.

 

Terms and Conditions of Options.  An option granted under the Plan is exercisable only to the extent that it is vested on the date of exercise. No option may be exercisable more than ten years from the option grant date, except that nonqualified stock options that are granted to participants outside the United States may have a term that is greater than ten years.

 

The exercise price per share under each option granted under the Plan may not be less than 100% of the fair market value of the common stock on the option grant date. The fair market value of the common stock will be the closing price of the common stock as reported on the NYSE on the option grant date. If there is no closing price reported on the option grant date, the fair market value will be deemed equal to the closing price as reported on the NYSE for the last preceding date on which sales of the common stock were reported.

 

Except upon the occurrence of a merger or other transaction described below, no amendment or modification may be made to an outstanding option which reduces the option price, either by lowering the option price or by canceling the outstanding option and granting a replacement option with a lower option price, without the approval of shareholders.

 

The option price of any option may be paid (1) in cash or its equivalent, (2) by tendering (either by actual delivery or attestation) previously acquired shares having an aggregate fair market value at the time of exercise equal to the option price, subject to specified conditions, (3) by a cashless (broker-assisted) exercise, (4) by a combination of each of the foregoing payment methods or (5) by any other method approved or accepted by the Management Development and Compensation Committee in its sole discretion.

 

Each option will become vested and exercisable at such times and under such conditions as the Management Development and Compensation Committee may approve consistent with the terms of the Plan. To date, option awards generally have provided for vesting ratably over three years on each anniversary of the grant date.

 

In the case of incentive stock options, the aggregate fair market value of the common stock determined on the option grant date with respect to which such options are exercisable for the first time during any calendar year may not exceed $100,000.

 

Incentive stock options are non-transferable during the optionee’s lifetime. Awards of non-qualified stock options are generally non-transferable, except for transfers by will or the laws of descent and distribution. The Management Development and Compensation Committee may, in its discretion, determine that an award of non-qualified stock options may be transferred, subject to terms and conditions that the Management Development and Compensation Committee deems appropriate.

 

The Management Development and Compensation Committee may impose restrictions on any shares of common stock acquired pursuant to the exercise of an option as it deems advisable, including minimum holding period requirements or restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which the shares of common stock are then listed or traded, or under any blue sky or state securities laws applicable to the shares of common stock.

 

Terms and Conditions of Stock Appreciation Rights.  SARs may be granted in conjunction with all or a part of any option granted under the Plan. The Management Development and Compensation Committee will determine at the SAR grant date or thereafter the time or times at which and the circumstances under which an SAR may be exercised in whole or in part, the time or times at which and the circumstances under which

an SAR will cease to be exercisable, the method of exercise, the method of settlement, the form of consideration payable in settlement (which may be cash, shares or a combination thereof), whether or not an SAR will be in tandem or in combination with any other grant, and any other terms and conditions of any SAR. Exercisability of SARs may be subject to future service requirements, to the achievement of one or more of the performance objectives that are described below under “Corporate Performance Objectives” or to such other terms and conditions as the Management Development and Compensation Committee, in its sole discretion, may impose.

 

Upon exercise of an SAR, the holder will be entitled to receive, in the specified form of consideration, the excess of the fair market value of one share of common stock on the exercise date over the grant price of such SAR, as determined by the Management Development and Compensation Committee. The grant price of an SAR may not be less than the fair market value of a share of common stock on the grant date. Except upon the occurrence of a merger or other transaction described below, no amendment or modification may be made to an outstanding SAR which reduces the SAR grant price, either by lowering the SAR grant price or by canceling the outstanding SAR and granting a replacement SAR with a lower SAR grant price.

 

An SAR granted under the Plan will terminate upon the expiration of ten years from the grant date, except that an SAR that is granted to a participant outside the United States may have a term that is greater than ten years.

 

Awards of SARs are generally nontransferable, except for transfers by will or the laws of descent and distribution. The Management Development and Compensation Committee may, in its discretion, determine that an award of SARs may be transferred, subject to terms and conditions that the Management Development and Compensation Committee deems appropriate.

 

Terms and Conditions of Restricted Stock and Restricted Stock Units.  Subject to the provisions of the Plan, the Management Development and Compensation Committee will determine the terms and conditions of each award of restricted stock and restricted stock units, including the restricted period for all or a portion of the award, the restrictions applicable to the award and the purchase price, if any, for the common stock subject to the award. Unless otherwise determined by the Management Development and Compensation Committee, to the extent permitted or required by law as determined by the Management Development and Compensation Committee, holders of shares or restricted stock will have the right to exercise full voting rights with respect to those shares during the restricted period. Awards of restricted stock and restricted stock units may be subject to satisfaction of individual performance objectives or one or more of the performance objectives that are described below under “Corporate Performance Objectives.”

 

The restrictions and the restricted period may differ with respect to each participant. An award will be subject to forfeiture if events specified by the Management Development and Compensation Committee occur prior to the lapse of the restrictions. To date, awards of restricted stock generally have been subject to restrictions which lapse ratably over four years on each anniversary of the grant date.

 

Awards of restricted stock and restricted stock units are generally nontransferable, except for transfers by will or the laws of descent and distribution. The Management Development and Compensation Committee may, in its discretion, determine that an award of restricted stock or restricted stock units may be transferred, subject to terms and conditions that the Management Development and Compensation Committee deems appropriate.

 

Terms and Conditions of Performance Units and Performance Shares.  The Management Development and Compensation Committee may award performance shares and performance units in such amounts and upon such terms as the Management Development and Compensation Committee may determine. Each performance share will have an initial value that is equal to the fair market value of a share of common stock on the date of grant. The Management Development and Compensation Committee may set performance goals in its discretion which, depending on the extent to which they are met, will determine the value or number of performance units or performance shares that will be paid out to a participant. The Management Development and Compensation Committee may, in its sole discretion, pay earned performance units or performance shares in the form of cash, shares of common stock or a combination thereof equal to the value of the earned

performance units or performance shares. Any shares of common stock issued based upon performance units or performance shares may be granted subject to any restrictions that the Management Development and Compensation Committee deems appropriate.

 

Awards of performance units or performance shares are generally nontransferable, except for transfers by will or the laws of descent and distribution. The Management Development and Compensation Committee may, in its discretion, determine that an award of performance units or performance shares may be transferred, subject to terms and conditions that the Management Development and Compensation Committee deems appropriate.

 

Terms and Conditions of Cash-Based and Other Stock-Based Awards.  The Management Development and Compensation Committee may grant cash-based awards to participants in such amounts and upon such terms as the Management Development and Compensation Committee may determine. The Management Development and Compensation Committee may also grant other types of equity-based or equity-related awards (including the grant or offer for sale of unrestricted shares of common stock) in such amounts and subject to such terms and conditions as the Management Development and Compensation Committee may determine. Any such awards may involve the transfer of actual shares of common stock to participants, or payment in cash or otherwise of amounts based on the value of the shares of common stock. Any cash-based awards or other stock-based awards granted by the Management Development and Compensation Committee may be subject to performance goals established by the Management Development and Compensation Committee in its discretion.

 

Dividend Equivalents.  The Management Development and Compensation Committee is authorized to grant dividend equivalents to a participant in connection with an award under the Plan. Dividend equivalents will entitle the participant to receive cash, common stock or other property equal in value to dividends paid, or other periodic payments made, with respect to a specified number of shares of common stock. Dividend equivalents may be paid or distributed when accrued or will be deemed to have been reinvested in additional common stock, in awards under the Plan or in other investment vehicles, and will be subject to such restrictions on transferability and risks of forfeiture as the Management Development and Compensation Committee may specify.

 

Adjustment of Shares Subject to the Plan.  The Plan provides for adjustments in the event of any corporate event or transaction, such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, extraordinary dividend, stock split, reverse stock split, split up, spin-off, or other distribution of Gerber’s stock or property, combination of shares, exchange of shares, dividend-in-kind or other similar change in Gerber’s capital structure. If any such corporate event or transaction affects the common stock in such a manner that an adjustment is determined by the Management Development and Compensation Committee to be appropriate to prevent dilution or enlargement of the rights of participants, the Management Development and Compensation Committee will adjust, among other award terms, the number and kind of shares that may be delivered in connection with outstanding awards, the exercise price, grant price or purchase price relating to any outstanding awards, and other value determinations applicable to outstanding awards.

 

Effect of Change in Control Transactions.  If a participant’s employment is terminated within two years following the occurrence of a “change in control” transaction specified in the Plan, except as otherwise provided by the Management Development and Compensation Committee, all outstanding options and SARs will become immediately vested and exercisable and all outstanding awards of restricted stock and restricted stock units will become immediately vested and payable. In addition, any performance period will be deemed to have lapsed and any performance goals will have been deemed to have been met.

 

The foregoing effects will result:

 

 

 

Instead of the providing for accelerated vesting in awards under the Plan in connection with the foregoing transactions, the Management Development and Compensation Committee may provide that awards, whether or not exercisable, will be canceled and terminated and the holders of awards will receive a cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and securities equivalent to such cash payment) equal to the value of the award.

 

The Management Development and Compensation Committee may provide in any agreement under the Plan for accelerated vesting or exercisability of an award upon the occurrence of specified events, including a change in control of Gerber, as defined in any such agreement.

 

Corporate Performance Objectives.  Section 162(m) of the Internal Revenue Code limits publicly-held companies to an annual deduction for federal income tax purposes of $1,000,000 for compensation paid to their chief executive officer and the three most highly compensated executive officers (other than the principal financial officer) determined at the end of each year. Performance-based compensation is excluded from this limitation. The Plan is designed to permit the Management Development and Compensation Committee to grant awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m).

 

Section 162(m) requires that, to qualify as performance-based, the compensation must be paid solely on account of the attainment of one or more pre-established, objective performance goals. In the case of compensation attributable to Plan awards other than options, the performance goal requirement is deemed satisfied if the vesting of such awards is subject to the achievement of performance goals based on objective business criteria. To establish performance objectives for these awards, the Management Development and Compensation Committee exclusively uses business criteria specified in the Plan. The performance objectives may be stated either on an absolute or relative basis and may be based on one or more of such business criteria. The business criteria are: