<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
Ionics, Incorporated
(Name of Registrant as Specified In Its Charter)
Ionics, Incorporated
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
(LOGO)
IONICS, INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 5, 1994
To the Stockholders of
Ionics, Incorporated:
Notice is hereby given that the Annual Meeting of Stockholders of Ionics,
Incorporated (the "Corporation" or the "Company") will be held in the auditorium
of The First National Bank of Boston Building, 100 Federal Street, Boston,
Massachusetts, on Thursday, May 5, 1994 at 2:00 P.M. for the following purposes:
1. To elect four Class II Directors of the Corporation, each to serve
for a three-year term.
2. To approve and ratify an amendment to the Corporation's 1979 Stock
Option Plan to increase the number of shares of Common Stock available for
issuance by 325,000 shares.
3. To approve and ratify an amendment to the Corporation's 1979 Stock
Option Plan to comply with Section 162(m) of the Internal Revenue Code by
limiting the number of shares of Common Stock that may be acquired in any
year by any participant to 100,000 shares.
4. To select an Auditor of the Corporation for the current fiscal
year.
5. To consider and act upon such other matters as may properly come
before the meeting.
The Board of Directors has fixed the close of business on March 18, 1994 as
the record date for determination of the stockholders entitled to notice of and
to vote at the meeting.
By Order of the Board of Directors
STEPHEN KORN, Clerk
Ionics, Incorporated
65 Grove Street
Watertown, Massachusetts 02172
March 30, 1994
WHETHER OR NOT YOU EXPECT TO BE AT THE MEETING, WILL YOU PLEASE MARK, SIGN,
DATE AND RETURN YOUR PROXY IN THE ENVELOPE ENCLOSED HEREWITH.
<PAGE> 3
IONICS, INCORPORATED
65 GROVE STREET
WATERTOWN, MASSACHUSETTS 02172
------------------------
PROXY STATEMENT
------------------------
MARCH 30, 1994
The Notice of the 1994 Annual Meeting of Stockholders of the Corporation is
set forth on the preceding page and there is enclosed with this Proxy Statement
a form of Proxy solicited by the Board of Directors of the Corporation. The cost
of this solicitation will be borne by the Corporation. In addition to
solicitation by mail, certain of the officers and employees of the Corporation
also may solicit Proxies personally or by telephone or telegram. This Proxy
Statement is being first sent to stockholders on or about March 30, 1994. A copy
of the Annual Report to Stockholders for the year 1993 (including audited
financial statements of the Corporation) also accompanies this Proxy Statement.
Only stockholders of record as of the close of business on March 18, 1994
are entitled to notice of and to vote at the 1994 Annual Meeting and/or any
adjournment thereof. The outstanding stock of the Corporation on the record date
entitled to vote consisted of 6,949,406 shares of common stock, $1 per share par
value ("Common Stock"). The holders of the outstanding shares of Common Stock
are entitled to one vote per share. All shares represented by valid Proxies
received by the Clerk of the Corporation prior to the meeting will be voted as
specified in the Proxy: if no specification is made and if discretionary
authority is conferred by the stockholder, the shares will be voted for the
election of each of the Board's nominees to the Board of Directors in proposal
1; for the approval and ratification of the amendments to the 1979 Stock Option
Plan in proposals 2 and 3; and for the selection of an auditor in proposal 4. A
stockholder giving a Proxy has the power to revoke it at any time prior to its
exercise by delivering to the Clerk of the Corporation a written revocation or a
duly executed Proxy bearing a later date, or by attendance at the meeting and
voting such shares in person.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether or
not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as not having been voted for purposes of determining
the approval of any matter submitted to the shareholders for a vote. If a broker
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
2
<PAGE> 4
<TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists as of March 18, 1994 the number of shares of the
Corporation's Common Stock beneficially owned by stockholders known by the
Corporation to own more than five percent of such Common Stock:
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------------------ -------------- ----------
<S> <C> <C>
Wellington Management Company 551,040 shares(1) 7.9%
75 State Street
Boston, MA 02109
Savena Trust 400,000 shares(2) 5.8%
8 Elizabethan Strasse,
4010
Basel, Switzerland
Daniel J. Terra 353,000 shares 5.1%
990 Skokie Boulevard
Northbrook, IL 60062
- ---------------
<FN>
(1) Includes shared voting power as to 404,790 shares and shared dispositive
power as to all 551,040 shares. Wellington Management Company has no sole
voting or sole dispositive power as to any of these shares.
(2) The Savena Trust is a trust created under the laws of Liechtenstein, the
principal indirect beneficiary of which is Mr. Arnaud de Vitry d'Avaucourt,
a director of the Corporation. Mr. de Vitry d'Avaucourt has neither voting
nor dispositive power over the shares held in such trust and accordingly
disclaims beneficial ownership of such shares. The Savena Trust and its
trustees have made a joint public filing disclosing the Trust's ownership
of 400,000 shares of the Corporation's Common Stock with certain other
reporting persons, including: (a) the Philora Trust, the principal indirect
beneficiary of which is Mr. de Vitry d'Avaucourt's wife, which has reported
beneficial ownership of 170,963 shares of the Corporation's Common Stock;
(b) Mr. de Vitry d'Avaucourt, who has reported beneficial ownership of (i)
81,000 shares of the Corporation's Common Stock as to which he shares
beneficial ownership with his wife, and (ii) 6,000 shares of the
Corporation's Common Stock pursuant to presently exercisable options; and
(c) Mrs. de Vitry d'Avaucourt, who has reported shared beneficial ownership
with her husband of 81,000 shares of the Corporation's Common Stock as
herein noted. The aggregate number of shares owned by all such reporting
persons is 657,963 shares, or approximately 9.5% of the Corporation's
outstanding shares.
</TABLE>
3
<PAGE> 5
<TABLE>
The following table sets forth as of March 18, 1994 the number of shares of
Common Stock of the Corporation beneficially owned by all the Directors
(including nominees), each of the executive officers named in the Summary
Compensation Table on page 12 of this Proxy Statement, and all Directors and
executive officers of the Company as a group (14 individuals).
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS
------------------------ ----------------------- ----------
<S> <C> <C>
William L. Brown................................................ 3,000(1) *
Arnaud de Vitry d'Avaucourt..................................... 87,000(2) 1.3%
Lawrence E. Fouraker............................................ 7,200(3) *
Samuel A. Goldblith............................................. 6,000(4) *
Arthur L. Goldstein............................................. 209,211+ (5) 3.0%
Kachig Kachadurian.............................................. 106,465+ (6) 1.5%
William E. Katz................................................. 113,230+ (7) 1.6%
Robert B. Luick................................................. 6,100(8) *
John J. Shields................................................. 11,540(9) *
Mark S. Wrighton................................................ 0 --
Allen S. Wyett.................................................. 3,000(10) *
Theodore G. Papastavros......................................... 51,240+(11) *
Stephen Korn.................................................... 12,416+(12) *
All Directors and Executive
Officers as a Group (14 individuals).......................... 631,402+(13) 8.7%
- ---------------
<FN>
* The number of shares owned beneficially at March 18, 1994 is less than 1%
of the shares of Common Stock outstanding at that date.
+ If certain of the options owned by these executive officers are exercised,
certain of the shares would be subject to repurchase in varying amounts if
the individual's employment with the Company were to be terminated before
specified dates.
(1) Includes 2,000 shares subject to option, as to which Mr. Brown has the
right to acquire beneficial ownership.
(2) Includes 6,000 shares subject to options, as to which Mr. de Vitry
d'Avaucourt has the right to acquire beneficial ownership. The remaining
81,000 shares, as to which Mr. de Vitry d'Avaucourt shares dispositive
power, are held by a financial institution in a fiduciary capacity for the
benefit of Mr. de Vitry d'Avaucourt's wife. Such number excludes 170,963
shares held in a trust of which Mr. de Vitry d'Avaucourt's wife is the
principal beneficial owner, and also excludes an additional 400,000 shares
held in a separate trust, of which Mr. de Vitry d'Avaucourt is the
principal indirect beneficiary. Mr. de Vitry d'Avaucourt disclaims
beneficial ownership of such 570,963 shares.
(3) Includes 4,000 shares subject to options, as to which Mr. Fouraker has the
right to acquire beneficial ownership. Does not include 300 shares owned by
members of Mr. Fouraker's immediate family, as to which Mr. Fouraker
disclaims beneficial ownership. The Company is required to identify any
director or officer who failed to file on a timely basis with the
Securities and Exchange Commission a required report relating to ownership
and changes in ownership of the Company's Common Stock. Through an
oversight, Mr. Fouraker's filing on Form 5 reporting the gift of 300 shares
to family members was made 17 days beyond the due date.
</TABLE>
4
<PAGE> 6
(4) Represents shares subject to options, as to which Mr. Goldblith has the
right to acquire beneficial ownership.
(5) Includes 107,000 shares subject to options, as to which Mr. Goldstein has
the right to acquire beneficial ownership. Includes beneficial ownership of
5,200 shares (as of December 31, 1993) held in the Ionics Section 401(k)
Plan for the account of Mr. Goldstein. Does not include 3,400 shares held
by members of Mr. Goldstein's immediate family, as to which Mr. Goldstein
disclaims beneficial ownership.
(6) Includes 68,750 shares subject to options, as to which Mr. Kachadurian has
the right to acquire beneficial ownership. Includes beneficial ownership of
2,114 shares (as of December 31, 1993) held in the Ionics Section 401(k)
Plan for the account of Mr. Kachadurian. Includes 500 shares held by a
member of his immediate family, as to which Mr. Kachadurian disclaims
beneficial ownership.
(7) Includes 60,188 shares subject to options, as to which Mr. Katz has the
right to acquire beneficial ownership. Does not include 5,200 shares held
by members of Mr. Katz's immediate family, as to which Mr. Katz disclaims
beneficial ownership.
(8) Includes 1,000 shares subject to options, as to which Mr. Luick has the
right to acquire beneficial ownership. Does not include 370 shares held by
members of Mr. Luick's immediate family, as to which Mr. Luick disclaims
beneficial ownership.
(9) Includes 5,000 shares subject to options, as to which Mr. Shields has the
right to acquire beneficial ownership.
(10) Includes 2,000 shares subject to options, as to which Mr. Wyett has the
right to acquire beneficial ownership. Does not include 500 shares held by
a member of Mr. Wyett's immediate family, as to which Mr. Wyett disclaims
beneficial ownership.
(11) Includes 28,750 shares subject to options, as to which Mr. Papastavros has
the right to acquire beneficial ownership. Includes beneficial ownership of
227 shares (as of December 31, 1993) in the Ionics Section 401(k) Plan for
the account of Mr. Papastavros.
(12) Includes 12,400 shares subject to options, as to which Mr. Korn has the
right to acquire beneficial ownership. Includes beneficial ownership of 16
shares (as of December 31, 1993) in the Ionics Section 401(k) Plan for the
account of Mr. Korn.
(13) Assumes exercise of options held by the group for all 318,088 shares and
that such shares are outstanding.
5
<PAGE> 7
EXPLANATION OF AGENDA FOR THE MEETING
ITEM 1. ELECTION OF DIRECTORS.
The Corporation has a classified Board of Directors consisting of three
Class I Directors, four Class II Directors and four Class III Directors. The
Class I, Class II and Class III Directors currently in office will serve until
the annual meeting of stockholders to be held in 1996, 1994 and 1995,
respectively, and until their respective successors are duly elected and
qualified. At each annual meeting of stockholders, Directors are elected for a
full term of three years to succeed those whose terms are expiring.
<TABLE>
It is the intention of the persons authorized by the enclosed Proxy, which
is solicited by the Board of Directors, to nominate and elect the persons named
in the table below as Class II Directors, all of whom currently serve on the
Board. Mark S. Wrighton was elected a Class II Director by the Board of
Directors, effective November 11, 1993. To be elected, each nominee must receive
the affirmative vote of a plurality of the issued and outstanding shares of the
Common Stock represented in person or by Proxy at the Annual Meeting and
entitled to vote. The following table sets forth, for each nominee, his
principal occupation since January 1, 1989 and present positions with the
Corporation, period of past service as a Director, age on March 1, 1994, and
directorships of other public companies (i.e., companies subject to the
reporting requirements of the Securities Exchange Act of 1934 or registered as
investment companies under the Investment Company Act):
<CAPTION>
PRINCIPAL OCCUPATIONS
(SINCE JANUARY 1, 1989),
PRESENT POSITIONS WITH PERIOD
THE CORPORATION OF PAST
AND DIRECTORSHIPS SERVICE AS A
NAME AND AGE OF OTHER PUBLIC COMPANIES DIRECTOR
------------ ------------------------- ------------
Directors whose Terms Expire in 1994 (Class II Directors)
<S> <C> <C>
Arnaud de Vitry d'Avaucourt Engineering consultant; Chairman of the 1964 to date
(67)*# Board, Eureka (SICAV), Paris, a French
investment firm (1985-1990); Director,
Digital Equipment Corporation and
Schlumberger Limited
Kachig Kachadurian Senior Vice President of the Company 1986 to date
(44) (since May 1991); previously Vice
President of the Company
William E. Katz Executive Vice President of the Company 1961 to date
(69)
Mark S. Wrighton Provost and Professor of Chemistry, November 1993 to date
(44) Massachusetts Institute of Technology;
Director, Helix Technology Corp.
</TABLE>
6
<PAGE> 8
<TABLE>
The following table sets forth similar information about the Class I and
Class III Directors of the Company, whose terms of office do not expire at the
1994 Annual Meeting and who consequently are not nominees for election in 1994.
<CAPTION>
PRINCIPAL OCCUPATIONS
(SINCE JANUARY 1, 1989),
PRESENT POSITIONS WITH PERIOD
THE CORPORATION OF PAST
AND DIRECTORSHIPS SERVICE AS A
NAME AND AGE OF OTHER PUBLIC COMPANIES DIRECTOR
------------ ------------------------- ------------
Directors whose Terms Expire in 1996 (Class I Directors)
<S> <C> <C>
Lawrence E. Fouraker Professor Emeritus, Harvard Business 1986 to date
(70)*+# School, and self-employed business
advisor (since prior to 1989); Director,
Alcan Aluminum, Ltd., General Electric
Company, Gillette Company, The New
England, Citicorp, and Enserch Corp.
Samuel A. Goldblith Professor Emeritus, Massachusetts 1980 to date
(74)*+# Institute of Technology, and consultant
since 1990; Senior Advisor to the
President, Massachusetts Institute of
Technology (1986-1990)
Arthur L. Goldstein President and Chief Executive Officer of 1971 to date
(58)+ the Company (since prior to 1989);
Chairman of the Board of the Company
since May 1990; Director, Unitrode
Corporation
Directors whose Terms Expire in 1995 (Class III Directors)
William L. Brown Retired Chairman of the Board, The First May 1991 to date
(72)*# National Bank of Boston and Bank of
Boston Corporation; Director, GC
Companies, Inc.; Stone and Webster,
Incorporated; Standex International
Corporation; North American Mortgage
Company; Trustee, Bradley Real Estate
Trust
Robert B. Luick Of Counsel, Sullivan & Worcester, 1948 to 1968;
(82) Attorneys (since 1992); prior to 1992, 1971 to date
partner, Sullivan & Worcester; Assistant
Clerk of the Corporation (since prior to
1989)
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
(SINCE JANUARY 1, 1989),
PRESENT POSITIONS WITH PERIOD
THE CORPORATION OF PAST
AND DIRECTORSHIPS SERVICE AS A
NAME AND AGE OF OTHER PUBLIC COMPANIES DIRECTOR
------------ -------------------------- ------------
<S> <C> <C>
John J. Shields President and Chief Executive Officer, 1988 to date
(55)*# King's Point Holdings Incorporated
(diversified business information,
technology instrumentation and cranberry
cultivation); President and Chief
Executive Officer, Computervision
Corporation (January 1991-April 1993);
Senior Vice President, Digital Equipment
Corporation (1985-1989); Director, Light
Stream Corporation
Allen S. Wyett President, Wyett Consulting Group, Inc. February 1992 to date
(60)*# (since 1990); Chief Executive Officer,
Robert Allen Fabrics, Inc. (1970-1990)
- ---------------
<FN>
* Member of Audit Committee
+ Member of Executive Committee
# Member of Compensation Committee
</TABLE>
Mr. Luick is of counsel of the law firm of Sullivan & Worcester, which
provides legal services to the Corporation from time to time.
In addition to the Executive Committee of the Board of Directors, which did
not meet during the year, the Corporation has an Audit Committee, of which Mr.
de Vitry d'Avaucourt is Chairman, and a Compensation Committee, of which Mr.
Fouraker is Chairman. There is no standing nominating committee of the Board.
The Audit Committee meets with management and with the Corporation's independent
auditors at least once a year to review financial results and procedures,
internal financial controls, audit plans and recommendations. The Compensation
Committee reviews and establishes the remuneration to be paid to the executive
officers of the Corporation, reviews the remuneration to be paid to other
officers, and acts as the administrator of the Corporation's stock option plans.
During 1993, the Board of Directors held four meetings. The Audit Committee
met twice and the Compensation Committee met twice. Each Director attended 75%
or more of the aggregate of (i) the total number of meetings of the Board and
(ii) the total number of meetings held by all committees of the Board on which
such Director served.
If, at the time of the Annual Meeting, any of the above-named nominees are
unable to serve, a circumstance which is not anticipated, and if the enclosed
Proxy confers discretionary authority, the persons named in the Proxy will
either vote for such substitute nominees as may be designated by the Board of
Directors or will vote for a reduction in the number of Directors, as determined
by the Board.
8
<PAGE> 10
ITEM 2. APPROVAL OF AMENDMENT TO 1979 STOCK OPTION PLAN TO INCREASE NUMBER OF
SHARES AVAILABLE FOR ISSUANCE BY 325,000 SHARES.
Description of 1979 Plan
Under the 1979 Stock Option Plan (the "1979 Plan"), the Corporation may
grant options to acquire its Common Stock to officers and other key employees of
the Corporation and its subsidiaries. As of December 31, 1993, a total of 12,754
of the 1,130,000 shares previously reserved for issue under the 1979 Plan remain
available for future grants of options. Approximately 200 employees, including
officers of the Corporation and its subsidiaries, are presently eligible to
participate in the 1979 Plan. During 1993, options for a total of 345,250 shares
were issued under the 1979 Plan with an average exercise price of $39.54 per
share.
Under the terms of the 1979 Plan, the grantees, the number of shares
covered by each option, the exercise price of each non-qualified option (which
may not be less than $1.00 per share) and the duration of options (which may not
exceed ten years plus one day) are determined by the 1979 Plan's administrator,
the Compensation Committee of the Board of Directors (the "Committee"). Only
non-qualified options may now be granted under the 1979 Plan. Options may be
exercised not only with cash, but also with Common Stock of the Corporation. The
Compensation Committee usually provides either (i) that an option may be
exercised only in part, on a cumulative basis, during each of the five years
following the date of grant; or (ii) if the option is made immediately
exercisable in full, that the Corporation has the right to repurchase a
decreasing portion of any shares purchased upon exercise during the five years
following the date of grant. In any event, the option may not be transferred by
the grantee, and it may be exercised only while the grantee is an employee of
the Corporation or of a subsidiary, or within 30 days after termination of his
employment, or by an individual's estate for a period of 90 days after his
death. The termination date of the 1979 Plan is February 15, 1997.
There are no federal income tax consequences to an option holder when a
non-qualified option is granted. Upon exercise of a non-qualified option, the
option holder recognizes taxable compensation in an amount equal to the fair
market value of the stock on the date of exercise minus the exercise price, and
the Corporation is allowed a corresponding compensation deduction. If the
Corporation has the right to repurchase the shares acquired under a
non-qualified option, the taxable events in connection with the exercise of the
option are postponed until the Corporation's repurchase rights expire.
In addition to stock options, the Committee may award performance units
("Performance Units") under the Plan from time to time as it deems appropriate.
A performance unit plan permits an employee to be awarded cash, stock options on
Common Stock, or some combination thereof, contingent upon the Corporation
achieving certain performance goals. The Committee has broad discretion to
determine the nature of the performance objectives, which will be based upon a
specific dollar amount of growth or on a percentage rate of improvement in such
factors as the Corporation's (or a subsidiary's) earnings per share, income,
return on equity, or such other measures related to the growth or improvement of
the Corporation or its subsidiaries as the Committee determines. The Committee
will also determine the length of the period in which the stipulated performance
is to be achieved (the "Award Period"), whether and to what extent the
performance objectives have been attained, as well as the value of the
Performance Units earned. The Committee may establish a stated value for each
Performance Unit. If an employee ceases employment because of disability or
death prior to the end of an Award Period, any Performance Units he or she might
ultimately have earned will be paid at the end of the Award Period, as
determined by the Committee. Upon termination of employment for any other
reason, Performance Units and all of an employee's rights associated therewith
will terminate, unless the Committee in its discretion determines otherwise. The
Committee has not yet granted any Performance Units under the 1979 Plan.
9
<PAGE> 11
In general, for tax purposes, a participant will include in his or her
income the fair market value of a Performance Unit award when the award is paid
out to the participant. The amount of ordinary income recognized by the
participant is deductible by the Company. For financial statement purposes, the
grant of Performance Units will give rise to an employee compensation cost to be
charged to the operations of the Company. Such cost will be equal to the cash
amount or the fair market value of the number of shares or options to be awarded
at the end of the Award Period, less any payment required to be made by the
recipient (e.g., the exercise price in the event the Performance Units are to be
paid out in options), should the performance conditions be met.
The Board of Directors may at any time terminate the 1979 Plan, or amend
it, except with respect to certain matters which require the approval of the
Corporation's stockholders. No options or Performance Units may be granted under
the 1979 Plan after its termination.
Proposed Amendment
On February 17, 1994, the Corporation's Board of Directors amended the 1979
Plan, subject to the approval of the stockholders of the Corporation at the 1994
Annual Meeting, to increase the number of shares available for issuance upon
exercise of options or pursuant to the pay-out of Performance Units by 325,000
shares, representing approximately 4.7% of the Corporation's outstanding stock
(see Item 3 for an additional proposed amendment to the 1979 Plan).
The Board of Directors has taken such action, subject to stockholder
approval, to provide for the availability of additional shares in connection
with future grants of stock options and/or Performance Units, based upon its
belief that stock options and Performance Units are desirable and effective
employment incentives for the retention of key employees, as well as to attract
additional key employees to the Corporation.
The Board of Directors recommends that you vote FOR the proposal to ratify
and approve the amendment to the 1979 Plan to increase by 325,000 shares the
number of shares of Common Stock available under the 1979 Plan. Under the terms
of the 1979 Plan, the increase in the number of shares of Common Stock available
for issuance under the 1979 Plan requires the affirmative vote of the holders of
a majority of the outstanding shares of Common Stock, or 3,474,704 shares.
ITEM 3. APPROVAL OF AMENDMENT TO 1979 STOCK OPTION PLAN TO LIMIT NUMBER OF
SHARES WHICH MAY BE ACQUIRED BY ANY PARTICIPANT IN ANY YEAR TO 100,000
SHARES.
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code of 1986. Under Section 162(m), the allowable deduction for
compensation paid or accrued with respect to the chief executive officer and
each of the four most highly compensated employees of a publicly held
corporation is limited to no more than $1 million per year for fiscal years
beginning on or after January 1, 1994. This limitation does not apply to
compensation attributable to stock options or Performance Units if, among other
things, the 1979 Plan includes limits on grants of options and Performance Units
to plan participants so that the number of shares of Common Stock which can be
acquired by a participant in a defined time period is limited.
To comply with Section 162(m), on February 17, 1994, the Corporation's
Board of Directors amended the 1979 Plan to provide that no participant in the
1979 Plan may be granted stock options or Performance Units in any year to
acquire in the aggregate more than 100,000 shares of Common Stock. The Board of
Directors desires to amend the 1979 Plan to comply with Section 162(m) to permit
the full amount of compensation attributable to stock options or Performance
Units to be available as an income tax deduction to the Corporation.
10
<PAGE> 12
The Board of Directors recommends that you vote FOR the proposal to ratify
and approve the amendment to the 1979 Plan to comply with Section 162(m) by
limiting the number of stock options and Performance Units which may be granted
to any participant in any year to permit the acquisition by any participant of
no more than 100,000 shares of Common Stock in the aggregate. Approval of this
amendment requires the affirmative vote of the holders of a majority of the
number of shares represented in person or by Proxy at the Annual Meeting.
ITEM 4. SELECTION OF AN AUDITOR.
It is proposed that the stockholders select an independent auditor for the
Corporation for the current fiscal year, which ends December 31, 1994. The
persons named in the Proxy intend to vote in favor of selecting Coopers &
Lybrand unless otherwise directed in the Proxy. The firm became auditors for the
Corporation in 1974.
Although the Corporation is not required to submit the selection of its
auditor to a vote of stockholders, the Board of Directors of the Corporation
believes it is sound policy and in the best interests of the stockholders to do
so. In the event a majority of the votes cast are against the selection of
Coopers & Lybrand, the Board will consider the vote and the reasons therefor in
future recommendations on the selection of an auditor for the Corporation.
A representative of Coopers & Lybrand is expected to be present at the
stockholders' meeting with the opportunity to make a statement if desired, and
is expected to be available to respond to appropriate questions from
stockholders who are present at the meeting.
11
<PAGE> 13
EXECUTIVE COMPENSATION AND OTHER INFORMATION
<TABLE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides summary information concerning compensation
paid or accrued by the Company to, or on behalf of, the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company (determined as of December 31, 1993) for the fiscal
years ended December 31, 1991, 1992 and 1993:
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
SECURITIES ALL OTHER
ANNUAL COMPENSATION UNDERLYING COMPENSATION(2)
NAME AND ---------------------- OPTIONS/SARS ---------------
PRINCIPAL POSITION YEAR SALARY($) BONUS($) (SHARES)(1) ($)
------------------ ---- --------- -------- ------------ ---
<S> <C> <C> <C> <C> <C>
Arthur L. Goldstein..................... 1993 282,500 0 50,000 3,233
Chairman of the Board, 1992 275,000 140,000 0 2,042
President and Chief Executive Officer 1991 260,000 140,000 25,000
William E. Katz......................... 1993 190,000 0 22,500 0
Executive Vice President 1992 185,000 85,000 0 0
1991 175,000 75,000 15,000
Kachig Kachadurian...................... 1993 190,000 0 22,500 3,262
Senior Vice President 1992 185,000 85,000 0 2,050
1991 175,000 75,000 15,000
Theodore G. Papastavros................. 1993 136,250 0 10,000 393
Vice President, 1992 132,500 45,000 0 267
Strategic Planning and Treasurer 1991 125,000 40,000 6,000
Stephen Korn............................ 1993 136,250 0 7,000 157
Vice President and General Counsel 1992 132,500 35,000 0 107
1991 125,000 30,000 3,000
- ---------------
<FN>
(1) See Note 2 to table included under "Stock Option Grants."
(2) Company matching contributions to participant's account in Ionics Section
401(k) Plan, available to all employees after an eligibility period.
Employees may elect to contribute to the Plan from 1% to 12% of the amount
that they would otherwise receive as cash compensation, and the contributed
amounts, subject to certain limitations, are not subject to current federal
income taxes. Amounts contributed to the Plan are invested at the direction
of the employee in shares of the Company's Common Stock or in shares of one
or more of three mutual funds. The maximum amount that a participant may
elect to invest in the Company's Common Stock is 6% of compensation. The
Company contributes to the Plan, for the individual accounts of its
employees, an amount up to 50% of the amount each participant has elected to
invest in Common Stock of the Company. Matching amounts are invested
entirely in the Company's Common Stock. The contributions by the Company for
any one calendar year cannot exceed an aggregate maximum amount fixed from
time to time by the Board of Directors.
</TABLE>
12
<PAGE> 14
<TABLE>
STOCK OPTION GRANTS
The following table provides information concerning the grant of stock
options (also reported in the Summary Compensation Table) under the Company's
1979 Stock Option Plan during the fiscal year ended December 31, 1993, to the
named executive officers.
OPTION/SAR GRANTS IN 1993 (1)
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
PERCENTAGE OF ANNUAL RATES
TOTAL OF STOCK PRICE
NUMBER OF OPTIONS/SARS APPRECIATION FOR
SECURITIES UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS/SARS GRANTED(2) EMPLOYEES PRICE EXPIRATION -------------------
NAME (SHARES OF COMMON STOCK) IN FISCAL 1993 ($/SHARE) DATE 5%($) 10%($)
---- ------------------------ -------------- --------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Arthur L.
Goldstein....... 50,000 14.5% 39.50 8/25/2003 1,242,067 3,147,641
William E. Katz... 22,500 6.5% 39.50 8/25/2003 558,930 1,416,439
Kachig
Kachadurian..... 22,500 6.5% 39.50 8/25/2003 558,930 1,416,439
Theodore G.
Papastavros..... 10,000 2.9% 39.50 8/25/2003 248,413 629,528
Stephen Korn...... 7,000 2.0% 39.50 8/25/2003 173,889 440,670
- ---------------
<FN>
(1) The Company has issued no SARs (stock appreciation rights).
(2) All options were granted under the Company's 1979 Stock Option Plan, and
each option is exercisable for one share of Common Stock, which may be
purchased upon exercise with either cash or Common Stock. The options have
a duration of ten years and one day, and are immediately exercisable,
subject to the Company's right to repurchase a decreasing proportion of any
shares purchased upon exercise during the first five years from the date of
grant in the event the employee leaves the Company or desires to sell the
shares. Such repurchase rights in the Company terminate in the event of a
merger, consolidation or sale of all the assets by the Company, or in the
event another entity, person or group acquires 30% or more of the
outstanding voting shares of the Company. Options may not be transferred by
an option holder (other than by the laws of descent or distribution), may
be exercised only while the holder is an employee of the Company or a
subsidiary, or within 30 days after termination of employment, or by the
holder's estate for a period of 90 days after his death.
(3) The potential realizable dollar value of a grant is the product of (a) the
difference between: (i) the product of the per-share market price on the
date of grant and the sum of 1 plus the adjusted stock price appreciation
rate (the assumed rate of appreciation compounded annually over the term of
the option); and (ii) the per-share exercise price of the option; and (b)
the number of shares underlying the grant at fiscal year-end.
</TABLE>
13
<PAGE> 15
<TABLE>
STOCK OPTION EXERCISES
The following table provides information, with respect to the executive
officers listed in the Summary Compensation Table, concerning the exercise of
options during, and holdings of unexercised options at the end of, 1993.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1993
AND FISCAL YEAR-END OPTION/SAR VALUES (1)
<CAPTION>
(I) (II) (III) (IV)
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS/SARS OPTIONS/SARS AT
EXERCISE REALIZED(2) AT FISCAL FISCAL YEAR-END(2)
NAME (#) ($) YEAR-END ($)
- --------------------------------------- ----------- ----------- ------------ --------------------
<S> <C> <C> <C> <C>
Arthur L. Goldstein.................... 0 -- 107,000 1,811,375
William E. Katz........................ 0 -- 60,188 1,168,177
Kachig Kachadurian..................... 2,500 107,813 68,750 1,385,781
Theodore G. Papastavros................ 3,000 110,250 28,750 570,906
Stephen Korn........................... 0 -- 12,400 153,450
- ---------------
<FN>
(1) All options were granted under the Company's 1979 Stock Option Plan and are
currently exercisable, subject to certain repurchase rights in the
Corporation. See Note 2 to "Stock Option Grants" table. The Company has
issued no SARs (stock appreciation rights).
(2) Calculated as the difference between the closing price of the Company's
Common Stock, as reported on the date of option exercise, and the exercise
price of the option(s) (Column II), and as the difference between the
closing price of the Company's Common Stock, as reported on December 31,
1993, and the exercise price of the option(s) (Column IV).
</TABLE>
PENSION PLAN
Employees based in Watertown, Massachusetts; Phoenix, Arizona; Campbell,
California; and Bellevue, Washington may at their election participate in the
Company's defined benefit retirement plan ("Retirement Plan") after attaining
age 21 and completing one year of service. No benefits vest under the Retirement
Plan until an employee has five years of participation, at which time the
employee becomes 100% vested. An employee must contribute at least 1% of base
salary in order to accrue benefits under the Retirement Plan. The benefits
payable upon retirement vary with the years of service and level of compensation
while participating in the Retirement Plan. Upon retirement, participants also
receive the total of their own contributions to the Retirement Plan plus the
earnings thereon. The following table shows the estimated annual
Company-provided pension benefits payable to a participant at normal retirement
age (age 65) in the Retirement Plan.
14
<PAGE> 16
<TABLE>
PENSION PLAN TABLE
(ESTIMATED ANNUAL BENEFITS FOR YEARS
OF CREDITED SERVICE INDICATED(1))
<CAPTION>
YEARS OF SERVICE
BASE SALARY AT --------------------------------------------------------
RETIREMENT DATE 15 20 25 30 35
- --------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 50,000...................................... $ 6,364 $ 8,077 $ 9,790 $ 11,503 $ 13,217
75,000...................................... 9,793 12,487 15,180 17,874 20,567
100,000...................................... 13,223 16,897 20,570 24,244 27,918
125,000...................................... 16,652 21,306 25,961 30,615 35,269
150,000...................................... 20,082 25,716 31,351 36,985 42,620
175,000...................................... 23,511 30,126 36,741 43,356 49,971
200,000...................................... 26,941 34,536 42,131 49,726 57,321
225,000...................................... 30,370 38,946 47,521 56,097 64,672
250,000...................................... 31,857 40,858 49,858 58,859 67,859
- ---------------
<FN>
(1) Effective November 1, 1989, no more than $200,000 (as adjusted from time to
time by the Internal Revenue Service) of cash compensation may be taken into
account in calculating contributions under the Retirement Plan. In 1993, the
cash compensation limit was $235,840.
</TABLE>
Under the terms of the Retirement Plan, only the amount shown as "Salary"
in the Summary Compensation Table is covered under "Base Salary" above. The
fixed monthly retirement benefit of a participant retiring at normal retirement
age (assuming payment is made on a life annuity basis) is determined by the
following formula: (i) for years prior to January 1, 1986 -- one half of one
percent of the first $550 of base monthly salary as of January 1, 1985, plus one
and one-quarter percent (1.25%) of the balance of base monthly salary as of that
date, that sum being multiplied by the number of prior years of service; plus
(ii) for each year after December 31, 1985 through December 31, 1988 -- one half
of one percent (0.5%) of the first $550 of base monthly salary as of January 1st
of such year plus one and one-quarter percent (1.25%) of the balance of base
monthly salary; plus (iii) for each year after December 31, 1988 -- one and
one-quarter percent (1.25%) of base monthly salary as of January 1st of that
year. Fixed retirement benefits are not subject to deduction for Social Security
benefits or other benefits received by participants.
Executive officers named in the Summary Compensation Table have been
credited with the following years of service, and would receive the following
estimated annual benefit at normal retirement age (65): Mr. Goldstein, 33.6
years, $85,447; Mr. Katz, 44.4 years, $53,590; Mr. Kachadurian, 13 years,
$54,988; Mr. Papastavros, 37.2 years, $46,881; and Mr. Korn, 4.3 years, $34,326.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Board of Directors appoints each year from among its members a
Compensation Committee (the "Committee"). The Committee, which currently
consists of six non-employee directors (all of whom are "disinterested persons"
under Rule 16b-3 of the Securities Exchange Act of 1934), is responsible for
reviewing and establishing the compensation of the executive officers of the
Company, and for authorizing grants under the Company's 1979 Stock Option Plan.
The Committee has furnished this report concerning compensation of executive
officers for the fiscal year ended December 31, 1993.
The compensation program for executive officers involves consideration of
cash compensation and the granting of options to acquire the Company's Common
Stock.
15
<PAGE> 17
Cash Compensation
Cash compensation of executive officers is structured to include base
salary and, based on the achievement of performance objectives, a cash bonus.
The Company's objective is to pay a fair and competitive base salary to all
employees and to keep the growth of salary levels at or near the rate of
inflation. The Company determines the competitiveness of its base salary levels
in relation to other companies engaged in its industry, represented by those in
the "peer group" Index set forth in this Proxy Statement, or similar industries.
The Committee believes that the base salary paid to the Company's executive
officers falls within the median of the range of compensation paid by the "peer
group" companies. Salary levels for executive officers are usually established
in the early part of the fiscal year for that fiscal year.
The policy of the Company is to pay cash bonuses based upon the achievement
of specified corporate, business unit and individual performance objectives. The
cash bonuses listed in the Summary Compensation Table earned by executive
officers in 1991 and 1992, as well as by other senior officers, were earned
under the Company's Managerial Bonus Program. The Managerial Bonus Program
considers both quantitative and qualitative performance. Quantitative
performance focuses upon two measurements: earnings before interest and taxes
(EBIT) achieved by the business unit(s) for which the executive officer has
major responsibility or involvement, and EBIT return on the average capital
employed by such business unit(s) during the year. Qualitative performance
focuses primarily on the degree to which the officer has participated in and
contributed to the achievement of specified individual, divisional, departmental
or corporate non-financial objectives.
Budgeted amounts for EBIT and EBIT return on average capital employed are
established for each business unit early in each fiscal year. At the same time,
a corresponding cash bonus target is established for each executive officer
based upon the budgets of the business unit(s) for which the officer has major
managerial responsibility or involvement. The cash bonus actually awarded,
determined early in the next fiscal year by the Committee, depends upon the
extent to which the actual performance of the business unit(s) for which the
officer has responsibility or involvement meets or exceeds the budgeted amounts,
and upon the degree of success in achieving the qualitative objectives.
The Committee reserves the right to make discretionary bonus awards in
appropriate circumstances under which an executive officer might merit a bonus
based on other considerations.
Securities and Exchange Commission (SEC) regulations require that the
Committee discuss the basis for the 1993 compensation reported for the Chief
Executive Officer, Mr. Goldstein, and to discuss the relationship between the
Company's performance during 1993 and his compensation. Mr. Goldstein's base
salary (and the base salary of the other corporate executive officers) was
established by the Committee in February 1993, and reflected a 5.5% increase,
consistent with the Committee's salary policy. This increase was implemented as
of July 1, 1993.
The quantitative performance targets of the Managerial Bonus Program were
not achieved in 1993. As a result, the Compensation Committee, in concurrence
with management's recommendation, chose not to award cash bonuses to Mr.
Goldstein or any of the Company's executive officers for 1993.
Stock Options
The Committee believes that stock options are an appropriate mechanism to
provide senior management with a long-term incentive to strive for the continued
growth and success of the Company. The Company's stock option policy,
established by the Committee, is to recognize employee leadership and
significant contribution to the Corporation, regardless of the employee's level.
The Committee also believes that
16
<PAGE> 18
ownership of the Company's stock by management promotes the enhancement of
shareholder value by creating a greater communality of interest among
shareholders and management. For these reasons, the Committee has used in the
past, and expects to use in the future, the Company's 1979 Stock Option Plan as
an element of its executive compensation program. In 1993, the Compensation
Committee met on August 25th and awarded Mr. Goldstein a stock option grant of
50,000 shares, based upon a qualitative assessment of his performance since the
last stock option grant to him in 1991, including factors such as growth in the
Company's revenues and profitability, success in achieving annual goals, and
success in hiring additional key employees.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code enacted in 1993, generally
disallows a tax deduction to a public company for compensation in excess of $1
million paid to the company's chief executive officer and four other most highly
compensated executive officers. Certain types of performance-based compensation,
such as that available under the Company's 1979 Stock Option Plan, will not be
subject to the deduction limit if certain requirements set forth in Section
162(m) are met. The Company currently intends to structure compensation to
executive officers arising out of the 1979 Plan in a manner that complies with
the new statute.
Compensation Committee
Lawrence E. Fouraker (Chairman)
William L. Brown
Arnaud de Vitry d'Avaucourt
Samuel A. Goldblith
John J. Shields
Allen S. Wyett
FIVE-YEAR SHAREHOLDER RETURNS COMPARISON
The SEC requires that the Company include in this proxy statement a
line-graph presentation comparing cumulative, five-year return to the Company's
shareholders (based on appreciation of the market price of the Company's Common
Stock) on an indexed basis with (i) a broad equity market index and (ii) an
appropriate published industry or line-of-business index, or peer group index
constructed by the Company. The following presentation compares the Company's
Common Stock price in the five year period from December 31, 1988 to December
31, 1993, to the S&P 500 Stock Index and to a "peer group" index over the same
period. The "peer group" index consists of the common stock of Calgon Carbon
Corporation, Osmonics, Inc., Pall Corporation and United States Filter
Corporation. These corporations are involved in various aspects of the water
treatment or liquids separations businesses. The presentation assumes that the
value of an investment in each of the Company's Common Stock, the S&P 500 Index,
and the peer group index was $100 on December 31, 1988, and that any dividends
paid by any constituent company (none have been paid by the Company) were
reinvested in the same security.
17
<PAGE> 19
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
AMONG IONICS, S&P 500 INDEX AND "PEER GROUP" INDEX OF COMPARABLE COMPANIES
<CAPTION>
MEASUREMENT PERIOD IONICS,
(FISCAL YEAR COVERED) INCORPORATED S&P 500 PEER GROUP
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 150.00 131.59 130.26
1990 178.13 127.49 134.40
1991 281.25 166.17 199.16
1992 424.22 178.81 193.39
1993 310.16 196.75 173.32
</TABLE>
DIRECTOR COMPENSATION
In 1993, each director who is not an employee of the Company received an
annual retainer of $5,600, plus a fee of $850 for each regular board meeting
attended. Commencing in 1994, the annual retainer has been adjusted to $8,000
and the meeting fee to $1,000. In addition, under the Company's 1986 Stock
Option Plan for Non-Employee Directors ("1986 Plan"), each person who is not an
employee of the Company or any of its subsidiaries and who is elected a Director
of the Company is entitled to receive an option for 1,000 shares of Common Stock
upon his initial election, an option to acquire 1,000 additional shares
immediately upon completion of each of his next four successive years in office,
and an option to acquire 500 additional shares immediately upon completion of
each of his next five successive years in office. Thus, under the 1986 Plan, a
Director is entitled to receive options for a maximum of 7,500 shares of Common
Stock. Options granted under the 1986 Plan have an exercise price equal to the
market price on the date of grant, do not become exercisable until the
expiration of six months from the date of grant, and thereafter may be exercised
only during certain "window" periods. Options granted under the 1986 Plan expire
ten years after the date of grant, and terminate 30 days after the holder ceases
to be a Director, or 90 days following a Director's death.
18
<PAGE> 20
CERTAIN TRANSACTIONS
Because certain options granted under the Corporation's 1973 Non-Qualified
Stock Option Plan, which expired in 1983, were not eligible to be treated by
their holders as incentive stock options, the Board of Directors agreed to
permit officer-employees exercising non-qualified options granted prior to
January 1, 1976 to borrow from the Corporation up to an aggregate of $600,000 in
connection with the payment of taxes and other expenses incurred by them in
exercising the options. These loans bear interest at the rate of 5% per annum,
and their repayment is secured by the pledge of a least 80% of the stock so
purchased. On February 26, 1987 the Compensation Committee of the Board of
Directors extended the maturity of these loans until 1994. Mr. Goldstein and
three other officers borrowed funds pursuant to this loan facility. Two of the
other officers subsequently paid off their loans. In 1993, the largest
outstanding indebtedness of Mr. Goldstein was $141,560. Mr. Goldstein paid the
outstanding balance of the loan on December 14, 1993.
STOCKHOLDER PROPOSALS
The Corporation's 1995 Annual Meeting is presently expected to be held on
May 4, 1995. Proposals of stockholders intended to be presented at the 1995
Annual Meeting must be received no later than November 27, 1994, for inclusion
in the Corporation's proxy statement and proxy for that meeting, except that if
the date of the 1995 Annual Meeting is changed by more than 30 calendar days
from the presently expected date, the Corporation must receive such proposal
within a reasonable time before the Board of Directors makes it proxy
solicitation.
OTHER MATTERS
As of this time, the Board of Directors knows of no other matters to be
brought before the meeting. However, if other matters properly come before the
meeting or any adjournment thereof, and if discretionary authority to vote with
respect thereto has been conferred by the enclosed Proxy, the persons named in
the Proxy will vote the Proxy in accordance with their best judgment as to such
matters.
By Order of the Board of Directors
STEPHEN KORN, Clerk
Watertown, Massachusetts
March 30, 1994
19
<PAGE> 21
PROXY
IONICS, INCORPORATED
65 Grove Street, Watertown, Massachusetts 02172
Proxy for Annual Meeting to be held May 5, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Arthur L. Goldstein and Stephen Korn,
and each of them, as Proxies of the undersigned, each with the power to appoint
his substitute, and hereby authorizes both of them, or any one if only one be
present, to represent and to vote, as designated below, all the shares of the
Common Stock of Ionics, Incorporated held of record by the undersigned or with
respect to which the undersigned is entitled to vote or act, at the Annual
Meeting of Stockholders to be held on May 5, 1994 or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4 WITH DISCRETIONARY AUTHORITY TO VOTE
UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. PLEASE MARK,
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Election of all four Class II Directors listed below:
NOMINEES:
Arnaud de Vitry d'Avaucourt, Kachig Kachadurian, William E. Katz
and Mark S. Wrighton
SEE REVERSE SIDE. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATION, JUST SIGN ON THE REVERSE. YOU NEED NOT MARK ANY
BOXES.
----------------
SEE REVERSE SIDE
/X/ PLEASE MARK ----------------
VOTES AS IN
THIS EXAMPLE
<TABLE>
THE UNDERSIGNED HEREBY CONFER(S) UPON THE PROXIES AND EACH OF THEM
DISCRETIONARY AUTHORITY WITH RESPECT TO THE ELECTION OF DIRECTORS IN THE EVENT
THAT ANY OF THE NOMINEES IS UNABLE OR UNWILLING TO SERVE IF ELECTED.
<Captions>
WITHHELD
FOR ALL FROM ALL
NOMINEES NOMINEES
<C> <C>
1. Election of Directors (See reverse). / / / /
/ /
- ------------------------------------------------------------------------------------
For, except vote withheld from those nominees whose names you print on the above line
FOR AGAINST ABSTAIN
2. Proposal to ratify and approve
amendment to 1979 Stock Option
Plan to add 325,000 shares
available for issuance. / / / / / /
3. Proposal to ratify and approve
amendment to 1979 Stock Option
Plan to comply with Internal
Revenue Code Section 162(m) by
limiting the number of shares that
may be acquired in any year by
any participant to 100,000. / / / / / /
4. Selection of Coopers & Lybrand as
auditors. / / / / / /
5. To consider and act upon such other matters as may
properly come before the meeting.
</TABLE>
MARK HERE / /
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
Signature: Date:
------------------------------ ------------------
Signature: Date:
------------------------------ ------------------
<PAGE> 22
IONICS, INCORPORATED
1979 Stock Option Plan
----------------------
As Amended through February 17, 1994
------------------------------------
1. Purposes of Plan.
----------------
This 1979 Stock Option Plan (hereinafter called the "Plan") of Ionics,
Incorporated (hereinafter called the "Company") is intended to advance the
interests of the Company (and its subsidiaries) by providing a means whereby
key employees of the Company, that is, those who are largely responsible for
its management and its technical and business success, and are expected to
continue in this role, may be offered incentives in addition to the other
incentives which they may hold, such as pensions, etc.
2. Definitions.
-----------
2.1 "Subsidiaries" or "Subsidiary" shall mean a corporation,
partnership or other entity whose controlling stock or other ownership
interest is owned directly or indirectly by the Company.
2.2 A "key employee" shall mean an employee of the Company or of any
of its Subsidiaries who is engaged in an important executive, administrative
or technical function who is classified by the Administrators of the Plan as
such within the purposes of the Plan.
3. Effective Date and Duration.
---------------------------
The Plan will become effective immediately upon its adoption by the
Board of Directors of the Company, subject, however, to approval by the
holders of a majority of the outstanding shares of its capital stock having
voting rights present at the meeting when the matter was acted upon. The
Plan shall remain in effect until the close of business on February 15, 1997
(the "Termination Date").
4. Stock Subject to the Plan.
-------------------------
Subject to adjustment as provided hereinbelow, the total aggregate
number of shares of Common Stock, One Dollar ($1) per share par value
(hereinafter "Common Stock"), of the Company which are to be issued and
delivered upon exercise of options granted pursuant to this Plan
(hereinafter called the "Options" and each singly an "Option") or pursuant
to the earn out of Performance Units under this Plan, shall not exceed
1,455,000 shares of said Common Stock. Such shares may either be authorized
and unissued shares of Common Stock or issued shares of Common Stock which
shall have been reacquired by the Company and held as treasury shares. In
the event that any Options granted under the Plan shall be surrendered to
the Company or shall terminate, lapse or expire for any reason without
having been exercised in full, the shares not purchased under such Options
shall be available again for the purposes of issuance pursuant to the Plan.
<PAGE> 23
In the event that the outstanding shares of the Common Stock of the
Company are hereafter increased or decreased or changed into or exchanged
for a different number or kind of shares, or other securities of the Company
or of another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up,
combination of shares, or dividends payable in stock, corresponding
adjustments as determined by the Board of Directors in their sole discretion
to be appropriate shall forthwith be made in the Option price and in the
number and kind of shares for the purchase of which Options may theretofore
or thereafter be granted under the Plan; provided, however, the aggregate
total Option price of Options then outstanding and unexercised shall not be
changed thereby.
5. Administration of the Plan.
--------------------------
The Plan shall be administered by the Board of Directors of the Company
or such committee composed of its Directors as may be delegated this duty
and function by resolution of the Board of Directors (said Board or said
Committee, as the case may be, being hereinafter referred to as the
"Administrators"). The Administrators shall be comprised of, to the extent
required by applicable regulations under Section 162(m) of the Code, two or
more outside Directors as defined in applicable regulations thereunder and,
to the extent required by Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 or any successor provision, disinterested Directors. A
majority of the Administrators acting upon a particular matter shall have no
personal interest in the Option or matter with which they are concerned.
Subject to the express provisions of the Plan, the Administrators
acting by a majority of their number at a meeting or by written consent
shall have plenary authority in their discretion to grant Options under the
Plan, and in relation thereto to determine from time to time those officers
or employees of the Company or of its Subsidiaries who are to receive
Options, the number of shares to be optioned to each, the Option price
(which shall not be less than the par value of the stock subject to the
Option) and the terms and conditions upon which the Options are to be
granted, which need not be identical; including, without limitation,
requirements that an exercise of the Option may be conditioned in whole or
in part upon duration of the optionee's employment, his attainment of
specified performance criteria, his refraining from competitive activities
and other conditions. Options may be granted at any time prior to
termination of the Plan and the Options granted may extend beyond the
Termination Date.
Subject to the express provisions of the Plan, the Administrators may
(1) construe the respective stock Option agreements and the Plan, prescribe,
amend, and rescind rules and regulations relating to the Plan and make all
other determinations necessary or advisable for administering the Plan, and
(2) correct any defect or supply any omission or reconcile any inconsistency
in the Plan or in any stock Option agreement and in the manner and to the
extent they shall deem expedient to carry it into effect and (3) constitute
and appoint a person or persons selected by them to execute and deliver in
the name and on behalf of the Administrators all such agreements,
instruments and other documents (including without limitation of the
- 2 -
<PAGE> 24
generality of the foregoing documents evidencing amendments of individual
stock Options and other actions delegated to the Administrators by the votes
of the Board of Directors adopted at their meeting on February 18, 1982,
relating to "incentive stock options").
The Administrators shall have the authority in their discretion to
determine from time to time those officers or employees of the Company or of
its Subsidiaries who are eligible to receive Performance Units, as
hereinafter defined. In connection therewith the Administrators shall have
the authority to prescribe the number of Performance Units to be granted to
any key employee and all terms thereof and to adopt, amend and rescind rules
and regulations for the administration of Performance Units.
6. Persons to whom Options and Performance Units may be Granted.
------------------------------------------------------------
Only persons who are officers of, or who are "key employees" of the
Company or any of its Subsidiaries, and who accept an Option or Performance
Unit granted hereunder, as the case may be, and subject to all of the terms
and conditions of this Plan, may be granted any Options or Performance Units
under this Plan. During any one-year period, no individual shall be granted
Options and/or Performance Units which could result in the issuance to such
individual of more than 100,000 shares of Common Stock.
7. The Option Price.
----------------
The price payable upon exercise of an Option granted hereunder (the
"Option Price") shall be an amount as specified by the Administrators which
shall not be less than the par value of the stock which is subject to the
Option and which shall be paid upon exercise of the Option (1) in cash, (2)
with shares of the Company of the same class as the shares issuable upon
exercise of the Option, previously acquired by the optionee and having an
aggregate fair market value equal to the aggregate Option Price payable, or
(3) in any combination of cash and of such shares so valued. In the event
such shares are delivered to pay all or a portion of the Option Price -
(a) such shares shall be valued at the closing price for such stock on
the American Stock Exchange or other exchanges or markets where
such shares are primarily traded, as reported on the date of such
delivery of the shares, and
(b) a number of the shares being issued upon exercise of the Option
which is equal to the number of shares of such stock delivered in
payment of the Option Price shall be issued free from repurchase
rights of the Company under said Plan or stock Option agreement
evidencing the Option.
8. The Duration of the Options.
---------------------------
The duration of the Options granted hereunder shall be as determined by
the Administrators but shall not exceed a period of ten years from the date
of grant. Notwithstanding the preceding sentence, the duration of Options
not designated as Incentive Stock Options pursuant to Section 17 may be a
period of ten years and one day from the date of grant.
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<PAGE> 25
9. Nontransferability of Options.
-----------------------------
No Option granted under the Plan shall be encumbered, assigned, or
otherwise transferred, and an Option may be exercised during the lifetime of
the Optionee only by such person, and the stock Option agreement covering
the Option shares shall so provide.
10. Exercise of Options.
-------------------
The exercise, in whole or in part, of any Option granted under the Plan
shall be :
(a) subject to compliance of all conditions or restrictions stated in
Section 11 of this Plan or imposed at the time the Option is
granted, and
(b) exercisable only by the employee to whom granted and while he
remains in the employment of the Company or any of its
Subsidiaries, except that -
(1) if the employee holding the Option ceases to remain in such
employment for any reason other than his or her voluntary
termination or his or her being terminated by the Company (or
its Subsidiary employing said employee) because of his
malfeasance, violation of this or any other agreement with
the Company (or its employing Subsidiary), or other like
justifiable cause, the employee shall have the right within
thirty (30) days after said termination to exercise the
Option to the extent it would have been exercisable by the
employee immediately before the employee's termination, and
(2) if the employee holding the Option shall die while in said
employment or within said 30-day period after its termination
as described in sub-paragraph (1) above, the Option, to the
extent exercisable by said employee at the time of his death,
may be exercised within ninety (90) days after his death by
the executor or administrator of the employee's estate.
Options shall be exercised in each instance by the person entitled to
exercise them by giving written notice of exercise to the Company (to its
Treasurer) substantially in the form of Exhibit A annexed hereto and
tendering payment of the entire Option Price payable.
Unless the shares deliverable upon exercise of Options are registered
or qualified for public sale by an effective Registration Statement of the
Company under the Securities Act of 1933, as amended (or any superseding
law) and are registered or qualified for sale under all applicable state
securities laws, the person to whom the stock is issued and delivered
hereunder shall confirm to the Company that the recipient is purchasing the
shares for investment and not with a view to effecting any distribution or
resale of the shares.
In no instance may an Option be exercised for less than one full share
of the stock.
- 4 -
<PAGE> 26
11. Restrictions Applicable to Stock Issued and Delivered Under the Plan.
--------------------------------------------------------------------
<TABLE>
11.1 The Company may elect in granting an Option to include a provision
that during the period of five years from the date of grant of the
Option, the Company shall have the right to repurchase stock
acquired by exercise of the Option, at a price payable in cash
equal to the price which the Company received upon its issuance,
to the following extent
<CAPTION>
If the Repurchase right Portion of the Shares
arises prior to Subject to Repurchase
----------------------- ---------------------
<S> <C>
the end of first year All
the end of the second year the excess of 20% of the
Option shares held
the end of the third year the excess of 40% of the
Option shares held
the end of the fourth year the excess of 60% of the
Option shares held
the end of the fifth year the excess of 80% of the
Option shares held
After the fifth year of None
holding
<FN>
and upon the following events:
(a) if the employee issued the Option shall cease to be an employee of
the Company or of any of its Subsidiaries because of the
employee's voluntary termination of said employment or his being
terminated therefrom because of his malfeasance, violation of this
or any other agreement with the Company or said Subsidiary for
like justifiable cause, and/or
(b) before the participant may sell or transfer the stock in any
manner, whether voluntarily, by action of law or otherwise.
Said right of the Company to repurchase the stock may be exercised
by the Company at any time within thirty (30) days after it has
notice of any such event. At the closing of said purchase (which
shall be held on the fifth business day following the Company's
delivery of written notice to the holder that the Company has
elected to so purchase the shares) the Company shall pay the
purchase price to the holder against its receipt of delivery of
the stock certificates representing the stock being purchased,
duly endorsed or with duly executed stock powers to effect
transfer of the stock to the Company. If the Company doers not
elect to exercise said repurchase right within said period, the
holder shall be free to sell or transfer the stock free of such
</TABLE>
- 5 -
<PAGE> 27
[FN]
restriction, but unless said stock has been registered or
qualified for public sale under an effective Registration
Statement or other authorization under the Securities Act of 1933,
as amended (or under any superseding law) and qualified for public
sale under any applicable state securities laws, the holder shall
not so sell or transfer without prior written notice to the
Company and furnishing to the Company an opinion of legal counsel
or of said regulatory authority, satisfactory to the Company, that
no such registration or qualification of the stock is required in
the circumstances.
11.2 Each stock certificate representing stock issued upon exercise of
an Option hereunder shall bear such legend referring to these
restrictions as the Company may require, and it shall not transfer
ownership of such stock on its records except upon compliance with
these restrictions.
12. Stock Option Agreement Required.
-------------------------------
Each stock Option granted under the Plan shall be evidenced by a "Stock
Option Agreement" between the Company and the employee granted the Option,
to be in such form as the Administrators in granting the Option shall
determine, provided that said Stock Option Agreement shall in any event
include an undertaking on the part of the Employee to whom the Option is
granted (the "Optionee") that in consideration for the grant of such Option,
the Optionee will not at any time during his employment by the Company or by
any of its Subsidiaries (as defined in the Plan) or within two (2) years
following the date of termination of said employment, without the written
consent of the Company, directly or indirectly, accept employment from, or
engage in any work or activities as an employee, officer, Director, agent,
consultant, partner, proprietor or principal stockholder for any other
corporation, person or entity which is substantially competitive to the
business in which the Company or its Subsidiaries are then engaged.
13. Effect of the Option.
--------------------
The grant of an Option under the Plan shall not entitle the Optionee to
have or claim any rights of a stockholder of the Company (whether as to
dividends, voting rights or otherwise).
Neither the grant of an Option nor the making of any Stock Option
Agreement under this Plan shall confirm upon the Optionee any right with
respect to continuation of his or her employment nor shall it affect or
restrict the right of the Company, any Subsidiary of it, or any assuming
Company, or any successor of either of them employing the Optionee to
terminate such employment at any time.
14. Termination, Suspension, Amendment or Modification of the Plan.
--------------------------------------------------------------
The Board of Directors of the Company may at any time amend, alter,
suspend or terminate the Plan provided that:
(a) No change shall be made which, in the judgment of its Board of
Directors, will have a material adverse effect upon any Option
previously granted under this Plan unless the consent of the
Optionee is obtained in writing.
- 6 -
<PAGE> 28
(b) Without the approval by the holders of a majority of the
outstanding shares of its capital stock having voting rights,
(1) the maximum number of shares reserved for issuance upon the
exercise of Options under the Plan may not be changed; and
(2) the classes of employees to whom Options may be granted under
the Plan may not be changed.
15. Merger, Consolidation or Sale of the Entire Business of the Company.
-------------------------------------------------------------------
If, prior to the expiration of the Plan, or the period of restriction
during which the Company may have or may obtain rights to repurchase stock
issued hereunder pursuant to Section 11 of the Plan, the Company shall merge
with, consolidate in or with, or sell all or substantially all of its assets
and business to another corporation or entity (other than a company or
entity which continues under the control of the same persons who were the
stockholders or owners of the Company immediately prior to the event), all
Options then outstanding shall become subject to exercise in full and all of
said repurchase rights of the Company shall terminate as of the effective
date of said transaction.
16. Optionee Shall Comply with Applicable Laws and Regulations upon Exercise.
------------------------------------------------------------------------
Upon exercise of any Option granted hereunder, the person exercising
the Option shall file any and all reports if any, required of such person
under the Securities Exchange Act of 1934, as amended, or otherwise.
17. Incentive Stock Options.
-----------------------
The special terms and conditions of this Section 17 shall apply to
Stock Options granted hereunder which meet any of the following requirements
("Incentive Stock Options"):
(a) Options considered under the Internal Revenue Code to have
been granted on or after January 1, 1981, and before August
14, 1981, as to which the Optionee consents in writing to the
application of this Section 17; and
(b) Options granted on or after August 14, 1981, and before
February 18, 1982, which the Administrators designate in the
Stock Option Agreement as Incentive Stock Options, and as to
which the Optionee consents in writing to the application of
this Section 17; and
(c) Options granted on or after February 18, 1982, which the
Administrators designate in the Stock Option Agreement as
Incentive Stock Options.
The following special terms and conditions (in all of which, any
reference to the date of grant of a Stock Option shall mean the date on
which the Stock Option is considered to have been granted under Sections 421
- 7 -
<PAGE> 29
through 425 of the Internal Revenue Code and the regulations issued
thereunder) shall apply to all Incentive Stock Options:
17.1 OPTION PRICE. The Option Price shall be not less than the fair
market value of the stock covered by the Option, determined as of
the date of grant of the Option.
17.2 PRIOR OUTSTANDING OPTION. No Incentive Stock Option may be
exercised while there remains outstanding, within the meaning of
Section 422A(c)(7) of the Internal Revenue Code, any other
Incentive Stock Option which was granted at an earlier date to the
Optionee to purchase stock in this Corporation or in any other
corporation which is on the date of grant of the later Option
either a parent or subsidiary corporation of this Corporation, or
a predecessor corporation of any of such corporations. The Stock
Option Agreement for every Incentive Stock Option shall include a
provision to this effect. The two preceding sentences shall have
no application to any Incentive Stock Option granted after
December 31, 1986.
17.3 NO FURTHER GRANTS. No Option granted after February 15, 1989,
shall be designated an Incentive Stock Option.
17.4 TEN PERCENT STOCKHOLDER. If any Optionee to whom an Incentive
Stock Option is to be granted pursuant to the provisions of the
Plan is on the date of grant the owner (as determined under
Section 424(d) of the Internal Revenue Code) of stock possessing
more than 10% of the total combined voting power of all classes of
stock of this Corporation or any of its subsidiaries, then the
following special provisions shall be applicable to the Option
granted to such individual:
(i) The Option Price per share of stock subject to such Incentive
Stock Option shall not be less than 110% of the fair market
value of one share of stock on the date of grant; and
(ii) The Option shall not have a term in excess of five (5) years
from the date of grant.
Except as modified by the preceding provisions of this Section 17, all
the provisions of the Plan shall be applicable to the Incentive Stock
Options granted hereunder.
18. SPECIAL BONUS GRANTS. The Administrators may, but shall not be
required to, grant in connection with any Option which is not designated an
Incentive Stock Option a special bonus in cash in an amount not to exceed
the combined federal and state income tax liability incurred by the Option
holder as a consequence of his acquisition of stock pursuant to the exercise
of the Option, and payment of the bonus; payable, at the discretion of the
Administrators, in whole or in part to federal and state taxing authorities
for the benefit of the Option holder at such time or times as withholding
payments of such income tax may be required, and the remainder, if any, to
be paid in cash to the Optionee at the time or times at which he is required
to make payment of such tax. In the event that an Option with respect to
- 8 -
<PAGE> 30
which a special bonus has been granted becomes exercisable by the personal
representative of the estate of the Optionee in accordance with Section 10,
the bonus shall be payable to or for the benefit of the estate in the same
manner and to the same extent as it would have been payable to or for the
benefit of the Optionee had he survived to the date of exercise. A special
bonus may be granted simultaneously with a related Option, or granted
separately with respect to an outstanding Option granted at an earlier date.
In the case of an Optionee who is an officer or a director of the Company,
an Option with respect to which a special bonus is granted may be exercised:
(a) no earlier than six months after the date on which the bonus is
granted; provided, however, that this limitation shall not apply
in the event that the Optionee dies or becomes disabled before the
expiration of six months after the date on which the bonus is
granted; and
(b) only within one of the following:
(i) a period beginning on the third business day and ending on
the twelfth business day following the release for
publication by the Company of a quarterly or annual summary
statement of its sales and earnings; or
(ii) a period beginning on the first day and ending on the
thirtieth day following the date of approval by the
stockholders of the Company of (x) any consolidation or
merger of the Company in which the Company does not survive
as an independent, publicly owned corporation, or pursuant
to which shares of Common Stock would be converted into
cash, securities, or other property (other than a merger in
which the holders of Common Stock immediately before the
merger have the same proportionate ownership of common stock
of the surviving corporation after the merger), or (y) a
transfer of all or substantially all of the assets of the
Company (other than a transfer to a subsidiary corporation
controlled by the Company), or (z) the liquidation or
dissolution of the Company; or
(iii) a period beginning on the first day and ending on the
thirtieth day following (x) the acquisition of beneficial
ownership of thirty percent (30%) or more of the outstanding
voting shares of the Company, whether in one transaction or
a series of transactions, by another corporation, entity or
person or group of corporations, entities or persons
theretofore beneficially owning less than thirty percent
(30%) of such shares, or (y) the first purchase of shares
pursuant to a tender or exchange offer (other than one made
by the Company) for voting shares of the Company or
securities convertible into voting shares, after which offer
the offeror, if successful, will become the beneficial owner
of at least 30% of the outstanding voting shares of the
Company.
For purposes of this Section 18, the income tax liability incurred by
- 9 -
<PAGE> 31
the Option holder shall be calculated as described in the attached appendix
A, as of the date on which an amount is includible in the Option holder's
income pursuant to Section 83 of the Internal Revenue Code of 1986 as a
consequence of his acquisition of stock pursuant to the exercise of an
Option. The fair market value of the Option stock shall be its closing
price on the American Stock Exchange or other exchanges or markets where
such shares are permanently traded, for the date in question, and the tax
rate applicable to an Option holder shall be the single rate or the highest
graduated rate (exclusive of surtax) applied to earned income by a relevant
taxing jurisdiction.
19. PERFORMANCE UNITS. All Performance Units granted under the Plan shall
be on the following terms and conditions (and such other terms and
conditions that the Administrators may establish which are consistent with
the Plan):
(a) A Performance Unit is defined as the right of a key employee who
has been granted the same to receive cash and/or Common Stock
and/or Options conditioned upon and measured by the attainment of
financial goals set by the Administrators. Performance Units
granted under the Plan shall be evidenced by agreements in such
form and containing such terms and conditions, not inconsistent
with the Plan, as the Administrators may approve.
(b) The Administrators shall determine the number of Performance Units
to be granted to each key employee selected for an award and may
establish a stated value (the "Stated Value") of each Performance
Unit.
(c) Payment of Performance Units shall be made by the Company to the
extent that such Performance Units are earned out by attainment of
the performance objectives set for such Performance Units by the
Administrators pursuant to subsection (d) below. Such payment may
be in the form of the grant of Options, or, if made in cash or
shares of Common Stock, shall have a value equal to the dollar
value of the Performance Units earned out. Subject to the
provisions of Section 5, payment of the amounts to which
participants are entitled to be paid in respect of Performance
Units as provided above shall be made in cash, shares of Common
Stock or Options, or in some combination thereof, as the
Administrators may determine. The Administrators, in their sole
discretion, may defer distribution of one-half of the amount of
the payment for a period up to twelve months following the date in
which the decision as to entitlement to payment is made.
(d) The award period ("Award Period") in respect of any Performance
Units shall be a period set by the Administrators. At the time
each grant of Performance Units is made, the Administrators shall
establish performance objectives to be attained within the Award
Period as a condition of such Performance Units being earned out.
The performance objectives shall be based on a specific dollar
amount of growth or on a percentage rate of improvement in such
elements as the Company's (or a subsidiary's) earnings per share,
income, return on equity or such other measures related to growth
- 10 -
<PAGE> 32
or improvement of the Company (or its Subsidiaries) as the
Administrators shall determine. The Administrators shall
determine whether the performance objectives in respect of an
Award Period have been attained, as well as the value of the
Performance Units consequently earned out.
(e) In the event that recipient of a grant of Performance Units ceases
to be a key employee prior to the end of the Award Period by
reason of disability or death, his Performance Units if ultimately
earned out shall be payable at the end of the Award Period in
proportion to the active service of the key employee during the
Award Period, as determined by the Committee. Upon any other
termination of employment, Performance Units and all rights
associated therewith shall terminate unless the Administrators in
their discretion shall determine otherwise. For purposes of this
subsection, the term "disability" means disability as defined in
any disability program maintained by the Company or a subsidiary.
(f) Performance Units may not be transferred otherwise than by will or
the laws of descent.
(g) If, as a result of any change in accounting principles or
practices or the method of their application or in any tax or
other laws or regulations, the earnings per share or other
established criteria of the Company or its Subsidiaries as
reported in the Company's annual report to stockholders differs
materially from the earnings per share or other such criteria
which would have been reported absent such change, the
Administrators may, in their discretion, equitably adjust the
reported earnings per share or other such criteria used in
determining the attainment of any performance objectives
previously established by the Administrators as a condition of
earning out Performance Units.
(h) In the event of a stock dividend or other transaction described in
the last paragraph of Section 4, the Administrators may make
appropriate adjustments in performance objectives, such as
earnings per share, for outstanding Performance Units. In the
event of a merger, consolidation, acquisition or liquidation
described in the Section 15, all outstanding Performance Units and
all rights relating thereto shall terminate, except as otherwise
determined by the Administrators.
(i) No payments will be made with respect to Performance Units unless
arrangements satisfactory to the Administrators are made for any
federal income tax withholding or other withholding required.
(j) Unless Shares deliverable upon earn out of Performance Units are
registered or qualified for public sale by an effective
Registration Statement of the Company under the Securities Act of
1933, as amended (or any superseding law) and are registered or
qualified for sale under all applicable state securities laws, the
- 11 -
<PAGE> 33
person to whom the Common Stock is delivered shall confirm to the
Company that such recipient is purchasing the Shares for
investment and not with a view to effecting any distribution or
resale of the Shares.
- 12 -
