<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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 [Section]240.14a-11(c) or [Section]
240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- - --------------------------------------------------------------------------------
<PAGE> 2
[LOGO]
IONICS, INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 2, 1996
To the Stockholders of
Ionics, Incorporated:
Notice is hereby given that the Annual Meeting of Stockholders of Ionics,
Incorporated, a Massachusetts corporation (the "Corporation" or the "Company"),
will be held in the auditorium of The First National Bank of Boston Building,
100 Federal Street, Boston, Massachusetts 02110, on Thursday, May 2, 1996 at
2:00 P.M. for the following purposes:
1. To elect four Class I Directors of the Corporation, each to serve
for a three-year term or until a successor is elected or qualified.
2. To approve certain amendments to the Corporation's 1986 Stock Option
Plan for Non-Employee Directors, under which each non-employee
director will receive an option for 2,000 shares (subject to
adjustment for stock splits, stock dividends or other capital
adjustments) upon initial election and for each year of service
thereafter.
3. To approve an amendment to the Corporation's 1979 Stock Option Plan
to increase the number of shares available for issuance by 700,000
shares.
4. To ratify the selection of Coopers & Lybrand L.L.P. as independent
auditors for the fiscal year ending December 31, 1996.
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 15, 1996 as
the record date for determination of the stockholders entitled to notice of and
to vote at the meeting. Any stockholder attending the meeting may vote in person
even if such stockholder has returned a proxy.
By Order of the Board of Directors
STEPHEN KORN, CLERK
Ionics, Incorporated
65 Grove Street
Watertown, Massachusetts 02172
March 29, 1996
WHETHER OR NOT YOU EXPECT TO BE AT THE MEETING, 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 29, 1996
The Notice of the 1996 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, 1996. A copy
of the Annual Report to Stockholders for the fiscal year ended December 31, 1995
(including audited financial statements of the Corporation) also accompanies
this Proxy Statement.
Only stockholders of record as of the close of business on March 15, 1996
(the "Record Date") are entitled to notice of and to vote at the 1996 Annual
Meeting and/or any adjournment thereof. The outstanding stock of the Corporation
on the Record Date entitled to vote consisted of 14,961,285 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. Stockholders may vote
in person or by proxy. Execution of a Proxy will not affect a stockholder's
right to attend the meeting and vote in person. 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 of the amendments to the 1986 Stock Option Plan
for Non-Employee Directors in proposal 2; FOR the approval of the amendment to
the 1979 Stock Option Plan in proposal 3; and FOR the ratification of 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 and
broker "non-votes" as shares that are present and entitled to vote for purposes
of determining the presence of a quorum. Abstentions, but not "non-votes," are
counted for purposes of determining the number of shares voting on a particular
matter submitted to the stockholders for a vote. Neither abstentions nor
"non-votes" are treated as having been voted for purposes of determining the
approval of any such matter. A "non-vote" occurs when a nominee holding shares
for a beneficial owner votes on one proposal, but does not vote on another
proposal because, in respect of such other proposal, the nominee does not have
discretionary voting power and has not received instructions from the beneficial
owner.
2
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table lists as of the Record Date 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 outstanding at
such date:
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------- -------------------- ----------
<S> <C> <C>
Denver Investment Advisors LLC 1,220,100(1) 8.2%
1225 17th Street, 26th Floor
Denver, Colorado 80202
Wellington Management Company 780,400(2) 5.2%
75 State Street
Boston, MA 02109
<FN>
- - ---------------
(1) Includes sole voting power as to 959,700 shares and sole dispositive power
as to all 1,220,100 shares. Denver Investment Advisors LLC has no shared
voting power as to any of these shares.
(2) Includes shared voting power as to 503,000 shares and shared dispositive
power as to all 780,400 shares. Wellington Management Company has no sole
voting or sole dispositive power as to any of these shares.
</TABLE>
<TABLE>
The following table sets forth as of the Record Date the number of shares
of Common Stock of the Corporation beneficially owned by each of 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
(including nominees) and executive officers of the Company as a group (16
persons). Unless otherwise indicated, the named person possesses sole voting and
dispositive power with respect to the shares.
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS
- - ------------------------ ----------------------- ----------
<S> <C> <C>
Douglas R. Brown.............................................. 0 --
William L. Brown.............................................. 9,000 (1) *
Arnaud de Vitry d'Avaucourt................................... 175,500 (2) 1.2%
Lawrence E. Fouraker.......................................... 15,900 (3) *
Samuel A. Goldblith........................................... 12,250 (4) *
Arthur L. Goldstein........................................... 513,396+ (5) 3.4%
Kachig Kachadurian............................................ 241,974+ (6) 1.6%
William E. Katz............................................... 234,130+ (7) 1.6%
Robert B. Luick............................................... 13,700 (8) *
Carl S. Sloane................................................ 1,500 (9) *
John J. Shields............................................... 12,480 (10) *
Mark S. Wrighton.............................................. 3,100 (11) *
Allen S. Wyett................................................ 9,150 (12) *
Theodore G. Papastavros....................................... 117,789+(13) *
Stephen Korn.................................................. 43,266+(14) *
Robert J. Halliday............................................ 50,690+(15) *
All Directors, Nominees, and Executive Officers as a Group
(16 persons)................................................ 1,453,825+(16) 9.2%
<FN>
- - ---------------
* Less than 1%.
+ 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.
</TABLE>
3
<PAGE> 5
(1) Includes 7,000 shares subject to options, as to which Mr. Brown has the
right to acquire beneficial ownership.
(2) Includes 3,500 shares subject to options, as to which Mr. de Vitry
d'Avaucourt has the right to acquire beneficial ownership. Another 162,000
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 341,926 shares held
in a trust of which Mr. de Vitry d'Avaucourt's wife is the principal
beneficial owner, and also excludes an additional 524,000 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 865,926 shares.
(3) Does not include 600 shares owned by members of Mr. Fouraker's immediate
family, as to which Mr. Fouraker disclaims beneficial ownership.
(4) Includes 11,500 shares subject to options, as to which Mr. Goldblith has
the right to acquire beneficial ownership.
(5) Includes 302,000 shares subject to options, as to which Mr. Goldstein has
the right to acquire beneficial ownership. Includes beneficial ownership of
11,192 shares held in the Ionics Section 401(k) Plan for the account of Mr.
Goldstein. Does not include 6,800 shares held by members of Mr. Goldstein's
immediate family, as to which Mr. Goldstein disclaims beneficial ownership.
(6) Includes 173,500 shares subject to options, as to which Mr. Kachadurian has
the right to acquire beneficial ownership. Includes beneficial ownership of
5,113 shares held in the Ionics Section 401(k) Plan for the account of Mr.
Kachadurian. Includes 1,000 shares held by a member of his immediate
family, as to which Mr. Kachadurian disclaims beneficial ownership.
(7) Includes 117,126 shares subject to options, as to which Mr. Katz has the
right to acquire beneficial ownership. Does not include 10,400 shares held
by members of Mr. Katz's immediate family, as to which Mr. Katz disclaims
beneficial ownership.
(8) Includes 3,500 shares subject to options, as to which Mr. Luick has the
right to acquire beneficial ownership. Does not include 740 shares held by
members of Mr. Luick's immediate family, as to which Mr. Luick disclaims
beneficial ownership.
(9) Includes 1,000 shares subject to options, as to which Mr. Sloane has the
right to acquire beneficial ownership.
(10) Includes 7,500 shares subject to options, as to which Mr. Shields has the
right to acquire beneficial ownership.
(11) Includes 3,000 shares subject to options, as to which Mr. Wrighton has the
right to acquire beneficial ownership.
(12) Includes 7,000 shares subject to options, as to which Mr. Wyett has the
right to acquire beneficial ownership. Does not include 1,000 shares held
by a member of Mr. Wyett's immediate family, as to which Mr. Wyett
disclaims beneficial ownership.
(13) Includes 69,500 shares subject to options, as to which Mr. Papastavros has
the right to acquire beneficial ownership. Includes beneficial ownership of
895 shares in the Ionics Section 401(k) Plan for the account of Mr.
Papastavros.
4
<PAGE> 6
(14) Includes 41,800 shares subject to options, as to which Mr. Korn has the
right to acquire beneficial ownership. Includes beneficial ownership of 243
shares in the Ionics Section 401(k) Plan for the account of Mr. Korn.
(15) Includes 49,000 shares subject to options, as to which Mr. Halliday has the
right to acquire beneficial ownership. Includes beneficial ownership of 467
shares in the Ionics Section 401(k) Plan for the account of Mr. Halliday.
(16) Assumes exercise of stock options held by the group for all 796,926 shares
and that such shares are outstanding.
The information provided in the above footnotes concerning beneficial
ownership in the Ionics 401(k) Plan is derived from a Plan statement as of
December 31, 1995.
EXPLANATION OF AGENDA FOR THE MEETING
PROPOSAL 1. ELECTION OF DIRECTORS.
The Corporation has a Board of Directors consisting of four 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, 1997 and 1998, respectively, and
until their respective successors are duly elected and qualified (or until the
Director's earlier resignation or removal). 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 I Directors. Messrs. Goldblith, Goldstein and Sloane
currently serve as Class I Directors. Lawrence E. Fouraker, who currently serves
as a Class I Director and has served as a Director of the Corporation since
1986, is not standing for reelection. The Board of Directors has proposed the
nomination of Douglas R. Brown for election at the 1996 Annual Meeting to fill
the vacancy to be created by the retirement of Mr. Fouraker. 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 shows, for each
nominee, his principal occupation since January 1, 1991 and present positions
with the Corporation, period of past service as a Director of the Corporation,
age on March 1, 1996, 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
of 1940):
<CAPTION>
PRINCIPAL OCCUPATIONS
(SINCE JANUARY 1, 1991),
PRESENT POSITIONS WITH PERIOD
THE CORPORATION OF PAST
AND DIRECTORSHIPS SERVICE AS A
NAME AND AGE OF OTHER PUBLIC COMPANIES DIRECTOR
------------ ------------------------- ------------
<S> <C> <C>
Directors whose Terms Expire in 1996 (Class I Directors)
Douglas R. Brown President and Chief Executive (Mr. Brown is a nominee
(41) Officer, Advent International for election for the
Corp. (registered investment first time at the 1996
advisor) (since January 1, 1996); Annual Meeting)
Chief Investment Officer, Advent
International Corp. (1995); Chief
Executive Officer, Advent
International plc (1990-1994);
Director, Advent International
Corp. and Aspen Technology Corp.
(computer software)
</TABLE>
5
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
(SINCE JANUARY 1, 1991),
PRESENT POSITIONS WITH PERIOD
THE CORPORATION OF PAST
AND DIRECTORSHIPS SERVICE AS A
NAME AND AGE OF OTHER PUBLIC COMPANIES DIRECTOR
------------ ------------------------- ------------
<S> <C> <C>
Samuel A. Goldblith Professor Emeritus, Massachusetts 1980 to date
(76)*+# Institute of Technology, and
consultant since 1990
Arthur L. Goldstein President and Chief Executive 1971 to date
(60)+ Officer of the Company (since
prior to 1991); Chairman of the
Board of the Company since May
1990; Director, Cabot Corporation
(specialty chemicals manufacturing
and energy products); Unitrode
Corporation (manufacture and sale
of electronic components); and
State Street Boston Corporation
(bank holding company) and State
Street Bank and Trust Company
Carl S. Sloane Professor of Business February 1995 to date
(59)*# Administration, Harvard Graduate
School of Business Administration
(since September 1991); President
and Chief Executive Officer,
Mercer Management Consulting
(January - September 1991)
<FN>
- - ---------------
* Member of Audit Committee
+ Member of Executive Committee
# Member of Compensation Committee
</TABLE>
6
<PAGE> 8
<TABLE>
The following table contains similar information about the Class II and
Class III Directors of the Company, whose terms of office do not expire at the
1996 Annual Meeting and who consequently are not nominees for election in 1996:
<CAPTION>
PRINCIPAL OCCUPATIONS
(SINCE JANUARY 1, 1991),
PRESENT POSITIONS WITH PERIOD
THE CORPORATION OF PAST
AND DIRECTORSHIPS SERVICE AS A
NAME AND AGE OF OTHER PUBLIC COMPANIES DIRECTOR
------------ ------------------------- ------------
<S> <C> <C>
Directors whose Terms Expire in 1997 (Class II Directors)
Arnaud de Vitry d'Avaucourt Engineering consultant; Director, 1964 to date
(69)*# Digital Equipment Corporation
(computer systems)
Kachig Kachadurian Executive Vice President of the 1986 to date
(46) Company (since May 1994);
previously Senior Vice President
and Vice President of the Company
William E. Katz Executive Vice President of the 1961 to date
(71) Company
Mark S. Wrighton Chancellor and Professor, November 1993 to date
(46)*# Washington University, St. Louis,
Missouri (since July 1995);
previously Professor of Chemistry,
Massachusetts Institute of
Technology; Director, Helix
Technology Corporation (cryogenic
and vacuum technology products)
and OIS Optical Imaging Systems,
Inc. (active matrix liquid crystal
display products)
Directors whose Terms Expire in 1998 (Class III Directors)
William L. Brown Retired Chairman of the Board, The May 1991 to date
(74)*# First National Bank of Boston;
Director, Stone and Webster,
Incorporated (professional
engineering, construction and
consulting services); Standex
International Corporation
(diversified manufacturing and
marketing); and North American
Mortgage Company; Trustee, Bradley
Real Estate Trust
<FN>
- - ---------------
* Member of Audit Committee
# Member of Compensation Committee
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
(SINCE JANUARY 1, 1991),
PRESENT POSITIONS WITH PERIOD
THE CORPORATION OF PAST
AND DIRECTORSHIPS SERVICE AS A
NAME AND AGE OF OTHER PUBLIC COMPANIES DIRECTOR
------------ ------------------------- ------------
<S> <C> <C>
Robert B. Luick Of Counsel, Sullivan & Worcester, 1948 to 1968;
(84) Attorneys (since 1992); prior to 1971 to date
1992, partner, Sullivan &
Worcester; Assistant Clerk of the
Corporation (since prior to 1991)
John J. Shields President and Chief Executive 1988 to date
(57)*# Officer, King's Point Holdings
Incorporated (diversified business
information, technology
instrumentation and cranberry
cultivation); President and Chief
Executive Officer, Computervision
Corporation (January 1991 - April
1993)
Allen S. Wyett President, Wyett Consulting Group, February 1992 to date
(62)*# Inc. (since 1990)
<FN>
- - ---------------
* Member of Audit Committee
# Member of Compensation Committee
</TABLE>
Mr. Luick is of counsel to 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 served as 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
other officers, and acts as the administrator of the Corporation's stock option
and restricted stock plans.
During 1995, the Board of Directors held four meetings. The Audit Committee
met twice and the Compensation Committee met three times. Except for Mr.
Fouraker, 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.
PROPOSAL 2. APPROVAL OF AMENDMENTS TO THE 1986 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS.
Under the Corporation's 1986 Stock Option Plan for Non-Employee Directors
("1986 Plan"), which is administered by the Corporation's Board of Directors,
each person who is not an employee of the Corporation or any of its
subsidiaries, and who is elected a Director of the Corporation, is entitled to
receive an option to
8
<PAGE> 10
purchase 1,000 shares of Common Stock upon his initial election, an option to
acquire 1,000 additional shares immediately upon completion of each of such
Director's next four successive years in office, and an option to acquire 500
additional shares immediately upon completion of such Director's sixth through
tenth successive years in office. In 1995, options for a total of 6,500 shares
were issued under the 1986 Plan with an exercise price of $27.50 per share.
Although the Company's two-for-one stock split by way of 100% stock
dividend (distributed on January 6, 1995) provided an adjustment with respect to
outstanding stock options under the 1986 Plan, and resulted in an increase in
the maximum number of shares available for issuance under the 1986 Plan from
100,000 to 200,000, the terms of the 1986 Plan did not permit the number of
shares underlying options to be issued after future successive years in office
to be adjusted to take the stock split into effect. To permit future automatic
grants to Directors at the completion of additional successive years in office
to give effect to the stock split (and any future actions that might be taken by
the Company that would affect its outstanding stock), the Board of Directors on
August 22, 1995 adopted the following amendments to the 1986 Plan, subject to
the approval of the stockholders:
(1) The number of shares underlying each option to be granted under
the 1986 Plan was increased to 2,000, and the 1986 Plan was further amended
to provide that each non-employee Director will receive an option grant for
2,000 shares upon his initial election as a Director and upon completion of
each successive year in office, irrespective of the number of years such
individual has served as a Director.
(2) A provision was added to the 1986 Plan so that any future stock
split, stock dividend or other capital adjustment made by the Corporation
would automatically result in corresponding adjustments in the number and
kind of shares as to which outstanding options and options to be issued in
the future under the 1986 Plan will be exercisable.
The Board of Directors believes that is equitable to amend the 1986 Plan to
give future effect to the two-for-one stock split enacted in 1995, and to any
future capital adjustments. In addition, the Board of Directors believes that
the continued growth and profitability of the Corporation depends in part upon
the ability of the Corporation to attract and retain as members of its Board of
Directors knowledgable persons of broad business experience and professional
expertise who have no employment relationship with the Corporation. This goal
will be enhanced if an option grant is available upon the completion of each
year of service as a Director. Accordingly, the Board of Directors believes it
to be in the best interests of the Corporation and its stockholders to approve
these amendments to the 1986 Plan in order to provide further incentive for such
Directors to continue in service to the Corporation through an additional
opportunity for ownership of its capital stock.
The Board of Directors unanimously recommends that you vote FOR the
proposal to approve the amendments to the 1986 Plan. Approval of the amendments
requires the affirmative vote of a majority of the issued and outstanding Common
Stock represented at the meeting in person or by Proxy at the 1996 Annual
Meeting.
PROPOSAL 3. APPROVAL OF AMENDMENT TO THE 1979 STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES AVAILABLE FOR ISSUANCE BY 700,000 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, 1995, a total of 90,758
of the 2,910,000 shares (post-split) previously reserved for issuance under the
1979 Plan remain available for future grants of options or pursuant to the
earn-out of performance units ("Performance Units"). Approximately 220
employees, including officers of the Corporation and its
9
<PAGE> 11
subsidiaries, are presently eligible to participate in the 1979 Plan. During
1995 options for a total of 3,000 shares were issued under the 1979 Plan with an
exercise price of $27.25 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 from the date of grant) 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 Committee usually provides that the option is made immediately
exercisable in full, and 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 the event the grantee either leaves the Company
or attempts to sell his shares during such period. 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, 1999.
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. When the
option holder sells the shares, he or she generally will recognize a capital
gain or loss in an amount equal to the difference between the amount realized
upon the sale of the shares and his or her basis in the stock (generally, the
exercise price plus the amount taxed to the option holder as ordinary
compensation income). If the option holder's holding period for the shares
exceeds one year, such gain or loss will be a long-term capital gain or loss. 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
under the 1979 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.
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
10
<PAGE> 12
(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 22, 1996, the Corporation's Board of Directors amended the 1979
Plan, subject to the approval of the stockholders of the Corporation at the 1996
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 700,000
shares, representing approximately 4.7% of the Corporation's outstanding stock.
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 unanimously recommends that you vote FOR the
proposal to approve the amendment to the 1979 Plan to increase by 700,000 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 7,480,643
shares.
PROPOSAL 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, 1996. The
persons named in the Proxy intends to vote in favor of selecting Coopers &
Lybrand L.L.P. 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 L.L.P., 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 L.L.P. is expected to be present at
the Annual 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, 1995) for the fiscal
years ended December 31, 1993, 1994 and 1995:
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
------------------------
RESTRICTED SECURITIES ALL OTHER
ANNUAL COMPENSATION STOCK UNDERLYING COMPENSATION(3)
NAME AND -------------------- AWARDS OPTIONS/SARS ---------------
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) (#)(2) ($)
------------------ ---- --------- -------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Arthur L. Goldstein................. 1995 376,250 224,800 -- 0 4,500
Chairman of the Board, 1994 296,250 80,000 133,307 100,000 3,000
President and Chief 1993 282,500 0 -- 100,000 3,233
Executive Officer
Kachig Kachadurian.................. 1995 220,000 104,500 -- 0 4,500
Executive 1994 201,250 63,000 70,278 60,000 3,931
Vice President 1993 190,000 0 -- 45,000 3,262
William E. Katz..................... 1995 206,750 120,720 -- 0 0
Executive 1994 199,250 63,000 43,654 30,000 0
Vice President 1993 190,000 0 -- 45,000 0
Theodore G. Papastavros............. 1995 152,000 70,250 -- 0 4,560
Vice President, 1994 143,000 25,000 41,638 20,000 941
Strategic Planning 1993 136,250 0 -- 20,000 393
and Treasurer
Stephen Korn........................ 1995 152,000 70,250 -- 0 1,848
Vice President, General 1994 143,000 20,000 33,327 20,000 469
Counsel and Clerk 1993 136,250 0 -- 14,000 157
<FN>
- - ---------------
(1) Awards under the Corporation's 1994 Restricted Stock Plan, approved by the
Stockholders at the 1995 Annual Meeting, issued in May 1995 for fiscal 1994.
Represents award of 4,892 shares to Mr. Goldstein, 2,579 shares to Mr.
Kachadurian, 1,602 shares to Mr. Katz, 1,528 shares to Mr. Papastavros and
1,223 shares to Mr. Korn, and constitutes the total restricted stock
holdings of such persons. The year-end value of such holdings (based on the
closing price of the Company's Common Stock as reported on the New York
Stock Exchange on December 29, 1995) was $212,802, $112,186, $69,687,
$66,468 and $53,200, respectively. Shares vest in 20% annual increments over
the five successive 12-month periods following the date of the restricted
stock award. During the period that the share restrictions apply, each
recipient has the rights of a stockholder of the Company generally,
including the right to receive any dividends distributed.
(2) See Note 1 to table included under "Stock Option Exercises."
12
<PAGE> 14
(3) Matching contributions by the Corporation to officers' accounts in the
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 four mutual funds. The Company contributes to
the Plan, for the individual accounts of the participants in the Plan, an
amount equal to 50% of the amount each participant has elected to invest, up
to 6% of compensation, 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>
STOCK OPTION GRANTS
No stock option grants were made to the listed executive officers in 1995.
<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, 1995.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1995
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-ENDED(2)
NAME (#) ($) YEAR-END ($)
---- ------------ ------------- ------------- --------------------
<S> <C> <C> <C> <C>
Arthur L. Goldstein....... -- -- 302,000 7,213,250
Kachig Kachadurian........ 10,000 344,500 173,500 4,197,563
William E. Katz........... -- -- 133,126 3,293,860
Theodore G. Papastavros... 8,000 312,000 69,500 1,726,188
Stephen Korn.............. 1,000 33,000 41,800 905,400
<FN>
- - ---------------
(1) 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. The Company has issued no SARs
(stock appreciation rights).
13
<PAGE> 15
(2) Calculated as the difference between the closing price of the Company's
Common Stock, as reported on the date of option exercise (or the sales price
on such date if the individual sold on the exercise date) 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 29,
1995 ($43.50 per share), and the exercise price of the option(s), multiplied
by the number of shares underlying the options (Column IV).
</TABLE>
PENSION PLAN
<TABLE>
Employees of the Company and its domestic divisions and subsidiaries
(except for employees of the Fabricated Products Group, based in Bridgeville,
Pennsylvania, who participate in a defined contribution pension plan) 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 an executive
officer or other participant at normal retirement age (age 65) in the Retirement
Plan.
PENSION PLAN TABLE
(ESTIMATED ANNUAL BENEFITS
FOR YEARS OF CREDITED SERVICE
INDICATED (1))
<CAPTION>
BASE SALARY AT
RETIREMENT DATE 15 20 25 30 35
- - --------------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 50,000.................................... $ 7,065 $ 9,153 $11,240 $13,328 $15,416
75,000.................................... 10,796 14,051 17,306 20,561 23,817
100,000.................................... 14,526 18,949 23,372 27,795 32,218
125,000.................................... 18,257 23,847 29,438 35,028 40,618
150,000.................................... 21,987 28,745 35,503 42,261 49,019
175,000.................................... 25,145 33,070 40,996 48,922 56,847
200,000.................................... 27,660 36,754 45,847 54,940 64,033
225,000.................................... 27,729 36,857 45,984 55,112 64,239
250,000.................................... 30,386 38,864 47,341 55,818 64,296
275,000.................................... 32,952 42,302 51,652 61,002 70,352
300,000.................................... 34,592 44,814 55,037 65,259 75,481
325,000.................................... 35,802 46,897 57,992 69,087 80,182
350,000.................................... 36,770 48,738 60,705 72,673 84,640
375,000.................................... 37,056 49,308 61,561 73,813 86,066
400,000.................................... 37,056 49,308 61,561 73,813 86,066
<FN>
- - ---------------
(1) Effective January 1, 1994, under Internal Revenue Code Section 401(a)(17),
no more than $150,000 of cash compensation may be taken into account in
calculating benefits under the Retirement Plan.
</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 an officer 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, 1989 -- one half of one
percent of the first $550 of base monthly salary as of January 1, 1990, plus one
and one-quarter percent (1.25%) of the balance of base
14
<PAGE> 16
monthly salary as of that date, that sum being multiplied by the number of prior
years of service; plus (ii) for calendar year 1989, one and one-quarter percent
(1.25%) of base monthly salary as of January 1, 1990; plus (iii) for each year
after December 31, 1989 -- 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
officers.
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, 35.6
years, $85,447; Mr. Kachadurian, 15 years, $61,948; Mr. Katz, 46.4 years,
$53,600; Mr. Papastavros, 39.2 years, $60,949; and Mr. Korn, 6.3 years, $37,108.
On February 22, 1996, the Company's Board of Directors adopted a
Supplemental Executive Retirement Plan for officers and key employees of the
Company ("SERP"). The purpose of the SERP is to permit officers and other key
employees whose Base Salary exceeds $150,000 in any year to accrue retirement
benefits on Base Salary in excess of $150,000 equivalent to the benefits that
would have been accrued under the Retirement Plan if Base Salary levels over
$150,000 could be taken into account in calculating benefits under that Plan.
The SERP will be administered by the Compensation Committee of the Board of
Directors.
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 eight 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 and 1994 Restricted Stock Plan. The Committee has furnished
this report concerning compensation of executive officers for the fiscal year
ended December 31, 1995.
The compensation program for executive officers involves consideration of
cash compensation, the granting of options to acquire the Company's Common
Stock, and the granting of restricted stock under the recently adopted 1994
Restricted Stock Plan.
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 determines base salary levels of executive officers by comparison to
other companies engaged in its industry, represented by those in the "peer
group" Index set forth in this Proxy Statement, or in similar industries,
subject to an evaluation of comparative overall performance of the 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 on 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 1994 and 1995, 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. With the adoption of the 1994 Restricted
Stock Plan, the Committee, after consideration of management's recommendations,
may elect to utilize restricted stock to fill a portion of any cash award that
might be payable under the Managerial Bonus Program, or may otherwise make
discretionary restricted stock
15
<PAGE> 17
awards. In 1995, a portion of the awards due under the Company's Managerial
Bonus Program for 1994 was filled by restricted stock grants.
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 on 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 may make discretionary bonus awards in appropriate
circumstances wherein an executive officer might merit a bonus based on other
considerations.
The base salary of Mr. Goldstein, the Company's Chief Executive Officer,
was established by the Committee in August 1995, and reflected an increase of
$147,500 effective July 1, 1995. In considering Mr. Goldstein's base salary, the
Compensation Committee compared it to that paid by peer companies and companies
in similar industries. In doing so, the Committee reviewed on a comparative
basis a) the Company's multi-year record of continuous improvement in financial
results including record revenues, net income, earnings per share and
year-ending backlog; b) improvement in return on equity; c) improvement in
stockholder value; and d) Mr. Goldstein's leadership in the development of the
Company's business and new products.
Based on the Company's record performance in 1995, and in consideration of
such performance in the context of the Company's Managerial Bonus Program
discussed above, the Compensation Committee approved bonuses as provided for
under such program to Mr. Goldstein and other executive officers and key
employees on February 22, 1996. Under the terms of the program, Mr. Goldstein
was entitled to a bonus of $224,800.
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 ownership of the Company's stock by management
promotes the enhancement of shareholder value by creating a greater community 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. The size of
stock option grants is based on evaluation of a recipient's performance, salary
level and number of options held as a result of prior grants. No stock option
grants were made in 1995 to Mr. Goldstein or any of the other executive
officers.
16
<PAGE> 18
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 and 1994
Restricted Stock Plan, will not be subject to the deduction limit if certain
requirements set forth in Section 162(m) are met. The Company believes that its
compensation awards to executive officers arising out of the 1979 Stock Option
Plan and 1994 Restricted Stock Plan comply with the requirements of Section
162(m).
Respectfully submitted by the
Compensation Committee
Lawrence E. Fouraker (Chairman)
William L. Brown
Arnaud de Vitry d'Avaucourt
Samuel A. Goldblith
John J. Shields
Carl S. Sloane
Mark S. Wrighton
Allen S. Wyett
STOCK PERFORMANCE GRAPH
The Securities and Exchange Commission (the "Commission") 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, 1990 to December 31, 1995, to the Standard &
Poors ("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, 1990, and that any cash
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 RETURN AMONG
IONICS, INCORPORATED, S&P 500 INDEX AND
"PEER GROUP" INDEX OF COMPARABLE COMPANIES
[GRAPH]
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) IONICS, INC. S&P 500 PEER GROUP
<S> <C> <C> <C>
1990 $100.00 $100.00 $100.00
1991 $157.89 $130.34 $148.19
1992 $238.16 $140.25 $143.89
1993 $174.12 $154.32 $128.96
1994 $220.18 $158.42 $127.66
1995 $305.26 $214.99 $184.99
</TABLE>
DIRECTOR COMPENSATION
Through the first half of 1995, each Director who is not an employee of the
Company received an annual retainer of $8,000, plus a fee of $1,000 for each
regular Board meeting attended. In August 1995, the annual retainer was adjusted
to $10,000. In addition, commencing in the second half of 1995, non-employee
Directors also receive a fee of $500 (except for the Committee Chairman, who
receives a fee of $1,000) for each meeting of a Committee of the Board they
attend, if held on the same day as a Board meeting, or $1,000 per meeting if
held on a day on which the Board does not meet.
Under the Company's 1986 Stock Option Plan for Non-Employee Directors
("1986 Plan"), subject to the approval by the stockholders of certain amendments
to the 1986 Plan at the 1996 Annual Meeting (see Proposal 2), 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 2,000 shares of
Common Stock upon his initial election, and an option to acquire 2,000
additional shares immediately upon completion of each of his next successive
years in office. Options granted under the 1986 Plan have an exercise price
equal to the fair market value 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.
STOCKHOLDER PROPOSALS
The Corporation's 1997 Annual Meeting is presently expected to be held on
May 1, 1997. Proposals of stockholders intended to be presented at the 1997
Annual Meeting must be received no later than November 24, 1996, for inclusion
in the Corporation's proxy statement and proxy for that meeting, except that
18
<PAGE> 20
if the date of the 1997 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 its 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 29, 1996
19
<PAGE> 21
IONICS, INCORPORATED
1979 Stock Option Plan
----------------------
As Amended through February 22, 1996
------------------------------------
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, 1999 (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 3,610,000 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> 22
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
<PAGE> 23
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.
<PAGE> 24
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.
<PAGE> 25
11. Restrictions Applicable to Stock Issued and Delivered Under the Plan.
---------------------------------------------------------------------
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
If the Repurchase right Portion of the Shares
arises prior to Subject to Repurchase
----------------------- ---------------------
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
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
<PAGE> 26
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.
<PAGE> 27
(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
<PAGE> 28
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
<PAGE> 29
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
the Option holder shall be calculated as described in the attached appendix
<PAGE> 30
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 or improvement of the
Company (or its Subsidiaries) as the
<PAGE> 31
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 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.
<PAGE> 32
IONICS, INCORPORATED
1986 STOCK OPTION PLAN
----------------------
FOR NON-EMPLOYEE DIRECTORS
--------------------------
(As amended through August 22, 1995)
------------------------------------
1. Purpose of Plan.
----------------
This 1986 Stock Option Plan for Non-Employee Directors (hereinafter
called the "Plan") of Ionics, Incorporated (hereinafter called the "Company") is
intended to advance the interests of the Company by providing a means of
attracting capable and qualified persons to serve as independent Directors, and
encouraging such persons to continue to serve as Directors, through ownership of
Common Stock of the Company.
2. Definitions.
------------
2.1 "Optionee" shall mean a person to whom a stock option has been
granted under the Plan.
2.2 "Subsidiary" shall mean a corporation, partnership or other entity
whose controlling stock or other ownership interest is owned directly or
indirectly by the Company.
3. Effective Date.
---------------
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 and present at the meeting when the matter is acted upon.
4. Stock Subject to the Plan.
--------------------------
Subject to adjustment as provided hereinbelow, the total number of
shares of Common Stock, one dollar ($1.00) per share par value (hereinafter
"Common Stock"), of the Company for which
<PAGE> 33
-2-
options may be granted pursuant to the Plan (hereinafter called the "Options"
and each singly an "Option") shall not exceed 200,000 shares in the aggregate.
Such shares may either be authorized and unissued shares of Common Stock or
issued shares of Common Stock which 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 purpose of issuance pursuant to the
Plan.
Each eligible Director shall be granted an Option to acquire 2,000
shares of Common Stock as provided in Section 6, subject to adjustment as
provided hereinbelow, for each year of service as a Director of the Company.
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 be made in
the number and kind of shares as to which outstanding Options (or portions
thereof then unexercised) and Options to be issued in the future pursuant to the
terms of this Plan shall be exercisable, such that the proportionate interest of
each Optionee shall be maintained as before the occurrence of such event. Such
adjustments in outstanding Options shall be made without change in the aggregate
total option price of Option then outstanding and unexercised, but with a
corresponding adjustment in the option price per share.
<PAGE> 34
-3-
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"). 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 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 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.
6. Eligibility; Grant of Options.
------------------------------
Only persons who hold office as Directors of the Company and who are not
otherwise employees of the Company or of any of its Subsidiaries may be granted
an Option under this Plan. Each Director of the Company who is not otherwise an
employee of the Company or any Subsidiary shall be granted an Option to acquire
2,000 shares under the Plan with respect to his election to office, and to each
year that he continues to serve as a Director of the Company. Each such Director
shall be entitled to receive an Option to acquire 2,000 shares under the Plan
immediately
<PAGE> 35
-4-
after the annual meeting of the stockholders at which he is first elected, and
an additional Option to acquire 2,000 shares immediately upon completion of each
next successive year in office. A Director who assumes office at a time other
than an annual meeting of stockholders shall be entitled to receive his initial
Option to acquire 2,000 shares under the Plan immediately after the annual
meeting of stockholders next following his assumption of office. For purposes of
the Plan, a Director shall be considered to have completed a "year in office" on
the date of each annual meeting of stockholders while he continues in office;
provided, however, that if the interval between any two such annual meetings is
greater than 395 days, a Director shall be considered to have completed a "year
in office" for purposes of the Plan on the 395th day after the preceding year's
annual meeting of stockholders, rather than on the date of the second of the two
such annual meetings.
7. The Option Price.
-----------------
The price payable upon exercise of an Option granted hereunder shall be
the fair market value at the date of grant of the shares covered by the Option.
For purposes of the Plan, if the Common Stock of the Company is listed for
trading on the New York Stock Exchange (or any other registered stock exchange),
the fair market value of the shares shall be equal to the last sale price for
the Common Stock on such exchange on the trading day next preceding the date of
grant of an Option.
The Option exercise price shall be paid (1) in cash, (2) in shares of
the Common Stock of the Company already owned by the person exercising the
Option, or (3) in any combination of cash and of such shares. In the event that
such shares are delivered to pay for all or a portion of the Option exercise
price, they shall be valued at the last sale price for the Common Stock on the
New York Stock Exchange (or other registered stock exchange)
<PAGE> 36
-5-
as reported on the date of delivery of the shares in exercise of the Option, and
any shares delivered in payment of the Option exercise price shall be free and
clear from all restrictions on transfer, claims or purchase rights, except as
the Administrators may affirmatively allow.
8. Nontransferability of Options.
------------------------------
No Option granted under the Plan shall be encumbered, assigned, or
otherwise transferred, otherwise than by will or the laws of descent and
distribution, and an Option may be exercised during the lifetime of an Optionee
only by him.
9. Duration of Options.
--------------------
Each Option shall expire not more than ten (10) years from its date of
grant, but shall be subject to earlier termination:
(a) in the event that the Optionee ceases to be a Director of the
Company, an Option may thereafter be exercised by him only to the
extent that under Section 10, the right to exercise the Option has
accrued and is in effect, and only within the period of thirty
(30) days after the Optionee ceases to be a Director; or
(b) in the event that the Optionee dies while holding office as a
Director or within the 30-day period described in paragraph
(a), an Option granted to him may thereafter be exercised by
his estate or by any person or persons who acquired the right
to exercise the Option by bequest or by inheritance or by
reason of the death of the Optionee, to the extent of the full
number of shares covered by the Option, regardless of whether
the Optionee at the time of this death was entitled to exercise
the Option in full, but only within the period of ninety (90)
days after his death.
<PAGE> 37
-6-
10. Time and Manner of Exercise.
----------------------------
Options granted under the Plan shall not be exercisable for a period of
six (6) months after their date of grant, but shall be immediately exercisable
in full thereafter; provided, however, that (i) options may be exercised only
during the periods beginning on the third business day following the date on
which the Company releases for publication its annual or quarterly financial
reports and ending on the twelfth business day following such date and (ii) no
Option shall be exercisable after ten (10) years from the date on which it was
granted.
To the extent that the right to exercise an Option has accrued and is in
effect, the Option may be exercised in full at one time or in part from time to
time by giving written notice, signed by the person or persons exercising the
Option, to the Company, stating the number of shares with respect to which the
Option is being exercised, and accompanied by payment in full for such shares in
accordance with Section 7. There shall be no such exercise at any one time as to
fewer than two hundred (200) shares or all of the remaining shares then
purchaseable by the person or persons exercising the Option, if fewer than two
hundred (200) shares. Upon such exercise, delivery of a certificate for paid-up
non-assessable shares shall be made at the principal Massachusetts office of the
Company to the person or persons exercising the Option at such time, during
ordinary business hours, after fifteen (15) days but not more than thirty (30)
days from the date of receipt of the notice by the Company, as shall be
designated in such notice, or at such time, place or manner as may be agreed
upon by the Company and the person or persons exercising the Option.
Notwithstanding the foregoing, the Company may delay issuance of shares pursuant
to an Option until the person exercising the Option has complied with all of the
terms and conditions of the Plan and the applicable stock option agreement.
<PAGE> 38
-7-
11. Stock Option Agreement Required.
--------------------------------
Each Option granted under the Plan shall be evidenced by a written
option agreement (the "Agreement") between the Company and the Optionee, in such
form as the Administrators shall determine, which Agreements may but need not be
identical, and which shall (i) comply with and be subject to the terms and
conditions of the Plan and (ii) provide that the Optionee agrees to continue to
serve as a Director of the Company during the term for which he was elected, and
that during such term he will not, 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
having business substantially competitive to the business in which the Company
or its Subsidiaries are then engaged. Any Agreement may contain such other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrators. No Option shall be granted within the meaning
of the Plan, and no purported grant of any Option shall be effective, until such
an Agreement shall have been duly executed on behalf of the Company and the
Director to whom the Option is to be granted.
12. Purchase for Investment; Rights of Holder of Subsequent
-------------------------------------------------------
Registration.
-------------
Unless the shares to be issued upon exercise of an Option have been
effectively registered under the Securities Act of 1933 as now in force or
hereafter amended, the Company shall be under no obligation to issue any shares
covered by any Option unless the person who exercises such Option, in whole or
in part, shall give a written representation and undertaking to the Company
which is satisfactory in form and scope to counsel to the Company and upon
which, in the opinion of such counsel, the Company may reasonably rely, that he
is acquiring the shares issued to him pursuant to such exercise of the Option
for his own account as an investment and not with a view to, or for sale in
connection with, the distribution of any such shares, and that he will make
<PAGE> 39
-8-
no transfer of the same except in compliance with any rules and regulations in
force at the time of such transfer under the Securities Act of 1933, or any
other applicable law, and that if shares are issued without such registration, a
legend to this effect may be endorsed upon the securities so issued. In the
event that the Company shall, nevertheless, deem it necessary or desirable to
register under the Securities Act of 1933 or other applicable statutes any
shares with respect to which an Option shall have been exercised, or to qualify
any such shares for exemption from the Securities Act of 1933 or other
applicable statutes, then the Company shall take such action at its own expense
and may require reasonable indemnity to the Company and its officers and
Directors from such holder against all losses, claims, damages and liabilities
arising from such use of the information so furnished and caused by any untrue
statement of any material fact therein, or caused by omission to state a
material fact required to be stated therein or necessary to make the statement
therein not misleading in light of the circumstances under which they were made.
13. Listing of Option Stock.
------------------------
So long as the Common Stock of the Company is listed on the New York
Stock Exchange or any other stock exchange, the Company shall take necessary
steps so that the shares to be issued upon exercise of an Option are listed by
such exchange, or will be so listed, upon notice of issuance.
14. Effect of Option.
-----------------
The grant of an Option 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
Agreement under the Plan shall confirm upon the Optionee any right with respect
to continuation of his Directorship, nor shall it affect or restrict the right
of the Company or any assuming or succeeding Company to terminate such
Directorship at any time.
<PAGE> 40
-9-
15. Termination, Suspension, Amendment or Modification of the
---------------------------------------------------------
Plan.
-----
Unless sooner terminated as hereinafter provided, the Plan will
terminate at the close of business on May 7, 2002.
The Board may at any time terminate or suspend the Plan or make such
modification or amendment thereof as it deems advisable, PROVIDED, however, that
the Board may not, without approval by the affirmative vote of the holders of a
majority of the securities of the Company present, or represented, and entitled
to vote at a meeting duly held in accordance with the applicable laws of the
Commonwealth of Massachusetts, (i) materially increase the benefits accruing to
participants under the Plan; (ii) materially increase the number of shares for
which Options may be granted under the Plan; or (iii) materially modify the
requirements as to eligibility for participation in the Plan. In no event,
however, may any provision of this Plan specified in Rule 16b-3(c)(2)(ii)(A) (or
any successor or amended provision thereof) of the Securities Exchange Act of
1934 (including without limitation, provisions as to eligibility and who may
participate in the Plan, the amount and price of shares for which Options may be
granted or the timing of awards), be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder. Termination or any
modification or amendment of the Plan shall not, without consent of a
participant, affect his rights under an Option previously granted to him.
16. Merger, Consolidation or Sale of the Entire Business of the
-----------------------------------------------------------
Company.
--------
If before the expiration 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
<PAGE> 41
-10-
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 as of the effective date of said transaction.
17. Compliance with Applicable Laws and Regulations.
------------------------------------------------
Upon exercise of any Option granted hereunder, the person exercising the
Option shall file any and all reports required of him under the Securities
Exchange Act of 1934, as amended, or otherwise.
<PAGE> 42
IONICS, INCORPORATED
65 GROVE STREET, WATERTOWN, MASSACHUSETTS 02172
PROXY FOR ANNUAL MEETING TO BE HELD MAY 2, 1996
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 and attorneys-in-fact 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 at the The First National
Bank of Boston Building, 100 Federal Street, Boston, Massachusetts 02110 on May
2, 1996 at 2:00 p.m. local time 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.
SEE REVERSE SIDE. If you wish to vote in accordance with the Board of Directors'
recommendation, just sign and date on the reverse side. You need not mark any
boxes.
- - --------------------------------------------------------------------------------
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
- - --------------------------------------------------------------------------------
Please sign this Proxy exactly as your name appears on the books of the
Corporation. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, this signature
should be that of an authorized officer who should state his or her title.
- - --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- - -------------------------------------- --------------------------------------
- - -------------------------------------- --------------------------------------
- - -------------------------------------- --------------------------------------
<PAGE> 43
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE With- For All
For hold Except
1.) Election of all four Class I / / / / / /
Directors listed below.
DOUGLAS R. BROWN, SAMUEL A. GOLDBLITH,
ARTHUR L. GOLDSTEIN AND CARL S. SLOANE
Instructions: To withhold authority to vote for any individual
nominee, mark "For All Except" box and strike a line through
the name of the nominee(s) in the list above.
RECORD DATE SHARES:
----------------------
Please be sure to sign and date this Proxy. Date
- - -------------------------------------------------------------------
- - ----Shareholder sign here---------------Co-owner sign here---------
For Against Abstain
2.) Proposal to approve certain / / / / / /
amendments to 1986 Stock Option
Plan for Non-Employee Directors.
For Against Abstain
3.) Proposal to approve amendment to / / / / / /
1979 Stock Option Plan to increase
number of shares available for
issuance by 700,000.
For Against Abstain
4.) Proposal to ratify selection of Coopers / / / / / /
& Lybrand L.L.P. as auditors for fiscal
year ended December 31, 1996.
5.) To consider and act upon such other matters as may
properly come before the meeting.
Mark box at right if comments or address changes have / /
been noted on the reverse side.
================================================================================
DETACH CARD DETACH CARD
IONICS, INCORPORATED
Dear Shareholder:
Please take note of the important information enclosed with this Proxy
Card. The matters to be voted upon are discussed in detail in the
enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your
right to vote your shares.
Please mark the boxes on the proxy card to indicate how your shares
are to be voted. Then sign the card, detach it and return your proxy
vote in the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders,
May 2, 1996.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
IONICS, INCORPORATED
