<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:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.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)
N/A
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
PRELIMINARY COPY FOR INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
[IONICS LOGO]
IONICS, INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 7, 1998
To the Stockholders of
Ionics, Incorporated:
Dear Stockholder:
You are cordially invited to attend our 1998 Annual Meeting of
Stockholders. The meeting is scheduled for 2:00 P.M. on Thursday, May 7, 1998,
and will be held in the Auditorium of The First National Bank of Boston
building, 100 Federal Street, Boston, MA 02110.
The notice of meeting and proxy statement that follow describe the business
to be conducted at the meeting.
As is our custom, we will give a presentation on the highlights for the
year 1997 as well as the current status of our business. I sincerely hope that
you will be able to attend this meeting and that you will have the opportunity
to meet members of our management team.
Please sign and return your proxy promptly, whether or not you plan to
attend. Your vote is very important to the Company.
On behalf of the Directors and Officers, I wish to thank you for your
interest in the Company.
Sincerely,
/s/ Arthur L. Goldstein
------------------------------------
ARTHUR L. GOLDSTEIN
Chairman and Chief Executive Officer
Watertown, Massachusetts
March 28, 1998
-----------------------------------------------------
YOUR VOTE IS IMPORTANT
Please sign, date and return your proxy card promptly
-----------------------------------------------------
<PAGE> 3
PRELIMINARY COPY FOR INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
[IONICS LOGO]
IONICS, INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 7, 1998
To the Stockholders of
Ionics, Incorporated:
Notice is hereby given that the Annual Meeting of Stockholders of Ionics,
Incorporated (the "Corporation" or the "Company") will be held in the auditorium
of The First National Bank of Boston building, 100 Federal Street, Boston,
Massachusetts, on Thursday, May 7, 1998 at 2:00 P.M. for the following purposes:
1. To elect four Class III Directors of the Corporation, each to serve
for a three-year term or until a successor is elected or qualified.
2. To approve an amendment to the Restated Articles of Organization of
the Corporation which increases the authorized common stock of the
Corporation, par value $1.00 per share, from 30 million to 55
million shares.
3. To ratify the selection of Coopers & Lybrand L.L.P. as independent
auditors for the fiscal year ending December 31, 1998.
4. 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 20, 1998 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 28, 1998
WHETHER OR NOT YOU EXPECT TO BE AT THE MEETING, PLEASE MARK, SIGN, DATE AND
RETURN YOUR PROXY IN THE ENVELOPE ENCLOSED HEREWITH.
<PAGE> 4
PRELIMINARY COPY FOR INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
IONICS, INCORPORATED
65 GROVE STREET
WATERTOWN, MASSACHUSETTS 02172
------------------------
PROXY STATEMENT
------------------------
MARCH 28, 1998
The Notice of the 1998 Annual Meeting of Stockholders of Ionics,
Incorporated (the "Corporation" or the "Company") 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. This Proxy Statement is furnished
in connection with the solicitation of Proxies by the Board of Directors of the
Corporation for use at the Annual Meeting of Stockholders to be held on
Thursday, May 7, 1998 (the "Annual Meeting") at 2:00 P.M., local time, in the
auditorium at The First National Bank of Boston building, 100 Federal Street,
Boston, Massachusetts, and any adjournments thereof. 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 28, 1998. A copy of the Annual
Report to Stockholders for the fiscal year ended December 31, 1997 (including
audited financial statements of the Corporation) also accompanies this Proxy
Statement.
Only stockholders of record as of the close of business on March 20, 1998
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting
and/or any adjournments thereof. The outstanding stock of the Corporation on the
Record Date entitled to vote consisted of [ ] shares of common
stock, $1.00 per share par value (the "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
amendment to the Corporation's Restated Articles of Organization in proposal 2;
and FOR the ratification of the selection of an auditor in proposal 3. 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 attending 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. Broker "non-votes" are not considered voted for the particular matter and
have the practical effect of reducing the number of affirmative votes required
to achieve a majority for such matter by reducing the total number of shares
from which the majority is calculated, except that broker "non-votes" will have
the practical effect of a vote "against" the proposal to amend the Corporation's
Restated Articles of Organization.
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<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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 the Common Stock outstanding at
such date:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------- -------------------- ----------
<S> <C> <C>
Denver Investment Advisors LLC 1,010,500(1) 6.3%
1225 17th Street, 26th Floor
Denver, Colorado 80202
Wellington Management Company LLP 2,106,261(2) 13.2%
75 State Street
Boston, MA 02109
</TABLE>
- ------------
(1) Includes sole voting power as to 667,400 shares and sole dispositive power
as to all 1,010,500 shares. Denver Investment Advisors LLC has no shared
voting power or shared dispositive power as to any of these shares.
(2) Includes shared voting power as to 1,480,440 shares and shared dispositive
power as to all 2,106,261 shares. Wellington Management Company LLP has no
sole voting power or sole dispositive power as to any of these shares.
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 current 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(#)
- ------------------------ -------------------- ----------
<S> <C> <C>
Douglas R. Brown.......................... 4,000(1) *
William L. Brown.......................... 13,000(2) *
Arnaud de Vitry d'Avaucourt............... 29,500(3) *
Kathleen F. Feldstein..................... 500 *
Arthur L. Goldstein....................... 636,635(4)+ 3.9%
William E. Katz........................... 250,404(5)+ 1.6%
Robert B. Luick........................... 16,100(6) *
Carl S. Sloane............................ 5,500(7) *
John J. Shields........................... 7,960(8) *
Daniel I.C. Wang.......................... 2,000(9) *
Mark S. Wrighton.......................... 7,100(10) *
Allen S. Wyett............................ 13,150(11) *
Robert J. Halliday........................ 89,015(12)+ *
Stephen Korn.............................. 81,723(13)+ *
Theodore G. Papastavros................... 151,830(14)+ *
All directors and executive officers
as a group (16 persons)................. 1,320,217(15) 7.8%
</TABLE>
- ---------------
# The number of shares of Common Stock deemed outstanding as of the Record
Date for each individual includes shares of Common Stock outstanding on
such date owned by such individual and all shares of Common Stock subject
to stock options held by such individual exercisable as of the Record Date
or within 60 days after the Record Date.
* 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.
2
<PAGE> 6
(1) Includes 4,000 shares which Mr. Douglas Brown has the right to acquire
pursuant to the exercise of stock options.
(2) Includes 11,000 shares which Mr. William Brown has the right to acquire
pursuant to the exercise of stock options.
(3) Includes 7,500 shares which Mr. de Vitry d'Avaucourt has the right to
acquire pursuant to the exercise of stock options. Another 12,000 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.
(4) Includes 424,000 shares which Mr. Goldstein has the right to acquire
pursuant to the exercise of stock options. Includes beneficial ownership of
4,080 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.
(5) Includes 145,000 shares which Mr. Katz has the right to acquire pursuant to
the exercise of stock options. Does not include 8,400 shares held by
members of Mr. Katz's immediate family, as to which Mr. Katz disclaims
beneficial ownership.
(6) Includes 7,500 shares which Mr. Luick has the right to acquire pursuant to
the exercise of stock options. Includes 400 shares held by a member of Mr.
Luick's immediate family, as to which Mr. Luick disclaims beneficial
ownership. Does not include 2,750 shares held by other members of Mr.
Luick's immediate family, as to which Mr. Luick disclaims beneficial
ownership.
(7) Includes 5,000 shares which Mr. Sloane has the right to acquire pursuant to
the exercise of stock options.
(8) Includes 7,500 shares which Mr. Shields has the right to acquire pursuant
to the exercise of stock options.
(9) Represents shares which Mr. Wang has the right to acquire pursuant to the
exercise of stock options.
(10) Includes 7,000 shares which Mr. Wrighton has the right to acquire pursuant
to the exercise of stock options.
(11) Includes 11,000 shares which Mr. Wyett has the right to acquire pursuant to
the exercise of stock options. Does not include 1,000 shares held by a
member of Mr. Wyett's immediate family, as to which Mr. Wyett disclaims
beneficial ownership.
(12) Includes 87,000 shares which Mr. Halliday has the right to acquire pursuant
to the exercise of stock options. Includes beneficial ownership of 792
shares in the Ionics Section 401(k) Plan for the account of Mr. Halliday.
(13) Includes 80,000 shares which Mr. Korn has the right to acquire pursuant to
the exercise of stock options. Includes beneficial ownership of 500 shares
in the Ionics Section 401(k) Plan for the account of Mr. Korn.
(14) Includes 101,500 shares which Mr. Papastavros has the right to acquire
pursuant to the exercise of stock options. Includes beneficial ownership of
1,570 shares in the Ionics Section 401(k) Plan for the account of Mr.
Papastavros.
3
<PAGE> 7
(15) Assumes exercise of options held by the group for all 911,800 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, 1997.
EXPLANATION OF AGENDA FOR THE MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Corporation has a Board of Directors currently consisting of four Class
I Directors, four Class II Directors and four Class III Directors. Kathleen F.
Feldstein was elected a Class I Director by the Board of Directors on November
14, 1997, filling the vacancy created by the resignation of Samuel A. Goldblith
on March 5, 1997. The Class I, Class II and Class III Directors currently in
office will serve until the annual meeting of stockholders to be held in 1999,
2000 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.
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 four persons
named in the table below as Class III Directors, all of whom presently serve as
Class III Directors. 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 BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL THE NOMINEES
LISTED BELOW. The following table shows, for each nominee, his principal
occupation since January 1, 1993 and present positions with the Corporation,
period of past service as a Director, age on March 1, 1998, 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):
4
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
(SINCE JANUARY 1, 1993),
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 1998 (Class III Directors)
William L. Brown Retired Chairman of the Board, The First May 1991 to date
(76)* National Bank of Boston; Director,
Standex International Corporation
(diversified manufacturing and
marketing), and G.C. Companies, Inc.
(motion picture distribution); Trustee,
Bradley Real Estate Trust
Robert B. Luick Of Counsel, Sullivan & Worcester, 1948 to 1968;
(86) Attorneys (since 1993); prior to 1993, 1971 to date
partner, Sullivan & Worcester; Assistant
Clerk of the Corporation (since prior to
1993)
John J. Shields General Partner, Boston Capital Ventures 1988 to date
(59)#+ (venture capital) since January 2, 1998;
President and Chief Executive Officer,
King's Point Holdings Incorporated
(diversified business information,
technology instrumentation and cranberry
cultivation) April 1993 - December 1997;
President and Chief Executive Officer,
Computervision Corporation (January 1990
-April 1993); Director, Centennial
Technologies, Inc. (manufacturer and
marketer of PC cards for
microelectronics applications)
Allen S. Wyett President, Wyett Consulting Group, Inc. February 1992 to date
(64)# (since 1990)
</TABLE>
- ---------------
* Member of Audit Committee
# Member of Compensation Committee
+ Member of Executive Committee
5
<PAGE> 9
The following table contains similar information about the Class I and
Class II Directors of the Company, whose terms of office do not expire at the
Annual Meeting and who consequently are not nominees for election in 1998:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
(SINCE JANUARY 1, 1993),
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 1999 (Class I Directors)
Douglas R. Brown President and Chief Executive Officer, May 1996
(43)* Advent International Corp. (registered to date
investment advisor) (since January 1,
1996); 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)
Kathleen F. Feldstein President, Economic Studies, Inc. November 1997
(57) (economic consulting firm) since 1987; to date
Director, Bank America Corp., Digital
Equipment Corporation (computer
systems), John Hancock Mutual Life
Insurance Company and Conrail Corp.
Arthur L. Goldstein President and Chief Executive Officer of 1971 to date
(62)+ the Company (since prior to 1993);
Chairman of the Board of the Company
since May 1990; Director, Cabot
Corporation (specialty chemicals
manufacturing and energy products), and
State Street Corporation (bank holding
company) and State Street Bank and Trust
Company
Carl S. Sloane Professor of Business Administration, February 1995
(61)+# Harvard Graduate School of Business to date
Administration (since 1991); Director,
Sapient Corporation (information
technology applications and solutions),
and Rayonier, Inc. (specialty pulps,
timber and wood products)
</TABLE>
- ---------------
* Member of Audit Committee
# Member of Compensation Committee
+ Member of Executive Committee
6
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
(SINCE JANUARY 1, 1993),
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 2000 (Class II Directors)
Arnaud de Vitry d'Avaucourt Engineering consultant; Director, 1964 to date
(71)* Digital Equipment Corporation
(computer systems)
William E. Katz Executive Vice President of the 1961 to date
(73) Company since prior to 1993
Daniel I.C. Wang Institute Professor and Director of May 1997 to date
(62)* Biotechnology Process Engineering
Center, Massachusetts Institute of
Technology; Director, PerSeptive
Biosystems, Inc. (biotechnology
products and services)
Mark S. Wrighton Chancellor, Washington University, November 1993
(48)# St. Louis, Missouri (since July to date
1995); previously Provost and
Professor of Chemistry,
Massachusetts Institute of
Technology; Director, Helix
Technology Corporation (cryogenic
and vacuum technology products), OIS
Optical Imaging Systems, Inc.
(active matrix liquid crystal
display products), and Cabot
Corporation (specialty chemicals
manufacturing and energy products)
</TABLE>
- ---------------
* Member of Audit Committee
# Member of Compensation Committee
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.
Douglas Brown is Chairman, and a Compensation Committee, of which Mr. Wyett is
Chairman. There is no 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 1997, the Board of Directors held four meetings. The Audit Committee
met twice and the Compensation Committee met once. Except for Mr. Samuel A.
Goldblith, who served as a Class I Director until March 5, 1997, and Mr. Douglas
Brown, each director attended 75% or more of the aggregate of (i) the
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<PAGE> 11
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 is
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 nominee(s) 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. AMENDMENT TO THE CORPORATION'S RESTATED ARTICLES OF ORGANIZATION TO
INCREASE AUTHORIZED COMMON STOCK
On February 24, 1998, the Board of Directors voted in favor of adopting,
and directed that there be submitted to the stockholders for their approval, an
amendment to the Corporation's Restated Articles of Organization (the "Charter")
to increase the number of authorized shares of Common Stock, par value $1.00 per
share, from 30 million to 55 million shares. Shares of the Corporation's Common
Stock, including the additional shares proposed for authorization, do not have
preemptive or similar rights.
As of January 1, 1998, there were approximately 16,001,285 shares of Common
Stock issued and outstanding, and approximately 3,608,098 shares reserved for
future issuance pursuant to the Corporation's current option and benefit plans.
If the proposed amendment to the Charter is approved, the Board of Directors
will have the authority to issue approximately 35,390,617 additional shares of
Common Stock without further stockholder approval, except as may be required for
a particular transaction by applicable law, regulatory agencies, or by the rules
of the New York Stock Exchange or any other exchange on which the Corporation's
securities may then be listed. Generally, the New York Stock Exchange currently
requires shareholder approval for any transaction or series of transactions
(other than a public offering for cash) in which Common Stock will be issued
having voting power equal to or in excess of 20% of the voting power outstanding
before the issuance of the Common Stock in the transaction(s), or if the number
of shares of Common Stock to be issued is or will be equal to or more than 20%
of the number of shares of Common Stock outstanding before the issuance. The
additional shares could be used for issuance for the potential corporate
purposes described below, including in connection with the Corporation's Renewed
Rights Plan also described below.
The additional shares of authorized Common Stock may be used for such
corporate purposes as may be determined by the Board of Directors from time to
time to be necessary or desirable. These purposes may include, without
limitation, raising capital through the sale of Common Stock; effecting a stock
split or issuing a stock dividend; acquiring other businesses in exchange for
shares of the Corporation's Common Stock; attracting and retaining valuable
employees by the issuance of additional securities under the Company's various
employee stock plans; and other transactions involving the use of Common Stock.
The Corporation at present has no commitments, agreements or undertakings to
issue any such additional shares.
Renewed Rights Plan
In December 1987, the Corporation's Board of Directors adopted a
Stockholder Rights Plan. On August 19, 1997, the Board of Directors renewed the
Stockholder Rights Plan ("Renewed Rights Plan"). Under the Renewed Rights Plan,
Common Stock Purchase Rights (collectively the "Rights" and individually a
"Right") were distributed as a Rights dividend on December 31, 1997 at the rate
of one Right for each share of Common Stock held as of the close of business on
that date. Neither the initial adoption of the Stockholder Rights Plan nor its
renewal required shareholder approval.
The Renewed Rights Plan is designed to prevent an acquirer from gaining
control of the Corporation without offering a fair price to all of the
Corporation's stockholders. The Renewed Rights Plan was not
8
<PAGE> 12
adopted by the Board in response to any specific offer or threat, but rather is
intended to protect the interests of stockholders in the event the Corporation
is confronted in the future with takeover tactics.
Each Right will entitle holders of Common Stock to buy one share of Common
Stock of the Company (or in certain circumstances to receive cash, property or
other securities of the Company) at an exercise price of $175, subject to
adjustment. The Rights will be exercisable only after 10 business days following
a public announcement that a person or group has acquired more than 15% of the
Common Stock (the "Stock Acquisition Date"), or 10 business days after such
person or group announces a tender or exchange offer which would result in its
ownership of 15% or more of the Common Stock.
If any person or group becomes the beneficial owner of 15% or more of the
Corporation's Common Stock other than pursuant to a tender or exchange offer for
all shares at a price that a majority of the independent directors determines to
be fair and otherwise in the best interest of the Corporation and its
stockholders, then each Right not owned by such person or group will entitle its
holder to purchase, at the then current exercise price of the Right, Common
Stock of the Corporation (or, in certain circumstances as determined by the
Board, including the failure of the stockholders to increase the authorized
Common Stock as proposed herein, a combination of cash, property, Common Stock
or other securities) having a value of twice the Right's exercise price. In
addition, if the Corporation is involved in a merger or other business
combination with another person in which its Common Stock is changed or
exchanged, or sells or transfers more than 50% of its assets or earning power to
another person, each Right that has not previously been exercised will entitle
its holder to purchase, at the then current exercise price of the Right, shares
of Common Stock of such other person having a value of twice the Right's
exercise price.
In general, the Corporation can redeem the Rights at $0.01 per Right at any
time prior to ten days following the Stock Acquisition Date. The Rights will
expire on August 19, 2007, unless earlier redeemed or exchanged.
A copy of the Renewed Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to the Company's Current Report on Form
8-K dated August 27, 1997. A copy of the Renewed Rights Agreement is available
free of charge from the Corporation.
Reasons for Increase in Authorized Common Stock
The Board of Directors believes that the authorized number of shares of
Common Stock should be increased to provide additional shares to be available
for issuance for the potential corporate purposes described above, without
having to incur the delay and expense incident to holding a special meeting of
stockholders to approve an increase in authorized Common Stock at such time, and
for the use in the Renewed Rights Plan if required. Although there is no
specific number of shares designated for use in the Renewed Rights Plan, a
larger number of authorized but unissued shares of Common Stock available for
the stockholders to purchase upon exercise of the Rights than is currently
available increases the Board of Director's flexibility in administering the
Renewed Rights Plan. The Board of Directors considers the authorization of
additional shares of Common Stock advisable for this reason but more importantly
to ensure the prompt availability of sufficient shares for issuance for other
corporate purposes should needs or opportunities arise. The Board of Directors
cannot predict the timing, magnitude or purpose of any future issuance of such
shares.
Anti-takeover Considerations
If the proposed amendment to the Charter is approved, the Board of
Directors will have the authority to issue approximately 35,390,617 additional
shares of Common Stock without further stockholder approval (except as may
otherwise be required by law, applicable regulatory agencies or the New York
Stock Exchange
9
<PAGE> 13
or other stock exchanges on which the Corporation's shares are then listed).
Issuance of shares of Common Stock under the Renewed Rights Plan could be used
to make a change in control of the Corporation more difficult or costly by
diluting stock ownership of persons seeking to obtain control of the
Corporation. The Corporation is not aware, however, of any pending or threatened
efforts to obtain control of the Corporation.
The Corporation is subject to the provisions of Chapter 110F of the
Massachusetts General Laws, the so-called Business Combination Statute. Under
Chapter 110F, a Massachusetts corporation with over 200 stockholders, such as
the Corporation, may not engage in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person becomes an interested stockholder, unless (i) the interested
stockholder obtains the approval of the Board of Directors prior to becoming an
interested stockholder, (ii) the interested stockholder acquires 90% of the
outstanding voting stock of the corporation (excluding shares held by certain
affiliates of the corporation) at the time it becomes an interested stockholder,
or (iii) the business combination is approved by both the Board of Directors and
at a meeting of stockholders by the holders of at least two-thirds of the
outstanding voting stock of the corporation (excluding shares held by the
interested stockholder). An "interested stockholder" is a person who, together
with affiliates and associates, owns (or at any time within the prior three
years did own) 5% or more of the outstanding voting stock of the corporation. A
"business combination" includes a merger, a stock or assets sale, and other
transactions resulting in a financial benefit to the stockholder.
On April 1990, Massachusetts enacted Chapter 156B sec. 50A of the
Massachusetts General Laws which, in general, requires that publicly held
Massachusetts corporations have a classified board of directors consisting of
three classes as nearly equal in size as possible. Once a corporation is subject
to the classified board provisions of this statute, directors may be removed by
a majority vote of the stockholders only for cause. This statute provides that a
corporation may elect to be exempt from the classified board provisions by a
vote of its directors. By vote of the Board of Directors, the Corporation did
not elect to be exempt from the classified board provisions of this statute.
Certain provisions of the Corporation's By-Laws may also act to delay,
defer or prevent changes in control or management of the Corporation. Special
meetings of the stockholders of the Corporation may be called by the President
or majority of the Board of Directors or by stockholders; if called by
stockholders, the call must be made by holders of 100% in interest of the
capital stock entitled to vote at the meeting. In addition, under amendments to
Articles V and VIII of the By-Laws adopted by the Board of Directors on November
14, 1997, and described on page 19 of this Proxy Statement, a stockholder must
give the Corporation advance notice and certain types of information in order
for the stockholder to bring a matter for action at a meeting of stockholders,
or to nominate a candidate for director at an annual meeting.
Any or all of the Corporation's ability to issue a large number of shares
of Common Stock without further stockholder approval, the provisions of the
Massachusetts General Laws and the By-Laws of the Corporation described above,
and the Renewed Rights Plan may have the effect of delaying, deferring or
preventing changes in control or management of the Corporation.
Approval of Amendment
Approval of the proposed amendment would require the affirmative vote of a
majority of the outstanding shares of Common Stock of the Corporation, or
[ ] shares, whether voting in person or by proxy at the Annual Meeting of
Stockholders. If the stockholders do not approve the amendment to the
Corporation's Restated Articles of Organization, the Renewed Rights Plan will
remain in full force and effect. If stockholder authorization is granted, the
Corporation will promptly file Articles of Amendment to the Corporation's
Restated Articles of Organization to effect the increase in authorized shares.
Upon such filing, all stockholders of the Corporation will be bound by the
amendment, whether or not they voted to approve it.
10
<PAGE> 14
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE AMENDMENT TO THE CORPORATION'S RESTATED ARTICLES OF ORGANIZATION.
PROPOSAL 3. SELECTION OF AN AUDITOR
The Board of Directors proposes that the firm of Coopers & Lybrand L.L.P.,
independent certified public accountants, be appointed to serve as auditors for
the fiscal year ending December 31, 1998. The ratification of this selection is
not required under the laws of Massachusetts, where the Corporation is
incorporated, but 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION
OF THIS SELECTION.
11
<PAGE> 15
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides summary information concerning the annual and
long-term compensation paid to or earned by the Company's Chief Executive
Officer and each of the four other most highly compensated executive officers of
the Company during the fiscal years ended December 31, 1997, 1996 and 1995 (the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<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($)(1) BONUS($) ($) (#)(2) ($)
------------------ ---- ------------ -------- ---------- ------------ ---
<S> <C> <C> <C> <C> <C> <C>
Arthur L. Goldstein...... 1997 509,600 120,000 0 0 43,881
Chairman of the Board, 1996 459,600 250,000 0 150,000 39,154
President and Chief 1995 385,850 224,800 0 0 4,500
Executive Officer
William E. Katz.......... 1997 234,100 55,000 0 0 7,624
Executive 1996 218,100 136,400 0 40,000 7,006
Vice President 1995 214,850 120,720 0 0 0
Theodore G.
Papastavros............ 1997 176,600 60,000 0 0 6,705
Vice President, 1996 164,600 76,250 0 40,000 6,286
Strategic Planning; 1995 158,600 70,250 0 0 4,560
Treasurer until
Nov. 1997
Robert J. Halliday....... 1997 176,600 60,000 0 0 2,951
Vice President, Finance 1996 164,600 76,250 0 40,000 2,881
and Chief 1995 155,600 70,250 0 0 2,310
Financial Officer
Stephen Korn............. 1997 176,600 45,000 0 0 2,815
Vice President, General 1996 164,600 76,250 0 40,000 2,757
Counsel and Clerk 1995 158,600 70,250 0 0 1,848
</TABLE>
- ---------------
(1) Salary figures for 1996 and 1995 include amounts ranging from $6,600 to
$9,600 previously categorized as personal benefits.
(2) All options were granted under the Company's 1979 Stock Option Plan, and
each option is exercisable for one share of Common Stock, which may be
purchased upon exercise with either cash or Common Stock. The options have a
duration of ten years and one day, and are immediately exercisable, subject
to the Company's right to repurchase a decreasing proportion of any shares
purchased upon exercise during the first five years from the date of grant
in the event the employee leaves the Company or desires to sell the shares.
Such repurchase rights in the Company terminate in the event 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), and 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 the holder's death.
(3) Comprised of (a) Company matching contributions to officer's account in
Ionics Section 401(k) Plan, available to all employees after an eligibility
period, and (b) for 1997 and 1996, amounts accrued under
12
<PAGE> 16
the Company's Supplemental Executive Retirement Plan, described below
following the Pension Plan Table. Matching 401(k) Plan contributions in 1997
for the Named Executive Officers in their order of presentation were $4,750,
$0, $4,690, $2,375 and $1,900, respectively. Amounts accrued under the
Supplemental Executive Retirement Plan for the Named Executive Officers in
1997 were $39,131, $7,624, $2,015, $576 and $915, respectively. Employees
may elect to contribute to the Ionics Section 401(k) 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 seven 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.
STOCK OPTION GRANTS
No stock option grants were made to the Named Executive Officers in 1997.
STOCK OPTION EXERCISES
No stock options were exercised by any of the Named Executive Officers in
1997.
PENSION PLAN
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 (the
"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.
13
<PAGE> 17
PENSION PLAN TABLE
(ESTIMATED ANNUAL BENEFITS
FOR YEARS OF CREDITED
SERVICE INDICATED (1))
<TABLE>
<CAPTION>
BASE SALARY AT
RETIREMENT DATE 5 10 15 20 25 30 35 40
- --------------- - -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 50,000 ............ 2,841 5,080 7,054 9,027 11,000 12,974 14,947 16,921
75,000 ............ 4,262 7,645 10,729 13,813 16,897 19,981 23,064 26,148
100,000 ............ 5,682 10,210 14,404 18,598 22,793 26,987 31,181 35,376
125,000 ............ 7,103 12,775 18,080 23,384 28,689 33,994 39,299 44,603
150,000 ............ 8,524 15,340 21,755 28,170 34,585 41,001 47,416 53,831
175,000 ............ 9,425 17,385 24,911 32,436 39,962 47,488 55,013 62,539
200,000 ............ 9,682 18,537 27,157 35,793 44,429 53,065 61,701 70,337
225,000 ............ 9,939 19,907 27,953 37,081 46,208 55,336 64,463 73,591
250,000 ............ 10,196 21,277 29,996 38,449 46,902 55,355 64,463 73,591
275,000 ............ 10,453 22,647 32,263 41,586 50,909 60,232 69,555 78,878
300,000 ............ 10,573 23,694 34,206 44,399 54,592 64,786 74,979 85,172
325,000 ............ 10,573 23,777 35,185 46,248 57,312 68,375 79,438 90,502
350,000 ............ 10,573 23,777 35,838 47,771 59,705 71,638 83,571 95,505
375,000 ............ 10,573 23,777 36,030 48,282 60,535 72,787 85,040 97,292
400,000 ............ 10,573 23,777 36,030 48,282 60,535 72,787 85,040 97,292
</TABLE>
- ---------------
(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 (effective January 1, 1997,
this number was adjusted to $160,000).
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 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 benefits at normal retirement age (65): Mr. Goldstein, 37.6
years, $85,895; Mr. Katz, 48.4 years, $53,600; Mr. Papastavros, 41.2 years,
$61,336; Mr. Halliday, 7.1 years, $53,125; and Mr. Korn, 8.3 years, $39,221.
In 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 the maximum pay upon which retirement benefits may be accrued in
any year to accrue retirement benefits on Base Salary in excess of that amount,
equivalent to the benefits that would have been accrued under the Retirement
Plan if Base Salary levels over that amount could
14
<PAGE> 18
be taken into account in calculating benefits under that Plan. The SERP is
administered by the Compensation Committee of the Board of Directors.
STOCK PLANS
The Corporation currently has four stock ownership plans: the 1979 Stock
Option Plan; the 1997 Stock Incentive Plan; the 1994 Restricted Stock Plan; and
the 1986 Stock Option Plan for Non-Employee Directors. No new stock options will
be granted under the 1979 plan, under which options for 1,831,444 shares were
outstanding as of December 31, 1997.
CHANGE IN CONTROL SEVERANCE AGREEMENTS
The Corporation has entered into Employee Retention Agreements (the
"Agreement(s)") with each of its six current executive officers and with six
other officers of the Corporation or its subsidiaries. The Agreements have an
initial term expiring on December 31, 1999, and are automatically extended on an
annual basis unless the Company provides at least three months' notice that the
Agreements will not be extended. Each Agreement provides for severance benefits
if the employment of the employee is terminated by the Company (other than for
Cause, as defined in the Agreement, or by reason of his death or disability) or
by the employee for Good Reason (as defined in the Agreement) within 24 months
after a Change in Control (as defined in the Agreement). Each Agreement provides
that, in the event of a Potential Change in Control (as defined in the
Agreement), the employee may not voluntarily resign as an employee, subject to
certain conditions, for at least six months after the occurrence of such
Potential Change in Control.
The Agreements provide for the following severance benefits: (i) a lump-sum
payment equal to 200% (299% in the case of Mr. Goldstein) of the sum of (x) the
employee's average annual base salary in the year of his termination and the
prior two years plus (y) the average of the cash bonuses paid or awarded to him
in respect of the three fiscal years preceding his termination; and (ii) the
continuation of life, disability, dental, and group health insurance benefits
for a period of 24 months without charge to the employee. To the extent that
payments to the employee pursuant to the Agreement (together with any other
payments or benefits, such as the accelerated vesting of stock options or
restricted stock awards, received by the employee in connection with a Change in
Control) would result in the triggering of the provisions of Sections 280G and
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the
Agreement provides that the payments to be made pursuant to the Agreement will
be reduced to the largest amount that would result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code.
In addition to the foregoing agreements and policies, the Corporation's
stock option and restricted stock plans provide for immediate lapse of the
Corporation's repurchase rights or vesting of all outstanding options and awards
upon any Change in Control (as defined in such plans) of the Corporation.
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 four non-employee directors under Rule 16b-3 of the Securities
Exchange Act of 1934 (the "Exchange Act"), is responsible for reviewing and
establishing the compensation of the executive officers of the Company, and for
authorizing grants under the Company's 1997 Stock Incentive Plan (previously
under the 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, 1997.
15
<PAGE> 19
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 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.
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, 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 on
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.
The Committee, after consideration of management's recommendations, may
elect to utilize restricted stock in lieu of a portion of any cash award that
might be payable under the Managerial Bonus Program. The Committee may also make
discretionary restricted stock awards. In 1995, a portion of the awards due
under the Company's Managerial Bonus Program for 1994 was filled with restricted
stock grants.
Budgeted amounts for EBIT and EBIT return on average capital employed are
established for each business unit, and for the Company as a whole, early in
each fiscal year. At the same time, a corresponding cash bonus target is
established for each executive officer based on 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 on the degree of success
in achieving the qualitative objectives.
The Committee may make discretionary bonus awards in appropriate
circumstances in which an executive officer might merit a bonus based on other
considerations.
The 1997 base salary of Mr. Goldstein, the Company's Chief Executive
Officer, was established by the Committee in February 1997. In considering Mr.
Goldstein's base salary, which was established at $509,600, the Committee
compared it to that paid by peer companies and companies in similar industries.
In doing so, the Committee reviewed on a comparative basis the Company's
multi-year record of continuous improvement in financial results including
record revenues, net income and earnings per share; improvements in
organizational structure; improvement in return on equity; and Mr. Goldstein's
leadership in the development of the Company's business and new products.
Based on the Company's performance in 1997, and in consideration of such
performance in the context of the Company's Managerial Bonus Program discussed
above, the Committee approved bonuses as provided for under the program to Mr.
Goldstein and other executive officers and key employees on February 24, 1998.
Under the terms of the program, Mr. Goldstein was entitled to a bonus of
$120,000.
16
<PAGE> 20
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 stockholder value by creating a greater community of
interest between stockholders and management. Future grants of stock options
will be made under the 1997 Stock Incentive Plan, approved by the stockholders
at the 1997 Annual Meeting. The size of stock option grants made by the
Committee is based on evaluation of a recipient's performance, salary level and
number of options held as a result of prior grants. During the fiscal year ended
December 31, 1997, no options were granted to Mr. Goldstein or the other
executive officers of the Corporation.
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 the 1997
Stock Incentive Plan, will not be subject to the deduction limit if certain
requirements set forth in Section 162(m) are met.
Respectfully submitted by the
Compensation Committee
Allen S. Wyett, Chairman
John J. Shields
Carl S. Sloane
Mark S. Wrighton
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former or current officer or
employee of the Company or any of its subsidiaries. To the Company's knowledge,
there were no relationships involving members of the Committee or other
directors of the Company requiring disclosure in this Proxy Statement.
17
<PAGE> 21
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 stockholders (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, 1992 to December 31, 1997, to the S&P 500
Stock Index and to a "peer group" index over the same period. The "peer group"
index consists of the common stock of Calgon Carbon Corporation, Osmonics, Inc.,
Pall Corporation and United States Filter Corporation. These corporations are
involved in various aspects of the water treatment or liquids separations
businesses. The presentation assumes that the value of an investment in each of
the Company's Common Stock, the S&P 500 Index, and the peer group index was $100
on December 31, 1992, and that any cash dividends paid by any constituent
company (none have been paid by the Company) were reinvested in the same
security.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
IONICS, INCORPORATED, S&P 500 INDEX AND "PEER GROUP" INDEX OF COMPARABLE
COMPANIES
<TABLE>
<CAPTION>
MEASUREMENT PERIOD IONICS,
(FISCAL YEAR COVERED) INCORPORATED S&P 500 PEER GROUP
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 73.11 110.06 89.62
1994 92.45 111.52 88.72
1995 128.18 153.39 128.56
1996 141.44 188.59 142.77
1997 115.29 251.49 124.29
</TABLE>
DIRECTOR COMPENSATION
Each director who is not an employee of the Company receives an annual
retainer of $10,000, plus a fee of $1,000 for each regular meeting of the Board
of Directors attended. In addition, each non-employee Director who is a member
of a Committee also receives a fee of $500 for each meeting of the Committee
attended, 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. A Committee chairman receives a
fee of $1,000 for each Committee meeting attended.
18
<PAGE> 22
Under the Company's 1986 Stock Option Plan for Non-Employee Directors (the
"1986 Plan"), each person who is not an employee of the Company or any of its
subsidiaries and who is elected a Director of the Company is entitled to receive
an option for 2,000 shares of Common Stock upon his initial election (or, if
elected by the Board of Directors, at the time of the next annual meeting of
stockholders), and an option to acquire 2,000 additional shares 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 1999 Annual Meeting is presently expected to be held on
May 6, 1999. Proposals of stockholders intended to be presented at the 1999
Annual Meeting must be received no later than November 29, 1998 for inclusion in
the Corporation's Proxy Statement and proxy for that meeting, except that if the
date of the 1999 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Corporation's directors,
executive officers and holders of more than 10% of the Corporation's Common
Stock (collectively, "Reporting Persons") to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock of the
Corporation. Such persons are required by regulations of the Commission to
furnish the Corporation with copies of all such filings. Based on its review of
the copies of such filings received by it with respect to the fiscal year ended
December 31, 1997 and written representations from certain Reporting Persons,
the Corporation believes that all Reporting Persons complied with all Section
16(a) filing requirements in the fiscal year ended December 31, 1997.
NOTICE OF AMENDMENTS TO BY-LAWS
On November 14, 1997, the Board of Directors amended Articles V, VIII and
XV of the Corporation's By-Laws. A description of the substance of these
amendments follows:
Article V Amendment
The amendment to Article V imposes certain procedural "advance notice"
requirements for a stockholder properly to bring a matter for action to a
meeting of stockholders. For any business brought by a stockholder to be
transacted at a stockholders' meeting (other than with respect to the election
of directors, which is provided for in Article VIII), the stockholder must be a
stockholder of record at the time of giving notice, as described herein, and
continue to be entitled to vote at the time of the meeting. Such notice must be
given to the Clerk of the Corporation not less than 80 nor more than 120 days
prior to the anniversary date of the immediately preceding annual meeting. In
the case of a special meeting of stockholders, or in the event the annual
meeting is called for a date more than 60 days prior to the anniversary date,
the stockholder must give such notice no later than 20 days following the date
on which notice of the meeting date was mailed or publicly disclosed.
Such notice must set forth, as to each matter which the stockholder
proposes to bring before the meeting: a brief description of the business
desired to be brought before the meeting, and the reasons for conducting
19
<PAGE> 23
such business; the name and record address of the stockholder proposing such
business; the class and number of shares of capital stock of the Corporation
held of record, owned beneficially and represented by proxy by such stockholder
as of the record date for the meeting (if such date shall then have been made
publicly available) and as of the date of such notice by the stockholder; and
all other information which would be required to be included in a proxy
statement or other required filings with the Commission, if with respect to any
such item of business, the stockholder were a participant in a solicitation
subject to Regulation 14A (the "Proxy Rules") under the Exchange Act.
Article VIII Amendment
A similar "advance notice" provision has been added as Section 2 of Article
VIII, setting forth procedures for a stockholder to be able to nominate a
candidate for director at an annual meeting of stockholders. For a stockholder
properly to nominate a candidate, the stockholder must be a stockholder of
record at the time of the giving of notice provided for in this section and must
continue to be entitled at the time of the meeting to vote for the election of
directors. The stockholder must submit a notice to the Clerk of the Corporation
not less than 80 nor more than 120 days prior to the anniversary date of the
immediately preceding annual meeting (if the meeting is called for a date more
than 60 days prior to the anniversary date, the notice must be received no later
than the close of business on the 20th day following the day on which notice of
the date of the meeting was mailed or public disclosure of the meeting date was
made, whichever first occurs).
The notice must set forth as to each person the stockholder proposes to
nominate for election or re-election as a director: name, age and business
address; principal occupation or employment; class and number of shares of
capital stock of the Corporation, if any, owned by the person; any other
information regarding the nominee as would be required to be included in a proxy
statement by the Proxy Rules; and the consent of each such nominee to serve as a
director of the Corporation if elected.
The notice must give the following information concerning the stockholder
giving the notice: name and record address; class and number of shares of
capital stock of the Corporation beneficially owned by the stockholder as of the
record date of the meeting (if such date shall then have been made publicly
available) and as of the date of such notice; a representation that the
stockholder intends to appear in person or by proxy at the meeting to nominate
the person(s) specified in the notice; a representation that the stockholder
(and anyone else on whose behalf or in concert with whom such stockholder is
acting) is qualified at the time of giving such notice to have such individual
serve as the nominee of such stockholder (and other parties); a description of
all arrangements or understandings between such stockholder and each nominee and
any other person or persons pursuant to which the nomination(s) are to be made
by such stockholder; and such other information concerning the stockholder as
would be required by the Proxy Rules to be included in a proxy statement.
Article XV Amendment
Article XV was amended to provide that the Treasurer need not be the chief
financial officer of the Corporation.
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.
20
<PAGE> 24
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation. In
addition to soliciting stockholders by mail, certain of the Corporation's
directors, officers and employees, without additional remuneration, may solicit
proxies in person or by telephone or telegraph. Brokers and other custodians,
nominees and fiduciaries will be requested to forward proxy-soliciting material
to the owners of stock held in their names, and the Corporation will reimburse
such brokers and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket costs. Solicitation by directors, officers and employees of the
Corporation may also be made of some stockholders in person or by mail,
telephone or telegraph following the original solicitation. The Corporation may,
if appropriate, retain an independent proxy solicitation firm to assist in
soliciting proxies. If the Corporation does so, it will pay such firm's
customary fees and expenses.
By Order of the Board of Directors
STEPHEN KORN, Clerk
Watertown, Massachusetts
March 28, 1998
21
<PAGE> 25
PRELIMINARY COPY FOR INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
IONICS, INCORPORATED
65 GROVE STREET, WATERTOWN, MASSACHUSETTS 02172
PROXY FOR ANNUAL MEETING TO BE HELD MAY 7, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ARTHUR L. GOLDSTEIN and STEPHEN KORN, and each
of them, as Proxies of the undersigned, each with full power to appoint his
substitute, and hereby authorizes both of them, or any one if only one be
present, to represent and to vote, as designated below, all the shares of the
Common Stock of Ionics, Incorporated held of record by the undersigned or with
respect to which the undersigned is entitled to vote or act, at the Annual
Meeting of Stockholders to be held on May 7, 1998, or at 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 AND 3, WITH DISCRETIONARY AUTHORITY TO VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
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, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR(S) 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> 26
X PLEASE MARK VOTES
- --- AS IN THIS EXAMPLE
- ----------------------
IONICS, INCORPORATED
- ----------------------
RECORD DATE SHARES:
401(K) PLAN SHARES:
1. Election of all four Class III Directors
listed below.
With- For All
For hold Except
------- ------- -------
WILLIAM L. BROWN
ROBERT B. LUICK
JOHN J. SHIELDS ------- ------- -------
ALLEN S. WYETT
NOTE: If you do not wish your shares voted "For"
a particular nominee, mark the "For All
Except" box and strike a line through the
nominee's(s') name(s). Your shares will be
voted for the remaining nominee(s).
For Against Abstain
------- ------- -------
2. Proposal to approve
amendment to Restated
Articles of Organization ------- ------- -------
to increase authorized
common stock from 30
million to 55 million
shares.
------- ------- -------
3. Proposal to ratify the
selection of Coopers & ------- ------- -------
Lybrand L.L.P. as
auditors for fiscal year
ended December 31, 1998.
------- ------- -------
4. To consider and act upon
such other matters as may
properly come before the ------- ------- -------
meeting.
----
Please be sure to sign and date this Proxy. Date Mark box at right if an ---
address change or comment
---- has been noted on the ---
reverse side of this card.
- ------------------------------------------------
Stockholder sign here Co-owner sign here
- ------------------------------------------------
