SCHEDULE 14A INFORMATION
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement [ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
ZYGO CORPORATION
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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.:
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(4) Date Filed:
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<PAGE>
ZYGO CORPORATION
LAUREL BROOK ROAD
MIDDLEFIELD, CONNECTICUT 06455
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 14, 1996
The Annual Meeting of Stockholders of Zygo Corporation will be held at the
Hotel Inter-Continental New York, 111 E. 48th Street, New York, New York, on
November 14, 1996, at 10:00 a.m. local time, for the following purposes:
1. To elect nine directors for the ensuing year.
2. To consider and vote upon a proposal to amend the Company's Amended and
Restated Non-Qualified Stock Option Plan to extend the termination date from
September 3, 1997 to September 3, 2002.
3. To act upon any other matter that may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on September 23, 1996 are
entitled to notice of and to vote at the meeting.
By order of the Board of Directors
Paul Jacobs,
Secretary
October 8, 1996
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
- --------------------------------------------------------------------------------
Please fill in, date, sign, and return your proxy promptly in the enclosed
stamped envelope whether or not you plan to be present at the meeting. You may
still vote in person if you attend the meeting.
<PAGE>
October 8, 1996
ZYGO CORPORATION
LAUREL BROOK ROAD
MIDDLEFIELD, CONNECTICUT 06455
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 14, 1996
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of Common Stock, par value
$.10 per share (the "Common Stock"), of Zygo Corporation (the "Company") in
connection with the solicitation by the Board of Directors of the Company of
proxies for use at the Annual Meeting of Stockholders to be held on November 14,
1996, or at any adjournment thereof, pursuant to the accompanying Notice of
Annual Meeting of Stockholders. The purposes of the meeting and the matters to
be acted upon are set forth in the accompanying Notice of Annual Meeting of
Stockholders. The Board of Directors is not currently aware of any other matters
that will come before the meeting.
Proxies for use at the Annual Meeting are being solicited by the Board of
Directors of the Company. Proxies will be mailed to stockholders on or about
October 8, 1996, and will be solicited chiefly by mail; however, certain
officers, directors, and employees of the Company, none of whom will receive
additional compensation therefor, may solicit proxies by telephone, telegram, or
other personal contact. All solicitation expenses, including costs of preparing,
assembling, and mailing proxy material, will be borne by the Company.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the Annual Meeting of Stockholders and a return
envelope for the proxy are enclosed. Stockholders may revoke the authority
granted by their execution of proxies at any time before their effective
exercise by filing with the Secretary of the Company a written notice of
revocation or a duly executed proxy bearing a later date, or by voting in person
at the meeting. Shares of the Company's Common Stock represented by executed and
unrevoked proxies will be voted in accordance with the choice or instructions
specified thereon. If no specifications are given, the proxies intend to vote
the shares represented thereby to approve Proposals No. 1 and No. 2 as set forth
herein and in the accompanying Notice of Annual Meeting of Stockholders and in
accordance with their best judgment on any other matters which may properly come
before the meeting.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record at the close of business on September 23, 1996
are entitled to notice of and to vote at the Annual Meeting or any and all
adjournments thereof. On September 23, 1996, there were 4,933,670 shares of
Common Stock outstanding; each such share is entitled to one vote on each of the
matters to be presented at the Annual Meeting. The holders of a majority of the
outstanding shares of Common Stock present in person or by proxy and entitled to
vote will constitute a quorum at the Annual Meeting.
PROPOSAL NO. 1 - ELECTION OF BOARD OF DIRECTORS
Nine directors (constituting the entire Board) are to be elected at the
Annual Meeting. The enclosed proxy, unless otherwise specified, will be voted to
elect as directors the nine nominees named below, all of whom are presently
directors of the Company. Each director elected will hold office until the next
Annual Meeting of Stockholders. The affirmative vote of a plurality of the
shares of Common Stock voting in person or by proxy shall be required for the
election of the directors. Shares of Common Stock held by stockholders present
in person at the Annual Meeting that
<PAGE>
are not voted for a nominee or shares held by stockholders represented at the
Annual Meeting by proxy from which authority to vote for a nominee has been
properly withheld (including broker non-votes) will not affect the election of
the nominees receiving the plurality of votes.
Each proxy received will be voted "FOR" the election of the nominees named
below unless otherwise specified in the proxy.
All nominees have consented to serve as directors. If a nominee should not
be available for election as contemplated, the shares represented by the proxy
will be voted for the person, if any, who is designated by the Board of
Directors to replace the nominee. The Board of Directors has no reason to
believe that any of the nominees will be unable to serve.
<TABLE>
<CAPTION>
Common Stock deemed
beneficially owned at
August 31, 1996 (a)
------------------------
Principal occupation
during past five years Number % of
and certain other Director of Common
Name directorships Age since shares Stock
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Paul F. Forman Chairman from June 1970 and, from June 1970 to 62 1970 227,860(b) 4.6%
August 1993, Chief Executive Officer and from June 1970
to November 1993, Treasurer; from June 1991 to February
1992, acting President; and, from February 1992 to
November 1993, Secretary of the Company.
Michael R. Corboy President and Chief Executive Officer of Corboy 66 1993 21,000(c) .4%
Investment Company since January 1992; Chairman and
Chief Executive Officer of Amtech Corporation from
December 1987 until December 1991; Director of
Interphase Corporation and Wyle Electronics.
Seymour E.Liebman Executive Vice President and General Counsel of Canon 47 1993 15,000(d) .3%
U.S.A., Inc. since February 1996; from January 1992 until
1966, Senior Vice President Finance and General Counsel
of Canon U.S.A., Inc.; from January 1990 until December
1991, Vice President Finance and General Counsel of
Canon U.S.A., Inc.
Robert G. McKelvey Chairman and President of George McKelvey Co., Inc. 59 1983 45,535(e) .9%
(Investment Advisor and Securities Broker-Dealer) for
more than the last five years.
-2-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Common Stock deemed
beneficially owned at
August 31, 1996 (a)
------------------------
Principal occupation
during past five years Number % of
and certain other Director of Common
Name directorships Age since shares Stock
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Paul W. Murrill Professional Engineer for more than the last five 62 1993 21,750(f) .4%
years; Director of Entergy Corporation, Tidewater,
Inc., First Mississippi Corporation, Piccadilly
Cafeterias, Inc., Howell Corporation, various
foundations and public service organizations.
John R. Rockwell Retired senior executive since 1990; Director of 68 1996 3,500 .1%
Advo, Inc., Tom's of Maine Inc. and Forum Corporation.
Robert B. Taylor Vice President and Treasurer of Wesleyan 49 1988 17,250(g) .3%
University since April 1985; Director of Middlesex
Mutual Assurance Co. and Farmers and Mechanics Bank.
Gary K. Willis President and Chief Executive Officer of the Company 51 1992 183,375(h) 3.7%
since August 1993; from February 1992 until August 1993,
Chief Operating Officer of the Company; from October
1990 until January 1992, independent consultant.
Carl A. Zanoni Vice President, Research, Development and Engineering 55 1970 266,550(i) 5.4%
of the Company since April 1992; from February 1989
until March 1992, Vice President, Research and
Development, Chief Scientist and, from June 1970 until
February 1989, Vice President, Engineering of the
Company.
All directors and
officers as a
group, including
those named
above (12 in all) 867,049(j) 16.5%
</TABLE>
(Footnotes on following page)
3
<PAGE>
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(a) The persons named and all directors and officers as a group in the
table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, except for shares
which can be acquired by the exercise of stock options.
(b) Includes options to purchase 35,250 shares of Common Stock which are
exercisable within 60 days.
(c) Consists of options to purchase 21,000 shares of Common Stock which
are exercisable within 60 days.
(d) Consists of options to purchase 15,000 shares of Common Stock which
are exercisable within 60 days. Does not include 605,205 shares owned
by Canon Inc.
(e) Includes options to purchase 15,000 of Common Stock which are
exercisable within 60 days.
(f) Includes options to purchase 21,000 shares of Common Stock which are
exercisable within 60 days.
(g) Includes options to purchase 15,000 shares of Common Stock which are
exercisable within 60 days. Does not include 261,905 shares owned by
Wesleyan University.
(h) Includes options to purchase 84,375 shares of Common Stock which are
exercisable within 60 days.
(i) Includes options to purchase 46,500 shares of Common Stock which are
exercisable within 60 days.
(j) Includes options to purchase 315,526 shares of Common Stock which are
exercisable within 60 days.
Eight meetings of the Board of Directors were held in fiscal 1996.
The Board of Directors has an Audit Committee, Compensation and Stock
Option Committee, and Nominating Committee to assist it in the discharge of its
responsibilities.
The Audit Committee reviews the scope, plan, and results of the annual
audit, any non-audit services provided by the independent public accountants,
the procedures and policies with respect to internal accounting controls, and
recommends the firm to be employed as independent auditors. Three meetings of
the Audit Committee were held in fiscal 1996. Messrs. Murrill and Taylor are the
members of the Audit Committee.
The Compensation and Stock Option Commettee, which was formed in November
1995 from the combination of the Company's Compensation Committee and Amended
and Restated Non-Qualified Stock Option Plan Committee (the "Non-Qualified Plan
Committee"), determines or recommends the compensation of certain executive
officers and key employees, is empowered to grant stock options to key employees
and directors of the Company under the Company's Amended and Restated
Non-Qualified Stock Option Plan (the "Non-Qualified Plan"), and recommends to
the Board amendments to existing employee benefit plans and adoption of any new
benefit plans. Messrs. Corboy, Liebman, and McKelvey are the members of the
Compensation and Stock Option Committee. The Compensation and Stock Option
Committee acted three times by unanimous written consent during fiscal 1996.
Prior to the formation of the Compensation and Stock Option Committee, Messrs.
Corboy, Liebman, and McKelvey were the members of the Compensation Committee and
Messrs. Liebman and McKelvey were the members of the Non-Qualified Plan
Committee. The Compensation Committee met twice and the Non-Qualified Plan
Committee met once during fiscal 1996.
-4-
<PAGE>
The Nominating Committee considers candidates (and potential candidates)
for the office of director of the Company, who are brought to its attention from
whatever source, and recommends to the full Board the names of those persons,
willing to serve, whom they believe it will be in the Company's overall best
interest to have fill any available vacancy or vacancies. Stockholders who wish
to propose director candidates for consideration by the Nominating Committee may
do so by writing to the Company's Secretary, giving the candidate's name,
biographical data and qualifications. Messrs. Willis, Liebman and McKelvey are
the members of the Nominating Committee. The Nominating Committee met once
during fiscal 1996.
Each director attended at least 75% of the total number of meetings of the
Board and Committees on which he served.
Effective August 1994, pursuant to the Zygo Corporation Non-Employee
Director Stock Option Plan (the "Non-Employee Director Plan"), each director who
is not a full-time employee of, or consultant to, the Company receives an option
to purchase 37,500 shares of Common Stock, vesting at 7,500 shares per year,
exercisable at the fair market value of a share of Common Stock on the date of
grant. Pursuant to the Non-Employee Director Plan, Mr. Rockwell was granted in
May 1996 an option to purchase 37,500 shares of Common Stock. The Non-Employee
Director Plan further provides that an option to purchase an additional 37,500
shares of Common Stock automatically will be granted to each director who was
not an employee of, or consultant to, the Company (a "Non-Employee Director") on
the fifth anniversary of the date on which an option was previously granted to
the Non-Employee Director, provided that he has continuously served as a
director of the Company through such fifth anniversary. Until November 1993,
each Non-Employee Director who was a designee of either Canon Inc. ("Canon") or
Wesleyan University ("Wesleyan") pursuant to the terms of a stockholders'
agreement received a yearly fee of $5,500 (subsequently increased to $13,000
effective December 1, 1993) plus $500 for each Board of Directors' meeting
attended. Prior to August 1994, each other Non-Employee Director received an
alternative package of, at the option of the director, (i) a yearly fee of
$13,000 plus $500 for each Board of Directors' meeting attended, (ii) an option
to purchase 30,000 shares of Common Stock, vesting at 6,000 shares per year,
exercisable at the fair market value of a share of Common Stock on the date of
grant, or (iii) a combination of these two alternatives. Each Non-Employee
Director also is and was reimbursed for his out-of-pocket expenses. No
additional fees are or were paid for committee participation or special
assignments. Effective July 1, 1994, Paul F. Forman receives an annual retainer
of $20,000 for his participation on the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1996, the Compensation Committee
consisted of Messrs. Seymour E. Liebman, Michael R. Corboy, and Robert G.
McKelvey. Mr. Liebman is the Executive Vice President and General Counsel of
Canon U.S.A., Inc., and affiliate of Canon. Canon Sales Co., Inc., a subsidiary
of Canon, serves as the exclusive distributor of the Company's products in
Japan. Sales to Canon and Canon Sales Co., Inc. aggregated approximately
$19,761,000 for fiscal 1996. Selling prices were based, generally, on the normal
terms given to domestic distributors. In addition, the Company and Canon have
entered into agreements providing for confidential exchanges of certain
technology. See "Certain Relationships and Related Transactions" later in this
Proxy Statement.
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<PAGE>
EXECUTIVE COMPENSATION
The following table contains information concerning the cash compensation
paid or to be paid by the Company, as well as certain other compensation paid or
accrued, during the fiscal years indicated, to the Chief Executive Officer of
the Company during the 1996 fiscal year and the other most highly compensated
executive officers of the Company ("named executives") whose cash compensation
exceeded $100,000 for the year ended June 30, 1996 for services in all
capacities to the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
-------------------------------------------------------- -------------------------------
Name Other (1) All(2)(3)
& Principal Position Annual Number of Other
Held During Fiscal 1996 Year Salary Bonus Compensation Stock Options Compensation
- ----------------------- ---- ------ ----- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gary K. Willis 1996 $201,253 $79,950 $10,800 -- $27,592
President and Chief 1995 $186,923 $45,600 $10,800 45,000 $5,900
Executive Officer, Director 1994 $175,673 $35,000 $7,200 15,000 $4,680
William H. Bacon (4) 1996 $83,908 $21,840 $4,985 -- $15,597
Vice President, Director of 1995 $78,591 $14,256 -- 15,000 $2,882
Quality Control 1994 $70,161 $7,560 -- 2,250 $2,065
Mark J. Bonney 1996 $146,257 $39,000 $10,800 -- $26,500
Vice President, Finance and 1995 $133,742 $32,400 $10,800 30,000 $4,573
Administration, Treasurer, 1994 $126,946 $25,600 $7,200 10,500 $2,579
Chief Financial Officer
Robert A. Smythe (4) 1996 $107,983 $28,600 $4,985 -- $19,830
Vice President, Director of 1995 $100,769 $15,364 -- 15,000 $2,958
Sales and Marketing 1994 $93,246 $14,385 -- 5,250 $2,420
Carl A. Zanoni 1996 $161,444 $42,575 $10,800 -- $27,274
Vice President, Research, 1995 $153,317 $37,080 $10,800 30,000 $5,816
Development and 1994 $146,263 $29,500 $7,200 10,500 $4,300
Engineering, Director
</TABLE>
- -------------------
(1) Amounts paid as automobile allowance.
(2) Includes aggregate amounts of $25,792, $14,589, $24,745, $18,534 and
$25,474 in fiscal 1996, $4,100, $2,489, $2,974, $2,454 and $4,023 in
fiscal 1995, and $2,808, $1,714, $1,000, $1,954 and $2,481 in fiscal 1994
paid or contributed on behalf of Messrs. Willis, Bacon, Bonney, Smythe and
Zanoni, respectively, under the Company's Defined Contribution Profit
Sharing Plan. Contributions made under the profit sharing component of the
Plan are determined annually by the Board of Directors, based on each
employee's compensation, and vest at the rate of 20% per year of service to
the Company. Employees are fully vested in contributions made in the
discretion of the Company under the 401(k) component of the Plan.
(3) Includes $1,800, $1,008, $1,755, $1,296 and $1,800 in fiscal 1996,
$1,800, $393, $1,599, $504 and $1,793 in fiscal 1995, and $1,872, $351,
$1,579, $466 and $1,819 in fiscal 1994 for Messrs. Willis, Bacon, Bonney,
Smythe and Zanoni, respectively, representing the value of life insurance
provided to the named executives.
(4) Messrs. Bacon and Smythe became officers of the Company on January 15,
1996.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant any options to the named executives during the
fiscal year ended June 30, 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Value of Unexercised
Unexercised Options at In-the-Money Options
Shares June 30, 1996 at June 30, 1996
Acquired Value -------------------------------------------------------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gary K. Willis 0 0 69,375 43,125 $2,713,613 $1,714,538
William H. Bacon 1,500 $38,501 9,938 11,812 $ 400,707 $ 469,623
Mark J. Bonney 0 0 26,250 36,750 $1,052,483 $1,466,843
Robert A. Smythe 0 0 7,276 15,186 $ 290,497 $ 603,867
Carl A. Zanoni 3,750 $91,095 36,375 29,625 $1,467,848 $1,177,913
</TABLE>
COMMITTEE REPORT TO STOCKHOLDERS
The report of the Compensation and Stock Option Committee shall not be
deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933,
as amended (the "Securities Act"), or under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The Compensation and Stock Option Committee is comprised of three
non-employee directors. As members of the Compensation Committee, it is our
responsibility to determine the most effective total executive compensation
strategy based on the Company's business and consistent with stockholders'
interests. Our specific duties entail reviewing the Company's compensation
practices and determining or recommending compensation for certain executive
officers and key employees.
COMPENSATION PHILOSOPHY
The Company believes that a strong, explicit link should exist between
executive compensation and the value delivered to stockholders. This belief has
been adhered to by developing both short-term and long-term incentive pay
programs which provide competitive compensation and mirror Company performance.
The overall objectives of this strategy are to attract and retain the best
possible executive talent, to motivate these executives to achieve the goals
inherent in the Company's strategy, to link executive and stockholder interests
through equity-based plans and to provide a compensation package that recognizes
individual contributions as well as overall business results.
Pay Mix and Measurement. The Company's executive compensation is based on
three components, base salary, short-term incentives, and long-term incentives,
each of which is intended to serve the overall compensation philosophy. In
awarding salary increases and bonuses, the Compensation and Stock Option
Committee did not relate the various elements of corporate performance to each
element of executive compensation. Rather, the Compensation and Stock Option
Committee considered whether the compensation package as a whole adequately
compensated each executive for the Company's performance and an executive's
contribution to such performance.
Base Salary. Base salaries for executive officers are initially determined
by evaluating the responsibilities of the position held and the experience of
the individual, and by reference to the competitive marketplace for executive
talent, including a comparison to base salaries for comparable positions at
other companies. Annual salary adjustments are determined by evaluating overall
Company performance and the performance of each executive officer taking into
account new responsibilities. Individual performance ratings take into account
such factors as achievement of the operating plan and attainment of specific
individual objectives.
-7-
<PAGE>
Short-Term Incentives. At the start of each fiscal year, target levels of
financial performance are established by senior management of the Company during
the budgeting process and approved by the Board of Directors. An incentive award
opportunity is established for each employee based on the employee's level of
responsibility, potential contribution, the success of the Company, and
competitive considerations.
The employee's actual award is determined at the end of the fiscal year
based on the Company's achievement of its pretax profit and revenue goals and an
assessment of the employee's individual performance, including contributions in
a number of specific areas, such as quality, customer satisfaction, innovation,
and efficiency. All awards made to senior executives are approved by the
Compensation and Stock Option Committee.
Long-Term Incentives. Stock options are granted from time to time to reward
key employees' contributions. The grant of options is based primarily on a key
employee's potential contribution to the Company's growth and profitability.
Options are granted at the prevailing market value of the Company's Common Stock
and will only have value if the Company's stock price increases. Generally,
grants of options vest in equal amounts over four or five years and the
individual must continue to be employed by the Company for such options to vest.
1996 COMPENSATION TO CHIEF EXECUTIVE OFFICER
The compensation of Mr. Willis, the Chief Executive Officer of Zygo, has
been determined and adjusted on the same basis as used for all executives as
described above. During fiscal 1996, Mr. Willis received salary payments
totalling $201,253, a 7.7% increase over that received in fiscal 1995. Mr.
Willis also earned a $79,950 bonus under Zygo's Management Incentive Plan for
attaining certain predetermined financial and nonfinancial objectives in fiscal
1996. During fiscal 1996, Mr. Willis was not granted any options to purchase
shares of the Company's Common Stock in accordance with the decision of the then
Non-Qualified Plan Committee in fiscal 1995, in order to incentivize management
to aggressively pursue increased shareholder value, to grant options to senior
management, including Mr. Willis, for an increased number of shares of Common
Stock and to forgo option grants to these individuals for the next two years.
The Compensation and Stock Option Committee believes that linking executive
compensation to corporate performance results in a better alignment of
compensation with corporate business goals and stockholder value. As performance
goals are met or exceeded, resulting in increased value to stockholders,
executives are rewarded commensurately. The Compensation and Stock Option
Committee believes that compensation levels during 1996 adequately reflect the
Company's compensation goals and policies.
COMPENSATION AND STOCK OPTION COMMITTEE
Michael R. Corboy
Seymour E. Liebman
Robert G. McKelvey
-8-
<PAGE>
PERFORMANCE GRAPH
The Stock Price Performance graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act or under the Exchange Act,
except to the extent the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
The graph below compares cumulative total return of the Company's Common
Stock with the cumulative total return of (i) the Nasdaq National Market - U.S.
Index and (ii) a group of peer companies weighted to reflect differing market
capitalizations. Companies in the peer group are ADE Corp., Cyberoptics Corp.,
Galileo Electro-Optics Corp., KLA Instruments Corp., Medar, Inc., Nanometrics,
Inc., Optical Coating Laboratory, Inc., Perceptron, Inc., Robotic Vision
Systems, Inc. and Tinsley Laboratories, Inc.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG
ZYGO CORPORATION, THE NASDAQ STOCK MARKET--US INDEX AND A PEER GROUP
[PERFORMANCE GRAPH]
Cumulative Total Return
---------------------------------------------
6/91 6/92 6/93 6/94 6/95 6/96
---- ---- ---- ---- ---- ----
ZYGO CORP 100 70 83 79 409 795
PEER GROUP 100 89 129 229 466 414
NASDAQ STOCK
MARKET--US 100 120 151 153 204 261
* $100 INVESTED ON 06/30/91 IN STOCK OR INDEX
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
-9-
<PAGE>
OTHER AGREEMENTS AND OTHER MATTERS
In March 1995, Mr. Willis's employment agreement with the Company was
amended, effective October 1994, to increase the annual salary payable to Mr.
Willis to $190,000 from $175,000, and to increase the monthly automobile
allowance from $600 to $900. In March 1996, Mark J. Bonney's employment
agreement was amended to increase his annual salary to $150,000 from $135,000,
and to increase the monthly automobile allowance from $600 to $900. The amended
agreements further automatically extend the term of the employment agreements
for successive one year periods, unless either the Company or Mr. Willis, or the
Company or Mr. Bonney, as applicable, gives the other notice of termination at
least 30 days prior to the end of that contract year, and provides for certain
severance payments.
The amended employment agreements grant to each of Messrs. Willis and
Bonney a severance package to cover them in the event the Company terminates his
employment (other than for justifiable cause, disability, or death) with the
Company. Under the package, Messrs. Willis and Bonney would be provided with
their base salary from the time of their involuntary termination to 12 months
and 6 months thereafter, respectively. In addition, in the event they resign
within 90 days of a "Change in Control," as defined, of the Company, the
amendments provide for the continued payment of their respective salaries for a
one-year period. The amended severance coverage for Mr. Willis is in addition to
(i) the automatic vesting of all stock options to purchase shares of the
Company's Common Stock then held by Mr. Willis and (ii) the continuation, for a
period of the lesser of three years or until covered by another plan, of all
existing health insurance, dental coverage, life insurance, AD&D and long-term
disability coverage then in effect for Mr. Willis (provided that during the
applicable period in which benefits are being paid by the Company, Mr. Willis
agrees to maintain a consulting relationship with the Company which will not
interfere with other obligations of Mr. Willis), previously provided for in the
event of a Change in Control of the Company. The amended severance coverage for
Mr. Bonney is in addition to the continuation, for a period of the lesser of one
year or until covered by another plan, of all existing health insurance, dental
coverage, life insurance, AD&D and long term disability coverage in effect for
Mr. Bonney at the time of termination (or the funds necessary to obtain
reasonably equivalent coverage to the extent the Company's benefit programs do
not provide for such continuation of benefits), previously provided for in the
event of a Change in Control of the Company.
In August 1993, the Company entered into a Services Agreement with each of
Paul F. Forman and Sol F. Laufer, a former Vice President of the Company and a
beneficial owner of greater than five percent of the Company's Common Stock,
providing for the retention of Mr. Forman or Mr. Laufer, respectively, as an
executive officer of the Company through the end of the 1994 fiscal year and
thereafter as a consultant to the Company for an additional five years, in the
case of Mr. Forman, and an additional four years in the case of Mr. Laufer.
Pursuant to his Agreement, Mr. Forman received salary payments of $148,271 for
the year of employment and a one-time payment of $149,500 upon his termination
from active employment, and receives a $20,000 retainer for board service for
each of the five years of his consultancy plus 80%, 60%, 40%, and 20% of his
salary at June 30, 1994, for each of the first through fourth years of his
consultancy, respectively. Pursuant to his Agreement, Mr. Laufer received salary
payments of $133,586 for the year of employment and a one-time payment of
$135,000 upon his termination of employment, and receives payments of 80%, 60%,
40%, and 20% of his salary at June 30, 1994, for each of the four years of his
consultancy, respectively. Each of the Services Agreements further provided that
all outstanding unvested stock options from the Company to Mr. Forman or Mr.
Laufer, as the case may be, vested effective at the conclusion of the fiscal
year ended June 30, 1994 (options for 20,475 shares of Common Stock in the case
of Mr. Forman and 24,487 shares of Common Stock in the case of Mr. Laufer, as of
June 30, 1994). The Agreements are terminable (with all payment obligations
thereunder terminating) by Mr. Forman or Mr. Laufer, as the case may be, at any
time, and by the Company upon the death or disability of Mr. Forman or Mr.
Laufer or for justifiable cause (as defined in the Agreements); except that if
an Agreement terminates as a result of the death or disability of Mr. Forman or
Mr. Laufer, he (or his estate) will be entitled to receive the lesser of twice
his June 30, 1994, salary or the aggregate remaining compensation payments
otherwise required to be made under the Agreement.
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<PAGE>
The Services Agreements, which contain certain restrictions on soliciting
employees and others and are coexistent with certain non-competition agreements
between Mr. Forman or Mr. Laufer and the Company, replace the Confidentiality
and Non-Competition Agreements, dated October 25, 1983, entered into between Mr.
Forman and Mr. Laufer and the Company. Pursuant to the Confidentiality and Non-
Competition Agreements, upon the involuntary termination of his employment by
the Company without cause, Mr. Forman or Mr. Laufer was entitled to receive, for
each of the five years from the termination of his employment, an amount equal
to the highest annual compensation (salary plus bonus) received by him at any
time during that termination year or any of the three years immediately
preceding his termination, increasing each of the five years by 12% or, if
greater, the consumer price index increase for that year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Canon Sales Co., Inc., a subsidiary of Canon, serves as the exclusive
distributor of the Company's products in Japan. (See "Compensation Committee
Interlocks and Insider Participation" earlier in this Proxy Statement.) Canon
does not manufacture or sell interferometers which compete with the Company's
products.
On November 30, 1993, in connection with the termination of a certain
Stockholders' Agreement, Canon, Wesleyan University, Paul F. Forman, Carl A.
Zanoni, Sol F. Laufer (collectively, the "Principal Stockholders"), and the
Company entered into a Registration Rights Agreement. In general, the
Registration Rights Agreement grants to each of the Principal Stockholders the
right, until November 30, 1998, to have his or its shares of Common Stock
included in any registered public offering of the Company's securities. Pursuant
to a public offering of the Company's Common Stock in December 1995, the
Principal Stockholders sold an aggregate of 455,000 shares of Common Stock.
PRINCIPAL STOCKHOLDERS
The only stockholders who, as of August 31, 1996, have advised the Company
that they beneficially own (because of sole or shared voting or investment
power) more than 5% of the Company's outstanding Common Stock are set forth
below. Such beneficial owners have sole voting and investment power with respect
to the shares of Common Stock shown as owned by them, except for shares which
can be acquired by the exercise of options.
Percent of
Name and Address Number of Shares Common Stock
- ---------------- ---------------- ------------
Kopp Investment Advisors, Inc. 610,356(1) 12.4%
6600 France Avenue South
Suite 672
Edina, Minnesota 55435
Canon Inc. 605,205 12.3%
Shinjuku Dai-Ichi Seimei
Building
Tokyo 160, Japan
Carl A. Zanoni 266,550(2) 5.4%
99 Long Hill Road
Middlefield, Connecticut 06455
Wesleyan University 261,905 5.3%
Middletown, Connecticut
06457
- ------------------
(1) Information derived from Schedule 13G, dated September 9, 1996, filed by
Kopp Investment Advisors, Inc.
(2) Includes options to purchase 46,500 shares of Common Stock which are
exercisable within 60 days.
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<PAGE>
PROPOSAL NO. 2 - ADOPTION OF AN AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED NON-QUALIFIED STOCK OPTION PLAN
By unanimous written consent on September 17, 1992, the Board of Directors
adopted, subject to stockholder approval, the Non-Qualified Plan. The
Non-Qualified Plan, as presently in existence, permits the granting of options
to purchase an aggregate of 1,425,000 shares of the Company's Common Stock to
present or future key employees of the Company or a subsidiary of the Company
and to directors of the Company, whether or not they are employees of the
Company, only until September 3, 1997. After that date, no additional options
may be granted under the Non-Qualified Plan. A "key employee" is
defined as an officer or employee who has substantial responsibility in the
direction and management of the Company or any division, branch or subsidiary of
the Company. The Board of Directors has unanimously adopted, subject to
stockholder approval, an amendment to the Non-Qualified Plan which would extend
the term during which options may be granted thereunder to September 3, 2002.
The Board of Directors believes that approval of the amendment to lengthen
the term of the Non-Qualified Plan will serve the best interests of the Company
and its stockholders. The Board believes that the ability to grant options will
help attract, motivate and retain key employees who are in a position to
contribute to the successful conduct of the business and affairs of the Company
as well as stimulate in such individuals an increased desire to render greater
service to the Company. The proposed amendment to the Non-Qualified Plan will
enable the Company to continue to grant stock options to these persons.
The Non-Qualified Plan is administered by a committee of at least two
members of the Board of Directors, chosen by the Board of Directors. The
Committee presently consists of Messrs. Corboy, Liebman, and McKelvey. Each
member of the Committee is a "non-employee director," as defined in Rule 16b-3
of the Exchange Act. Subject to the provisions of the Non-Qualified Plan, the
Committee has the authority to determine the individuals to whom stock options
will be granted, the number of shares to be covered by each option, the option
price, the option period, the vesting restrictions, if any, with respect to the
exercise of the option, and other terms and conditions.
The terms and conditions of each option granted under the Non-Qualified
Plan must be set forth in a Stock Option Agreement issued by the Company to the
optionee. Any such Stock Option Agreement must include certain provisions,
including that (i) the full purchase price of shares purchased under the option
will be paid upon exercise thereof, (ii) the option expire not later than ten
years from the date the option is granted, or prior thereto, if the optionee
ceases to be employed by the Company or a subsidiary thereof (otherwise than by
reason of the optionee's death) unless extended by the Committee acting in its
sole discretion (provided that no such extension shall result in an option
having a term greater than ten years), and (iii) the option shall not be
transferrable other than by will or by the laws of descent and distribution and
is exercisable during the lifetime of the optionee only by him or her.
The Board may amend or terminate the Non-Qualified Plan, provided that any
amendment which would increase the aggregate number of shares of Common Stock as
to which options may be granted under the Non-Qualified Plan (except
anti-dilution adjustments), materially increase the benefits under the
Non-Qualified Plan, or modify the class of persons eligible to receive options
under the Non-Qualified Plan is subject to the approval of the stockholders.
At September 1, 1996, there were 62 key employees, including two key
employees who are also directors, and seven other directors who were eligible to
participate in the Non-Qualified Plan. The number of shares at September 1, 1996
available for future grants under the Non-Qualified Plan was 399,920 shares of
Common Stock. During fiscal 1996, no options were granted under the
Non-Qualified Plan to executive officers and directors of the Company and
options to purchase an aggregate of 7,750 shares of Common Stock were granted to
employees who are not executive officers. The closing price of the Common Stock
as reported on the Nasdaq National Market on September 25, 1996 was $32.
-12-
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
An optionee does not realize taxable income upon the grant of an option. In
general, an optionee realizes ordinary income when the option is exercised
(assuming the stock acquired is either transferrable or not subject to a
substantial risk of forfeiture) equal to the excess of the value of the stock
over the exercise price (i.e., the option spread), and the Company receives a
corresponding deduction. Upon a later sale of the stock, the optionee realizes
capital gain or loss equal to the difference between the selling price and the
value of the stock at the time the option was exercised.
Accordingly, the Board of Directors recommends that the stockholders
approve the following resolution:
RESOLVED, that, subject to the approval of the
stockholders of the Corporation, the term during which options
may be granted under the Corporation's Amended and Restated
Non-Qualified Stock Plan (the "Plan") shall continue for an
additional five year term from its scheduled expiration date,
so that the second sentence of Section 3 of the Plan be
amended to read in its entirety as follows:
"The term during which options may be granted under
the Non-Qualified Plan commenced on its effective
date and shall continue until September 3, 2002."
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock of the Company present or represented by proxy and entitled to vote at the
Annual Meeting is required for the adoption of the proposed amendment to the
Non-Qualified Plan. Shares of Common Stock held by stockholders present in
person at the Annual Meeting that are not voted for approval of the amendment to
the Non-Qualified Plan or shares held by stockholders represented at the Annual
Meeting by proxy from which authority to vote for the amendment to the
Non-Qualified Plan has been properly withheld (including broker non-votes) will
not be counted toward the majority required for approval.
The Board of Directors deems Proposal No. 2 to be in the best interests of
the Company and its stockholders and recommends that the stockholders vote "FOR"
the approval thereof.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP ("KPMG") has been selected as the Company's
independent auditors for fiscal 1997. A representative of KPMG is expected to be
present at the Annual Meeting with the opportunity to make a statement if he so
desires and to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at the 1997
Annual Meeting of Stockholders of the Company must be received by the Company no
later than June 10, 1997 for inclusion in the Board of Directors' proxy
statement and form of proxy relating to that meeting.
OTHER MATTERS COMING BEFORE THE MEETING
As of the date of this Proxy Statement, the Board of Directors does not
know of any matters to be presented to the meeting other than the matters set
forth in the attached Notice of Annual Meeting. If any other matter properly
comes before the meeting, it is intended that the holders of the proxies will
vote thereon in their discretion.
By Order of the Board of Directors
Paul Jacobs,
Secretary
October 8, 1996
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<PAGE>
PROXY
ZYGO CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, NOVEMBER 14, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mr. Mark J. Bonney and Mr. Gary K. Willis
as Proxies, and each of them acting singly, with power of substitution to each,
and hereby authorizes them to represent and to vote, as designated below, all of
the shares of Common Stock of Zygo Corporation held of record by the undersigned
on September 23, 1996, at the annual meeting of stockholders to be held on
November 14, 1996, at 10:00 a.m., or any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS NO. 1 AND NO. 2. IN THEIR DISCRETION THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
Please mark, sign, date, and return this proxy card promptly using the enclosed
envelope.
I PLAN TO ATTEND THE MEETING TO BE HELD AT THE HOTEL INTER-CONTINENTAL NEW
YORK, 111 E. 48TH ST., NEW YORK CITY, NEW YORK ON NOVEMBER 14, 1996. [ ]
(Continued and to be dated and signed on reverse side)
<PAGE>
Proposal No. 1. Election of Directors: The nine nominees are Michael R.
Corboy, Paul F. Forman, Seymour E. Liebman, Robert G. McKelvey, Paul W.
Murrill, John R. Rockwell, Robert B. Taylor, Gary K. Willis and Carl A.
Zanoni.
For all listed Withhold authority For all listed Nominees, except
Nominees for all listed Nominees withhold for the following
Nominees (write name(s)
[ ] [ ] below)
-------------------------------
Proposal No. 2. Proposal to amend the Company's Amended and Restated
Non-Qualified Stock Option Plan:
[ ] For [ ] Against [ ] Abstain
Please sign exactly as name appears
hereon. All joint owners should
sign. When signing as attorney,
executor, administrator, trustee,
guardian or custodian for a minor,
please give full title as such. If
a corporation, please sign full
corporate name and indicate the
signer's office. If a partnership,
please sign in partnership name by
authorized person.
Date: _______________________, 1996
___________________________________
Signature
___________________________________
Signature if held jointly
PLEASE MARK YOUR CHOICE LIKE
THIS [X] IN BLUE OR BLACK INK.
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