SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
ZYGO CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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ZYGO CORPORATION
LAUREL BROOK ROAD
MIDDLEFIELD, CONNECTICUT 06455
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 13, 1997
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 13, 1997, 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 increase the number of
shares of Common Stock authorized for issuance under the Plan from
2,850,000 to 3,350,000 shares.
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 22, 1997 are
entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
Paul Jacobs,
Secretary
October 8, 1997
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YOUR VOTE IS IMPORTANT
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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.
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[THIS PAGE INTENTIONALLY LEFT BLANK]
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ZYGO CORPORATION
LAUREL BROOK ROAD
MIDDLEFIELD, CONNECTICUT 06455
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 13, 1997
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 13,
1997, 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, 1997, 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 22, 1997
are entitled to notice of and to vote at the Annual Meeting or any and all
adjournments thereof. On September 22, 1997, there were 10,914,422 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, 1997 (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 63 1970 416,020 (b) 3.8%
1970 to August 1993, Chief Executive
Officer and from June 1970 to November
1993, Treasurer; and, from February 1992
to November 1993, Secretary of the
Company.
Michael R. Corboy President and Chief Executive Officer of 67 1993 60,000 (c) .5%
Corboy Investment Company since January
1992; Director of Wyle Electronics and
Acquinas Funds, Inc.
Seymour E. Liebman Executive Vice President and General 48 1993 45,000 (d) .4%
Counsel of Canon U.S.A., Inc. since
February 1996; from January 1992 until
January 1996, Senior Vice President
Finance and General Counsel of Canon
U.S.A., Inc; Director of Energy
Conversion Devices, Inc.
Robert G. McKelvey Chairman and President of George 60 1983 104,070 (e) 1.0%
McKelvey Co., Inc. (Investment Advisor
and Securities Broker-Dealer) for more
than the last five years.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Common Stock deemed
beneficially owned at
August 31, 1997 (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 63 1993 58,500 (f) .5%
last five years; Director of Entergy
Corporation, Tidewater, Inc.,ChemFirst,
Piccadilly Cafeterias, Inc., Howell
Corporation, and various foundations and
public service organizations.
John R. Rockwell Retired senior executive since 1990; 69 1996 32,000 (g) .3%
Director of Advo, Inc., Tom's of Maine
Inc. and Forum Corporation.
Robert B. Taylor Vice President and Treasurer of Wesleyan 50 1988 49,500 (h) .5%
University since April 1985; Director of
Middlesex Mutual Assurance Co. and
Citizens Bank of Connecticut.
Gary K. Willis President and Chief Executive Officer of 52 1992 400,500 (i) 3.6%
the Company since August 1993; from
February 1992 until August 1993, Chief
Operating Officer of the Company.
Director of Rofin-Sinar Technologies, Inc.
Carl A. Zanoni Vice President, Research, Development 56 1970 556,700 (j) 5.1%
and Engineering of the Company since
April 1992.
All directors and officers
as a group, including those
named above (14 in all) 2,346,374 (k) 20.0%
(Footnotes on following page)
</TABLE>
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 70,500 shares of Common Stock which are
exercisable within 60 days.
(c) Includes options to purchase 57,000 shares of Common Stock which are
exercisable within 60 days.
(d) Includes options to purchase 45,000 shares of Common Stock which are
exercisable within 60 days. Does not include 1,210,410 shares owned by
Canon Inc.
(e) Includes options to purchase 45,000 shares of Common Stock which are
exercisable within 60 days.
(f) Includes options to purchase 57,000 shares of Common Stock which are
exercisable within 60 days.
(g) Includes options to purchase 25,000 shares of Common Stock which are
exercisable within 60 days.
(h) Includes options to purchase 45,000 shares of Common Stock which are
exercisable within 60 days.
(i) Includes options to purchase 202,500 shares of Common Stock which are
exercisable within 60 days.
(j) Includes options to purchase 117,000 shares of Common Stock which are
exercisable within 60 days.
(k) Includes options to purchase 859,424 shares of Common Stock which are
exercisable within 60 days.
Twelve meetings of the Board of Directors were held in fiscal 1997.
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. Four meetings of the
Audit Committee were held in fiscal 1997. Messrs. Murrill, Rockwell, and Taylor
are the members of the Audit Committee.
The Compensation and Stock Option 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 met two times and acted
six times by unanimous written consent during fiscal 1997.
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 Rockwell are
the members of the Nominating Committee. No formal meetings of the Nominating
Committee were held during fiscal 1997 as the entire Board addressed this task
at its meetings.
Each director attended at least 75% of the total number of meetings held
during fiscal 1997 of the Board and Committees on which he served.
Effective March 11, 1997, each director who is not a full-time employee of,
or consultant to the Company (a "Non-Employee Director") receives a meeting fee
of $1,500 per meeting attended, whether board or committee, in person or by
telephone. Pursuant to the Zygo Corporation Non-Employee Director Stock Option
Plan (the "Non-Employee Director Plan"), each Non-Employee Director has been
granted 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. The Non-Employee Director Plan further provides that an
option to purchase 25,000 shares of Common Stock automatically will be granted
to each person who is subsequently elected to the Board of Directors (and, who
is on such election, a Non-Employee Director) at the time of such election, and
to each Non-Employee Director (including presently existing Non-Employee
Directors) on the fifth anniversary of the date on which an option was
previously granted to that Non-Employee Director, provided that he has
continuously served as a director of the Company through such fifth anniversary.
Each Non-Employee Director also is reimbursed for out-of-pocket expenses
incurred as a result of attendance at a board or committee meeting. No
additional fees are paid for committee participation or special assignments. In
addition, in September 1996, Mr. Rockwell received a special one-time grant of
an option to purchase 20,000 shares of Common Stock, vesting at 10,000 shares
per year, exercisable at the fair market value of a share of Common Stock on the
date of grant. In addition, 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, 1997, 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., an affiliate of Canon Inc. ("Canon"). Canon Sales Co., Inc.,
a subsidiary of Canon, acts as a distributor of certain of the Company's
products in Japan. Sales to Canon and Canon Sales Co., Inc. aggregated
approximately $17,564,000 for fiscal 1997. 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.
5
<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 1997 fiscal year and the other four
most highly compensated executive officers of the Company ("named executives")
whose cash compensation exceeded $100,000 for the year ended June 30, 1997 for
services in all capacities to the Company.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------------------- ----------------------------
Other (1) All (2)(3)
Name & Principal Position Annual Number of Other
Held During Fiscal 1997 Year Salary Bonus Compensation Stock Options Compensation
- ----------------------- ---- ------ ----- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gary K. Willis 1997 $208,368 $79,455 $10,800 -- $39,968
President and Chief 1996 $201,253 $79,950 $10,800 -- $27,592
Executive Officer, Director 1995 $186,923 $45,600 $10,800 45,000 $ 5,900
William H. Bacon (4) 1997 $ 86,774 $19,404 $10,800 -- $17,861
Vice President, Director of 1996 $ 83,908 $21,840 $ 4,985 -- $15,597
Corporate Quality 1995 $ 78,591 $14,256 -- 15,000 $ 2,882
Mark J. Bonney 1997 $155,488 $39,617 $10,800 -- $30,492
Vice President, Finance and 1996 $146,257 $39,000 $10,800 -- $26,500
Administration, Treasurer, 1995 $133,742 $32,400 $10,800 30,000 $ 4,573
Chief Financial Officer
Robert A. Smythe (4) 1997 $111,396 $24,628 $10,800 -- $22,267
Vice President, Director of 1996 $107,983 $28,600 $ 4,985 -- $19,830
Sales and Marketing 1995 $100,769 $15,364 -- 15,000 $ 2,958
Carl A. Zanoni 1997 $168,707 $40,666 $10,800 -- $32,861
Vice President, Research, 1996 $161,444 $42,575 $10,800 -- $27,274
Development and Engineering, 1995 $153,317 $37,080 $10,800 30,000 $ 5,816
Director
</TABLE>
- --------------
(1) Amounts paid as automobile allowance.
(2) Includes aggregate amounts of $38,440, $16,801, $28,764, $20,913, and
$31,133 in fiscal 1997, $25,792, $14,589, $24,745, $18,534, and $25,474 in
fiscal 1996, and $4,100, $2,489, $2,974, $2,454, and $4,023 in fiscal 1995 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 $1,728, $1,060, $1,728, $1,354, and $1,728 in fiscal 1997, $1,800,
$1,008, $1,755, $1,296, and $1,800 in fiscal 1996, and $1,800, $393, $1,599,
$504, and $1,793 in fiscal 1995 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.
6
<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, 1997.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Value of
Unexercised Options at In-the-Money Options
June 30, 1997 at June 30, 1997
-------------------------- ---------------------------
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary K. Willis 0 0 172,500 52,500 $4,915,650 $1,509,375
William H. Bacon 0 0 28,500 15,000 $ 825,143 $ 431,250
Mark J. Bonney 0 0 81,750 44,250 $2,362,373 $1,275,203
Robert A. Smythe 0 0 27,299 17,625 $ 786,346 $ 506,719
Carl A. Zanoni 0 0 96,750 35,250 $2,803,823 $1,013,438
</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
7
<PAGE>
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.
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.
1997 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 1997, Mr. Willis received salary payments
totaling $208,368, a 3.5% increase over that received in fiscal 1996. Mr. Willis
also earned a $79,455 bonus under Zygo's Management Incentive Plan for attaining
certain predetermined financial and nonfinancial objectives in fiscal 1997.
During fiscal 1997, Mr. Willis was not granted any options to purchase shares of
the Company's Common Stock in accordance with the decision of the then Amended
and Restated Non-Qualified Stock Option 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 1997 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-Tencor 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
GRAPHICAL REPRESTATION OF CHART
Cumulative Total Return
------------------------------------------------=
6/92 6/93 6/94 6/95 6/96 6/97
ZYGO CORP ZIGO 100 120 113 587 1141 1604
PEER GROUP PPEER1 100 144 256 522 463 666
NASDAQ STOCK
MARKET (U.S.) INAS 100 126 127 169 218 265
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 base 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 base salary to $150,000 from
$135,000, and to increase the monthly automobile allowance from $600 to $900.
The amended agreements further authorize the Board at its discretion to
increase Messrs. Willis and Bonney's respective salary as appropriate and to
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 Paul F.
Forman providing for the retention of Mr. Forman 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. 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. The Services
Agreement further provided that all outstanding unvested stock options from the
Company to Mr. Forman vested effective at the conclusion of the fiscal year
ended June 30, 1994 (options for 20,475 shares of Common Stock at June 30,
1994). The Agreement is terminable (with all payment obligations thereunder
terminating) by Mr. Forman, at any time, and by the Company upon the death or
disability of Mr. Forman or for justifiable cause (as defined in the Agreement);
except that if the Agreement terminates as a result of the death or disability
of Mr. Forman, 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. In December 1996, the Company
entered into an amendment agreement with Mr. Forman, providing for the extension
of the term of the existing Services Agreement until September 30, 1999, with
Mr. Forman receiving annually for the last 15 months of the amended Services
Agreement 20% of his salary at June 30, 1994 (in addition to the retainer
previously provided for).
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The Services Agreement, which contains certain restrictions on soliciting
employees and others and is coexistent with a non-competition agreement between
Mr. Forman and the Company, replaces the Confidentiality and Non-Competition
Agreement, dated October 25, 1983, entered into between Mr. Forman and the
Company. Pursuant to the Confidentiality and Non-Competition Agreement, upon the
involuntary termination of his employment by the Company without cause, Mr.
Forman 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.
In August 1996, the Company completed the acquisition of its now
subsidiary, Technical Instruments Company ("TIC"), for approximately $11.7
million in cash and shares of Common Stock valued at $3 million. Francis E.
Lundy, the principal shareholder of TIC, and persons associated with Mr. Lundy,
received approximately 85% of the consideration paid by the Company in the
transaction as their pro rata percentage. Additionally, in connection with the
transaction, Mr. Lundy entered into a three year employment agreement with TIC
providing for, among other things, an annual salary of not less than $150,000.
In August of 1997, Mr. Lundy was elected a Vice President of the Company.
During the fiscal year ended June 30, 1997, the Company made purchases of
approximately $1.6 million from Technical Instrument San Francisco, an entity
principally owned by Francis E. Lundy. The purchases were made, generally, on
the Company's standard trade terms.
In September 1996, the Company completed the acquisition of its now
subsidiary, NexStar Corporation ("NexStar"), for approximately 250,000 shares of
Common Stock. Ahmad Akrami, the principal shareholder of NexStar, received
approximately 35% of the consideration paid by the Company in the transaction as
his pro rata percentage. Additionally, in connection with the transaction, Mr.
Akrami entered into a three year employment agreement with NexStar providing
for, among other things, an annual salary of not less than $125,000. In August
of 1997, Mr. Akrami was elected a Vice President of the Company.
Michael R. Corboy, a Director of the Company, inadvertently failed to
timely file a Form 4 in March 1997 relating to shares donated to a charitable
remainder trust. Mr. Corboy is currently in compliance with his reporting
obligations.
John R. Rockwell, a Director of the Company, inadvertently failed to timely
file a Form 4 in September 1996 upon the granting of stock options under the
Non-Employee Director Stock Option Plan. Mr. Rockwell is currently in compliance
with his reporting obligations.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Canon Sales Co., Inc., a subsidiary of Canon, acts as a distributor of
certain of the Company's products in Japan. (See "Compensation Committee
Interlocks and Insider Participation" earlier in this Proxy Statement.)
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. There
was no registered public offering of the Company's securities during the fiscal
year ended June 30, 1997.
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PRINCIPAL STOCKHOLDERS
The only stockholders who, as of August 31, 1997, 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. 1,433,124(1) 13.2%
6600 France Avenue South
Suite 672
Edina, Minnesota 55435
Canon Inc. 1,210,410 11.1%
Shinjuku Dai-Ichi Seimei Building
Tokyo 160, Japan
Crestone Capital Management 557,170(1) 5.1%
7720 East Bellview Ave.
Suite 220
Englewood, Colorado 80111
Carl A. Zanoni 556,700(2) 5.1%
99 Long Hill Road
Middlefield, Connecticut 06455
- -------
(1) Information derived from Carsons, I/B/E/S, updated September 2, 1997
(2) Includes options to purchase 117,000 shares of Common Stock which are
exercisable within 60 days.
PROPOSAL NO. 2--ADOPTION OF AN AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED NON-QUALIFIED STOCK OPTION PLAN
The Board of Directors has determined that it would be in the best
interests of the Company to further amend the Amended and Restated Non-Qualified
Stock Option Plan (the "Non-Qualified Plan") to provide that the number of
shares of Zygo Common Stock for which stock options (the "Stock Options") may be
granted pursuant to such Plan be increased from 2,850,000 shares to 3,350,000
shares. As of September 22, 1997, Stock Options to purchase 1,559,574 shares, in
the aggregate, granted pursuant to the Non-Qualified Plan were outstanding, and
Stock Options to purchase 439,840 shares remained available for future grant
thereunder. The proposed amendment would make 500,000 additional shares
available for issuance upon exercise of Stock Options granted under the
Non-Qualified Plan. The Board of Directors believes that an increase in the
number of Stock Options available for grant pursuant to the Non-Qualified Plan
is necessary in order to provide the Company with an effective incentive to
attract and retain key employees.
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 "disinterested person", 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. Potential optionees under the Non-Qualified Plan consist
12
<PAGE>
of present or future key employees of the Company or a subsidiary of the Company
and of directors of the Company, whether or not they are employees of the
Company. 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
transferable 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.
The table below indicates stock options which have been granted during the
1997 fiscal year under the Non-Qualified Plan to (i) each person named in the
Summary Compensation Table appearing earlier in this Proxy Statement, (ii) all
current executive officers of the Company as a group, (iii) all current
directors of the Company who are not executive officers of the Company as a
group and, (iv) all employees of the Company, including all current officers of
the Company who are not executive officers of the Company, as a group:
NON-QUALIFIED STOCK OPTION PLAN BENEFITS GRANTED DURING FISCAL 1997
Name and Position Dollar Value ($) Number of Shares
- ----------------- ---------------- ----------------
Gary K. Willis, President and $0 0
Chief Executive Officer, Director
William H. Bacon, Vice President, 0 0
Director of Corporate Quality
Mark J. Bonney, Vice President, 0 0
Finance and Administration, Treasurer
and Chief Financial Officer
Robert A. Smythe, Vice President, 0 0
Director of Sales and Marketing
Carl A. Zanoni, Vice President, 0 0
Research, Development and
Engineering, Director
Executive Officers as a Group 0 80,000
Non-Executive Officer Director Group 0 20,000
Non-Executive Officer Employee Group 0 302,500
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 transferable 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.
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<PAGE>
Accordingly, the Board of Directors recommends that the stockholders
approve the following resolution:
RESOLVED, that the total number of shares of the Corporation's Common
Stock which may be issued under the Corporation's Amended and Restated
Non-Qualified Stock Option Plan ("The Non-Qualified Plan") shall be
increased to 3,350,000 shares, so that the first sentence of Section 2 of
the Plan be amended to read in its entirety as follows:
"Except as otherwise permitted pursuant to paragraph 6 hereof, the
total number of shares of the Company's Common Stock, par value $.10
per share, which may be issued under The Non-Qualified Plan shall not
exceed 3,350,000 (after giving effect to stock split previously
authorized by the Board of Directors), and may be authorized and
unissued shares, or issued and reacquired shares, as the Board of
Directors may from time to time determine."
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 1998. 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 1998
Annual Meeting of Stockholders of the Company must be received by the Company no
later than June 10, 1998 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, 1997
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<PAGE>
PROXY
ZYGO CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, NOVEMBER 13, 1997
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 22, 1997, at the annual meeting of stockholders to be held on
November 13, 1997, 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 AT THE HOTEL INTER CONTINENTAL NEW YORK,
111 E. 48TH ST., NEW YORK CITY, NEW YORK ON NOVEMBER 13, 1997.
(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 increase the number of shares available for
grant under 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: _______________________, 1997
___________________________________
Signature
___________________________________
Signature if held jointly
PLEASE MARK YOUR CHOICE LIKE
THIS [X] IN BLUE OR BLACK INK.
