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)
- --------------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
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 17, 1998
The Annual Meeting of Stockholders of Zygo Corporation will be held at
the Offices of the Company, Laurel Brook Road, Middlefield, Connecticut on
November 17, 1998, at 10:00 a.m. local time, for the following purposes:
1. To elect nine directors for the ensuing year.
2. 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 21, 1998 are
entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
Paul Jacobs,
Secretary
October 9, 1998
- --------------------------------------------------------------------------------
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>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ZYGO CORPORATION
LAUREL BROOK ROAD
MIDDLEFIELD, CONNECTICUT 06455
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 17, 1998
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 17,
1998, 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 9, 1998, 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 Proposal No. 1 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 21, 1998
are entitled to notice of and to vote at the Annual Meeting or any and all
adjournments thereof. On September 21, 1998, there were 11,130,431 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
<PAGE>
election of the directors. Shares of Common Stock held by stockholders present
in person at the Annual Meeting that 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, 1998 (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 of the Board for each of the last five 64 1970 416,750(b) 3.7%
years.
Michael R. Corboy President and Chief Executive Officer of Corboy 68 1993 75,000(c) .7%
Investment Company for each of the last five
years; Director of Acquinas Funds, Inc.
Seymour E. Liebman Executive Vice President and General Counsel of 49 1993 60,000(d) .5%
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 McKelvey Co., 61 1983 119,370(e) 1.1%
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, 1998 (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 73,500(f) .7%
years; Director of Entergy Corporation, Tidewater,
Inc., Chem First, Piccadilly Cafeterias, Inc.,
Howell Corporation, and various foundations and
public service organizations.
John R. Rockwell Retired senior executive for more than the last 70 1996 57,000(g) .5%
five years; Director of Advo, Inc., Tom's of Maine
Inc. and Forum Corporation.
Robert B. Taylor Vice President and Treasurer of Wesleyan 51 1988 64,500(h) .6%
University for more than the last five years;
Director of Citizens Bank of Connecticut.
Gary K. Willis President and Chief Executive Officer of the 53 1992 423,000(i) 3.7%
Company for more than the last five years;
Director of Rofin-Sinar Technologies, Inc. and
Benthos Corporation.
Carl A. Zanoni Vice President, Research and Development of the 57 1970 571,700(j) 5.1%
Company since June 1998, and from April 1992 to
June 1998 Vice President of Research, Development
and Engineering.
All directors and officers
as a group, including those
named above (16 in all) 2,576,283(k) 21.3%
(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 54,000 shares of Common Stock which are
exercisable within 60 days.
(c) Includes options to purchase 72,000 shares of Common Stock which are
exercisable within 60 days.
(d) Consists of options to purchase 60,000 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 60,000 shares of Common Stock which are
exercisable within 60 days.
(f) Includes options to purchase 72,000 shares of Common Stock which are
exercisable within 60 days.
(g) Includes options to purchase 50,000 shares of Common Stock which are
exercisable within 60 days.
(h) Includes options to purchase 60,000 shares of Common Stock which are
exercisable within 60 days.
(i) Includes options to purchase 225,000 shares of Common Stock which are
exercisable within 60 days.
(j) Includes options to purchase 121,500 shares of Common Stock which are
exercisable within 60 days.
(k) Includes options to purchase 1,033,299 shares of Common Stock which are
exercisable within 60 days.
Twelve meetings of the Board of Directors were held in fiscal 1998. In
addition, the board acted one time by unanimous written consent during fiscal
1998.
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 1998. 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
four times by unanimous written consent during fiscal 1998.
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 1998 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 1998 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 75,000 shares of Common Stock, vesting at 15,000
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 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, 1998, 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 exclusive distributor of certain of the
Company's products in Japan. Sales to Canon and Canon Sales Co., Inc. aggregated
approximately $17,626,000 for fiscal 1998. 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 1998 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, 1998 for services in
all capacities to the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------------------- -----------------------------
NAME OTHER (1) ALL (3)(4)
& PRINCIPAL POSITION ANNUAL NUMBER OF (2) OTHER
HELD DURING FISCAL 1997 YEAR SALARY BONUS COMPENSATION STOCK OPTIONS COMPENSATION
- ----------------------- ---- ------ ----- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gary K. Willis 1998 $241,923 $ -- $10,800 25,000 $26,239
President and Chief 1997 $208,368 $79,455 $10,800 -- $39,968
Executive Officer, Director 1996 $201,253 $79,950 $10,800 -- $27,592
Mark J. Bonney 1998 $175,962 $ -- $10,800 15,000 $19,814
Vice President, 1997 $155,488 $39,617 $10,800 -- $30,492
Operations 1996 $146,257 $39,000 $10,800 -- $26,500
Francis E. Lundy (5) 1998 $161,539 $ -- $ -- 10,000 $18,258
Vice President, 1997 $130,385 $39,000 $ -- -- $14,908
New Business Development 1996 $ -- $ -- $ -- -- $ --
Robert A. Smythe (6) 1998 $126,635 $ -- $10,800 10,000 $14,798
Vice President, Advanced 1997 $111,396 $24,628 $10,800 -- $22,267
Marketing and Product 1996 $107,983 $28,600 $ 4,985 -- $19,830
Development
Carl A. Zanoni 1998 $189,712 $ -- $10,800 15,000 $20,147
Vice President, Research and 1997 $168,707 $40,666 $10,800 -- $32,861
Development, Director 1996 $161,444 $42,575 $10,800 -- $27,274
</TABLE>
- ----------
(1) Amounts paid as automobile allowance.
(2) As to each of the named executives, this grant was terminated on August 18,
1998 and new options were granted in an exchange rate of 4 for 10,
effective August 18, 1998.
(3) Includes aggregate amounts of $24,511, $18,086, $16,645, $13,300, and
$18,419 in fiscal 1998, $38,440, $28,764, $13,180, $20,913, and $31,133 in
fiscal 1997, and $25,792, $24,745, $0, $18,534, and $25,474 in fiscal 1996
paid or contributed on behalf of Messrs. Willis, Bonney, Lundy, 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.
(4) Includes $1,728, $1,728, $1,613, $1,498, and $1,728 in fiscal 1998, $1,728,
$1,728, $1,728, $1,354, and $1,728 in fiscal 1997, and $1,800, $1,755, $0,
$1,296, and $1,800 in fiscal 1996 for Messrs. Willis, Bonney, Lundy, Smythe
and Zanoni, respectively, representing the value of life insurance provided
to the named executives.
(5) Mr. Lundy became an officer of the Company on August 19, 1997. Salary data
is provided since the acquisition of Technical Instruments Co. on August 8,
1996.
(6) Mr. Smythe became an officer of the Company on January 15, 1996.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
% OF AT ASSUMED ANNUAL RATES OF
TOTAL OPTIONS STOCK PRICE APPRECIATION
OPTIONS GRANTED TO FOR OPTION TERM
GRANTED EMPLOYEES EXERCISER PRICE EXPIRATION ---------------------------------
NAME (1,3) IN FISCAL YEAR PER SHARE(2) DATE 5% 10%
---- ------- -------------- ------------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C>
Gary K. Willis 25,000 8.91% $35.13 8/19/07 $ 552,123 $ 1,399,380
Mark J. Bonney 15,000 5.35% $35.13 8/19/07 $ 331,274 $ 839,628
Francis E. Lundy 10,000 3.57% $35.13 8/19/07 $ 220,849 $ 559,752
Robert A. Smythe 10,000 3.57% $35.13 8/19/07 $ 220,849 $ 559,752
Carl A. Zanoni 15,000 5.35% $35.13 8/19/07 $ 331,849 $ 839,628
</TABLE>
- -------------
(1) Options vest ratably over four years on the anniversary of the grant.
(2) The exercise price of all options granted during fiscal 1998 was equal to
the market value of the underlying Common Stock on the day of the grant.
(3) This grant was terminated on August 18, 1998 and new options were granted
in an exchange rate of 4 for 10 on August 18, 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
JUNE 30, 1998 AT JUNE 30, 1998
SHARES ------------------------------- ------------------------------
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary K. Willis 0 0 202,500 47,500 $2,550,300 $288,225
Mark J. Bonney 0 0 111,000 30,000 $1,436,985 $192,150
Francis E. Lundy 0 0 10,000 40,000 $ 0 $ 0
Robert A. Smythe 0 0 37,424 17,500 $ 480,901 $ 96,075
Carl A. Zanoni 0 0 117,000 30,000 $1,521,030 $192,150
</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 goals 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
7
<PAGE>
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.
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 years and the individual must
continue to be employed by the Company for such options to vest.
OPTION TERMINATION, NEW GRANT AND RE-PRICING
On August 18, 1998, the Company's Compensation and Stock Option Plan
Committee ("the Committee") took the following actions. First it determined to
terminate options to purchase an aggregate of 120,000 shares of Common Stock
previously authorized for issuance to officers, and subsequently grant options
to purchase an aggregate of 48,000 shares of Common Stock to the officers priced
at an exercise price of $10.813, the closing price of the Common Stock on the
date of the grant. Second, it determined to reprice options to purchase an
aggregate of 110,000 shares of Common Stock previously authorized for issuance
the non-officer employees at an exercise price of $10.813. The Committee felt
that these actions were advisable given that the stock price had declined
substantially since the date of the grant of such options and the options had
lost much of their intended value in providing incentive to employees to work
toward increasing the price of the Common Stock.
8
<PAGE>
<TABLE>
<CAPTION>
OPTION CANCELLATION AND NEW GRANT
LENGTH OF
NUMBER OF MARKET PRICE NUMBER OF OPTION
SECURITIES OF STOCK EXERCISE SECURITIES TERM
UNDERLYING AT THE PRICE EXERCISE UNDERLYING REMAINING
OPTIONS TIME OF AT TIME OF PRICE NEW OPTIONS NEW AT DATE OF
NAME DATE CANCELLED CANCELLATION CANCELLATION GRANT GRANT CANCELLATION
---- ---- --------- ------------ ------------ ----- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gary K. Willis 8/18/98 25,000 $10.813 $35.13 $10.813 10,000 9 years
Mark J. Bonney 8/18/98 15,000 $10.813 $35.13 $10.813 6,000 9 years
Francis E. Lundy 8/18/98 10,000 $10.813 $35.13 $10.813 4,000 9 years
Robert A. Smythe 8/18/98 10,000 $10.813 $35.13 $10.813 4,000 9 years
Carl A. Zanoni 8/18/98 15,000 $10.813 $35.13 $10.813 6,000 9 years
</TABLE>
1998 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 1998, Mr. Willis received salary payments
totaling $241,923, a 16.7% increase over that received in fiscal 1997. Fiscal
1998 data was calculated based upon 26 pay periods during the fiscal year,
fiscal 1997 was calculated based on 25 pay periods due to the timing of certain
payrolls, had both years been computed based on 26 pay periods, the salary
increase in fiscal 1998 versus fiscal 1997 would be 11.9%. Due to the Company's
financial performance versus its targets in fiscal 1998 the senior executives of
the Company, including Mr. Willis did not receive a bonus under Zygo's
Management Incentive Plan in fiscal 1998. During fiscal 1998, Mr. Willis was
granted options to purchase 25,000 shares of the Company's Common Stock
(subsequently, terminated and a new grant issued for 10,000 shares of the
Company's Common Stock).
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 1998 adequately reflect the
Company's compensation goals and policies.
COMPENSATION AND STOCK OPTION COMMITTEE
Michael R. Corboy
Seymour E. Liebman
Robert G. McKelvey
9
<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 REPRESENTATIVE OF TABLE BELOW]
6/93 6/94 6/95 6/96 6/97 6/98
---- ---- ---- ---- ---- ----
ZYGO CORPORATION 100 94.55 490.91 954.55 1,341.82 646.36
PEER GROUP 100 176.76 360.87 319.45 458.45 274.28
NASDAQ STOCK MARKET-US 100 100.96 134.77 173.03 210.38 277.69
* $100 INVESTED ON 06/30/91 IN STOCK OR INDEX
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
10
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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 authorizes 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). 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).
11
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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 of 1996, the Company completed the acquisition of its now
subsidiary, Zygo Advanced Imaging Systems, formerly known as Technical
Instruments Company ("TIC"). In connection with the transaction, Mr. Lundy
entered into a three year employment contract 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.
In September of 1996, the Company completed the acquisition of its now
subsidiary, Zygo Automation Systems, formerly known as Nexstar Corporation
("Nexstar"). In connection with the transaction, Mr. Akrami entered into a three
year employment contract 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.
In August 1997, the Company completed the acquisition of its now
subsidiary, Sight Systems, Inc. ("SSI"), for approximately 287,400 shares of
Common Stock. David Grant, the principal shareholder of SSI, received
approximately 70% of the consideration paid by the Company in the transaction as
his pro rata percentage. Additionally, in connection with the transaction, Mr.
Grant entered into a three year employment agreement with SSI providing for,
among other things, an annual salary of not less than $120,000. In August of
1998, Mr. Grant was elected a Vice President of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who beneficially own more than ten percent of the Company's Common
Stock, to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission (the "SEC"). Executive officers,
directors and greater than ten percent beneficial owners are required by the SEC
to furnish the Company with copies of all Section 16(a) forms they filed.
Based upon a review of the copies of such forms furnished to the Company
and written representatives from the Company's executive officers and directors,
the Company believes that during fiscal 1998 all Section 16(a) filing
requirements applicable to its executive officers, directors and greater than
ten percent beneficial owners were complied with on a timely basis.
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, 1998.
12
<PAGE>
During the fiscal year ended June 30, 1998, the Company made purchases of
approximately $790,000 from Technical Instrument-San Francisco, an entity
principally owned by Francis E. Lundy. Price for products purchased are based on
normal terms and conditions.
PRINCIPAL STOCKHOLDERS
The only stockholders who, as of August 31, 1998, 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. 1,925,860(1) 17.4%
6600 France Avenue South
Suite 672
Edina, Minnesota 55435
Canon Inc. 1,210,410 10.9%
Shinjuku Dai-Ichi Seimei Building
Tokyo 160, Japan
Carl A. Zanoni 571,700(2) 5.1%
99 Long Hill Road
Middlefield, Connecticut 06455
- ----------
(1) Information derived from Carsons, I/B/E/S, updated August 31, 1998.
(2) Includes options to purchase 121,500 shares of Common Stock which are
exercisable within 60 days.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP ("KPMG") has been selected as the Company's
independent auditors for fiscal 1999. 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 1999
Annual Meeting of Stockholders of the Company must be received by the Company no
later than June 10, 1999 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 9, 1998
13
<PAGE>
PROXY
ZYGO CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, NOVEMBER 17, 1998
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 21, 1998, at the Annual Meeting of Stockholders to be held on
November 17, 1998, 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 ALL NOMINEES LISTED IN PROPOSAL NO. 1. 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 OFFICES OF THE COMPANY,
LAUREL BROOK RD, MIDDLEFIELD, CONNECTICUT, ON NOVEMBER 17, 1998.
(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,
Nominees for all listed except withhold for the
Nominees following Nominees (write
name(s) below)
-------------------------------
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: _______________________, 1998
___________________________________
Signature
___________________________________
Signature if held jointly
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK.
