SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
II-VI INCORPORATED
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
II-VI INCORPORATED
375 SAXONBURG BOULEVARD
SAXONBURG, PENNSYLVANIA 16056
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 1, 1996
------------------
TO THE SHAREHOLDERS OF
II-VI INCORPORATED:
The Annual Meeting of Shareholders of II-VI Incorporated will be held at
the offices of the Company, 375 Saxonburg Boulevard, Saxonburg, Pennsylvania, on
Friday, November 1, 1996, at 1:30 P.M., to consider and act upon the following
matters:
1. The election of two (2) directors for terms to expire in 1999.
2. The ratification of the Board of Directors' selection of Alpern,
Rosenthal & Company as auditors for the fiscal year ending June 30,
1997.
3. Approval to permit the II-VI Incorporated Deferred Compensation Plan to
purchase Common Stock of the Company for the account of plan
participants.
4. Such other matters as may properly come before the meeting.
The Board of Directors has established the close of business on Tuesday,
September 10, 1996, as the record date for determination of shareholders
entitled to notice of and to vote at the Annual Meeting.
IF YOU ARE UNABLE TO ATTEND THE MEETING, IT IS REQUESTED THAT YOU COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
Robert D. German, Secretary
September 16, 1996
<PAGE>
II-VI INCORPORATED
375 SAXONBURG BOULEVARD
SAXONBURG, PENNSYLVANIA 16056
------------------
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS
NOVEMBER 1, 1996
------------------
This proxy statement is being furnished to the shareholders of II-VI
Incorporated, a Pennsylvania corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company of proxies to be voted at
the annual meeting of shareholders (the "Annual Meeting") scheduled to be held
on Friday, November 1, 1996, at 1:30 P.M. at the principal executive offices of
the Company, 375 Saxonburg Boulevard, Saxonburg, Pennsylvania 16056. This proxy
statement was first mailed to shareholders on or about
September 20, 1996. A copy of the Company's Annual Report to Shareholders for
the fiscal year ended June 30, 1996 is being furnished with this proxy
statement.
Only shareholders of record as of the close of business on Tuesday,
September 10, 1996, are entitled to notice of and to vote at the Annual Meeting
and any adjournment thereof. The outstanding capital stock of the Company on
that date consisted of 6,331,738 shares of Common Stock, no par value ("Common
Stock"), each entitled to one vote per share.
All shares represented by valid proxies received by the Treasurer of the
Company prior to the Annual Meeting will be voted as specified in the proxy. If
no specification is made, the shares will be voted FOR the election of each of
the Board's nominees to the Board of Directors and FOR each of the proposals
described below. Unless otherwise indicated by the shareholder, the proxy card
also confers discretionary authority on the Board-appointed proxies to vote the
shares represented by the proxy on any matter that is properly presented for
action at the Annual Meeting. A shareholder giving a proxy has the power to
revoke it any time prior to its exercise by delivering to the Treasurer of the
Company a written revocation or a duly executed proxy bearing a later date
(though no revocation shall be effective until notice thereof has been given to
the Secretary of the Company), or by attendance at the meeting and voting his or
her shares in person.
Under the Company's Articles of Incorporation and By-Laws, and applicable
state law, the affirmative vote of shareholders entitled to cast at least a
majority of the votes which all shareholders present at the meeting are entitled
to cast generally is required for shareholder approval, including ratification
of the selection of Alpern, Rosenthal & Company as independent auditors of the
Company for the fiscal year ending June 30, 1997 and the proposal for permitting
the II-VI Incorporated Deferred Compensation Plan (the "Deferred Compensation
Plan") to purchase Common Stock for the account of plan participants. As such,
abstentions generally have the effect of a negative vote. Broker non-votes on a
particular matter have no effect since, by definition, they are not entitled to
be cast on the matter. With regard to the election of directors, votes may be
cast in favor of a candidate or may be withheld. As directors are elected by a
plurality, abstentions and broker non-votes have no effect on the election of
directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company recommends a vote FOR each of the
nominees named below for election as director, FOR the ratification of the Board
of Directors' selection of Alpern, Rosenthal & Company as independent auditors
of the Company for the fiscal year ending June 30, 1997 and FOR permitting the
Deferred Compensation Plan to purchase Common Stock for the account of plan
participants.
ELECTION OF DIRECTORS
The Company's By-Laws provide that the Board of Directors shall establish
the number of directors which shall be not less than five nor more than nine
members. The By-Laws also provide for a board of directors of three classes,
each class consisting of as nearly an equal number as practicable, as determined
by the Board. At present, the Board of Directors of the Company has determined
that the number of directors shall be six consisting of two directors in each of
three classes.
<PAGE>
Two directors of Class Three are to be elected to hold office for a term of
three years and until their respective successors are elected and qualified,
subject to the right of the shareholders to remove any director as provided in
the By-Laws. Any vacancy in the office of a director may be filled by the
shareholders. In the absence of a shareholder vote, a vacancy in the office of a
director may be filled by the remaining directors then in office, even if less
than a quorum, or by the sole remaining director. Any director elected by the
Board of Directors to fill a vacancy shall serve until his successor is elected
and has qualified or until his or her earlier death, resignation or removal. If
the Board of Directors increases the number of directors, any vacancy so created
may be filled by the Board of Directors.
The holders of Common Stock have cumulative voting rights in the election
of directors. In voting for directors, a shareholder has the right to multiply
the total number of shares which the shareholder is entitled to vote by the
number of directors to be elected in each class, and to cast the whole number of
votes so determined for one nominee in the class or to distribute them among the
nominees if more than one nominee is named in such class. The two nominees
receiving the greatest number of affirmative votes will be elected as Class
Three Directors whose terms expire in 1999. Unless otherwise indicated by the
shareholder, a vote for the nominees of the Board of Directors will give the
named proxies discretionary authority to cumulate all votes to which the
shareholder is entitled and to allocate them after the total vote counts are
available in favor of any one or more such nominees as the named proxies
determine, with a view to maximizing the number of nominees of the Board of
Directors who are elected. The effect of cumulation and voting in accordance
with that discretionary authority may be to offset the effect of a shareholder's
having withheld authority to vote for an individual nominee or nominees because
the proxies will be able to allocate votes of shareholders who have not withheld
authority to vote in any manner they determine among such nominees. If a
shareholder desires specifically to allocate votes among one or more nominees,
the shareholder should so specify on the proxy card.
The persons named as proxies on the enclosed proxy card were selected by
the Board of Directors and have advised the Board of Directors that, unless
authority is withheld, they intend to vote the shares represented by them at the
Annual Meeting for the election of Carl J. Johnson and Thomas E. Mistler,
nominees of the Board of Directors, who have served as directors of the Company
since 1971 and 1977, respectively.
The Board of Directors knows of no reason why any nominee for director
would be unable to serve as director. If at the time of the Annual Meeting any
of the named nominees are unable or unwilling to serve as directors of the
Company, the persons named as proxies intend to vote for such substitutes as may
be nominated by the Board of Directors.
The following sets forth certain information concerning each nominee for
election as a director of the Company and each director whose term of office
will continue after the meeting.
NOMINEES FOR CLASS THREE DIRECTORS WHOSE TERMS EXPIRE 1999
CARL J. JOHNSON, 54, a co-founder of the Company in 1971, serves as
Chairman, Chief Executive Officer, and Director of the Company. He served as
President of the Company from 1971 until 1985 and has been a Director since its
founding and Chairman since 1985. From 1966 to 1971, Dr. Johnson was Director of
Research & Development for Essex International, Inc., an automotive electrical
and power distribution products manufacturer, now a subsidiary of United
Technologies Corporation. From 1964 to 1966, Dr. Johnson worked at Bell
Telephone Laboratories as a member of the technical staff. In August 1996, he
was selected as a director of Xymox Technology, Inc. Dr. Johnson completed his
Ph.D. in Electrical Engineering at the University of Illinois in 1969. He holds
the B.S. and M.S. degrees in Electrical Engineering from Purdue University and
Massachusetts Institute of Technology (MIT), respectively.
THOMAS E. MISTLER, 54, has served as a Director of the Company since 1977.
Mr. Mistler is currently General Manager of Energy Systems Business Unit
Operations for Westinghouse Electric Corporation in Pittsburgh, Pennsylvania.
Since 1984, Mr. Mistler has served in various engineering, marketing and general
management capacities with Westinghouse Electric Corporation in Morristown, New
Jersey, and Pittsburgh, Pennsylvania. He was located in Riyadh from 1981 to 1984
where he served as President of Westinghouse Saudi Arabia Limited. Mr. Mistler
joined Westinghouse Electric Corporation in 1965 after graduating from Kansas
State University with B.S. and M.S. degrees in Nuclear Engineering. Mr. Mistler
is a member of the Executive Committee of the Board for Nuclear Energy Institute
and Trustee of Brothers Brother Foundation.
2
<PAGE>
CLASS TWO DIRECTORS WHOSE TERMS EXPIRE 1998
PETER W. SOGNEFEST, 55, has served as a Director of the Company since 1979.
Mr. Sognefest is President and Chief Executive Officer of Xymox Technology, Inc.
Until April 1996, he was President and Chief Executive Officer of LH Research,
Inc. Until February 1994, he was President and Chief Executive Officer of IRT
Corporation. Until 1992, Mr. Sognefest was Chairman of Digital Appliance
Controls, Inc. (a wholly-owned subsidiary of Emerson Electric Company). He
founded the company in 1984 to design, manufacture and market digital appliance
controls and sold the company to Emerson Electric Company in July 1991. Mr.
Sognefest was previously Vice President and General Manager of the Industrial
Electronics Division of Motorola, Inc. from 1982 to 1984, having joined Motorola
in 1977. From 1967 to 1977, he was with Essex Group, Inc., a wholly-owned
subsidiary of United Technologies Corporation, where he held the position of
General Manager of Semiconductor Operations. Mr. Sognefest holds the B.S. and
M.S. degrees in Electrical Engineering from the University of Illinois. He is a
former Senior Fellow at Mellon Institute in Pittsburgh, Pennsylvania, where he
worked on the Essex Group Research Fellowship.
FRANCIS J. KRAMER, 47, was elected to the Board of Directors in August
1989. Mr. Kramer has been employed by the Company since 1983 and has been its
President and Chief Operating Officer since 1985. Mr. Kramer joined the Company
as Vice President and General Manager of Manufacturing and was named Executive
Vice President and General Manager of Manufacturing in 1984. Prior to his
employment by the Company, Mr. Kramer was the Director of Operations for the
Utility Communications Systems Group of Rockwell International Corporation. Mr.
Kramer graduated from the University of Pittsburgh in 1971 with a B.S. degree in
Industrial Engineering and from Purdue University in 1975 with an M.S. degree in
Industrial Administration.
CLASS ONE DIRECTORS WHOSE TERMS EXPIRE 1997
RICHARD W. BOHLEN, 60, has served as a Company Director since 1984. Mr.
Bohlen was Senior Vice President, Operations, Rockwell International Corporation
from 1989 to 1991. Previously, he was President of the Measurement and Flow
Control Division of Rockwell International Corporation from 1986 to 1988. From
1977 until 1986, he was President of the Municipal and Utility Division at
Rockwell. In 1972 he became Director of Technology for Rockwell's Industrial
Products Group and served as Corporate Director of Business Strategy from 1973
to 1976. Mr. Bohlen spent the first fifteen years of his career in the aerospace
industry with Grumman Corporation and Rockwell International Corporation. He
formerly served as director of GF Corporation and as chairman and director of
the Pacific Coast Gas Association. Mr. Bohlen holds the B.S., M.S. and M.B.A.
degrees from Massachusetts Institute of Technology (MIT), Polytechnic Institute
of NY and California State University (Fullerton, California) respectively.
DUNCAN A. J. MORRISON, 59, has served as a Director of the Company since
1982. Mr. Morrison is President at ARRI Canada Limited; previously, he was a
Vice President of Corporate Financial Consulting with Seapoint Financial
Corporation in Toronto, Canada. From 1987 until 1990, Mr. Morrison was the Chief
Financial Officer of the CTV Television Network Ltd. in Toronto, Canada. From
1976 until 1986, Mr. Morrison was the Vice President/Controller of Copperweld
Corporation in Pittsburgh, Pennsylvania. He was Vice President, Treasurer and
the Comptroller of Kysor Industrial Corporation in Cadillac, Michigan from 1966
to 1976. Mr. Morrison is a director of Minder Research Corporation (electronics
manufacturer). Mr. Morrison was born in Canada and graduated from Westerveld
Business College in London, Ontario, with a B.A. in Accounting.
3
<PAGE>
BOARD OF DIRECTORS AND BOARD COMMITTEES
The Company's Board of Directors held four (4) meetings during the fiscal
year ended June 30, 1996. Each director attended at least 75% of the meetings of
the Board of Directors and any committee of which he is a member.
Directors who are not also employees of the Company receive a fee of $700
per day for attending meetings of the Board of Directors, plus reimbursement of
expenses. Some of the Board's meetings are held for a two-day period. Members of
the Audit Committee of the Board of Directors are paid $350 per meeting (if held
on a day other than a day on which a Board meeting is held), plus reimbursement
of expenses. Under the 1994 Nonemployee Directors Stock Option Plan approved by
the shareholders at the 1994 Annual Meeting (the "Directors Plan"), each of the
Company's nonemployee directors received options to purchase 15,000 shares,
including the effect of the two-for-one stock split effected by the Company on
September 7, 1995 (the "Stock Split"), of the Company's Common Stock at an
exercise price equal to $4.00, the fair market value at the time of grant. Such
options vest in five equal annual installments beginning on November 4, 1995. No
additional compensation is paid to members of the Option Plan Committee,
Purchase Plan Committee or Compensation Committee.
AUDIT COMMITTEE
The Board has an Audit Committee of nonmanagement directors currently
consisting of Duncan A. J. Morrison and Richard W. Bohlen. The Committee's
duties include monitoring performance of the Company's business plan, reviewing
the Company's internal accounting methods and procedures and reviewing certain
business strategies. The Audit Committee met twice in fiscal 1996.
OPTION PLAN COMMITTEE AND PURCHASE PLAN COMMITTEE
The Board has an Option Plan Committee and a Purchase Plan Committee to
administer those plans. The duties of the Option Plan Committee include
selecting from eligible employees those persons to whom options will be granted
and determining the type of option, the number of shares to be included in each
option, any restriction on exercise for some or all of the shares subject to the
option, and the option price. The Option Plan Committee establishes the period
in which each option may be exercised, either in whole or in part. The Option
Plan Committee also administers the Directors Plan. The Purchase Plan
Committee's duties include administering and interpreting the Company's Amended
and Restated Employee Stock Purchase Plan (the "Purchase Plan"); proscribing,
amending and rescinding rules and regulations relating to the Purchase Plan;
suspending the operation of the Purchase Plan; and making all other
determinations necessary to the administration of the Purchase Plan, including
the appointment of individuals to facilitate the day-to-day operation thereof.
The current members of each of these committees are Peter W. Sognefest,
Chairman, and Richard W. Bohlen, Thomas E. Mistler and Duncan A. J. Morrison.
The Option Plan Committee met two (2) times during fiscal 1996 while the
Purchase Plan Committee met two (2) times during the same period.
COMPENSATION COMMITTEE
The Board has a Compensation Committee, comprised of nonmanagement
directors, which is responsible for determining the compensation of the
Company's executive officers and management. The Compensation Committee is
comprised of Peter W. Sognefest, Chairman, and Richard W. Bohlen, Thomas E.
Mistler and Duncan A. J. Morrison. It met twice in fiscal 1996.
NOMINATIONS
The Company's By-Laws describe in full the procedures to be followed by a
shareholder in recommending nominees for director. In general, such
recommendations can only be made by a shareholder entitled to notice of and to
vote at a meeting at which directors are to be elected, must be in writing and
must be received by the Chairman of the Company no later than (i) with respect
to the election of directors at an annual meeting, 90 days prior to the
anniversary date of the prior year's annual meeting, or (ii) with respect to the
election of directors at a special meeting, within 10 days after notice of such
meeting is given to shareholders or publicly disseminated. Furthermore, the
recommendation must include certain information regarding the nominating
shareholder and the nominee (including their relationship and any understanding
between such persons regarding such nomination, the shares owned by the
nominating shareholder, the number of shares to be voted for such nominee and
information concerning such nominee that would be required in a proxy statement
filed with the Securities and Exchange Commission). The Company does not have a
standing nominating committee.
4
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth all cash compensation paid by the Company,
as well as other compensation paid or accrued, to each of its executive officers
(the "Named Executive Officers") for services rendered in all capacities during
the fiscal years ended June 30, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
<S> <C> <C> <C> <C> <C>
ANNUAL SECURITIES
COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS COMPENSATION (2)
<CAPTION>
($) ($) (POUND) ($)
<S> <C> <C> <C> <C> <C>
CARL J. JOHNSON -- 1996 144,000 339,000 -- 6,000
Chairman and Chief Executive Officer 1995 137,000 338,000 18,000 3,000
1994 132,000 27,000 -- 4,000
FRANCIS J. KRAMER -- 1996 132,000 250,000 -- 12,000
President and Chief Operating Officer 1995 126,000 265,000 16,000 8,000
1994 121,000 22,000 -- 3,000
HERMAN E. REEDY -- 1996 105,000 104,000 -- 12,000
Vice President and General Manager 1995 100,000 65,000 10,000 7,000
of Quality and Engineering 1994 97,000 8,000 -- 4,000
JAMES MARTINELLI -- 1996 78,000 98,000 -- 9,000
Treasurer and Chief Financial Officer 1995 68,000 54,000 30,000 5,000
</TABLE>
- ---------
(1) The amounts shown include management bonuses determined at the discretion of
the Board of Directors based on the Company's performance; amounts received
under the Bonus Incentive Plan in the fiscal year, and amounts to be paid in
fiscal 1997 under such plan; the Management-By-Objective Plan for services
rendered in the fiscal year; and bonuses deferred under the Deferred
Compensation Plan. Under the Bonus Incentive Plan, each participant receives
a cash bonus based on a formula percentage of the Company's profits
determined annually by the Board of Directors. Partial bonus amounts are
paid quarterly based on estimated Company performance, and the remainder is
paid after fiscal year end and final determination of the applicable
percentage by the Board. Bonus payments are pro-rated according to each
participant's annual base compensation. Under the Company's
Management-By-Objective Plan, a formula percentage of operating profits is
determined annually by the Board of Directors and awarded to selected
employees. These awards are based on graded performance of recipients
measured against pre-established goals. Under the Deferred Compensation
Plan, eligible participants can elect to defer a percentage of bonus
compensation.
(2) Amounts shown are for premiums paid for life and disability insurance. The
amounts shown also include payments made pursuant to the Company's Profit
Sharing Plan, which is qualified under Section 401 of the Internal Revenue
Code of 1986, as amended.
STOCK OPTION PLAN
The Company's Board of Directors and shareholders in 1982 adopted an
Incentive Stock Option Plan which was amended and restated by the Board and
approved by the shareholders in 1987 as the II-VI Incorporated Stock Option Plan
of 1987 and in 1990 as the II-VI Incorporated Stock Option Plan of 1990 (the
"Option Plan"). The Option Plan provides for the issuance of up to 1,240,000
shares of the Company's Common Stock, including the effect of the Stock Split.
As of June 30, 1996, approximately 76 officers and employees of the Company were
eligible for consideration to receive options under the Option Plan.
5
<PAGE>
The following table sets forth information with respect to each of the
Company's Named Executive Officers concerning the exercise of options during
fiscal 1996 and unexercised options held as of June 30, 1996:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<S> <C> <C> <C> <C>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FISCAL AT FISCAL
YEAR END YEAR END
<CAPTION>
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE (1)
(POUND) ($) (POUND) ($)
<S> <C> <C> <C> <C>
CARL J. JOHNSON.................................. -- -- 26,200/15,800 369,790/213,100
FRANCIS J. KRAMER................................ -- -- 22,800/14,200 321,530/191,600
HERMAN E. REEDY.................................. -- -- 5,200/9,400 77,206/127,100
JAMES MARTINELLI................................. -- -- 9,200/24,300 127,100/343,200
</TABLE>
- ---------
(1) Calculated on the basis of the fair market value of the underlying
securities at year end, minus the exercise price.
EMPLOYMENT AGREEMENTS
Carl J. Johnson, Francis J. Kramer, and Herman E. Reedy have employment
agreements with the Company, terminable by either party on thirty days' prior
written notice, which contain, among other matters, provisions for payment of
compensation and benefits in the discretion of the Company, provisions for
severance payments based on salary and years of service, and agreements
regarding confidentiality, noncompetition and assignment of inventions.
REPORT OF THE COMPENSATION COMMITTEE AND OPTION COMMITTEE
The Compensation Committee has the responsibility of recommending to the
Board of Directors appropriate salaries and bonuses for all executive officers
and top management of the Company. The Option Committee has the responsibility
of granting stock options to eligible employees, including the executive
officers. Both committees are comprised of all of the non-management directors
of the Company.
Compensation Philosophy
To link the interests of executives and managers to the interests of
shareholders and other potential investors.
To provide incentives for working toward increasing short-term and
long-term shareholder value through growth-driven financial compensation.
To provide incentives for innovation, quality management, responsiveness to
customer needs, and an action-oriented approach to opportunities in the
marketplace.
To attract and retain individuals with the leadership and technical skills
required to carry the Company into the future, and to grow the business.
To provide compensation in a manner that allows for shared risks by the
executives and managers but also the potential for shared rewards.
Executive Compensation
The Company uses a three-pronged approach to its executive compensation
program: 1) base salary; 2) potential for cash or stock bonuses which are
eligible for deferral; and 3) incentive stock. The Company's compensation plans
tie a significant portion of executive compensation to performance goals. In
fact, executive officers have over 35-50% of their compensation package
"at-risk," which means it is not guaranteed but rather
6
<PAGE>
is received through bonuses or incentive stock based on the Company performance.
In the aggregate, 62% and 60% of the executive officer's compensation for fiscal
1996 and 1995, respectively, on average, came from at-risk incentive directly
related to Company performance. During the course of each year, the Committee
meets with the CEO and COO of the Company to review recommendations on changes,
if any, in the base salary of each executive officer. Based on the Committee's
judgment and knowledge of salary practices, national surveys and an individual's
performance and contribution to the Company, the Committee modifies or approves
the CEO and COO recommendations.
Base Salary: The Company sets base salary levels for executive management
each year based on a number of factors, including the status of the competitive
marketplace for such positions, the responsibilities of the position, the
experience of the individual, the individual's performance during the past year,
and equity in relationship to other executive positions within the Company.
Cash and Stock Bonuses: The Company awards cash bonuses under a Bonus
Incentive Plan which is based on a formula percentage of the Company's profits
determined annually by the Board of Directors. The Company awards bonuses under
a Management-By-Objective Plan which is based on a formula percentage of
operating profits, determined annually by the Board, and based on achievement of
certain strategic objectives integral to the annual operating plan. In addition,
at the Board of Directors discretion, annual bonuses may be awarded to executive
officers and top management based on the Company's performance.
Incentive Stock: The Company has a variable compensation plan covering all
employees, including executive officers based on achievement of certain
objectives. On average, once every two fiscal years the Option Committee may
consider granting executive officers of the Company options under the Option
Plan. These options, which generally vest over time, are awarded to officers
based on their continued contribution to the Company's achievement of financial
and operating objectives. These options are designed to align the interests of
the Company's stockholders and to motivate the Company's executive officers to
remain focused on the overall long-term performance of the Company.
Chief Executive Officer and Chief Operating Officer
In setting compensation for the Chief Executive Officer and Chief Operating
Officer, the Compensation Committee considers objective criteria including
performance of the business, accomplishments of long-term strategic goals and
the development of management. The Compensation Committee considers the
Company's revenue growth and earnings to be the most important factors in
determining the Chief Executive Officer's and Chief Operating Officer's
compensation packages. Along with the financial performance factors, the
Compensation Committee also considers achievement of long-term strategic goals,
including enhancing the Company's reputation among both its customer and
investor bases during the year, and the market base salary of comparable
positions. The base salary has normally been 70-75% of the market base salary
due to the "at risk" portion of the compensation mentioned earlier.
During fiscal 1996, Carl J. Johnson received a salary of $144,000. Dr.
Johnson received a cash bonus in the amount of $295,000, a stock bonus of
$15,000 and a deferred bonus of $29,000.
During fiscal 1996, Francis J. Kramer received a salary of $132,000. Mr.
Kramer received a cash bonus in the amount of $223,000, a stock bonus of $11,000
and a deferred bonus of $16,000.
Compensation Committee and Option
Committee
Peter W. Sognefest, Chairman
Richard W. Bohlen
Thomas E. Mistler
Duncan A.J. Morrison
7
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information available to the Company
as of August 15, 1996, regarding the ownership of the Company's Common Stock by
(i) each of the Company's directors and nominees; (ii) each of the Company's
Named Executive Officers; (iii) all executive officers and directors of the
Company as a group; and (iv) each person or group known by the Company to
beneficially own more than five percent (5%) of the Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK (1)
<S> <C> <C>
SHARES PERCENT
CARL J. JOHNSON (2)................................................................... 1,281,423 20.2%
c/o II-VI Incorporated
Saxonburg Boulevard
Saxonburg, Pennsylvania 16056
RICHARD W. BOHLEN (3)................................................................. 59,400 *
THOMAS E. MISTLER (3)(4).............................................................. 185,390 2.9%
DUNCAN A. J. MORRISON (3)............................................................. 14,060 *
PETER W. SOGNEFEST (3)................................................................ 15,066 *
FRANCIS J. KRAMER (5)................................................................. 62,840 1.0%
HERMAN E. REEDY (5)................................................................... 53,535 *
JAMES MARTINELLI (5).................................................................. 27,428 *
ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (EIGHT PERSONS) (2)-(6)............... 1,699,142 26.5%
</TABLE>
- ---------
* Less than 1%
(1) Unless otherwise indicated, each of the shareholders named in the table has
sole voting and investment power with respect to the shares beneficially
owned, subject to the information contained in the footnotes to the table.
(2) Includes 898,551 shares of Common Stock over which Dr. Johnson has sole
voting and investment power, 29,800 shares subject to vested options under
the Option Plan, 173,100 shares over which Dr. Johnson has sole voting power
and shared investment power (with a voting trust pursuant to rights of first
refusal and option rights over shares held in the voting trust), and 58,842
shares in a charitable trust over which Dr. Johnson has shared voting and
investment power. Also includes 121,130 shares held by Dr. Johnson's spouse,
as to which shares he disclaims beneficial ownership.
(3) Includes 3,000 shares subject to stock options held by each of Messrs.
Bohlen, Mistler, Morrison and Sognefest and exercisable within 60 days of
August 15, 1996.
(4) All such shares are held in a trust.
(5) Includes 26,000 shares, 7,200 shares and 15,200 shares subject to stock
options held by Messrs. Kramer, Reedy and Martinelli, respectively, and
exercisable within 60 days of August 15, 1996.
(6) Includes 90,200 shares subject to stock options held by executive officers
and directors as a group and exercisable within 60 days of August 15, 1996.
8
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PERFORMANCE GRAPH
The following graph compares cumulative total shareholder return on the
Company's Common Stock with the cumulative total shareholder return of the
companies listed in the NASDAQ Market Value Index and with a peer group of
companies constructed by the Company (the "Peer Group"), for the period from
July 1, 1991, to June 30, 1996. The Peer Group includes Aeroflex Inc., Apa
Optics Inc., Optical Coating Lab Inc., Scan Optics Inc. and Tinsley Labs Inc.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
- ------------------------------ FISCAL YEAR ENDING ------------------------------
COMPANY 1991 1992 1993 1994 1995 1996
II-VI INC 100 100.00 78.26 139.13 965.22 1121.74
PEER GROUP 100 110.63 101.36 124.94 144.87 220.31
BROAD MARKET 100 107.75 132.27 145.04 170.11 214.14
THE PEER GROUP CHOSEN WAS:
Customer Selected Stock List
THE BROAD MARKET INDEX CHOSEN WAS:
NASDAQ MARKET INDEX
THE PEER GROUP IS MADE UP OF THE FOLLOWING SECURITIES:
The above graph represents and compares the value, through June 30, 1996,
of a hypothetical investment of $100 made on July 1, 1991, in each of (i) the
Company's Common Stock, (ii) the Nasdaq Market Index, and (iii) the companies
comprising the Peer Group, assuming, in each case, the reinvestment of
dividends. The cumulative shareholder return through June 30, 1996, indicates
that the Company has outperformed the Peer Group and the Nasdaq Market Value
Index.
APPROVAL TO ACQUIRE COMPANY COMMON STOCK UNDER THE II-VI INCORPORATED DEFERRED
COMPENSATION PLAN
OVERVIEW
On June 21, 1996, the Board of Directors of the Company approved a new
compensation plan, the II-VI Incorporated Deferred Compensation Plan (together
with any amendments thereto and together with the trust between the Company and
the trustee, collectively, the "Plan"). The Plan is designed to allow officers
and key employees of the Company to defer receipt of compensation into a trust
fund for retirement purposes. The Plan was established to assist the Company's
efforts to appropriately compensate high quality employees.
The Plan permits the purchase of Common Stock with funds accumulated
pursuant to the Plan. The Company is seeking to obtain shareholder approval
before permitting the Plan to purchase Common Stock in order to comply with the
rules of the Nasdaq Stock Market.
SUMMARY OF PLAN
The principal features of the Plan are described below. The full text of
the Plan can be obtained from the Company by writing the Treasurer at II-VI
Incorporated, 375 Saxonburg Boulevard, Saxonburg, Pennsylvania 16056.
Generally. The Plan is a nonqualified, defined contribution employees'
retirement plan. The Plan could be funded by the Company making contributions
based on compensation deferrals, matching contributions and discretionary
contributions. Compensation deferrals will be based on an election by the
participant to defer a percentage of compensation under the Plan. At the
Company's discretion, it may match deferral elections or make discretionary
contributions unrelated to any deferral election. All assets in the Plan are
subject to claims of the Company's creditors until such amounts are paid to the
Plan participants.
Administration. The Plan shall be administered by the Company. A trust has been
established between the Company and Bankers Trust Company, the trustee, for the
purpose of holding and distributing the assets of the Plan.
Eligibility. Any employee who is invited to participate in the Plan and who
represents a select group of highly-compensated or management employees, as
determined by the Company, shall be eligible to participate in the Plan. An
employee may first become a participant beginning on or after June 30, 1996.
Contributions.
Compensation--The Plan allows each participant to elect to defer any
percentage of compensation for each pay period. At present, the Company only
permits participants to defer a percentage of the participant's anticipated
bonus, not salary. A deferral agreement form is used to elect such percentage.
Matching Contributions--The Plan permits the Company to match the
employee's contribution based on a percentage determined by the Company. At
present, the Company does not intend to make any matching contribution.
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<PAGE>
Discretionary Contributions--The Plan permits the Company to make
discretionary contributions to a participant as determined in the sole
discretion of the Company. At present, the Company does not intend to make any
discretionary contributions.
All contributions are forwarded by the Company to the trustee and are deposited
into the trust. To the extent permitted, the participant directs how the
contributions are to be invested. Subject to shareholder approval, this may
include acquiring Common Stock of the Company.
Elections to Defer Compensation. Under the Plan, participants can elect to
defer any compensation not yet received by them. As noted, at present the
Company is allowing participants to defer only their annual bonus, which is
earned and paid in August each year for services rendered during the prior
fiscal year ended June 30. As of June 30, 1996, participants in the Plan had
made elections with respect to deferral of future bonuses. A participant is
entitled to change an election at any time, although such election will not be
effective for any compensation previously received by the participant.
Investment Options. Each participant can allocate his deferred compensation
into various investment funds. In addition, subject to shareholder approval,
participants will be entitled to elect to acquire Company Common Stock with
deferred compensation. A participant is entitled to change his investment
elections at any time.
Benefits. Upon retirement, termination or disability, a participant's account
shall be distributed to the participant according to a series of installment
payments as selected by the participant. Upon death of a participant, a single
sum payment shall be made to the participant's beneficiary.
Withdrawal Privileges. A participant may withdraw up to 90% of the value of his
account in the event of an unforeseeable emergency. The Plan Administrator will
establish uniform, nondiscriminatory guidelines to use in determining whether a
financial hardship exists.
Amendments to the Plan. The Company may amend the Plan at any time.
Non-Alienation of Benefits. No benefits payable under the Plan shall be subject
to the claims of any creditors of the participants, beneficiary or spouse.
Federal Income Tax Consequences
The following summary is based upon an interpretation of present federal
tax laws and regulations and may be inapplicable if such laws and regulations
are changed. The Plan is subject to certain provisions of the Employee
Retirement Income Security Act of 1974. The Plan is not qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Generally, any compensation deferred by a participant will not be subject
to income taxes at the time of the deferral. Investment earnings generated by
the deferred compensation accounts held by the trust represent taxable income to
the Company and not to the participants. Payments that are made from the trust
to the participant on account of the death, disability, termination or
retirement of the participant will be taxable income to the participant in the
year received. The Company will receive a corresponding income tax deduction at
that time.
VOTE REQUIRED PRIOR TO PERMITTING THE DEFERRED COMPENSATION PLAN TO ACQUIRE
COMPANY COMMON STOCK FOR THE ACCOUNT OF PLAN PARTICIPANTS
The affirmative vote of at least a majority of the total votes entitled to
be cast on the proposal by shareholders present in person or by proxy at the
annual meeting is required to permit participants in the Plan to acquire Company
Common Stock under the Plan. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR PERMITTING THE DEFERRED COMPENSATION PLAN TO ACQUIRE COMMON STOCK OF
THE COMPANY FOR THE ACCOUNT OF PLAN PARTICIPANTS.
RATIFICATION OF SELECTION OF AUDITORS
Unless otherwise directed by the shareholders, proxies will be voted for
the ratification of the Board of Directors' selection of Alpern, Rosenthal &
Company as the Company's independent auditors for the fiscal year ending June
30, 1997. The affirmative vote of the holders of at least a majority of the
votes which all shareholders present at the Annual Meeting are entitled to cast
is required to ratify such selection. A representative of
10
<PAGE>
Alpern, Rosenthal & Company is expected to be present at the Annual Meeting to
respond to appropriate questions and will have the opportunity to make a
statement if such person so desires.
FORM 10-K ANNUAL REPORT TO THE SECURITIES
AND EXCHANGE COMMISSION
A copy of the Annual Report on Form 10-K of the Company for the fiscal year
ended June 30, 1996, as filed with the Securities and Exchange Commission, will
be available after September 30, 1996. A shareholder may obtain a copy of the
Form 10-K without charge and a copy of any exhibits thereto upon payment of a
reasonable charge limited to the Company's costs of providing such exhibits by
writing to Treasurer at II-VI Incorporated, 375 Saxonburg Boulevard, Saxonburg,
Pennsylvania 16056.
OTHER MATTERS
The Company knows of no other matters to be presented for action at the
meeting. However, if any other matters should properly come before the meeting,
it is intended that votes will be cast pursuant to the proxy in respect thereto
in accordance with the best judgment of the persons acting as proxies.
The Company will pay the expense in connection with the printing,
assembling and mailing to the holders of Common Stock of the Company the notice
of meeting, this proxy statement and the accompanying form of proxy. In addition
to the use of the mails, proxies may be solicited by directors, officers or
regular employees of the Company personally or by telephone or telegraph. The
Company may request the persons holding stock in their names, or in the names of
their nominees, to send proxy material to and obtain proxies from their
principals, and will reimburse such persons for their expense in so doing.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons who beneficially own
more than ten percent of a class of the Company's registered equity securities
to file with the Securities and Exchange Commission and deliver to the Company
initial reports of ownership and reports of changes in ownership of such
registered equity securities.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, the Company's directors, executive officers and more than
ten percent shareholders filed all reports due under Section 16(a) for the
period from July 1, 1995, through June 30, 1996.
SHAREHOLDER PROPOSALS
Shareholders who intend to submit a proposal at the Annual Meeting of the
shareholders of the Company expected to be held in November 1997 must submit
such proposal to the attention of the Treasurer of the Company at the address of
its executive offices no later than May 23, 1997.
11
<PAGE>
II-VI INCORPORATED
This Proxy Is Solicited On Behalf Of The Board Of Directors Of The Company
The undersigned hereby appoints Francis J. Kramer and Peter W. Sognefest
or either of them, with power of substitution to each, as proxies to represent
and to vote as designated on the reverse side all of the shares of Common
Stock held of record at the close of business on September 10, 1996 by the
undersigned at the annual meeting of shareholders of II-VI Incorporated
to be held at the offices of the Company, 375 Saxonburg Boulevard, Saxonburg,
Pennsylvania 16056, on November 1, 1996, and at any adjournment thereof.
(Please sign on reverse side and return promptly)
<PAGE>
Please mark your
A [X] votes as in this
example.
The Board of Directors recommends a vote "FOR" proposals numbered 1, 2 and 3.
1. ELECTION OF DIRECTORS
Vote FOR all nominees
listed at right (except WITHHOLD AUTHORITY
as indicated to the to vote for all nominees Nominees: Carl J. Johnson
contrary below) listed at right Thomas E. Mistler
[ ] [ ]
(Instruction: To withhold authority to vote for any individual nominee, strike a
line through that nominee's name.)
FOR AGAINST ABSTAIN
2. Ratification of the Board of Directors [ ] [ ] [ ]
selection of Alpern, Rosenthal & Company
as independent auditors for the Company
and its subsidiaries for the 1997 fiscal year.
3. Permit the II-VI Incorporated Deferred [ ] [ ] [ ]
Compensation Plan to purchase Common Stock
of the Company for the account of plan
participants.
Unless otherwise specified in the squares provided, the proxies shall vote in
the election of directors for the nominees listed at left hereof, for
ratification of the selection of Alpern, Rosenthal & Company as independent
auditors and for permitting the II-VI Incorporated Deferred Compensation
Plan to purchase Common Stock of the Company for the account of plan
participants. Proxies also shall have discretionary power to vote upon such
other matters as may properly come before the meeting or any adjournment
thereof.
A majority of such proxies who shall be present and shall act at the meeting
(or if only one shall be present and act, then that one) may exercise all
powers hereunder.
PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY.
SIGNATURE _______________________ DATE ____________ 1996
_________________________________ DATE ____________ 1996
Signature if held jointly
Important: Shareholders sign here exactly as the name appears hereon.
