<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 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] 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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
II-VI INCORPORATED
375 SAXONBURG BOULEVARD
SAXONBURG, PENNSYLVANIA 16056
------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 6, 1998
------------
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 6, 1998, at 1:00 p.m., to consider and act upon the following
matters:
1. The election of two (2) directors for terms to expire in 2001.
2. The ratification of the Board of Directors' selection of Deloitte &
Touche LLP as auditors for the fiscal year ending June 30, 1999.
3. Such other matters as may properly come before the meeting.
The Board of Directors has established the close of business on Monday,
September 14, 1998, 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 21, 1998
<PAGE>
II-VI INCORPORATED
375 SAXONBURG BOULEVARD
SAXONBURG, PENNSYLVANIA 16056
------------
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS
NOVEMBER 6, 1998
------------
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 6, 1998, at 1:00 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 28, 1998. A copy of the Company's Annual Report to
Shareholders for the fiscal year ended June 30, 1998 is being furnished with
this proxy statement.
Only shareholders of record as of the close of business on Monday, September
14, 1998, 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 6,842,986 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 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 the other proposal 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 Company a written
revocation or a duly executed proxy bearing a later date (although 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
law, the affirmative vote of shareholders entitled to cast at least a majority
of the votes which all shareholders present at the meeting in person or by
proxy are entitled to cast generally is required for shareholder approval,
including the ratification of the selection of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending June 30, 1999.
As such, abstentions generally have the effect of a negative vote. Any 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 and FOR the ratification of the
Board of Directors' selection of Deloitte & Touche LLP as independent auditors
of the Company for the fiscal year ending June 30, 1999.
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 Two 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 Two Directors whose terms expire in 2001. 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 Peter W. Sognefest and Francis J.
Kramer, nominees of the Board of Directors who have served as directors of the
Company since 1979 and 1989, 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 TWO DIRECTORS WHOSE TERMS EXPIRE 2001
PETER W. SOGNEFEST, 57, 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 Semi-Conductor 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, 49, was elected to the Board of Directors on August 26,
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
2
<PAGE>
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 Corp. 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 THREE DIRECTORS WHOSE TERMS EXPIRE IN 1999
CARL J. JOHNSON, 56, 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. From 1964
to 1966, Dr. Johnson worked at Bell Telephone Laboratories as a member of the
technical staff. 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. In August 1996, he was selected as a director
of Xymox Technology, Inc.
THOMAS E. MISTLER, 56, has served as a Director of the Company since 1977.
Mr. Mistler is currently an independent consultant. Previously, he was Senior
Vice President of Energy Systems Business 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 Engineering. Mr. Mistler is a Trustee
of Brothers Brother Foundation, an international charitable organization.
CLASS ONE DIRECTORS WHOSE TERMS EXPIRE 2000
RICHARD W. BOHLEN, 62, 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 MBA degrees from Massachusetts Institute of
Technology (MIT), Polytechnic Institute of NY and California State University
(Fullerton, California), respectively.
DUNCAN A. J. MORRISON, 61, has served as a Director of the Company since
1982. Mr. Morrison is President at ARRI Canada Ltd; 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, 1998. 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 $1,000
per day for attending meetings of the Board of Directors, plus reimbursement
of expenses. In addition, eligible nonemployee directors receive a one-time
grant of options to purchase 15,000 shares of the Company's Common Stock at
the fair market value of such Common Stock on the date of grant. Such options
vest at a rate of 20% per year. 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 $500 per meeting (if held on a day other than a day on which a Board
meeting is held), plus reimbursement of expenses. No additional compensation
is paid to members of the Option Plan Committee, Purchase Plan Committee or
Compensation Committee.
During the year ended June 30, 1998, two members of the Board of Directors,
Thomas E. Mistler and Richard W. Bohlen, served as independent consultants to
the Company for certain matters. In this capacity they earned $10,800 and
$3,000, respectively, during the year ended June 30, 1998.
AUDIT COMMITTEE
The Board has an Audit Committee of nonmanagement directors currently
consisting of Duncan A.J. Morrison, Chairman, 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
1998.
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 and the Purchase Plan Committee each
met twice during fiscal 1998.
COMPENSATION COMMITTEE
The Board has a Compensation Committee, comprised of non-management
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 1998.
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
4
<PAGE>
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.
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, 1998, 1997 and 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION SECURITIES
----------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS COMPENSATION (2)
- --------------------------- ---- ------- --------- ---------- ----------------
($) ($) (#) ($)
<S> <C> <C> <C> <C> <C>
Carl J. Johnson -- 1998 175,000 215,000 -- 7,000
Chairman and Chief Executive 1997 153,000 356,000 4,000 7,000
Officer 1996 144,000 339,000 -- 6,000
Francis J. Kramer -- 1998 161,000 160,000 -- 14,000
President and Chief 1997 140,000 276,000 4,000 14,000
Operating Officer 1996 132,000 250,000 -- 12,000
Herman E. Reedy -- 1998 123,000 58,000 -- 13,000
Vice President and General 1997 111,000 105,000 3,000 13,000
Manager 1996 105,000 104,000 -- 12,000
of Quality and Engineering
James Martinelli -- 1998 105,000 54,000 -- 12,000
Treasurer and Chief 1997 90,000 99,000 3,000 12,000
Financial Officer 1996 78,000 98,000 -- 9,000
</TABLE>
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(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 and under 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.
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, in 1990 as the II-VI Incorporated Stock Option Plan of 1990 and
in 1997 as the II-VI Incorporated Stock Option as of 1997 (the "Option Plan").
The Option Plan currently provides for the issuance of up to 1,560,000 shares
of the Company's Common Stock. As of June 30, 1998, approximately 110 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 1998 and unexercised options held as of June 30, 1998:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FISCAL AT FISCAL
YEAR END YEAR END
------------- -----------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE (1)
- ---- --------------- -------- ------------- -----------------
(#) ($) (#) ($)
<S> <C> <C> <C> <C>
Carl J. Johnson......... -- -- 18,600/10,400 209,745/83,246
Francis J. Kramer....... -- -- 31,400/9,600 369,750/73,997
Herman E. Reedy......... 3,400 76,226 600/6,400 --/46,250
James Martinelli........ -- -- 22,100/14,400 263,528/147,000
</TABLE>
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(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, non-competition 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; 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 is received through bonuses
6
<PAGE>
or incentive stock based on the Company's performance. In the aggregate, 46%
and 63% of the executive officer's compensation for fiscal 1998 and 1997,
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 such 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 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 also awards bonuses under a
Management-By-Objective Plan which is based on a formula percentage of
operating profits, determined annually by the Board, based on achievement of
certain strategic objectives integral to the annual operating plan.
Incentive Stock: The Company has a variable compensation plan covering all
employees, including executives 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 awards 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 awards are designed to align the
interests of the Company's shareholders 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 package. 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 1998, Carl J. Johnson received a salary of $175,000. Dr.
Johnson received a cash bonus in the amount of $215,000.
During fiscal 1998, Francis J. Kramer received a salary of $161,000. Mr.
Kramer received a cash bonus in the amount of $160,000.
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, 1998, 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)
-----------------------
SHARES PERCENT
------------ ----------
<S> <C> <C>
Carl J. Johnson (2)..................................... 1,279,696 18.7%
c/o II-VI Incorporated
Saxonburg Boulevard
Saxonburg, Pennsylvania 16056
Richard W. Bohlen (3)................................... 27,300 *
Thomas E. Mistler (3)(4)................................ 194,000 2.8%
Duncan A.J. Morrison (3)................................ 20,060 *
Peter W. Sognefest (3).................................. 17,156 *
Francis J. Kramer (5)................................... 72,693 1.1%
Herman E. Reedy (5)..................................... 49,741 *
James Martinelli (5)(6)................................. 41,894 *
Pilgrim Baxter & Associates, Ltd. (7)................... 677,500 9.9%
825 Dupontail Road
Wayne, Pennsylvania 19087
PBHG Emerging Growth Fund............................... 570,600 8.3%
825 Dupontail Road
Wayne, Pennsylvania 19087
All executive officers and directors as a group (eight
persons) (2-6,8)....................................... 1,702,540 24.9%
</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 943,477 shares of Common Stock over which Dr. Johnson has sole
voting and investment power, 23,000 shares subject to vested options under
the Option Plan, 125,825 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 65,264 shares in a charitable trust over which Dr. Johnson has shared
voting and investment power. Also includes 122,130 shares held by Dr.
Johnson's spouse, as to which shares he disclaims beneficial ownership.
(3) Includes 9,000 shares subject to stock options held by each of Messrs.
Bohlen, Mistler and Morrison, and 7,000 shares subject to stock options
held by Mr. Sognefest and exercisable within 60 days of August 15, 1998.
(4) All such shares are held in a trust.
(5) Includes 35,400 shares, 3,200 shares and 28,700 shares subject to stock
options held by Messrs. Kramer, Reedy and Martinelli, respectively, and
exercisable within 60 days of August 15, 1998.
(6) Includes 1,400 shares over which Mr. Martinelli has shared voting and
investment power.
(7) Includes the 570,600 shares owned by PBHB Emerging Growth Fund, which has
sole voting and sole dispositive power over such shares.
(8) Includes 124,300 shares subject to stock options held by executive
officers and directors as a group and exercisable within 60 days of August
15, 1998.
8
<PAGE>
PERFORMANCE GRAPH
The following graph compares cumulative total stockholder 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 new and old peer
group of companies constructed by the Company (the "New Peer Group" and the
"Old Peer Group", respectively), for the period from July 1, 1993, to June 30,
1998. The New Peer Group includes Coherent Inc., Laser Power Corporation,
Optical Coating Laboratory Inc., Rofin-Sinar Technologies Inc. and Spectra-
Physics Lasers Inc. The Old Peer Group includes Aeroflex Inc., APA Optics
Inc., Optical Coating Laboratory Inc. and Scan Optics Inc. The Company
believes that the New Peer Group is more representative of its competition and
considers recent developments among competitors in its industry.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG II-VI, NASDAQ INDEX, NEW PEER GROUP AND OLD PEER GROUP INDEX
<TABLE>
<CAPTION>
Measurement period NASDAQ NEW PEER GROUP OLD PEER GROUP
(Fiscal year Covered) II-VI INDEX INDEX INDEX
- --------------------- -------- ------- ------- ---------
<S> <C> <C> <C> <C>
Measurement PT -
7/1/93 $ 100.00 $100.00 $100.00 $100.00
FYE 6/30/94 $ 177.78 $109.66 $ 89.99 $120.96
FYE 6/30/95 $1,233.33 $128.61 $179.11 $141.83
FYE 6/30/96 $1,433.33 $161.89 $324.87 $220.10
FYE 6/30/97 $1,866.67 $185.23 $270.21 $195.02
FYE 6/30/98 $1,266.67 $213.05 $226.52 $261.59
</TABLE>
The above graph represents and compares the value, through June 30, 1998, of
a hypothetical investment of $100 made on July 1, 1993, in each of (i) the
Company's Common Stock, (ii) the NASDAQ Market Index, (iii) the companies
comprising the New Peer Group and (iv) the companies comprising the Old Peer
Group, assuming, in each case, the reinvestment of dividends. The cumulative
shareholder return through June 30, 1998, indicates that the Company has
outperformed the Peer Groups and the NASDAQ Market Value Index.
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 Deloitte & Touche LLP as
the Company's independent auditors for the fiscal year ending June 30, 1999.
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 Deloitte & Touche LLP
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.
9
<PAGE>
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, 1998, as filed with the Securities and Exchange Commission will
be available after September 30, 1998. 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 the 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 capital 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, 1997, through June 30, 1998, except that Herman E.
Reedy did not file a report regarding the exercise of a stock option and sale
of stock, James Martinelli did not file a report with respect to shares
acquired under the Deferred Compensation Plan and Carl J. Johnson did not file
a report with respect to shares acquired under the Deferred Compensation Plan
and certain charitable gifts.
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 1998, must submit
such proposal to the attention of the Treasurer of the Company at the address
of its executive offices no later than May 20, 1999.
10
<PAGE>
P R O X Y
II-VI INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Carl J. Johnson and Thomas E. Mistler or
either of them, with power of substitution to each, as proxies to represent
and to vote as designated on the reverse all of the shares of Common Stock
held of record at the close of business on September 14, 1998 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 6, 1998, and at any adjournment thereof.
(PLEASE SIGN ON REVERSE SIDE AND RETURN PROMPTLY)
<PAGE>
____ |
[X] PLEASE MARK YOUR | |
VOTES AS IN THIS | |
EXAMPLE. |______
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS NUMBERED 1 AND 2
FOR WITHHOLD
AUTHORITY
1. ELECTION OF DIRECTORS [_] [_]
NOMINEES:
Peter W. Sognefest
Francis J. Kramer
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING
NOMINEES:
- -----------------------------------------------
FOR AGAINST ABSTAIN
2. RATIFICATION OF THE BOARD OF
DIRECTORS' SELECTION OF DELOITTE [_] [_] [_]
& TOUCHE LLP AS INDEPENDENT
AUDITORS FOR THE COMPANY AND
ITS SUBSIDIARIES FOR THE 1999
FISCAL YEAR.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE PROXIES SHALL VOTE IN
THE ELECTION OF DIRECTORS FOR THE NOMINEES LISTED AT LEFT HEREOF AND FOR
RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS.
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.
_______________ Date:_______, 1998_________________________ Date:_______, 1998
SIGNATURE SIGNATURE IF HELD JOINTLY
Important: Shareholders sign here exactly as name appears hereon.
