-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J3tFI3CuqHlab9AQzfNhuarmVd5dwKV24D/qQl00OWXDkmGFw0rj64UGTMhe2uTu iUOu/Ce0fBKuO7QNFCZnSw== 0000950132-99-000875.txt : 19991227 0000950132-99-000875.hdr.sgml : 19991227 ACCESSION NUMBER: 0000950132-99-000875 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991105 FILED AS OF DATE: 19990928 FILER: COMPANY DATA: COMPANY CONFORMED NAME: II-VI INC CENTRAL INDEX KEY: 0000820318 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 251214948 STATE OF INCORPORATION: PA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-16195 FILM NUMBER: 99718446 BUSINESS ADDRESS: STREET 1: 375 SAXONBURG BLVD CITY: SAXONBURG STATE: PA ZIP: 16056 BUSINESS PHONE: 4123524455 MAIL ADDRESS: STREET 1: 375 SAXONBURG BLVD CITY: SAXONBURG STATE: PA ZIP: 16056 DEF 14A 1 DEFINITIVE PROXY STATEMENT FOR II-VI INCORPORATED SCHEDULE 14A 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 (S) 240.14a-11(c) or (S) 240.14a-12 II - VI INCORPORATED - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) 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: ------------------------------------------------------------------------- (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: II-VI INCORPORATED 375 Saxonburg Boulevard Saxonburg, Pennsylvania 16056 ------------ Notice of Annual Meeting of Shareholders to be held on November 5, 1999 ------------ 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 5, 1999, 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 2002. 2. The ratification of the Board of Directors' selection of Deloitte & Touche LLP as auditors for the fiscal year ending June 30, 2000. The shareholders will also be asked to consider such other matters as may properly come before the meeting. The Board of Directors has established the close of business on Monday, September 13, 1999, 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 20, 1999 II-VI INCORPORATED 375 Saxonburg Boulevard Saxonburg, Pennsylvania 16056 ------------ PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS November 5, 1999 ------------ 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 5, 1999, 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, 1999. A copy of the Company's Annual Report to Shareholders for the fiscal year ended June 30, 1999 is being furnished with this proxy statement. Only shareholders of record as of the close of business on Monday, September 13, 1999, 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 6,348,826 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, 2000. 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, 2000. 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. 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 2002. 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 in 2002 Carl J. Johnson, 57, 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 B.S. and M.S. degrees in Electrical Engineering from Purdue University and Massachusetts Institute of Technology (MIT), respectively. Dr. Johnson serves as a director of Xymox Technology, Inc., Armstrong Laser Technology, Inc. and Applied Electro-Optics Corporation. Thomas E. Mistler, 57, has served as a Director of the Company since 1977. Since September 1, 1999 Mr. Mistler has been President, Chief Executive Officer and a director of ESCO Holding Corp. and Engineered Arresting Systems Corporation of Aston, Pennsylvania. Previously, he was Senior Vice President of Energy Systems Business for Westinghouse Electric Corporation in Pittsburgh, Pennsylvania. From 1984 to 1998, 2 Mr. Mistler 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 director and vice-chairman of Brothers Brother Foundation, an international charitable organization. Class One Directors Whose Terms Expire 2000 Richard W. Bohlen, 63, 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, 62, has served as a Director of the Company since 1982. Mr. Morrison has been President at ARRI Canada Ltd. since October 1994. 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. Class Two Directors Whose Terms Expire 2001 Peter W. Sognefest, 58, has served as a Director of the Company since 1979. Since May 1996, Mr. Sognefest has been President and Chief Executive Officer of Xymox Technology, Inc. From March 1994 until April 1996, he was President and Chief Executive Officer of LH Research, Inc. From 1992 until February 1994, he was President and Chief Executive Officer of IRT Corporation. Until 1992, Mr. Sognefest was Chairman of Digital Appliance Controls, Inc. (DAC; a wholly-owned subsidiary of Emerson Electric Company). He founded DAC 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. Francis J. Kramer, 50, has served as a Director of the Company since 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 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. 3 BOARD OF DIRECTORS AND BOARD COMMITTEES The Company's Board of Directors held four (4) meetings during the fiscal year ended June 30, 1999. 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 fiscal year ended June 30, 1999, 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 $30,160 and $3,000, respectively, during the year ended June 30, 1999. Audit Committee The Board has an Audit Committee of non-management 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 1999. 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 Company's Nonemployee Directors Stock Option 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 1999. 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. The Compensation Committee met twice in fiscal 1999. 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 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, 1999, 1998 and 1997: Summary Compensation Table
Annual Compensation Securities ----------------- Underlying All Other Name and Principal Position Year Salary Bonus (1) Options Compensation (2) - --------------------------- ---- ------- --------- ---------- ---------------- ($) ($) (#) ($) Carl J. Johnson-- 1999 191,000 97,000 9,000 14,000 Chairman and Chief Executive Officer 1998 175,000 215,000 -- 7,000 1997 153,000 356,000 4,000 7,000 Francis J. Kramer-- 1999 175,700 74,000 9,000 14,000 President and Chief Operating Officer 1998 161,000 160,000 -- 14,000 1997 140,000 276,000 4,000 14,000 Herman E. Reedy-- 1999 131,000 44,000 7,000 11,000 Vice President and General Manager 1998 123,000 58,000 -- 13,000 of Quality and Engineering 1997 111,000 105,000 3,000 13,000 James Martinelli-- 1999 115,000 44,000 7,000 11,000 Treasurer and Chief Financial Officer 1998 105,000 54,000 -- 12,000 1997 90,000 99,000 3,000 12,000
- -------- (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 (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, 1999, approximately 100 officers and employees of the Company were eligible for consideration to receive options under the Option Plan. 5 The following table sets forth information with respect to each of the Company's Named Executive Officers regarding options granted in the last fiscal year. Option Grants in Last Fiscal Year
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation For Option Individual Grants Term ---------------------------------------------- -------------- Number of Securities % of Total Underlying Options Unexercised Granted to Exercise Options Employees in or Expiration Name Granted Fiscal Year Base Price Date 5% 10% - ---- ----------- ------------ ---------- ---------- ------ ------- (#) ($/Sh) ($) ($) Carl J. Johnson......... 9,000 10 $11.00 8/14/08 62,000 158,000 Francis J. Kramer....... 9,000 10 $11.00 8/14/08 62,000 158,000 Herman E. Reedy......... 7,000 8 $11.00 8/14/08 48,000 123,000 James Martinelli........ 7,000 8 $11.00 8/14/08 48,000 123,000
The following table sets forth information with respect to each of the Company's Named Executive Officers concerning the exercise of options during fiscal 1999 and unexercised options held as of June 30, 1999: Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options Options at Fiscal at Fiscal Year End Year End ------------- ----------------- Shares Acquired Value Exercisable/ Exercisable/ Name on Exercise Realized Unexercisable Unexercisable (1) - ---- --------------- --------- ------------- ----------------- (#) ($) (#) ($) Carl J. Johnson......... -- -- 23,000/15,000 149,725/24,525 Francis J. Kramer....... -- -- 35,400/14,600 246,205/21,800 Herman E. Reedy......... 2,000 10,875 1,200/10,800 --/13,625 James Martinelli........ -- -- 28,700/14,800 206,403/45,000
- -------- (1) Calculated on the basis of the fair market value of the underlying securities at fiscal year end, minus the exercise price. Employment Agreements Carl J. Johnson, Francis J. Kramer, Herman E. Reedy and James Martinelli 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, and agreements regarding confidentiality, non-competition and assignment of inventions. The employment agreements also provide that in the event the employee is terminated by the Company for any reason except for fraud, theft, embezzlement, or any other dishonest act, the employee will continue to receive his base salary at the time of termination for up to nine months after the date of termination. 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. 6 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, environmental, health and safety performance 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 collectively have over 30% to 50% of their compensation package "at-risk," which means it is not guaranteed but rather is received through bonuses or incentive stock based on the Company's performance. In the aggregate, 31% and 46% of the executive officer's compensation for fiscal 1999 and 1998, 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 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 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 7 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. Compensation Committee and Option Committee Peter W. Sognefest, Chairman Richard W. Bohlen Thomas E. Mistler Duncan A.J. Morrison 8 PRINCIPAL SHAREHOLDERS The following table sets forth certain information available to the Company as of August 15, 1999, 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.
Beneficial Ownership of Common Stock (1) ----------------------- Shares Percent ------------ ---------- Carl J. Johnson (2)..................................... 1,273,874 20.1% c/o II-VI Incorporated Saxonburg Boulevard Saxonburg, Pennsylvania 16056 Richard W. Bohlen (3)(4)................................ 64,300 1.0% Thomas E. Mistler (3)(5)................................ 197,000 3.1% Duncan A.J. Morrison (3)................................ 23,060 * Peter W. Sognefest (3)(6)............................... 20,156 * Francis J. Kramer (7)................................... 78,493 1.2% Herman E. Reedy (7)..................................... 53,741 * James Martinelli (7)(8)................................. 52,646 * Dimensional Fund Advisors Inc........................... 499,916 7.9% 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 All executive officers and directors as a group (eight persons) (2)-(9)....................................... 1,763,270 27.8%
- -------- * 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 932,676 shares of Common Stock over which Dr. Johnson has sole voting and investment power, 29,200 shares subject to stock options held by Dr. Johnson and exercisable within 60 days of August 15, 1999 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 64,043 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 12,000 shares subject to stock options held by each of Messrs. Bohlen, Mistler and Morrison, and 10,000 shares subject to stock options held by Mr. Sognefest and exercisable within 60 days of August 15, 1999. (4) Includes 10,000 shares over which Mr. Bohlen has shared voting and investment power. (5) Includes 150,000 shares held in a trust. (6) Includes 290 shares held by Mr. Sognefest's son, as to which shares he disclaims beneficial ownership. (7) Includes 41,200 shares, 5,200 shares and 36,700 shares subject to stock options held by Messrs. Kramer, Reedy and Martinelli, respectively, and exercisable within 60 days of August 15, 1999. (8) Includes 1,400 shares over which Mr. Martinelli has shared voting and investment power. (9) Includes 158,300 shares subject to stock options held by executive officers and directors as a group and exercisable within 60 days of August 15, 1999. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Dr. Johnson serves as a director of Xymox Technology, Inc. Mr. Sognefest is President and Chief Executive Officer of Xymox Technology, Inc., and during fiscal 1999 served as a director of the Company and Chairman of the Compensation Committee. 9 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 Index and with a peer group of companies constructed by the Company (the "Peer Group"), for the period from June 30, 1994, through June 30, 1999. The Peer Group includes Coherent Inc., Laser Power Corporation, Optical Coating Laboratory Inc., Rofin-Sinar Technologies Inc. and Spectra-Physics Lasers Inc. [GRAPH APPEARS HERE] COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG II-VI INCORPORATED, NASDAQ MARKET INDEX AND PEER GROUP INDEX Measurement period NASDAQ Market Peer Group (Fiscal year Covered) II VI Incorporated Index Index - --------------------- ------------------- ------------- --------- Measurement PT - 6/30/94 $100.00 $100.00 $100.00 FYE 6/30/95 $639.75 $117.28 $199.99 FYE 6/30/96 $806.25 $147.64 $362.39 FYE 6/30/97 $1,050.00 $177.85 $301.75 FYE 6/30/98 $712.50 $235.75 $273.72 FYE 6/30/99 $475.00 $330.37 $422.29 The above graph represents and compares the value, through June 30, 1999, of a hypothetical investment of $100 made at the closing price on June 30, 1994, in each of (i) the Company's Common Stock, (ii) the NASDAQ Market Index comprising the New Peer Group and (iii) the companies comprising the Peer Group, assuming, in each case, the reinvestment of dividends. The cumulative shareholder return through June 30, 1999 indicates that the Company has outperformed the Peer Group 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, 2000. 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. 10 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, 1999, as filed with the Securities and Exchange Commission will be available after September 30, 1999. 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, 1998, through June 30, 1999. Shareholder Proposals Proposals by shareholders intended for inclusion in the Company's proxy statement and form of proxy for the Annual Meeting of the Company expected to be held in November 2000, must be delivered to James Martinelli, Treasurer and Chief Financial Officer of II-VI Incorporated, 375 Saxonburg Boulevard, Saxonburg, Pennsylvania 16056 by May 31, 2000. Rules under the Securities Exchange Act of 1934, as amended, describe the standards as to the submission of shareholder proposals. Additionally, the Board-appointed proxies will have discretionary authority to vote on any proposals by shareholders that are not intended to be included in the Company's proxy materials for the 2000 Annual Meeting, but are intended to be presented by the shareholder from the floor, unless notice of the intent to make such proposal is received by Mr. Martinelli at the address above on or before August 14, 2000. 11 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 Peter W. Sognefest and Francis J. Kramer 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 13, 1999 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 5, 1999, and at any adjournment thereof. (PLEASE SIGN ON REVERSE SIDE AND RETURN PROMPTLY) ____ | [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: Carl J. Johnson Thomas E. Mistler 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 2000 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:_______, 1999_________________________ Date:_______, 1999 SIGNATURE SIGNATURE IF HELD JOINTLY Important: Shareholders sign here exactly as name appears hereon. -----END PRIVACY-ENHANCED MESSAGE-----