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 240.14-11(c) or 240.14a-12
ZEVEX INTERNATIONAL, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than 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:
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.
<PAGE>
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
ZEVEX INTERNATIONAL, INC.
4314 ZEVEX Park Lane
Salt Lake City, Utah 84123
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
JUNE 4, 1998.
To the Shareholders:
The annual meeting of the shareholders (the "Annual Meeting") of ZEVEX
International, Inc., (the "Company") will be held on June 4, 1998, at the
Company's corporate offices, 4314 South ZEVEX Park Lane (670 West), Salt Lake
City, Utah 84123, at 3:00 p.m., Mountain Time, to consider and vote on the
following proposals:
1. To elect Dean G. Constantine, David J. McNally, Phillip L. McStotts,
Bradly A. Oldroyd and Darla R. Gill as directors of the Company to serve a
one-,two-, or three-year term, or until their successor is duly elected and
qualified.
2. To ratify the appointment by the Board of Directors of Ernst & Young
LLP, certified public accountants, as independent auditors for the year ended
December 31, 1998.
3. To approve certain changes to the Company's Amended 1993 Stock Option
Plan.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items are more fully described in the Proxy Statement
accompanying this Notice.
ONLY SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON APRIL 19, 1998,
ARE ENTITLED TO NOTICE OF AND TO VOTE AT THE ANNUAL MEETING AND ANY
ADJOURNMENT(S) THEREOF. YOUR ATTENDANCE AT THE ANNUAL MEETING IS IMPORTANT.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE URGED TO
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER ATTENDING
THE MEETING MAY VOTE IN PERSON EVEN IF SUCH SHAREHOLDER HAS PREVIOUSLY RETURNED
A PROXY.
BY ORDER OF THE BOARD OF DIRECTORS
By /s/ Dean G. Constantine
Dean G. Constantine, Chairman
Dated: May 7, 1998
<PAGE>
ZEVEX INTERNATIONAL, INC.
4314 ZEVEX Park Lane
SALT LAKE CITY, UTAH 84123
PROXY STATEMENT
This proxy statement is furnished to the shareholders of ZEVEX International,
Inc., a Delaware corporation (hereafter "ZEVEX," or the "Company"), in
connection with its annual meeting of shareholders (the "Annual Meeting") to be
held on June 4, 1998, at the Company's corporate offices, 4314 ZEVEX Park Lane
(670 West) Salt Lake City, Utah, 84123, at 3:00 p.m., Mountain Time, and at any
adjournment(s) thereof. This proxy statement and the notice of Annual Meeting
are first being mailed to shareholders on or about May 7, 1998.
A PROXY FOR USE AT THE ANNUAL MEETING IS ENCLOSED. ANY SHAREHOLDER WHO
EXECUTES AND DELIVERS A PROXY HAS THE RIGHT TO REVOKE IT AT ANY TIME BEFORE ITS
EXERCISE BY FILING WITH THE SECRETARY OF THE COMPANY AN INSTRUMENT REVOKING IT
OR A DULY EXECUTED PROXY BEARING A LATER DATE. IN ADDITION, A SHAREHOLDER MAY
REVOKE A PROXY PREVIOUSLY EXECUTED BY HIM OR HER BY ATTENDING THE ANNUAL MEETING
AND ELECTING TO VOTE IN PERSON.
Management of the Company is soliciting proxies in connection with the
Annual Meeting. The cost of this solicitation will be borne by the Company.
Solicitation will be primarily by mail, but may be made by telephone, telegraph,
or personal contact by certain officers, employees and consultants of the
Company who will not receive any special compensation or remuneration therefor.
Only holders of record of the 3,294,426 shares of the Company's Common
Stock outstanding, as of April 19, 1998 (the "Record Date"), are entitled to
vote at the Annual Meeting. Each shareholder has the right to one vote for each
share of the Company's Common Stock owned by him or her. Cumulative voting for
the election of directors or for any other purpose is not provided for. Stock
representing a majority of the 3,294,426 shares of the Company's Common Stock
issued and outstanding on the Record Date must be represented at the Annual
Meeting to constitute a quorum for conducting business.
At the Annual Meeting, the shareholders will consider and vote on the
following proposals:
1. To elect Dean G. Constantine, David J. McNally, Phillip L. McStotts,
Bradly A. Oldroyd and Darla R. Gill as directors of the Company to serve a one-,
two-, or three-year term,or until their successor is duly elected and qualified.
2. To ratify the appointment by the Board of Directors of Ernst & Young
LLP, certified public accountants, as independent auditors for the year ended
December 31, 1998.
3. To approve certain changes to the Company's Amended 1993 Stock
Option Plan.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Any holders of the Company's Common Stock intending to present
proposals at the annual meeting of the Company's shareholders in 1999 must
address those proposals to the Secretary of the Company at 4314 ZEVEX Park Lane,
Salt Lake City, Utah 84123. Such proposals must be received by the Company no
later than January 1, 1999, to be included in the proxy statement in connection
with that meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock (par value $0.001) as of March 30, 1998,
by (i) each person (or group of affiliated persons) who is known by the Company
to beneficially own more than 5% of the outstanding shares of the Company's
Common Stock, (ii) each director and executive officer of the Company, and (iii)
all executive officers and directors of the Company as a group. As of such date,
the Company had a total of 3,294,426 shares of Common Stock outstanding. Unless
indicated otherwise, the address for each officer, director and 5% shareholder
is c/o the Company, 4314 ZEVEX Park Lane, Salt Lake City, Utah 84123.
<TABLE>
<CAPTION>
Number of Percent
Name Shares Owned of Class(1)
-------------------------------------------- ------------------------ -------------------
<S> <C> <C>
Kirk Blosch(2) 550,000 14.8%
Jeff Holmes(3) 550,000 14.8%
Blosch & Holmes, L.L.C.(4) 250,000 7.6%
Dean G. Constantine(5) 264,600 8.0%
David J. McNally(6) 252,598 7.6%
Phillip L. McStotts(7) 161,800 4.9%
Bradly A. Oldroyd(8) 8,000 *
Darla R. Gill(9) 6,480 *
All Officers and Directors
as a Group (5 persons) 693,478 20.7%
*Less than 1%
</TABLE>
(1) For each shareholder, the calculation of percentage of beneficial ownership
is based on 3,294,426 shares of Common Stock outstanding as of March 30, 1998,
and shares of Common Stock subject to options held by the shareholder that are
currently exercisable or exercisable within 60 days, which are deemed to be
outstanding and to be beneficially owned by the shareholder holding such
options. The percentage ownership of any shareholder is determined by assuming
that the shareholder has exercised all options and conversion rights to obtain
additional securities and that no other shareholder has exercised such rights.
Except as indicated otherwise below, the persons and entity named in the table
have sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to applicable community property
laws.
(2) Includes 125,000 shares of Common Stock held directly by Mr. Blosch, 175,000
shares of Common Stock issuable upon exercise of warrants that are currently
exercisable or will become exercisable within 60 days, and 250,000 shares of
Common Stock held by Blosch & Holmes, L.L.C. of which Mr. Blosch is a principal
(and which 250,000 shares are also reported as beneficially owned by Mr. Holmes
and Blosch & Holmes, L.L.C.). Mr. Blosch's address is 2081 S. Lakeline Drive,
Salt Lake City, UT 84109.
(3) Includes 125,000 shares of Common Stock held directly by Mr. Holmes, 175,000
shares of Common Stock issuable upon exercise of warrants that are currently
exercisable or will become exercisable within 60 days, and 250,000 shares of
Common Stock held by Blosch & Holmes, L.L.C. of which Mr. Holmes is a principal
(and which 250,000 shares are also reported as beneficially owned by Mr. Blosch
and Blosch & Holmes, L.L.C.). Mr. Holmes' address is 8555 E. Voltaire Ave.,
Scottsdale, AZ 85260.
(4) Includes 250,000 shares of Common Stock held by Blosch & Holmes, L.L.C. of
which Messrs. Blosch and Holmes are principals (and which 250,000 shares are
also reported as beneficially owned by Mr. Holmes and Mr. Blosch). The address
for Blosch & Holmes, L.L.C. is 2081 S. Lakeline Drive, Salt Lake City, UT 84109.
(5) Chief Executive Officer, President, and Chairman of the Company. Includes
12,400 shares of Common Stock issuable upon exercise of options held by Mr.
Constantine that are currently exercisable or will become exercisable within 60
days, and 100 shares of Common Stock owned by each of his dependent children.
Excludes 70,000 shares of Common Stock issuable upon exercise of options held by
Mr. Constantine that are not currently exercisable and will not become
exercisable within 60 days.
(6) Vice President, Marketing Director, and director of the Company. Includes
12,400 shares of Common Stock issuable upon exercise of options held by Mr.
McNally that are currently exercisable or will become exercisable within 60
days. Excludes 70,000 shares of Common Stock issuable upon exercise of options
held by Mr. McNally that are not currently exercisable and will not become
exercisable within 60 days.
(7) Chief Financial Officer, Secretary, Treasurer, and director of the Company.
Includes 12,400 shares of Common Stock issuable upon exercise of options held by
Mr. McStotts that are currently exercisable or will become exercisable within 60
days. Excludes 70,000 shares of Common Stock issuable upon exercise of options
held by Mr. McStotts that are not currently exercisable and will not become
exercisable within 60 days.
(8) Director. Includes 8,000 shares of Common Stock issuable upon exercise of
options that are currently exercisable or will become exercisable within 60
days.
(9) Director. Includes 480 shares of Common Stock held directly and 6,000 shares
of Common Stock issuable upon exercise of options that are currently exercisable
or will become exercisable within 60 days.
SECTION 16(a) BENEFICIAL REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers to file
with the SEC and the American Stock Exchange initial reports of ownership and
reports of changes in ownership of Common Stock. 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 believes that all directors and
executive officers during 1997 complied on a timely basis with all applicable
filing requirements under Section 16(a) of the Exchange Act, except that Messrs.
Constantine, McNally and McStotts each did not timely file one report on Form 4.
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
- -------------------------------------------------------------------------------
The Company recently changed its state of incorporation from Nevada to
Delaware. Pursuant to the Company's Delaware Certificate of Incorporation and
Bylaws, the Company's Board of Directors has been divided into three classes,
with only a single class subject to re-election each year. The initial
re-election of the Board of Directors under this procedure requires the
directors to be nominated to serve a one-, two-, or three-year term depending
upon the class into which they have been divided. Thereafter, any director,
whether elected or re-elected, will serve a three-year term. These three classes
contain all seven of the Company's directorships. Two classes each contain two
directorships and one class contains three directorships.
There are five members of the current Board of Directors. The Company
intends to fill two open positions on its Board of Directors. The term of office
for the current Board of Directors expires at the Annual Meeting. All have been
nominated for re-election to the Board of Directors for terms expiring in the
year set forth on the table below. The names of the five nominees, their ages,
the years they have been directors of ZEVEX, and their current positions with
ZEVEX (where applicable) also appear on the following pages. The shares
represented by all proxies received will be voted for these nominees, except to
the extent authority to do so is withheld as provided in the form of proxy
enclosed. If elected, nominees will serve as directors of the Company for the
period set forth opposite their name or until their successor is duly elected
and qualified. If the two open positions on the Board of Directors are filled,
the directors who are elected to fill the vacancies will serve until the annual
meeting of shareholders in 2001, or until their successor is duly elected and
qualified.
Shares represented by proxies returned and duly executed will be voted,
unless otherwise specified, in favor of the five nominees for the Board of
Directors named below to serve the terms corresponding to their names. Each
nominee for director will be elected by a majority of the votes cast at the
Annual Meeting. If any (or all) such persons should be unable to serve, the
persons named in the enclosed proxy will vote the shares covered thereby for
such substitute nominee (or nominees) as the Board of Directors may select.
Shareholders may withhold authority to vote for any nominee(s) by entering the
names of such nominee(s) in the space provided for such purpose on the enclosed
proxy card. Proxies will be voted "FOR" the election of the five nominees for
the terms corresponding to their names unless instructions to "withhold" votes
are set forth on the proxy card. Withheld votes will not influence voting
results. Abstentions may not be specified as to the election of directors. The
Board of Directors recommends that shareholders vote to elect the five nominees
named below for the Board of Directors for the terms of office corresponding to
their names.
<PAGE>
NOMINEES FOR DIRECTOR
The following table sets forth the name, age and principal position of
each nominee for director as well as the expiration of each director nominee's
proposed term of office. Each of the directors holds the same office with ZEVEX,
Inc., a wholly-owned subsidiary of the Company, through which the Company
conducts its operations.
<TABLE>
<CAPTION>
Expiration
Name Age Position of Term
- ------------------------------ -------- ---------------------------------------------------------------- -----------------
<S> <C> <C>
Dean G. Constantine 45 President, Chief Executive Officer and Director 2001
David J. McNally 36 Vice President, Director of Marketing and Director 2000
Phillip L. McStotts 40 Chief Financial Officer, Secretary/Treasurer and Director 1999
Bradly A. Oldroyd 40 Director 2000
Darla R. Gill 46 Director 1999
</TABLE>
Certain biographical information with respect to each of the officers
and directors is set forth below.
Dean G. Constantine is a founder of the Company and has served as the
Company's CEO, President, and Chairman of the Board since its inception in 1986.
Prior to joining the Company, he was employed by EDO Corporation, Western
Division, in Salt Lake City, Utah, from October 1985 to September 1987, and from
January 1971, to June 1983. During his nearly fifteen years of employment with
EDO Corporation, Mr. Constantine had various responsibilities including project
supervision, management of engineering for commercial and industrial
transducers, and research and development. From July 1983, through October 1985,
Mr. Constantine was employed as an engineering specialist at Northrop
Corporation Electro-Mechanical Division, Anaheim, California, where his
responsibilities included engineering project management and applications
engineering.
David J. McNally is a founder of the Company and has served as the
Company's Vice President and Marketing Director, and as a director since its
inception in 1986. Prior to joining the Company, he was employed by EDO
Corporation in Salt Lake City, Utah as a marketing manager of transducers from
October 1985 to September 1987. From June 1984 to October 1985, Mr. McNally was
employed by Physical Acoustics Corporation, a Princeton, New Jersey based
manufacturer of acoustic testing systems, as its regional sales manager for the
Southeastern United States. From June 1983, to June 1984, he was employed by
Hercules, Inc., in Magna, Utah, as an advanced methods development engineer. Mr.
McNally received a Bachelor of Science Degree in Mechanical Engineering from
LaFayette College in May 1983 and a Master of Business Administration Degree
from the University of Utah in June 1992.
Phillip L. McStotts is a founder of the Company and has served as the
Company's CFO, Secretary, and Treasurer, and as a director since its inception.
In addition to running his own professional corporation since October 1986,
Phillip L. McStotts, CPA, Mr. McStotts was employed from May 1985 to September
1986, as an accountant with the Salt Lake City firm of Chachas & Associates,
where he was tax manager. He has also worked in the tax departments of the
regional accounting firms of Pearson, Del Prete & Company, and Petersen,
Sorensen & Brough. Mr. McStotts received a Bachelor of Science Degree in
Accounting from Westminster College in May 1980, and received a Master of
Business Administration Degree in Taxation from Golden Gate University in May
1982.
Bradly A. Oldroyd has been a director of the Company since October
1991. He is the founder, president and principal shareholder of Pinnacle
Management Group, a Salt Lake City-based personnel services firm. He is also a
member of the faculty of the University of Phoenix campus in Salt Lake City,
where he teaches management and marketing courses in undergraduate and graduate
programs. Mr. Oldroyd received a Bachelor of Science degree in Marketing from
Utah State University in 1981 and a Master of Business Administration Degree
from the University of Utah in 1982.
Darla R. Gill is the founder and President of Momentum Medical Corp., a
Salt Lake City-based manufacturer and distributor of home health care products.
Ms. Gill is also sole proprietor of DRG Enterprises, a consulting company
specializing in marketing, sales and new product development. Ms. Gill was a
founder of Merit Medical Systems, Inc., in Salt Lake City, and served until 1992
as Executive Vice President and Director. She was also previously employed by
Utah Medical Products, Inc., where she served as Vice President of Marketing and
Sales. Ms. Gill also currently serves as a Director of the Board of NYB
Corporation in Salt Lake City. Ms. Gill graduated from the University of Phoenix
with a Bachelors Degree in Business Administration in 1988.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- --------------------------------------- -------- ------------------------------------------------------------
<S> <C> <C>
Dean G. Constantine 45 Chairman, President and Chief Executive Officer
David J. McNally 36 Vice President, and Director of Marketing
Phillip L. McStotts 40 Chief Financial Officer and Secretary/Treasurer
</TABLE>
Each of the executive officers holds the same offices with ZEVEX, Inc., a
wholly-owned subsidiary of the Company, through which the Company conducts its
operations. For the biographies of Messrs. Constantine, McStotts and McNally,
see "NOMINEES FOR DIRECTOR."
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has two committees, the Audit Committee and the
Compensation Committee. The Audit Committee is composed of Ms. Darla R. Gill and
Mr. Bradly A. Oldroyd. The Compensation Committee is also composed of Ms. Gill
and Mr. Oldroyd. The Audit Committee is authorized to review proposals of the
Company's auditors regarding annual audits, recommend the engagement or
discharge of the Company's auditors, review recommendations of such auditors
concerning accounting principles and the adequacy of internal controls and
accounting procedures and practices, to review the scope of the annual audit, to
approve or disprove each professional service or type of service other than
standard auditing services to be provided by the auditors, and to review and
discuss the audited financial statements with the auditors. The Compensation
Committee makes recommendations to the Board of Directors regarding remuneration
of the executive officers and directors of the Company.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held three meetings during the last fiscal year.
The Audit Committee held one meeting during the last fiscal year. The
Compensation Committee held one meeting during the last fiscal year.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
The Company pays each director who is not an employee of the Company or its
subsidiary a director's fee of $500 per Board of Directors meeting attended,
$250 for any annual meeting attended, and $125 per hour for any special meeting
attended. Additionally, the Company has issued stock options to the non-employee
directors in the past and may do so in the future. Although the Company may also
issue stock options to directors who are employees for their service as
directors, these employee directors currently receive no additional compensation
for serving as directors or attending meetings of directors or shareholders.
COMPENSATION OF EXECUTIVE OFFICERS
None of the executive officers has an employment agreement with the
Company. The following table sets forth the compensation paid by the Company to
each of the Company's executive officers during the three-year period ended
December 31, 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------------------------------------
Annual Compensation Awards Payouts
---------------------------------- -------------------------- -------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted All
Name and Annual Stock LTIP Other
Principal Position Year Salary Bonus Comp. Awards Options Payouts Comp.
----------------------------- ------- ------------ ----------- --------- -------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dean G. Constantine 1997 $105,000 $11,125 0 0 0 $4,207(1)
CEO and President 1996 $77,917 $12,189 0 0 0 $6,286(1)
1995 $69,375 $10,102 0 0 0 $4,712(2)
David J. McNally 1997 $105,000 $11,125 0 0 0 $4,207(1)
Vice President 1996 $77,917 $12,189 0 0 0 $6,286(1)
1995 $69,375 $10,102 0 0 0 $4,712(2)
Phillip L. McStotts 1997 $105,000 $11,125 0 0 0 $4,207(1)
Secretary/Treasurer 1996 $77,917 $12,189 0 0 0 $6,286(1)
1995 $69,375 $10,102 0 0 0 $4,712(2)
</TABLE>
(1) Represents the amount paid by the Company as a contribution to the Company's
401(k) Pension and Profit Sharing Plan on the officer's behalf.
(2) Represents $2,631 paid by the Company as a contribution to the Company's
401(k) Pension and Profit Sharing Plan on the officer's behalf and $2,081 as
each officer's portion of the contribution made by the Company into its Employee
Stock Ownership Plan.
OPTIONS GRANTS IN LAST FISCAL YEAR
Effective September 30, 1997, the Compensation Committee approved the
grant of Common Stock purchase options for 70,000 shares each to Messrs.
Constantine, McNally, and McStotts. The options vest over a four-year period and
are exercisable at a price of $16.44 per share. On June 19, 1997, the Company
granted Common Stock purchase option for 1,000 shares each to Darla R. Gill and
Bradly Oldroyd, the Company's two non-employee directors. The options vest
immediately and are exercisable at a price of $17.50 per share. On February 13,
1997, the Company granted Common Stock purchase options for 7,000 shares each to
Messrs. Constantine, McNally and McStotts. The options vest immediately and are
exercisable at a price of $3.85 per share.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth the options exercised during the year ended
December 31, 1997, by each executive officer of the Company and the value of
options held by such persons at such year-end.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End FY-End
Shares
Name and Acquired Value Exercisable/ Exercisable/
Principal Position on Exercise Realized Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Dean G. Constantine
President 0 0 12,400/70,000 62,300/0
David J. McNally
Vice President 0 0 12,400/70,000 62,300/0
Phillip J. McStotts
Secretary/Treasurer 0 0 12,400/70,000 62,300/0
</TABLE>
Of the unexercised options listed above for each of Messrs.
Constantine, McNally and McStotts, 5,400 were granted on December 17, 1992, and
expire on December 16, 2001. The exercise price on these above options is $5.00.
Of the unexercised options listed above for each of Messrs. Constantine, McNally
and McStotts, 7,000 were granted on February 13, 1997, and expire on February
12, 2002. The exercise price on these above options is $3.85. Of the unexercised
options listed above for each of Messrs. Constantine, McNally and McStotts,
70,000 were granted on September 30, 1997 and expire on September 29, 2002. The
exercise price on these above options is $16.44. The value of the unexercised
options was determined by reference to the closing price for the Company's
Common Stock on the American Stock Exchange as of the end of the last fiscal
year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has granted demand registration rights, for a two-year
period commencing February 1, 1998, with respect to 350,000 shares of Common
Stock issuable upon the exercise of warrants held by Kirk Blosch and Jeff W.
Holmes, two of the Company's principal shareholders. The Company has agreed to
pay the registration expenses arising in connection with the registration of
these shares. The selling expenses will be paid by Messrs. Blosch and Holmes.
On April 15, 1997, the Company entered into a consulting contract with
DMG Advisors, L.L.C., a Nevada limited liability company ("DMG"). Kirk Blosch
and Jeff W. Holmes, two of the Company's principal shareholders, are members and
managers of DMG. Under the consulting contract, the Company paid an initial fee
of $50,000 and is paying $10,000 per month through April 15, 1999 in exchange
for the consulting services of DMG in the nature of strategic planning, public
relations, advice regarding financings, and the identification and evaluation of
potential acquisitions of new products or companies. The Company is also
obligated to pay reasonable business expenses incurred by DMG.
Pursuant to a Stock Purchase Agreement, dated December 31, 1996 between
the Company and Blosch & Holmes, L.L.C., a Utah limited liability company
("Blosch & Holmes"), as amended on September 30, 1997, Blosch & Holmes has the
right to appoint one member of the Company's board of directors, provided that
such nominee must be acceptable to the Company. Kirk Blosch and Jeff W. Holmes,
principal shareholders of the Company, are the two member/managers of Blosch &
Holmes. The right to appoint a member of the Company's board of directors
expires when Blosch & Holmes, together with Kirk Blosch and Jeff W. Holmes, no
longer holds at least 6.5% of the voting stock of the Company. Blosch & Holmes
has not exercised this right.
For a description of the compensation arrangements between the Company
and its officers and directors, see "COMPENSATION OF DIRECTORS AND EXECUTIVE
OFFICERS."
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors reviews and approves
salaries, bonuses, and other benefits payable to the Company's officers. The
Compensation Committee is composed of Ms. Darla R. Gill and Mr. Bradly A.
Oldroyd, both independent non-employee directors.
The goals of the Compensation Committee in establishing compensation
for executive officers are to align executive compensation with business
objectives and performance and to enable the Company to attract, retain and
reward executive officers who contribute to the long-term success of the
Company. The compensation policies and programs utilized by the Compensation
Committee and endorsed by the Board of Directors generally consist of the
following:
i. Recommending executive officer total compensation in relation to Company
performance;
ii. Providing a competitive compensation program in order to attract,
motivate and retain qualified personnel;
iii. Providing a management tool for focusing and directing the energies of
the Company's three executives toward achieving individual and corporate
objectives; and
iv.Providing long-term incentive compensation in the form of annual stock
option awards and performance-based stock option awards to link individual
success to that of the Company.
The Company's executive compensation consists of three components: base
salary, annual incentive compensation in the form of cash bonuses and stock
options, each of which is intended to complement the others, and together to
satisfy the Company's compensation objectives. The Compensation Committee's
policies with respect to each of the three components are discussed below:
Base Salary. The Compensation Committee considers several factors in
determining base salaries for the Company's three executive officers, including
industry averages for comparative positions, responsibilities of the executive
officers, length of service with the Company, and corporate and individual
performance.
Cash Bonuses. Cash bonuses paid to the Company's three executive
officers are discretionary and are based on the relative success of the Company
in attaining certain financial objectives and the three officers' contribution
to the achievement of those financial objectives.
Stock Options. Stock options provide additional incentives to the
Company's three executive officers to maximize long-term shareholder value. The
options that have been granted vest over a defined period to encourage these
officers to continue their employment with the Company. The Company also grants
stock options to all employees, commensurate with their potential contributions
to the Company.
Chief Executive Officer Compensation
Dean G. Constantine has been President and Chief Executive Officer of
the Company since its incorporation in 1986. For fiscal year 1997, Mr.
Constantine received compensation consisting of a salary of $110,000, a cash
bonus of $11,125, and options to purchase 77,000 additional shares of the
Company's Common Stock. In determining Mr. Constantine's compensation, the
Compensation Committee evaluates corporate performance, individual performance,
compensation paid to the Company's two other executive officers, and
compensation paid to chief executive officers of comparable companies. Through
his equity ownership in the Company, consisting of 252,200 shares of Common
Stock and options to purchase 82,400 shares of Common Stock, Mr. Constantine
shares with other shareholders of the Company a significant stake in the success
of the Company's business.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Darla R. Gill
Bradly A. Oldroyd
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The following graph shows a comparison of the cumulative total shareholder
return on the Company's Common Stock over the past five fiscal years with the
cumulative total return of the Russell 2000 Stock Index and the Company's Peer
Group, consisting of Novametrix Medical, Applied Biometrics, Inc., Candela Laser
Corporation, Invivo Corporation, Zoll Med Corporation, Lectec Corporation and
Medstone International. The Company derived its Peer Group from the American
Stock Exchange Institutional Management Report. The graph assumes $100 is
invested in the Company's Common Stock and in each of the two indices at the
closing market quotation on December 31, 1992 and that dividends are reinvested.
The stock price performance graph depicted below shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934. The stock price performance on the graph is
not necessarily an indicator of future price performance.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Russell 2000 100 112 110 137 160 184
Peer Group 100 133 88 118 120 90
ZEVEX 100 97 82 85 77 211
</TABLE>
PROPOSAL 2 - APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP ("Ernst & Young")
for the Company as independent certified public accountants to examine the
Company's financial statements for the year ended December 31, 1998. During
1997, Ernst & Young examined the accounts of ZEVEX and its subsidiaries and also
provided other audit services to ZEVEX in connection with Securities and
Exchange Commission filings. Representatives of Ernst & Young will be present at
the Annual Meeting, but are not expected to make any formal presentation.
On April 10, 1997, the Company engaged Ernst & Young as its principal
accountants to audit the Company's financial statements for the year ended
December 31, 1997. The appointment of Ernst & Young was approved by the Audit
Committee of the Board of Directors of the Company. The Company discontinued its
relationship with its former independent accountants, Daines and Rasmussen,
P.C., effective with the appointment of Ernst & Young. The change in independent
accountants resulted from strategic planning by the Board of Directors and the
Audit Committee for the long-term accounting and auditing needs of the Company.
There were no disagreements with the Company's former accountants on
any matter of accounting principles or practices, financial statement
disclosures, or auditing scope or procedure which would have caused the former
accountants to make reference in their report to such disagreements if not
resolved to their satisfaction. During the two years ended December 31, 1996,
the reports of the Company's independent accountants did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the
shares of the Company's Common Stock represented at the Annual Meeting in person
or by proxy is required for the approval of the selection of the Company's
independent certified public accountants. The Board of Directors believes such
selection is in the best interest of the Company, and recommends that
shareholders vote "FOR" the proposal.
PROPOSAL 3 - INCREASE IN NUMBER OF SHARES UNDER THE AMENDED
1993 STOCK OPTION PLAN
AMENDED 1993 STOCK OPTION PLAN
The Compensation Committee of the Board of Directors has increased the
number of shares reserved for issuance under the Company's Amended 1993 Stock
Option Plan (the "Stock Option Plan") from 240,000 shares of Common Stock to
600,000 shares of Common Stock. Because the Company may issue incentive stock
options ("ISO's") under the Stock Option Plan, Section 422 of the Internal
Revenue Code requires shareholder approval of the increase. In addition, Section
711 of the American Stock Exchange Rules requires such shareholder approval to
be solicited pursuant to Securities and Exchange Commission ("SEC") Rules. If
this increase is approved by the Shareholders, it will be effective as of
November 20, 1997. Described below are the material features of the Stock Option
Plan and certain information about stock option grants that have been issued
under the Stock Option Plan to date.
GENERAL
The Stock Option Plan provides for the grant of a variety of awards,
including ISO's, non-qualified stock options ("NSO's"), stock appreciation
rights, and shares of Common Stock (collectively, "Awards"). The Stock Option
Plan is administered either by the Board of Directors or a committee of the
Board of Directors (the "Administrator"). Awards are made in the discretion of
the Administrator and may be made to Company officers, directors, employees, and
other persons as determined by the Administrator. Presently, there are three
executive officers, two non-employee directors, and 86 other employees of the
Company currently employed by the Company (as well as all future employees) are
eligible to participate in the Stock Option Plan.
Currently, a maximum of 600,000 shares of Common Stock (subject to
adjustment in the event of stock split or other changes in the Common Stock as
provided in the Stock Option Plan) may be awarded under the Stock Option Plan.
The Board of Directors can increase the number of shares that may be awarded
under the Stock Option Plan. To the extent: (i) options expire prior to
exercise, (ii) restricted shares of Common Stock are forfeited, or (iii) the
recipient of an Award does not otherwise receive the full number of shares of
Common Stock that might have been issued to the recipient, such shares will
again be available for award under the Stock Option Plan. The unexercised
portion of any Award made to a director, officer, or employee of the Company
will be null and void if such person is terminated or resigns from the Company
within six months of the date of the Award. Each Award will be evidenced by an
agreement incorporating the Stock Option Plan's terms and conditions and other
relevant provisions. The Company intends to file a registration statement under
the Securities Act of 1933 with respect to the shares issued and reserved for
issuance under the Stock Option Plan in the near future. Until such time, shares
issued under the Stock Option Plan will be "restricted" as defined under SEC
Rule 144.
THE ADMINISTRATOR
As mentioned above, the Administrator of the Stock Option Plan will be
the Board of Directors or a committee of the Board of Directors. Such committee
must be made up of two or more "non-employee directors" (as defined under SEC
Rule 16(b)(3)). The Administrator has full authority and discretion in the
administration of the Stock Option Plan, including the designation of those
persons receiving Awards, the number of shares to be covered by options, stock
appreciation rights or stock awards, the exercise price and other terms of
options, and the other terms of stock appreciation rights or other tandem
awards. Further, the Administrator may specify additional terms and conditions
that may be placed upon receiving an Award. The Administrator's decisions in the
administration of the Stock Option Plan shall be final and binding on all
persons for all purposes.
OPTIONS AND STOCK APPRECIATION RIGHTS
ISO's may be granted under the Stock Option Plan only to employees of
the Company and must be at a price per share not less than 100% of the fair
market value of the Common Stock at the date of the grant (110% for optionees
holding 10% or more of the Company's Common Stock). The Stock Option Plan limits
grants of ISO's that may be exercised for the first time by the holder during
any calendar year to $100,000 in market value. Each ISO, unless sooner
terminated, expires within five years from the date of grant for optionees
holding more than 10% of the Company's Common Stock. No ISO's will be granted
after ten years following the effective date of the Stock Option Plan.
New Non-Qualified Stock Options ("NSO's") may also be issued under the
Stock Option Plan. NSO's are not subject to the requirements of the Code and,
therefore, may not contain the same restrictions as ISO's issued under the Stock
Option Plan. To date, the Company has issued only 14,000 NSO's under the Stock
Option Plan.
The exercise period for NSO's is set by the Administrator in its
discretion. The exercise price for options may be paid to the Company, in the
discretion of the Administrator, in cash, shares of Common Stock, or payments
over time. Generally, an option or stock appreciation right may be exercised
only by the holder within three months after his or her termination of
employment (twelve months if due to disability) unless the Administrator
determines otherwise. Such option or stock appreciation right may be exercised
no later than twelve months following an active employee's death unless the
Administrator determines otherwise, but in no event later than the expiration of
the exercise period for the option or stock appreciation rights. An Award is
terminated immediately upon termination of an employee for material misconduct.
Except for ISO's, Awards generally are transferable to a holder's family member,
a trust for the benefit of the holder or family member, a charity, by will, or
by the laws of descent and distribution. ISO's are exercisable during an
optionee's lifetime only by such optionee and are transferable only upon death
by will or the laws of descent or distribution.
STOCK AWARDS
Shares of Common Stock awarded under the Stock Option Plan or issued in
connection with another Award granted under the Plan may be issued subject to a
restriction period set by the Administrator during which time the shares may not
be sold, transferred, assigned or pledged. The Administrator may provide for
other restrictions and termination provisions that it deems appropriate in its
discretion.
<PAGE>
AMENDMENTS
The Administrator may amend the Stock Option Plan at any time, subject
to the rights of the holders of outstanding Awards as specified in their Award
agreements.
AWARDS UNDER THE STOCK OPTION PLAN
As of December 31, 1997, options for 313,690 shares of Common Stock
were outstanding under the Stock Option Plan at exercise prices ranging from
$2.50 to $17.50 per share, and at a weighted-average exercise price of $12.39
per share. These options have expiration dates ranging from five to seven years.
Based on a closing price of $9.375 for the Company's Common Stock on the
American Stock Exchange as of December 31, 1997, the total market value of
unexercised options granted under the Stock Option Plan (as computed according
to the weighted-average exercise price of $12.39) at that date was
($945,775.35). As of December 31, 1997, options for 44,610 shares had been
exercised, leaving 241,700 shares available for future grant under the Stock
Option Plan. No other forms of Award have been granted under the Stock Option
Plan. The stock options outstanding under the Stock Option Plan are summarized
below:
<TABLE>
<CAPTION>
Shares Subject to
Option Holder Options
- ----------------------------------- --------------------------
<S> <C>
Dean G. Constantine(1) 82,400
David J. McNally(1) 82,400
Phillip L. McStotts(1) 82,400
Current Executive Officers
As a Group(1) 247,200
Current Directors Who
Are Not Executive Officers 14,000
All Employees Who
Are Not Executive Officers 52,490
Total 313,690
</TABLE>
(1) The three executive officers of the Company are: Dean G. Constantine,
President and Chief Executive Officer; David McNally, Vice President and
Marketing Director; and Phillip McStotts, Chief Financial Officer and
Secretary/Treasurer. Of the options held by each of these officers, only options
for 12,400 shares are exercisable, as of December 31, 1997, by each officer.
FEDERAL INCOME TAX CONSEQUENCES OF THE AMENDMENT TO THE 1993 STOCK
OPTION PLAN
The following describes the general federal income tax consequences of
the various Awards to employees of the Company. An employee will not realize any
income at the time an ISO is granted nor upon exercise of an ISO. However, the
difference between the option exercise price and the Common Stock's fair market
value at the time of exercise will be taken into account for purposes of the
employee's alternative minimum income tax, if any.
Upon the subsequent disposition of shares of Common Stock acquired by
the exercise of an ISO more than (i) two years after the ISO is granted and (ii)
one year after the transfer of shares of Common Stock upon the exercise of such
option, the employee's basis for determining the capital gain or loss realized
upon such disposition will be the option price. If the subsequent disposition of
stock occurs before these special holding requirements are met, the employee
generally will recognize ordinary income upon such disposition equal to the
excess of the fair market value of the shares at the time the option was
exercised over the exercise price.
An employee will not realize any income at the time a non-qualified
stock option or stock appreciation right is granted. Upon the employee's
exercise of a non-qualified stock option, the difference between the fair market
value of the Common Stock at the time of exercise and the option price will be
ordinary income to the employee. Similarly, the amount of cash and the fair
market value of the Common Stock received upon the employee's exercise of a
stock appreciation right will be ordinary income to the employee. However, any
employee who receives restricted Common Stock, either as an Award or upon
exercise of an option or a stock appreciation right, will realize, as ordinary
income at the time of the lapse of the restrictions, an amount equal to the fair
market value of the Common Stock at the time of such lapse (less the option
price for such shares if purchased by exercising an option) unless an
appropriate election is made in which case the employee will recognize ordinary
income as if the Common Stock had not been restricted. At the time the employee
realizes ordinary income, the Company will be entitled to a deduction in the
same amount as the ordinary income realized by the employee.
The foregoing is only a summary of the effect of federal income
taxation upon an employee with respect to the grant and exercise of options and
the receipt of other Awards under the Stock Option Plan. This summary does not
purport to be complete and does not discuss the income tax laws of any state or
foreign country in which an employee may reside.
VOTE REQUIRED
The increase in the number of shares reserved for issuance under the
Stock Option Plan will be submitted to stockholders for their approval at the
Annual Meeting. The affirmative vote of the holders of at least a majority of
the shares of Common Stock represented at the Annual Meeting in person or by
proxy is required for this approval. The Board of Directors believes that this
increase is in the best interest of the Company and recommends that shareholders
vote "FOR" the proposal.
<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of Section
15(d) of the Securities Exchange Act of 1934, Commission File No. 33-19583, and
in accordance therewith files reports on Forms 10-Q, 10-K, and 8-K with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information can be inspected, and copies can be obtained at the public reference
facilities of the Commission at Room 1024, 450 Fifth Street, NW, Washington,
D.C. 20549, at prescribed rates. The Company will provide without charge to any
shareholder of the Company, upon written or oral request of any such person, a
copy of the Company's annual report on Form 10-K for the year ended December 31,
1997 (not including exhibits). Such requests should be addressed to ZEVEX
International, Inc., 4314 ZEVEX Park Lane, Salt Lake City, Utah 84123,
Attention: Phillip L. McStotts, Secretary. (Telephone: (801) 264-1001).
OTHER MATTERS
The Board of Directors knows of no other matters that are likely to be
brought before the Annual Meeting. If any other matters are properly addressed
and resolved, the proxies will vote on such matters in accordance with their
best judgement.
By order of the Board of Directors,
Dean G. Constantine
Chairman
<PAGE>
(front side of proxy card)
PROXY
ZEVEX INTERNATIONAL, INC.
4314 ZEVEX Park Lane
Salt Lake City, Utah 84123
Annual Meeting of Shareholders
June 4, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<PAGE>
The undersigned shareholder of ZEVEX International, Inc., a Delaware
corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated May 1, 1998, and
hereby appoints Dean G. Constantine and Phillip L. McStotts and each of them,
proxies and attorneys-in-fact, with full power to each of substitution in behalf
of and in the name of the undersigned, to represent the undersigned at the
Annual Meeting of Shareholders ("Annual Meeting") to be held on June 4, 1998 at
3:00 p.m. Mountain Time, at the offices of the Company located at 4314 ZEVEX
Park Lane, Salt Lake City, Utah 84123, and at any adjournment(s) thereof, and to
vote all shares of Common Stock held of record by the undersigned on April 19,
1998, which the undersigned would be entitled to vote, if then and there
personally present, on the matters set forth below and upon such other matters
as may properly come before the Annual Meeting or any adjournment(s) thereof.
The Board of Directors recommends votes FOR the following proposals:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below for the terms [ ] WITHHOLD AUTHORITY
ending in the year set forth to vote for all nominees
opposite their names listed below
(except as indicated to the contrary in the space below)
Dean G. Constantine 2001
David J. McNally 2000
Phillip L. McStotts 1999
Bradly A. Oldroyd 2000
Darla R. Gill 1999
To withhold a vote from any nominee(s), print the name(s) of such person(s) in
the space provided:
- -----------------------------------------------------------
- -----------------------------------------------------------
2. APPOINTMENT OF ERNST & YOUNG, LLP, CERTIFIED PUBLIC ACCOUNTANTS, AS
INDEPENDENT AUDITORS FOR THE YEAR ENDED DECEMBER 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF AN INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE UNDER THE COMPANY'S AMENDED STOCK OPTION PLAN
FROM 240,000 SHARES TO 600,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued and signed on reverse side)
(reverse side of proxy card)
4. IN THEIR DISCRETION, proxy holders are authorized to vote upon such other
business as may properly come before the Annual Meeting.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO CONTRARY DIRECTION IS INDICATED,
IT WILL BE VOTED "FOR" THE PROPOSALS OUTLINED ABOVE AND ON SUCH OTHER MATTERS AS
MAY COME BEFORE THE ANNUAL MEETING.
Please sign exactly as the name appears on your Stock Certificate. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as such.
If the shares are owned by a corporation, an authorized officer must sign in the
name of the corporation.
Dated: ______________________
<PAGE>
NUMBER OF SHARES HELD OF RECORD NUMBER OF SHARES HELD AT BROKERAGE OR CLEARING
HOUSE
NAME OF BROKERAGE OR CLEARING HOUSE
SIGNATURE (if held by an individual)
PRINT NAME NAME OF ENTITY SHAREHOLDER
(if not held by an individual)
SIGNATURE (if held jointly) SIGNATURE OF AUTHORIZED SIGNER OF ENTITY
PRINT NAME TITLE OF AUTHORIZED SIGNER
<PAGE>
RETURN PROXY TO: ZEVEX International, Inc.
4314 ZEVEX Park Lane, Salt Lake City, Utah 84123
