<PAGE> 1
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Zoll Medical Corporation
(Name of Registrant as Specified In Its Charter)
Zoll Medical Corporation
(Name of Person(s) Filing Proxy Statement)
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:
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<PAGE> 2
ZOLL MEDICAL CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, FEBRUARY 4, 1999
------------------------
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") of Zoll Medical Corporation (the "Company") will be held on
Thursday, February 4, 1999 at 10:00 a.m. at State Street Bank and Trust Company,
225 Franklin Street, Boston, Massachusetts 02110 for the following purposes:
1. To elect two Class I directors of the Company to serve until the
2002 Annual Meeting of Stockholders and until their respective successors
are duly elected and qualified;
2. To amend the Company's 1992 Stock Option Plan (the "Plan") to
increase the number of shares of the Company's Common Stock subject to
issuance under the Plan by 300,000 shares, or approximately 4.8% of the
total number of shares outstanding; and
3. To consider and act upon any other matters which may properly be
brought before the Annual Meeting and at any adjournments or postponements
thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned, or to which the Annual Meeting
may be postponed.
The Board of Directors has fixed the close of business on December 18, 1998
as the record date for determining the stockholders entitled to notice of and to
vote at the 1999 Annual Meeting and at any adjournments or postponements
thereof. Stockholders of record of the Company's Common Stock at the close of
business on that date will be entitled to notice of and to vote at the Annual
Meeting and at any adjournments or postponements thereof.
You are requested to complete and sign the enclosed form of proxy which is
being solicited by the Board of Directors and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy may be revoked by delivery of a
later dated proxy. Stockholders of record who attend the Annual Meeting may vote
in person, even if they have previously delivered a signed proxy.
By Order of the Board of Directors
Raymond C. Zemlin, Clerk
Burlington, Massachusetts
January 11, 1999
- -------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
- -------------------------------------------------------------------------------
<PAGE> 3
ZOLL MEDICAL CORPORATION
32 SECOND AVENUE
NORTHWEST PARK
BURLINGTON, MASSACHUSETTS 01803
------------------------
PROXY STATEMENT
------------------------
1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, FEBRUARY 4, 1999
January 11, 1999
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Zoll Medical Corporation (the "Company")
for use at the 1999 Annual Meeting of Stockholders of the Company to be held on
Thursday, February 4, 1999, and at any adjournments or postponements thereof
(the "Annual Meeting"). At the Annual Meeting, stockholders will be asked to
vote upon (i) the election of two Class I directors of the Company, (ii) the
amendment to the Company's 1992 Stock Option Plan (the "Plan"); and (iii) any
other matters properly brought before the Annual Meeting.
VOTING
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy Card are first being sent to stockholders on or about January 11, 1999.
The Board of Directors has fixed the close of business on December 18, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting (the "Record Date"). Only stockholders of record
of the Company's common stock, par value $.02 per share (the "Common Stock"), at
the close of business on the Record Date will be entitled to notice of and to
vote at the Annual Meeting. As of the Record Date, there were 6,201,284 shares
of Common Stock outstanding and entitled to vote at the Annual Meeting. Holders
of Common Stock outstanding as of the close of business on the Record Date will
be entitled to one vote for each share held by them.
The presence, in person or by proxy, of holders of at least a majority of
the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Directors are elected by a plurality of the votes cast at the Annual
Meeting. The affirmative vote of a majority of the total votes cast on the
proposal to amend the Plan is required to approve the proposed amendment to the
Plan. Abstentions and broker non-votes are each included in the number of shares
present at the Annual Meeting for purposes of establishing a quorum. Abstentions
and broker non-votes will have no effect on the outcome of the election of
directors or the approval of the amendment to the Plan.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE
VOTE AT THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING
AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY IS SUBMITTED AND NO
INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE ELECTION OF THE TWO
NOMINEES FOR CLASS I DIRECTORS OF THE COMPANY NAMED IN THIS PROXY STATEMENT AND
FOR THE APPROVAL OF THE AMENDMENT TO THE PLAN. IT IS NOT ANTICIPATED THAT ANY
MATTER OTHER
<PAGE> 4
THAN THOSE SET FORTH IN THIS PROXY STATEMENT WILL BE PRESENTED AT THE ANNUAL
MEETING. IF OTHER MATTERS ARE PRESENTED, PROXIES WILL BE VOTED IN ACCORDANCE
WITH THE DISCRETION OF THE PROXY HOLDERS.
A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Clerk of the Company at the
address of the Company set forth above; by filing a duly executed proxy bearing
a later date; or by appearing in person and voting by ballot at the Annual
Meeting. Any stockholder of record as of the Record Date attending the Annual
Meeting may vote in person whether or not a proxy has been previously given, but
the presence (without further action) of a stockholder at the Annual Meeting
will not constitute revocation of a previously given proxy.
The Company's 1998 Annual Report, including the Company's audited financial
statements for the fiscal year ended September 26, 1998, is being mailed to
stockholders concurrently with this Proxy Statement.
PROPOSAL 1
ELECTION OF A CLASS OF DIRECTORS
The Board of Directors of the Company is comprised of eight members and is
divided into three classes, with the directors in each class serving for a term
of three years and until their successors are duly elected and qualified. As the
term of one class expires, a successor class is elected at each succeeding
annual meeting of stockholders.
At the Annual Meeting, two Class I directors will be elected to serve until
the 2002 Annual Meeting and until their successors are duly elected and
qualified. The Board of Directors has nominated Noah T. Herndon and Daniel M.
Mulvena for election as Class I directors (the "Nominees"). The Board of
Directors anticipates that each of the Nominees will serve as a director if
elected. However, if any person nominated by the Board of Directors is unable to
accept election, the proxies will be voted for the election of such other person
or persons as the Board of Directors may recommend.
INFORMATION REGARDING NOMINEES AND DIRECTORS
The following table sets forth certain information with respect to the two
Nominees for election as directors at the Annual Meeting and those continuing
directors of the Company whose terms expire at the annual meetings of
stockholders in 2000 and 2001 based on information furnished to the Company by
each director. The following information is as of September 26, 1998 unless
otherwise specified.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND PRINCIPAL OCCUPATION DIRECTOR BENEFICIAL OWNERSHIP PERCENT
FOR PAST FIVE YEARS AGE SINCE OF COMMON STOCK(1) OF CLASS
- ----------------------------- --- -------- -------------------- --------
<S> <C> <C> <C> <C>
CLASS I NOMINEES FOR ELECTION AT THE 1999 ANNUAL MEETING
Noah T. Herndon....................................... 66 1995 7,500(2) *
Partner of Brown Bothers Harriman & Co. since 1974.
From 1978 to present Mr. Herndon has been the
partner principally in charge of the operations for
Brown Brothers Harriman & Co.'s Boston office. Mr.
Herndon is a director of National Auto Credit, Inc.,
Fieldcrest Cannon, Inc. and Watts Industries, Inc.
and a Trustee of Cabot Industrial Trust.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND PRINCIPAL OCCUPATION DIRECTOR BENEFICIAL OWNERSHIP PERCENT
FOR PAST FIVE YEARS AGE SINCE OF COMMON STOCK(1) OF CLASS
- ----------------------------- --- -------- -------------------- --------
<S> <C> <C> <C> <C>
Daniel M. Mulvena..................................... 50 1998 0(3) *
Owner of Commodore Associates, Inc., a consulting
company. From 1992 to 1995, Mr. Mulvena was a Group
Vice President of Boston Scientific Corporation. Mr.
Mulvena serves as Chairman of the Board of Directors
of Echo-cath, Inc. and Magna Lab, Inc. He is also a
director of Thoratec Laboratories, Inc.
CLASS II CONTINUING DIRECTORS -- TERM TO EXPIRE IN 2000
Willard M. Bright..................................... 84 1983 155,450(4) 2.8%
Formerly Chairman of the Board of Directors of the
Company. Formerly President and Chief Executive
Officer of The Kendall Company and Boehringer
Mannheim Corporation, medical products
manufacturers, and President and director of
Curtiss-Wright Corp., an aerospace and industrial
products manufacturer. Mr. Bright is a Director of
CSS Industries, Inc., Furman Lumber Company and
MacroChem Corporation.
Thomas M. Claflin, II................................. 57 1980 66,745(5) 1.1%
Principal of Claflin Capital Management, Inc., a
venture capital firm, and General Partner of its
venture capital partnerships. Mr. Claflin is a
Director of Altron Incorporated.
M. Stephen Heilman.................................... 64 1996 212,500(6) 3.4%
Founder, Chairman and Chief Executive Officer of
Lifecor, Inc., a medical device company, since 1986.
Founder, Chairman and Chief Executive Officer of
Vascor, Inc. since 1986. Mr. Heilman is a director
of SkyMark Corporation, Actronics, Medrad Inc. and
Precision Therapeutics.
CLASS III CONTINUING DIRECTORS -- TERM TO EXPIRE IN 2001
Richard A. Packer..................................... 41 1996 49,800(7) *
President and Chief Operating Officer of the Company
since 1996. During 1996, he served as Chief
Financial Officer of the Company. From 1992 to 1996
he served as the Company's Vice President of
Operations. Prior to 1992, he was Vice President of
various functions at Whistler Corporation, a
consumer electronics company.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND PRINCIPAL OCCUPATION DIRECTOR BENEFICIAL OWNERSHIP PERCENT
FOR PAST FIVE YEARS AGE SINCE OF COMMON STOCK(1) OF CLASS
- ----------------------------- --- -------- -------------------- --------
<S> <C> <C> <C> <C>
Rolf S. Stutz......................................... 49 1983 102,900(8) 1.6%
Chairman of the Board of Directors and Chief
Executive Officer of the Company. From 1978 until he
joined the Company in 1983, Mr. Stutz held a variety
of domestic and international management positions
with Millipore Corporation, a manufacturer of high
technology membrane filtration and purification
products for the analytical, pharmaceutical and
microelectronics markets. Mr. Stutz is a director of
Hemasure Corporation, Cambridge Heart, Inc. and
Lifecor, Inc.
James W. Biondi, M.D.(9).............................. 42 1999 1,000(3) *
Chairman of Cardiopulmonary Corp. since its founding
in 1988, and Chief Executive Officer and President
since 1992. Cardiopulmonary Corp. designs, develops
and assembles advanced software driven ventilators
used for the treatment of anesthesia and intensive
care patients. Since 1992, Dr. Biondi has been an
Adjunct Assistant Professor of Medicine at Yale
University School of Medicine. Dr. Biondi also
serves as a director of Ivy Biomedical Systems, Inc.
and Imagyn Medical Technologies, Inc.
All directors and executive officers as a group (11 670,645(10) 10.8%
persons)............................................
</TABLE>
- ---------------
* Less than 1%.
(1) The persons 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 the information contained in the other footnotes to this table.
(2) Includes 2,500 shares of Common Stock issuable upon exercise of options to
purchase Common Stock which are exercisable within 60 days after September
26, 1998.
(3) Does not include 10,000 shares of Common Stock subject to stock options
which are not exercisable within 60 days of September 26, 1998.
(4) Represents 151,700 shares of Common Stock held by the Willard M. Bright
Revocable Inter Vivos Trust dated August 2, 1990 and 3,750 shares of Common
Stock issuable upon exercise of options to purchase Common Stock which are
exercisable within 60 days after September 26, 1998.
(5) Includes 229 shares of Common Stock held by Mr. Claflin's spouse and 3,278
shares held by various Claflin Capital Management, Inc. partnership
entities, as to which Mr. Claflin disclaims beneficial ownership, and 2,500
shares of Common Stock issuable upon exercise of options to purchase Common
Stock which are exercisable within 60 days after September 26, 1998.
(6) Includes 2,500 shares of Common Stock issuable upon exercise of options to
purchase Common Stock which are exercisable within 60 days after September
26, 1998.
(7) Includes 36,500 shares of Common Stock issuable upon exercise of options to
purchase Common Stock which are exercisable within 60 days after September
26, 1998.
4
<PAGE> 7
(8) Includes 17,500 shares of Common Stock issuable upon exercise of options to
purchase Common Stock which are exercisable within 60 days after September
26, 1998.
(9) On January 7, 1999, the Company entered into an agreement with Elliott
Associates, L.P. ("Elliott") and Westgate International, L.P. ("Westgate"),
shareholders of the Company who together own approximately 15.4% of the
Company's Common Stock. Pursuant to the terms of the agreement, Elliott and
Westgate proposed, and the Company agreed, that the Board of Directors
would be expanded to eight members and Dr. James W. Biondi would be elected
as a Class III Director to fill the resulting vacancy. On January 7, 1999,
Dr. Biondi joined the Board of Directors as a Class III Director.
(10) Includes 140,000 shares of Common Stock issuable upon exercise of options
to purchase Common Stock which are exercisable within 60 days after
September 26, 1998.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company held 6 meetings during the fiscal
year ended September 26, 1998 Each of the directors attended more than 75% of
the aggregate of the total number of meetings of the Board of Directors and of
the committees of which he was a member which were held during the period he was
a director or committee member.
The Company has standing Audit and Compensation Committees. The members of
the Audit Committee are Messrs. Claflin (as Chairman), Herndon and Heilman. The
Audit Committee reviews the results of the annual audit of the Company's
accounts conducted by the Company's independent auditors and the recommendations
of the auditors with respect to accounting systems and controls. During the
fiscal year ended September 26, 1998, the Audit Committee held two meetings.
The members of the Compensation Committee are Messrs. Herndon (as Chairman)
and Mulvena. The Compensation Committee reviews and approves the Company's
executive compensation and benefit policies and administers the Company's 1992
Stock Option Plan and the Directors' Plan. During the fiscal year ended
September 26, 1998, the Compensation Committee held one meeting. The
Compensation Committee's report on executive compensation appears elsewhere in
this Proxy Statement.
The Board of Directors selects nominees for election as directors of the
Company. The Board of Directors will consider a nominee for election to the
Board recommended by a stockholder of record if such recommendation is timely in
accordance with, and is accompanied by the information required by, the
Company's By-laws. The Company does not maintain a standing nominating
committee.
DIRECTOR COMPENSATION
Non-employee directors of the Company receive: (i) an $8,000 annual
retainer payable quarterly; (ii) a $2,000 annual retainer for Committee Chairmen
payable quarterly; and (iii) a $500 meeting fee for each meeting of directors
attended. Dr. Bright has a consulting arrangement with the Company pursuant to
which he provides management, personnel and marketing advice and services to the
Company. During the fiscal year ended September 26, 1998, Dr. Bright received
$50,000 pursuant to this arrangement.
Non-Employee Directors' Stock Option Plan. The Company has adopted a
Non-Employee Directors' Stock Option Plan which provides that each Director of
the Company who is not also an employee of the Company will be granted options
to purchase 10,000 shares of the Company's Common Stock. Each Non-Employee
Director of the Company who served in such position on April 23, 1996, the
effective date of this Plan, received a grant of options as of that date. Each
Non-Employee Director who is elected to the Board of Directors after that date
is automatically granted an option to purchase 10,000 shares of common stock on
the
5
<PAGE> 8
date such person is initially elected to the Board. The exercise price of
options granted under the Plan is equal to the fair market value of the common
stock on the date of grant. All options granted under the Plan vest in four
equal annual installments beginning on the first anniversary of the date of
grant. Mr. Mulvena joined the Board of Directors on April 22, 1998 and received
options to purchase 10,000 shares at an exercise price of $7.00 per share. Dr.
Biondi joined the Board of Directors on January 7, 1999 and received options to
purchase 10,000 shares at an exercise price of $9.00 per share.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the aggregate
cash compensation paid by the Company with respect to the three fiscal years
ended September 26, 1998 to the Company's Chief Executive Officer and each of
the four other most highly compensated executive officers in fiscal 1998
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -----------------
----------------------------------------- SHARES UNDERLYING
NAME AND OTHER ANNUAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($) GRANTED(#)(2) COMPENSATION($)(3)
- ------------------ ---- --------- ----------- --------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Rolf S. Stutz...................... 1998 260,000 -- 4,800(4) -- 1,248
Chairman and Chief 1997 250,000 15,000 4,800(4) 10,000 1,200
Executive Officer 1996 243,667 60,000 4,800(4) -- 720
Richard A. Packer.................. 1998 200,000 -- -- -- 960
President and Chief 1997 180,000 15,000 -- 10,000 864
Operating Officer 1996 163,333 45,000 -- 20,000 720
Frits J. Borst..................... 1998 129,426 10,717(5) 29,167(6) -- --
Vice President- 1997 128,968 29,328(5) 31,813(6) 5,000 --
International Operations 1996 146,221 47,922(5) 33,547(6) -- --
Ward M. Hamilton................... 1998 135,000 21,250 -- -- 648
Vice President-Marketing......... 1997 125,000 5,000 -- 5,000 600
1996 110,000 44,000 -- -- 528
Donald Boucher..................... 1998 129,000 18,125 -- -- 619
Vice President-Research.......... 1997 129,000 5,000 -- 5,000 619
and Development 1996 110,000 44,000 -- -- 619
</TABLE>
- ---------------
(1) Amounts shown for each fiscal year include bonuses paid during the
succeeding fiscal year. Thus, the 1998 bonus includes an amount paid in
fiscal 1999 for fiscal 1998.
(2) Excludes options which were repriced. See "Report on Repricing of Certain
Stock Options."
(3) All Other Compensation reflects life insurance premiums paid by the Company
for the executive officers.
(4) Reflects a car allowance of $400 per month.
(5) These amounts represent a bonus payment of $500 and a payment of $10,217
made in lieu of vacation benefits for fiscal 1998, a bonus payment of
$20,000 and a payment of $9,328 made in lieu of vacation benefits for fiscal
1997 and a bonus payment of $28,973 and a payment of $18,949 made in lieu of
vacation benefits for fiscal 1996.
(6) These amounts reflect an automobile allowance for Mr. Borst of $7,884 for
1998, 1997 and 1996, payments of $13,000, $14,647 and $22,404 made as a
pension contribution for 1998, 1997 and 1996 respectively, and a payment of
$8,283, $9,282 and $3,259 for disability insurance for 1998, 1997 and 1996.
6
<PAGE> 9
Option Grants in Last Fiscal Year. The Company did not grant any new stock
options to any of the Named Executive Officers during the fiscal year ended
September 26, 1998. In November 1997, the Company repriced certain options
previously granted to the Named Executive Officers. See "Report on Repricing of
Certain Stock Options."
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values. No stock options were exercised by the Named Executive Officers during
the fiscal year ended September 26, 1998. The following table sets forth certain
information regarding stock options held as of September 26, 1998 by the Named
Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
ACQUIRED --------------------------- ----------------------
ON VALUE EXERCIS- UNEXERCIS- EXERCIS- UNEXERCIS-
NAME EXERCISE(#) REALIZED($)(1) ABLE(#)(3) ABLE(#) ABLE($) ABLE($)
- ---- ----------- -------------- ----------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Rolf S. Stutz................. -- -- 17,500 62,500 15,313 45,938
Richard A. Packer............. -- -- 36,500 45,500 10,938 32,813
Frits J. Borst................ -- -- 8,750 26,250 7,656 22,969
Ward M. Hamilton.............. -- -- 48,250 12,750 163,281 9,844
Donald Boucher................ -- -- 17,750 29,250 7,656 22,969
</TABLE>
- ---------------
(1) Value realized equals the aggregate market value of the shares acquired on
the exercise date(s), less the applicable aggregate option exercise
price(s).
(2) Year-end value is based on the closing market price per share on September
25, 1998 ($7.75), less the applicable aggregate option exercise price(s) of
in-the-money options multiplied by the number of unexercised in-the-money
options which are exercisable and unexercisable, respectively.
(3) Includes options exercisable within 60 days after September 26, 1998.
7
<PAGE> 10
REPORT ON REPRICING OF CERTAIN STOCK OPTIONS
The table below sets forth information pertaining to all repricings of
options held by any Named Executive Officer during all fiscal years since the
Company's initial public offering in 1992. Options are considered to be repriced
whenever the Company adjusts or amends the exercise price of stock options
previously granted to any executive officer, whether through amendment,
cancellation or an exchange program, or any other means. In connection with the
repricing, the vesting period for such option was restarted. Each repriced
option will vest in four equal annual installments beginning on the anniversary
of the repricing date. Since its initial public offering, the Company repriced
outstanding stock options in November, 1995, April, 1996 and in November, 1997.
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE ORIGINAL OPTION
UNDERLYING OF STOCK AT EXERCISE PRICE NEW TERM
OPTIONS TIME OF AT TIME OF EXERCISE REMAINING
REPRICED REPRICING REPRICING PRICE AT DATE OF
NAME DATE (#) ($) ($) ($) REPRICING
- ---- -------- ---------- ------------ -------------- -------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Rolf S. Stutz.............. 11/20/97 40,000 $6.875 $ 10.00 $6.875 approximately 5 years
11/20/97 20,000 $6.875 $ 14.50 $6.875 approximately 6 years
4/22/96 20,000 $14.50 $ 24.75 $14.50 approximately 7 years
Richard A. Packer.......... 11/20/97 30,000 $6.875 $ 14.50 $6.875 approximately 5 years
11/20/97 10,000 $6.875 $ 14.50 $6.875 approximately 6 years
4/22/96 30,000 $14.50 $ 21.75 $14.50 approximately 7 years
4/22/96 10,000 $14.50 $ 24.75 $14.50 approximately 7 years
11/16/95 12,000 $ 8.75 $ 14.00 $ 8.75 approximately 9 years
Frits J. Borst............. 11/20/97 30,000 $6.875 $ 14.50 $6.875 approximately 6 years
4/22/96 30,000 $14.50 $ 36.75 $14.50 approximately 8 years
11/16/95 12,000 $ 8.75 $ 14.00 $ 8.75 approximately 9 years
Ward M. Hamilton........... 11/20/97 10,000 $6.875 $ 14.50 $6.875 approximately 5 years
4/22/96 10,000 $14.50 $ 24.75 $14.50 approximately 7 years
11/16/95 6,000 $ 8.75 $ 14.00 $ 8.75 approximately 9 years
Donald Boucher............. 11/20/97 30,000 $6.875 $ 14.50 $6.875 approximately 5 years
4/22/96 30,000 $14.50 $ 31.00 $14.50 approximately 7 years
11/16/95 12,000 $ 8.75 $ 14.00 $ 8.75 approximately 9 years
</TABLE>
8
<PAGE> 11
STOCK PERFORMANCE CHART
The following chart provides an annual comparison, from September 30, 1993
of the cumulative total shareholder return (assuming reinvestment of any
dividends) among Zoll Medical Corporation, the Nasdaq National Market Index, the
Russell 2000 Index and the Hambrecht & Quist ("H&Q") Health Care (Excluding
Biotechnology) Index, an industry index of 43 health care and medical technology
companies (including the Company). Zoll has traditionally compared its 5 year
cumulative total return to the Nasdaq National Market Index. Because of the
relative weighting used in compiling this index, the index tends to reflect the
performance of several very large capitalization high tech companies. Because
Zoll is generally considered a small capitalization company, management believes
that continued comparison to this index does not provide meaningful information.
Management believes it is more appropriate to compare Zoll's performance to
other companies in the Russell 2000 Index. The Russell 2000 Index covers a broad
cross-section of public companies, many of which have relatively small market
capitalization. The historical information set forth below is not necessarily
indicative of future performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ZOLL MEDICAL CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX, THE RUSSELL 2000 INDEX
AND THE HAMBRECHT & QUIST HEALTHCARE-EXCLUDING BIOTECHNOLOGY INDEX
[GRAPH]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
9/30/93 9/30/94 9/30/95 9/30/96 9/30/97 9/30/98
<S> <C> <C> <C> <C> <C> <C>
ZOLL MEDICAL
CORPORATION......... 100.00 25.52 25.86 42.76 19.31 20.86
NASDAQ STOCK MARKET
(U.S.).............. 100.00 102.81 139.28 165.24 226.81 231.84
HAMBRECHT & QUIST
HEALTHCARE--EXCLUDING
BIOTECHNOLOGY....... 100.00 116.28 178.32 218.25 261.74 267.63
RUSSELL 2000......... 100.00 102.56 126.66 143.20 190.84 157.54
</TABLE>
* $100 INVESTED ON 9/30/93 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
9
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE
Objective of the Company's Compensation Program. The Company's executive
compensation program is intended to attract, retain and reward executives who
are capable of leading the Company effectively and continuing its growth in the
competitive marketplace for cardiac resuscitation equipment. The Company's
objective is to utilize a combination of cash and equity-based compensation to
provide appropriate incentives for executives while aligning their interests
with those of the Company's stockholders.
Like many other public companies, the Company uses a three-pronged approach
to its compensation for each executive for the following twelve months. First,
the executive's base salary is intended to create a reasonably competitive
minimum level of compensation for each executive for the following twelve
months. Second, the Company maintains an incentive bonus program for executive
officers and certain other members of management under which discretionary
bonuses may be offered based upon the achievement of corporate and individual
performance goals. The objective of the incentive bonus program is to reward
executives for their past twelve months' performance. Finally, the Company
utilizes stock options granted under its 1992 Stock Option Plan as a long-term
incentive for the executive officers as well as for many other employees of the
Company. The Company believes that stock options are important in aligning
management and stockholder interests and in encouraging management to adopt a
longer-term perspective. Accordingly, options generally provide for incremental
vesting over a four-year period.
Compensation Committee Procedures. The Company's executive compensation
program is administered under the direction of the Company's Compensation
Committee, which is composed of two non-employee directors. The Compensation
Committee meets periodically in connection with regularly-scheduled Board of
Directors' meetings, and may consult by telephone at other times. The
determinations of the Compensation Committee relating to the compensation of the
Company's executive officers and the granting of options are then approved or
ratified by all of the non-employee directors.
With respect to the compensation of Mr. Stutz, the Compensation Committee
exercises its independent discretion in determining his compensation, subject to
review by all of the non-employee directors. With respect to the compensation of
the other executive officers, the Compensation Committee consults other members
of the Board, but generally relies to a significant extent on Mr. Stutz's
recommendations as the Company's Chief Executive Officer.
Factors Considered in Setting Compensation of the Chief Executive
Officer. The Compensation Committee considers the Company's financial
performance, as measured by sales and earnings growth, to be a significant
determinant in Mr. Stutz's overall compensation package. In making its
determinations, however, the Compensation Committee also considers a number of
other factors which are not subject to precise quantitative measurement and
which the Committee believes can only be properly assessed over the long term.
In fiscal 1998, these factors included further development of the management
organization, restructuring of the sales force, development of and strategic
planning for the Company's new M Series line of products, and the development of
new markets and products through acquisitions and investments. During fiscal
1998, Mr. Stutz devoted his full time as Chief Executive Officer of the Company
and expects to continue to do so in 1999.
Compensation Decisions for Chief Executive Officer and President. The
Compensation Committee recognizes that during fiscal 1998 both Mr. Stutz and Mr.
Packer contributed substantially to, among other things, the development and
introduction of the new M Series line of products, the restructuring of the
sales force and the continuing growth of the Company's Westech business. This
excellent performance has positioned the Company for strong growth and
significantly improved operating results in fiscal 1999 and beyond. Based on
these successes, the Committee believes that Messrs. Stutz and Packer are
entitled to
10
<PAGE> 13
appropriate raises in salary for fiscal 1999 and bonuses for fiscal 1998.
However, Messrs. Stutz and Packer have requested that no salary increase or
fiscal 1998 bonus be awarded to them currently since their efforts have not
yet -- due to the inherent lag time involved in the marketing of new products
and the restructuring of the sales force -- improved the Company's financial
results. Both Messrs. Stutz and Packer believe, and the Committee concurs, that
these salary and bonus decisions should be made only after their efforts begin
to show improved financial results that benefit all stockholders. Accordingly,
the Committee deferred until later in fiscal 1999 any salary increase or bonus
award for Messrs. Stutz and Packer.
Repricing of Certain Stock Options. During fiscal year 1998, the
Compensation Committee considered the stock options held by employees and
Directors of the Company and the fact that significant portions of the
outstanding options had exercise prices well above the recent historical trading
prices for the Company's Common Stock. The Committee believed that it was
important to provide equity incentives to employees and Directors to remain with
the Company and to provide a proper incentive to such persons to improve Company
performance and stockholder value. Accordingly, effective as of November 20,
1997, the Board of Directors approved, upon the recommendation of the
Compensation Committee, the repricing of outstanding stock options held by
employees or Directors of the Company which had an exercise price greater than
$10.00 per share. As a condition to this repricing, the option holder was
required to agree to restart the vesting period for each repriced option,
thereby further enhancing the ability of the option to retain employees. Such
options were amended with the new exercise price being equal to the closing
price of the Company's common stock as of the date of the repricing. The
repriced options have an exercise price of $6.875 per share. Each repriced
option, including those previously vested, will now vest in four equal annual
installments beginning on the first anniversary of the repricing date. Options
to purchase 417,850 shares had exercise prices above $10.00 per share and were
eligible for repricing. The Named Executive Officers of the Company held 200,000
of such options, with original exercise prices ranging from $10.00 to $36.75.
All of these options were repriced with an exercise price of $6.875 per share.
Submitted by the Compensation
Committee for fiscal 1998
NOAH T. HERNDON, Chairman
DANIEL M. MULVENA
SEVERANCE ARRANGEMENTS
Mr. Stutz and Mr. Packer each have an employment agreement with the Company
providing for a severance payment of twelve months' salary in the event their
employment is terminated by the Company without cause. Each Agreement provides
for non-competition for a period of three years following termination. At his
fiscal 1998 base salary, Mr. Stutz would receive a severance payment of
approximately $260,000 under this provision and Mr. Packer would receive a
severance payment of approximately $200,000.
CERTAIN RELATIONSHIPS
Noah T. Herndon, a director of the Company, is a partner of Brown Brothers
Harriman & Co., with which the Company maintains a working capital line of
credit and other customary, arm's-length banking relationships. M. Stephen
Heilman is Founder, Chairman and Chief Executive Officer of Lifecor, Inc., in
which the Company has made a $2 million investment. Pursuant to an agreement
entered into in connection with such investment, the Company has agreed to Mr.
Heilman serving as a director of the Company, and Mr. Heilman voted in favor of
Mr. Stutz being elected to Lifecor, Inc.'s board of directors.
11
<PAGE> 14
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Based on a review of the reports of changes in beneficial ownership of the
Corporation's Common Stock and written representations furnished to the
Corporation, the Corporation believes that its executive officers and directors
filed on a timely basis the reports required to be filed under Section 16(a) of
the Securities Exchange Act of 1934 during the fiscal year ended September 26,
1998.
PROPOSAL 2
AMENDMENT TO THE 1992 STOCK OPTION PLAN
BACKGROUND OF THE PLAN
The Company's 1992 Stock Option Plan (the "Plan") was adopted by the Board
of Directors and the stockholders of the Company in April, 1992. The Plan
replaced the Company's prior stock option plan, which was terminated by the
Board of Directors except as to then-outstanding options. The Plan provides for
the granting of "incentive stock options" under the Internal Revenue Code of
1986 and non-qualified options to purchase shares of Common Stock. Options under
the Plan may be granted to officers, employees and consultants of the Company
and its subsidiaries.
PROPOSED AMENDMENT OF THE PLAN
As originally adopted in 1992, the Plan provided for the issuance of up to
450,000 shares of Common Stock pursuant to the exercise of options granted under
the Plan. At that time, the Company had approximately 125 full-time and 9
part-time employees. As a result of the Company's rapid growth and the Board of
Director's belief that stock options should not be reserved exclusively for
senior management but should be granted as a performance incentive throughout
the organization, the original shares remaining available for issuance under the
Plan were nearly exhausted by the end of 1994. Accordingly, in January 1995 the
Plan was amended, with the approval of the stockholders of the Company, to
increase the number of shares of Common Stock available for issuance under the
Plan by 300,000 shares. In November, 1996, the Plan was again amended, with the
approval of the stockholders, to add 200,000 more shares to the Plan.
As of September 26, 1998, the Company had 361 full-time and 14 part-time
employees. The Company has granted options to approximately 27% of these
employees, effectively depleting the pool of options available for issuance. On
November 19, 1998 the Board of Directors adopted an amendment to the Plan,
subject to stockholder approval, to increase the number of shares of Common
Stock available for issuance under the Plan by 300,000 shares. In all other
respects, the Plan would remain unchanged. The Board of Directors believes that
the additional 300,000 shares, which represent approximately 4.8% of the
outstanding shares of Common Stock, are necessary for the Company to continue to
attract and retain the highly-qualified officers and employees necessary for its
future growth.
VOTE REQUIRED FOR APPROVAL
The proposed amendment of the Plan requires the affirmative vote of the
holders of a majority of the total votes cast on the proposal at the Annual
Meeting. THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENT IS IN THE
BEST INTEREST OF THE COMPANY AND THEREFORE RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE AMENDMENT.
12
<PAGE> 15
OTHER MATTERS
PRINCIPAL STOCKHOLDERS
The following table presents information as to the persons or entities
believed by the Company to be beneficial owners of more than 5% of the Company's
Common Stock on September 26, 1998 based on representations of officers and
directors of the Company and certain filings made under Section 13 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). All such
information was provided by the stockholders listed and reflects their
beneficial ownership as of the dates specified in the footnotes to the table.
<TABLE>
<CAPTION>
NO. OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OF
OF BENEFICIAL OWNER OWNED CLASS
- ------------------- ------------- -------
<S> <C> <C>
Elliott Associates, L.P.(1).............................. 952,200 15.38%
Westgate International, L.P.
Martley International, Inc.
712 Fifth Avenue
New York, New York 10019
The Kaufmann Fund, Inc.(2)............................... 910,900 14.4%
140 E. 45th St., 43rd Floor
Suite 2624
New York, New York 10017
Dimensional Fund Advisors Inc.(3)........................ 418,900 6.77%
1299 Ocean Avenue, 11th Floor
Santa, Monica, CA 90401
</TABLE>
- ---------------
(1) Based on information set forth in a Schedule 13G/A filed under the Exchange
Act on November 11, 1998.
(2) Based on information set forth in a Schedule 13G/A filed under the Exchange
Act on February 18, 1998.
(3) Based on information set forth in a Schedule 13G filed under the Exchange
Act on February 10, 1998.
INDEPENDENT AUDITORS
The accounting firm of Ernst & Young LLP has served as the Company's
independent auditors since 1984. A representative of Ernst & Young LLP will be
present at the Annual Meeting, will be given the opportunity to make a statement
if he so desires and will be available to respond to appropriate questions.
SOLICITATION OF PROXIES
The cost of solicitation of proxies in the form enclosed herewith will be
borne by the Company. In addition to the solicitation of proxies by mail, the
directors, officers and employees of the Company may also solicit proxies
personally or by telephone without special compensation for such activities. The
Company will also request persons, firms and corporations holding shares in
their names or in the names of their nominees, which are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners. The Company will reimburse such holders for their reasonable expenses.
13
<PAGE> 16
STOCKHOLDER PROPOSALS
For a proposal of a stockholder to be included in the Company's proxy
statement for the Company's 2000 Annual Meeting, it must be received at the
principal executive offices of the Company on or before September 13, 1999. Such
a proposal must also comply with the requirements as to form and substance
established by the Securities and Exchange Commission for such a proposal to be
included in the proxy statement.
In addition, the Company's By-laws provide that any stockholder wishing to
nominate a director or have a stockholder proposal considered at an annual
meeting must provide written notice of such nomination or proposal and
appropriate supporting documentation, as set forth in the By-laws, to the
Company at its principal executive offices (a) not less than 75 calendar days
nor more than 120 calendar days prior to the anniversary date of the immediately
preceding annual meeting of stockholders or special meeting in lieu thereof (the
"Anniversary Date") or (b) in the case of a special meeting of stockholders in
lieu of the annual meeting or in the event that the annual meeting of
stockholders is called for a date more than 30 calendar days prior to the
Anniversary Date, not later than the close of business on (i) the 10th calendar
day (or if that day is not a business day for the corporation, on the next
succeeding business day) following the earlier of (1) the date on which notice
of the date of such meeting was mailed to stockholders, or (2) the date on which
the date of such meeting was publicly disclosed, or (ii) if such date of notice
or public disclosure occurs more than 75 calendar days prior to the scheduled
date of such meeting, the 75th calendar day prior to such scheduled date of such
meeting (or if that day is not a business day for the corporation, on the next
succeeding business day). Any such proposal should be mailed to: Zoll Medical
Corporation, 32 Second Avenue, Northwest Park, Burlington, Massachusetts 01803,
Attention: Clerk.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD
TODAY.
14
<PAGE> 17
ZOLL MEDICAL CORPORATION
Proxy for Annual Meeting of Stockholders
February 4, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Rolf S. Stutz and Richard A.
Packer, and each of them, as Proxies of the undersigned, with full power to
appoint their substitutes, and authorizes each of them to represent and to vote
all shares of Common Stock of Zoll Medical Corporation (the "Company") held by
the undersigned as of the close of business on December 18, 1998, at the Annual
Meeting of Stockholders to be held at State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110 on Thursday, February 4, 1999, at
10:00 a.m., local time, and at any adjournments or postponements thereof.
When properly executed, this proxy will be voted in the manner directed by the
undersigned stockholder(s). If no direction is given, this proxy will be voted
FOR the election of the two nominees for Class I Directors and FOR the approval
of the amendment to the Plan and at the Proxies' discretion upon such other
business as may properly come before the meeting. The Board of Directors
recommends a vote "FOR" Proposal 1 and "FOR" Proposal 2. A stockholder wishing
to vote in accordance with the Board of Directors recommendation need only sign
and date this proxy and return it in the envelope provided.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign this proxy exactly as your name(s) appear(s) on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation, this signature should
be that of an authorized officer who should state his or her title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
<PAGE> 18
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- --------------------------
ZOLL MEDICAL CORPORATION
- --------------------------
Mark box at right if an address change or comment has been noted [ ]
on the reverse side of this card.
RECORD DATE SHARES:
---------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------------
- -- Stockholder sign here -------------------------- Co-owner sign here ---
l. Proposal to elect the following persons
as Class I Directors to serve until the
2002 Annual Meeting and until their
successors are duly elected and
qualified. For All With- For All
Nominees hold Except
NOAH T. HERNDON [ ] [ ] [ ]
DANIEL M. MULVENA
INSTRUCTION: To withhold authority to vote for any nominee, mark the "For All
Except" box and strike a line through the name of the nominee in the list above.
For Against Abstain
2. To amend the Company's 1992 Stock Option [ ] [ ] [ ]
Plan to increase the number of shares
available for issuance under the Plan
by 300,000 shares.
3. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or at any adjournment(s)
thereof.
The undersigned hereby acknowledges receipt of a copy of the accompanying Notice
of Annual Meeting of Stockholders, the Proxy Statement with respect thereto and
the Company's 1998 Annual Report and hereby revokes any proxy or proxies
heretofore given. This proxy may be revoked at any time before it is exercised.
DETACH CARD DETACH CARD
ZOLL MEDICAL CORPORATION
Dear Stockholder,
Please take note of the important information regarding the Company's management
and financial results enclosed with this proxy card.
Your vote on these matters counts, and you are strongly encouraged to exercise
your right to vote your shares.
Please mark one box for each proposal on the proxy card above to indicate how
your shares should be voted. Then, sign and date the card, detach it and return
your proxy vote in the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders to be
held February 4, 1999.
Thank you in advance for your prompt consideration of these matters. This will
help the Company avoid the expense of subsequent mailings.
Sincerely,
ZOLL MEDICAL CORPORATION
