UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 §240.14a-12 |
ZOLL MEDICAL CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. |
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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: |
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| (1) | Amount Previously Paid: |
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| (4) | Date Filed: |
ZOLL MEDICAL CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, JANUARY 23, 2008
NOTICE IS HEREBY GIVEN that the 2008 Annual Meeting of Shareholders (the “Annual Meeting”) of ZOLL Medical Corporation (the “Company”) will be held on Wednesday, January 23, 2008 at 10:00 a.m., local time, at the Conference Center at Goodwin ProcterLLP, Exchange Place, Boston, Massachusetts 02109 for the following purposes:
1. To elect three Class I directors of the Company to serve until the 2011 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified and to elect one Class III director of the Company to serve until the 2010 Annual Meeting of Shareholders and until his successor is duly elected and qualified;
2. To ratify and approve the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm; 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 7, 2007 as the record date for determining the shareholders entitled to notice of and to vote at the Annual Meeting and at any adjournments or postponements thereof. Shareholders of record of the Company’s common stock, par value $0.01 per share, 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. Shareholders 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
STEPHEN KORN
Secretary
Chelmsford, Massachusetts
December 21, 2007
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL 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.
ZOLL MEDICAL CORPORATION
269 Mill Road
Chelmsford, Massachusetts 01824
PROXY STATEMENT
2008 ANNUAL MEETING OF SHAREHOLDERS
To Be Held on Wednesday, January 23, 2008
December 21, 2007
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 2008 Annual Meeting of Shareholders of the Company to be held on Wednesday, January 23, 2008 at 10:00 a.m., local time, and at any adjournments or postponements thereof, at the Conference Center at Goodwin ProcterLLP, Exchange Place, Boston, Massachusetts 02109 (the “Annual Meeting”). At the Annual Meeting, shareholders will be asked to vote upon (1) the election of three Class I directors of the Company and one Class III director of the Company, (2) the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm, and (3) 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 shareholders on or about December 21, 2007. The Board of Directors has fixed the close of business on December 7, 2007 as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting (the “Record Date”). Only shareholders of record of Company common stock, par value $0.01 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 20,504,969 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 in interest of the total number of issued and outstanding shares of Common Stock entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non-votes are each included in the number of shares present at the Annual Meeting for purposes of establishing a quorum. Directors are elected by a plurality of the votes cast at the Annual Meeting. Votes may be cast FOR or WITHHELD FROM each nominee. Votes cast FOR the nominees will count as “yes votes”; votes that are WITHHELD FROM the nominees will be excluded entirely from the vote and will have no effect. The ratification of the selection of the independent registered public accounting firm shall be approved by a majority of the shares voting on such proposal. Votes may be cast FOR or AGAINST the approval of the ratification of the selection of the independent registered public accounting firm. Abstentions and broker non-votes will have no effect on the outcome of the election of directors or the ratification of the selection of the independent registered public accounting firm.
Shareholders 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 nominees for the Class I directors of the
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Company and the nominee for the Class III director of the Company named in this proxy statement and FOR the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm. It is not anticipated that any matter other than that 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. The Board of Directors unanimously recommends a vote FOR the nominees and FOR the approval of the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm.
A shareholder of record may revoke a proxy at any time before it has been exercised by (1) filing a written revocation with the Secretary of the Company at the address of the Company set forth above, (2) filing a duly executed proxy bearing a later date, or (3) appearing in person and voting by ballot at the Annual Meeting. Any shareholder 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 shareholder at the Annual Meeting will not constitute revocation of a previously given proxy.
The Company’s 2007 Annual Report, including the Company’s audited financial statements for the fiscal year ended September 30, 2007, is being mailed to shareholders concurrently with this proxy statement.
PROPOSAL 1
ELECTION OF DIRECTORS
Currently there are seven members of the Board of Directors. If Lewis H. Rosenblum is elected to the Board of Directors as a Class III director at the Annual Meeting, there will be eight members of the Board of Directors. The Board of Directors 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 shareholders. Daniel M. Mulvena, Benson F. Smith, and John J. Wallace are currently serving as Class I directors. Lewis H. Rosenblum is a nominee for election as a Class III director. Dr. James W. Biondi and Robert J. Halliday are currently serving as Class III directors and will continue to serve until the 2010 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified.
At the Annual Meeting, three Class I directors will be elected to serve until the 2011 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified and one Class III director will be elected to serve until the 2010 Annual Meeting of Shareholders and until his successor is duly elected and qualified. Based on the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has nominated Messrs. Mulvena, Smith, and Wallace for election as Class I directors and Mr. Rosenblum for election as a Class III director (collectively the “Nominees”). The Board of Directors anticipates that each of the Nominees will serve as a director if elected. However, if the Nominees nominated by the Board of Directors are unable to accept election, the proxies will be voted for the election of such other person as the Board of Directors may recommend.
Proxies may not be voted for a greater number of persons than the number of Nominees. In order to be elected, each Nominee must receive the affirmative vote of a plurality of the issued and outstanding shares of the Common Stock represented in person or by proxy at the Annual Meeting and entitled to vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE FOUR DIRECTOR NOMINEES LISTED BELOW.
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Information Regarding Nominees and Directors
The following table sets forth certain information with respect to the Nominees for election as directors at the Annual Meeting and those continuing directors of the Company whose terms expire at the Annual Meetings of Shareholders in 2009 and 2010 based on information furnished to the Company by each director. The following information is as of December 3, 2007 unless otherwise specified.
Name and Principal Occupation | Age | Director Since | Amount and Nature of Beneficial Ownership of Common Stock(1)(2)(3) | Percent Of Class | |||||
| Class I Nominees for Election at the 2008 Annual Meeting | |||||||||
Daniel M. Mulvena | 59 | 1998 | 7,000 | (4) | * | ||||
Mr. Mulvena is the owner of Commodore Associates, Inc., a consulting company. From 1992 to 1995, Mr. Mulvena was a Group Vice President of Boston Scientific Corporation, a medical device company. Mr. Mulvena is a director of Thoratec Corporation, a medical device company. Mr. Mulvena received a B.A. degree from Vanderbilt University. | |||||||||
Benson F. Smith | 60 | 2000 | 30,388 | (5) | * | ||||
Mr. Smith is the managing partner for the Sales Research Group, a research and consulting organization. Since January 1999, Mr. Smith has also been the Chief Executive Officer of BFS & Associates LLC, a company specializing in strategic planning and venture investing. From January 2000 until December 2005, Mr. Smith also served as a speaker and author at The Gallup Organization, a global research-based consultancy firm. Mr. Smith was formerly President, Chief Operating Officer and a member of the Board of Directors of C.R. Bard, Inc., a medical device company. Mr. Smith worked at C.R. Bard, Inc. in various capacities for 25 years until his retirement in 1998. Mr. Smith currently serves as a director of Rochester Medical Corporation, a medical device company, and Teleflex Incorporated, a specialty engineered product designer and manufacturer, as well as a board member for a variety of academic and health-related organizations. Mr. Smith received a B.A. degree from Grinnell College and was a post graduate Watson Fellow. | |||||||||
John J. Wallace | 54 | 2007 | 0 | (6) | * | ||||
Mr. Wallace has served as a consultant since June 2007. Prior to this, Mr. Wallace served as Chief Operating Officer of Nova Biomedical Corporation, a medical device company, from 1997 through June 2007. Prior to that, Mr. Wallace served as the Vice President, Operations and Chief Financial Officer of Nova Biomedical Corporation from 1991 through 1997. Mr. Wallace currently serves as a director of Vision-Sciences, Inc., a medical device company. Mr. Wallace received his undergraduate degree from Northeastern University and an M.B.A. degree from Babson College. | |||||||||
| Class II Continuing Directors—Term to Expire 2009 | |||||||||
Thomas M. Claflin, II | 66 | 1980 | 34,504 | (7) | * | ||||
Mr. Claflin is a principal of Claflin Capital Management, Inc., a venture capital firm, and general partner of its venture capital partnerships. Mr. Claflin is a director of Point Therapeutics, Inc., a biopharmaceutical company. Mr. Claflin received his undergraduate degree from Harvard College and an M.B.A. from the Harvard Graduate School of Business Administration. | |||||||||
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Name and Principal Occupation | Age | Director Since | Amount and Nature of Beneficial Ownership of Common Stock(1)(2)(3) | Percent Of Class | ||||||
Richard A. Packer | 50 | 1996 | 280,600 | (8) | 1.35 | % | ||||
Mr. Packer joined the Company in 1992 and in November 1999 was appointed Chairman of the Board of Directors and Chief Executive Officer. Mr. Packer served as President, Chief Operating Officer and Director from 1996 to his appointment as CEO. From 1992 to 1996 he served as Chief Financial Officer and Vice President of Operations of the Company. From 1987 to 1992, Mr. Packer served as Vice President of various functions for Whistler Corporation, a consumer electronics company. Prior to this, Mr. Packer was a manager with the consulting firm of PRTM/KPMG, specializing in operations of high technology companies. Since April 2007, Mr. Packer has also served as a director of Bruker BioSciences Corporation, a bioscientific device company. Mr. Packer received B.S. and M. Eng. degrees from the Rensselaer Polytechnic Institute and an M.B.A. degree from the Harvard Graduate School of Business Administration. | ||||||||||
| Class III Nominee for Election at the 2008 Annual Meeting | ||||||||||
Lewis H. Rosenblum | 64 | — | — | — | ||||||
Mr. Rosenblum is the President, China Operations for Thermo Fisher Scientific, a scientific instrument and supply company, a position he has held since January 2006. Prior to that, from January 2003 until December 2005, Mr. Rosenblum served as the President, Clinical Diagnostic Division for Thermo Electron Corporation. From March 1997 until December 2002, Mr. Rosenblum served as the President of the Bioscience Technology Division of Thermoquest Corp., a division of Thermo Electron Corporation. Mr. Rosenblum received a B.S.E.E. degree from Drexel University and an M.B.A. degree from the University of Hartford. | ||||||||||
| Class III Directors—Term to Expire 2010 | ||||||||||
James W. Biondi, M.D. | 51 | 1999 | 29,000 | (9) | * | |||||
Dr. Biondi founded and has served as Chairman of the Board of Directors of Cardiopulmonary Corporation, a medical device company, since 1988 and Chief Executive Officer since 1992. Dr. Biondi also serves as Chairman of the Board of Directors of Ivy Biomedical Systems, Inc., a medical device company. Dr. Biondi received a B.S. degree from Rensselaer Polytechnic Institute and a M.D. degree from Albany Medical College. | ||||||||||
Robert J. Halliday | 53 | 2003 | 25,000 | (10) | * | |||||
Mr. Halliday has served as Executive Vice President and Chief Financial Officer of Varian Semiconductor Equipment Associates, Inc., a manufacturer of semiconductor capital equipment, since October 2006; Executive Vice President, Treasurer and Chief Financial Officer from October 2004 to October 2006; Vice President, Treasurer and Chief Financial Officer from November 2002 to October 2004; and Vice President and Chief Financial Officer from March 2001 to November 2002. Prior to joining Varian Semiconductor, Mr. Halliday was Vice President and Chief Financial Officer of Unica Corporation, a software company. Previously, Mr. Halliday was at Ionics, Incorporated, a global separations technology company. At Ionics, he was Chief Operating Officer in 2000; Vice President of the Consumer Water Group from 1996 to 2000; and Chief Financial Officer from 1990 to 2000. Mr. Halliday received an M.B.A. degree from The Wharton School of Finance and a B.S. degree from the University of Pennsylvania’s Wharton School. | ||||||||||
All directors, nominees and executive officers as a group (16 persons) | 807,758 | (11) | 3.81 | % | ||||||
| * | Less than 1%. |
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| (1) | The persons named in this 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) | The share numbers in this table reflect the Company’s two-for-one stock split, which became effective on February 20, 2007. |
| (3) | Our calculation of the percentage of shares beneficially owned by the shareholders in this table is based upon the number of shares of our Common Stock outstanding as of December 3, 2007 (20,487,469), plus for each listed beneficial owner, any shares of Common Stock that the listed beneficial owner has the right to acquire within 60 days of December 3, 2007. |
| (4) | Represents 7,000 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are exercisable within 60 days after December 3, 2007. Does not include 7,000 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are not exercisable within 60 days of December 3, 2007. |
| (5) | Includes 27,000 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are exercisable within 60 days after December 3, 2007. Does not include 7,000 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are not exercisable within 60 days of December 3, 2007. In May 2007, Mr. Smith pledged 1,694 shares as security for a real estate loan. |
| (6) | Does not include 22,000 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are not exercisable within 60 days of December 3, 2007. |
| (7) | Includes 7,000 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are exercisable within 60 days after December 3, 2007. Does not include 7,000 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are not exercisable within 60 days of December 3, 2007. |
| (8) | Includes 254,000 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are issuable exercisable within 60 days after December 3, 2007. Does not include 175,000 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are not exercisable within 60 days of December 3, 2007. |
| (9) | Includes 27,000 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are exercisable within 60 days after December 3, 2007. Includes 2,000 shares owned indirectly for the benefit of minor children. Does not include 7,000 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are not exercisable within 60 days of December 3, 2007. |
| (10) | Represents 25,000 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are exercisable within 60 days after December 3, 2007. Does not include 7,000 shares of Common Stock issuance upon exercise of options to purchase Common Stock, which are not exercisable within 60 days of December 3, 2007. |
| (11) | Includes 723,500 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are exercisable within 60 days after December 3, 2007. Does not include 442,200 shares of Common Stock issuable upon exercise of options to purchase Common Stock, which are not exercisable within 60 days of December 3, 2007. |
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company held five meetings and took action by unanimous written consent on one occasion during the fiscal year ended September 30, 2007. 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. Our Annual Meeting of Shareholders is generally held to coincide with one of the Board’s regularly scheduled meetings. The Company does not have a formal policy requiring members of the Board of Directors to attend our annual meetings, although all directors typically attend the annual meeting. Each of the directors attended the 2007 Annual Meeting of Shareholders.
The Company has standing Audit, Compensation, and Nominating and Corporate Governance Committees.
Audit Committee
During the 2007 fiscal year, the members of the Audit Committee were Messrs. Smith (as Chairman) and Halliday and Dr. Biondi. In November 2007, Mr. Wallace joined the Audit Committee. The Board of Directors has determined that each of the members of the Audit Committee is “independent” under the rules of the National Association of Security Dealers and the Securities and Exchange Commission. The Board of Directors has also determined that Mr. Halliday qualifies as the “audit committee financial expert” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee has a written charter adopted by the Board of Directors, which charter is available on the Company’s website atwww.zoll.com and will be sent in paper form to any shareholder who submits a request to the Company’s Secretary at the address listed on page 1. The Board of Directors and the Audit Committee have adopted an Audit Committee Complaint Procedure, which is available on the Company’s website atwww.zoll.com and will be sent in paper form to any shareholder who submits a request to the Company’s Secretary at the address listed on page 1. The Audit Committee is responsible for selecting the Company’s independent registered public accounting firm, and assisting the Board of Directors in general oversight and monitoring of management’s and the independent auditor’s participation in the Company’s financial reporting process. The primary objective in fulfilling these responsibilities is to promote and preserve the integrity of the Company’s financial statements and the independence of the Company’s external independent auditor. During the fiscal year ended September 30, 2007, the Audit Committee held five meetings. The Audit Committee’s report on the Company’s audited financial statements for the fiscal year ended September 30, 2007 appears elsewhere in this proxy statement.
Compensation Committee
During the 2007 fiscal year, the members of the Compensation Committee were Mr. Mulvena (as Chairman) and Dr. Biondi. The Board of Directors has determined that each member of the Compensation Committee is “independent” under the rules of the National Association of Security Dealers and the Securities and Exchange Commission. The Company has adopted a Compensation Committee Charter, which was most recently amended by the Board of Directors on November 14, 2007. A copy of the Compensation Committee Charter, as amended, is available on the Company’s website atwww.zoll.com and will be sent in paper form to any shareholder who submits a request to the Company’s Secretary at the address listed on page 1. The Compensation Committee (1) annually reviews and makes recommendations to the Board of Directors with respect to the compensation of all directors, officers and members of senior management of the Company; (2) reviews and approves the corporate goals and objectives that may be relevant to the compensation of the Chief Executive Officer and evaluates the Chief Executive Officer’s performance in light of the goals and objectives that were set for the Chief Executive Officer and determines the Chief Executive Officer’s compensation based on such evaluation; (3) administers the Company’s Amended and Restated 2001 Stock Incentive Plan, 1992 Stock Option Plan, the Non-Employee Director Stock Option Plan, and the 2006 Non-Employee Director Stock Option Plan; and (4) prepares the Compensation Committee’s report on executive compensation for inclusion in our proxy statements in accordance with Securities and Exchange Commission rules and regulations. From time to time the Compensation Committee
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will work with our Chief Executive Officer in fulfilling its responsibilities. During the fiscal year ended September 30, 2007, the Compensation Committee held two meetings and took action by unanimous written consent on one occasion. The Compensation Committee’s report on executive compensation appears elsewhere in this proxy statement.
Nominating and Corporate Governance Committee
During the 2007 fiscal year, the members of the Nominating and Corporate Governance Committee were Messrs. Claflin (as Chairman) and Mulvena. The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is “independent” under the rules of the National Association of Security Dealers and the Securities and Exchange Commission. The Company has adopted a Nominating and Corporate Governance Committee Charter. A copy of the Nominating and Corporate Governance Committee Charter is available on the Company’s website atwww.zoll.com and will be sent in paper form to any shareholder who submits a request to the Company’s Secretary at the address listed on page 1. The Nominating and Corporate Governance Committee is responsible for developing and recommending to the Board of Directors a set of corporate governance guidelines and periodically reviewing such guidelines and recommending any changes to them. The Company has adopted Corporate Governance Guidelines, which are available on the Company’s website atwww.zoll.com and will be sent in paper form to any shareholder who submits a request to the Company’s Secretary at the address listed on page 1. In addition, the Nominating and Corporate Governance Committee reviews and evaluates potential nominees for election or appointment to the Board of Directors and recommends such nominees to the full Board of Directors. The Nominating and Corporate Governance Committee will consider a nominee for election to the Board of Directors recommended by a shareholder of record if the shareholder submits the nomination following the timing and information requirements of the Company’s Amended and Restated By-Laws. Such proposal should specify whether the named person(s) should be considered by the Nominating and Corporate Governance Committee for inclusion as a Board of Directors nominee or whether the named person(s) are to be considered shareholder nominees under the Company’s Amended and Restated By-Laws. Please see the section of this proxy statement entitled “Other Matters—Shareholder Proposals” for a summary of these requirements. At a minimum, each nominee, whether proposed by a shareholder or any other party, is expected to have the highest personal and professional integrity, shall demonstrate sound judgment, shall have an experience base useful to the Company and complementary to the other directors, and shall be expected to effectively interact with other members of the Board to serve the long-term interests of the Company and its shareholders. The Nominating and Corporate Governance Committee recommended that Messrs. Mulvena, Smith, and Wallace each be nominated for election to serve as Class I directors to serve until the 2011 Annual Meeting of Shareholders and that Mr. Rosenblum be nominated to serve as a Class III director to serve until the 2010 Annual Meeting of Shareholders. Mr. Rosenblum was recommended to the Nominating and Corporate Governance Committee based on his standing in the Company’s market area and international business experience as well as being well known by some of the directors and management of the Company. Following Mr. Rosenblum’s recommendation, the Nominating and Corporate Governance Committee engaged Travis Research Associates, Inc., an executive search firm, to facilitate its evaluation of Mr. Rosenblum. During the fiscal year ended September 30, 2007, the Nominating and Corporate Governance Committee held one meeting and took action by unanimous written consent on one occasion.
Please note that the information contained in our website is not incorporated by reference in, or considered to be a part of, this proxy statement.
Director Independence
The Board of Directors has determined that each of Dr. Biondi and Messrs. Claflin, Halliday, Mulvena, Smith, and Wallace is an “independent director” in accordance with corporate governance rules of the National Association of Securities Dealers as a result of having no relationship with the Company other than (1) serving as a director and a Board of Directors committee member, (2) receiving related fees as disclosed in this proxy statement, and (3) having beneficial ownership of the Company’s Common Stock as disclosed in the section of
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this proxy statement entitled “Proposal 1—Election of a Class of Directors—Information Regarding Nominees and Directors.” Therefore, the Company currently has a majority of “independent directors.” If elected to the Board of Directors, it is anticipated that Mr. Rosenblum shall be an “independent director” in accordance with the corporate governance rules of the National Association of Securities Dealers.
Meetings of Independent Directors
Independent directors of the Company regularly meet in executive sessions outside the presence of management. Currently, the independent directors of the Company are Dr. Biondi and Messrs. Claflin, Halliday, Mulvena, Smith, and Wallace. The presiding director for these meetings is currently Mr. Claflin, who is the lead independent director. Any interested parties who wish to make their concerns known to the independent directors may avail themselves of the same procedures utilized with respect to the Company’s Audit Committee Complaint Procedures. The Audit Committee Complaint Procedures are available on the Company’s website atwww.zoll.com.
Communication with the Board of Directors
If you wish to communicate with any of our Directors or the Board of Directors as a group, you may do so by either (1) following the same procedures with respect to the Company’s Audit Committee Complaint Procedures (available on the Company’s website atwww.zoll.com), or (2) by writing to the Board of Directors, or such individual director(s) c/o the Secretary, ZOLL Medical Corporation, 269 Mill Road, Chelmsford, Massachusetts 01824-4105.
We recommend that all correspondence be sent via certified U.S. mail, return receipt requested. All correspondence received by the Secretary will be forwarded promptly to the appropriate addressee(s).
Employee Code of Conduct
The Company has adopted an Employee Code of Conduct, which is available on the Company’s website atwww.zoll.com and will be sent in paper form to any shareholder who submits a request to the Company’s Secretary at the address listed on page 1. The Employee Code of Conduct applies to all employees of the Company and the Board of Directors of the Company, and is meant to provide a general framework for the Company’s expectations with respect to the conduct of its employees and directors.
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COMPENSATION DISCUSSION AND ANALYSIS
We provide what we believe is a competitive total compensation package to our executive management team through a combination of base salary, annual cash incentive bonuses, long-term equity incentive compensation and broad-based benefits programs.
We place significant emphasis on pay for performance-based incentive compensation, which is designed to reward our executives based on the achievement of predetermined corporate and individual goals. This Compensation Discussion and Analysis explains our compensation objectives, policies and practices with respect to our Chief Executive Officer, Chief Financial Officer and the other three most highly compensated executive officers as determined in accordance with applicable Securities and Exchange Commission rules, which are collectively referred to as the named executive officers.
Objectives of Our Executive Compensation Programs
Our compensation programs for our named executive officers are designed to achieve the following objectives:
| • | attract and retain talented and experienced executives in the highly competitive and dynamic medical device industry; |
| • | motivate and reward executives whose knowledge, skills and performance are critical to our success; |
| • | align the interests of our executives and stockholders by motivating executives to increase stockholder value and rewarding executives when stockholder value increases; |
| • | provide a competitive compensation package, which is weighted heavily towards pay for performance and in which a significant portion of total compensation is determined by the achievement of corporate and individual goals and the creation of stockholder value; |
| • | ensure fairness among the executive management team by recognizing the contributions each executive makes to our success; and |
| • | foster a shared commitment among executives by coordinating their corporate and individual goals. |
Our Executive Compensation Programs
Our executive compensation primarily consists of base salary, annual cash incentive bonuses, long-term equity incentive compensation and broad-based benefits programs. Overall, we design our executive compensation programs to achieve the objectives described above. In particular, consistent with the significant emphasis we place on performance-based incentive compensation, long-term equity incentive compensation in the form of stock options constitutes a significant portion of our total executive compensation, and also serves as a method for retaining key employees. We also structure our annual cash incentive bonuses to be tied to the achievement of predetermined corporate financial performance goals and individual management objectives.
Within the context of the overall objectives of our compensation programs, we determined the specific amounts of compensation to be paid to each of our executives in fiscal 2007 based on a number of factors, including:
| • | our understanding of the amount of compensation generally paid by similarly situated companies to their executives with similar roles and responsibilities; |
| • | our executives’ performance in past years in general and as measured against predetermined corporate financial performance goals and individual management objectives; and |
| • | the individual experience, skills, roles and responsibilities of our executives. |
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Each of the primary elements of our executive compensation is discussed in detail below, including a description of the particular element and how it fits into our overall executive compensation and a discussion of the amounts of compensation paid to our named executive officers in fiscal 2007 under each of these elements. In the descriptions below, we highlight particular compensation objectives that we have designed specific elements of our executive compensation program to address; however, it should be noted that we have designed our compensation programs to complement each other and collectively serve all of our executive compensation objectives described above. Accordingly, whether or not specifically mentioned below, we believe that each element of our executive compensation program to a greater or lesser extent serves each of our objectives.
Base Salary
We pay our executives a base salary, which we review and determine annually. We believe that a competitive base salary is a necessary element of any compensation program that is designed to attract and retain talented and experienced executives. We also believe that attractive base salaries can motivate and reward executives for their overall performance. Although base salaries are established in part based on the individual executive’s experience, skills and expected contributions during the coming year as well as his or her performance during the prior years, we do not view base salaries as primarily serving our objective of paying for performance.
For fiscal 2007, we increased the annual base salaries of our named executive officers as follows: Mr. Packer’s base salary increased from $350,000 to $375,000, Mr. Whiton’s base salary increased from $220,000 to $250,000, Mr. Moghadam’s base salary increased from $186,000 to $200,000, Mr. Flora’s base salary increased from $210,000 to $240,000 and Mr. Hamilton’s base salary increased from $190,000 to $200,000. We increased Mr. Packer’s base salary in recognition of his leadership and management efforts, which were critical to the success we realized in fiscal 2006, including, in particular, the successful introduction of next-generation products, the increase in our Auto-Pulse revenues, and the improvement of our international business. The base salaries of our other executives were increased to reflect their respective roles and responsibilities and our Compensation Committee’s understanding of competitive base salary levels.
Annual Cash Incentive Bonuses
Consistent with our emphasis on performance-based incentive compensation programs, our executives are eligible to receive annual cash incentive bonuses primarily based upon their performance as measured against predetermined goals and objectives established by us. Specific criteria for these bonuses are determined based on a combination of qualitative and quantitative measures, the details of which are established each year. These goals vary for each executive based on his or her responsibilities and role within the Company and include corporate financial performance measures, which may include achieving targeted corporate earnings per share growth, revenue growth, return on sales and cash flow. Each executive will also have a number of goals tied to his or her completion of specific management objectives. Both the corporate financial performance goals and the individual management objectives are intended to require performance that should result in our meeting or exceeding our corporate financial plan. In fiscal 2007, generally 70% to 85% of the bonus potential for the named executive officers was based on the achievement of corporate financial performance goals and the balance of the bonus potential was based on the achievement of management objectives specifically set for each officer. Moreover, an additional bonus of up to 50% of the cash bonus payable on account of achieving certain of the corporate financial performance goals would be awarded for fiscal 2007 if our corporate net income for the year exceeded our plan by a predetermined percentage.
For fiscal 2007, we established the targeted annual cash incentive bonus for Mr. Packer to equal approximately 88% of his base salary and for each of the other named executive officers the targeted bonus ranged from approximately 45% to 70% of their respective base salaries. For Mr. Packer, we set corporate financial performance goals tied to our quarterly and annual earnings per share, revenue growth, return on sales and cash flow. For the other named executive officers, the corporate financial performance goals were based on achieving a predetermined level of earnings per share and, in the case of Messrs. Moghadam and Flora, the
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revenue growth and contribution of their respective sales regions. We set these corporate financial performance goals for the target amount of annual cash incentive bonuses at levels that we believe will be achieved by our executives a majority of the time. Our maximum and threshold levels for these corporate financial performance goals are determined in relation to our target levels. The goals are intended to provide for correspondingly greater or lesser incentive payments, and are accordingly harder or easier to achieve. We set the corporate financial performance goals for the maximum pay-out at levels that we believe will be achieved only as a result of exceptional performance. Our individual management objectives are tailored to the specific roles and responsibilities of each executive and are set at levels that we believe are achievable with strong performance by our executives.
For fiscal 2007, Mr. Packer earned $230,000 as the maximum target bonus for achieving all of his corporate financial performance goals, an additional $115,000 for exceeding the corporate net income plan by more than a predetermined percentage and $80,000 for satisfying specified management objectives related to improvements in our AutoPulse, Lifecor and international businesses, product integration, product and service quality and new resuscitation products. Mr. Whiton earned $90,000 as the maximum target bonus for achieving his corporate financial performance goal, an additional $54,000 for exceeding the corporate net income plan by more than a predetermined percentage and $33,000 for satisfying specified management objectives. Mr. Moghadam earned $98,000 as the maximum target bonus for achieving his corporate financial performance goals, an additional $66,300 for exceeding the corporate net income plan and the contribution level of his sales region by predetermined percentages and $7,000 for satisfying specified management objectives. Mr. Flora earned $100,000 for achieving certain of his corporate financial performance goals, an additional $33,000 for exceeding the corporate net income plan by more than a predetermined percentage and $12,500 for satisfying specified management objectives. Mr. Hamilton earned $62,500 as the maximum target bonus for achieving his corporate financial performance goal, an additional $37,500 for exceeding the corporate net income plan by more than a predetermined percentage and $15,000 for satisfying specified management objectives.
Long-Term Equity Incentive Compensation
We grant long-term equity incentive awards in the form of stock options to executives as part of our total compensation package. Consistent with our emphasis on performance-based incentive compensation, these awards represent a significant portion of total executive compensation. We use long-term equity incentive awards in order to align the interests of our executives and our stockholders by providing our executives with strong incentives to increase stockholder value and a significant reward for doing so.
Stock option awards provide our executive officers with the right to purchase shares of our Common Stock at a fixed exercise price typically for a period of up to ten years, subject to continued employment with our company. Stock options have generally vested over four years based on continued employment with us. We have made grants to our named executive officers generally on an annual basis. All options are granted at an exercise price equal to the closing price of our Common Stock on the date of grant. Although the Company’s policy had been to grant all of our stock options to executives as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, subject to the volume limitations contained in the Internal Revenue Code, we currently grant all of our stock options as non-qualified stock options. Generally, for stock options that do not qualify as incentive stock options, we are entitled to a tax deduction in the year in which the stock options are exercised equal to the spread between the exercise price and the fair market value of the stock for which the stock option was exercised. The holders of the stock options are generally taxed on this same amount in the year of exercise. For stock options that qualify as incentive stock options, we do not receive a tax deduction and the holder of the stock option may receive more favorable tax treatment than he or she would for a non-qualified stock option.
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For fiscal 2007, we considered a number of factors in determining the stock options to be granted to our executives, including:
| • | the present and expected future value of the stock option grants; |
| • | our understanding of the amount of equity compensation generally granted by similarly situated companies to their executives with similar roles and responsibilities; and |
| • | the amount and percentage of our total equity granted to our executives. |
We believe that the level of stock options granted to the executives in fiscal 2007 will, during their term, constitute a significant incentive for the executives to improve our overall financial performance and thereby increase the value of our stock.
For fiscal 2007, we granted stock options to each of our named executive officers in the following amounts: Mr. Packer was granted an option to purchase 100,000 shares of our Common Stock, Mr. Whiton was granted an option to purchase 30,000 shares of our Common Stock, Mr. Moghadam was granted an option to purchase 20,000 shares of our Common Stock, Mr. Flora was granted an option to purchase 20,000 shares of our Common Stock, and Mr. Hamilton was granted an option to purchase 20,000 shares of our Common Stock.
Broad-Based Benefits Programs
All full-time employees, including our named executive officers, may participate in our health and welfare benefit programs, including health coverage, disability insurance, life insurance and our 401(k) plan.
Severance Benefits
We have agreed to provide severance benefits to our named executive officers in the event of, among other things, a change of control. These benefits are designed to promote stability and continuity of our executive management team. We believe that the interests of stockholders will be best served if the interests of our executive management team are aligned with them. We further believe that providing these benefits should eliminate, or at least reduce, the reluctance of our executive management team to pursue potential change of control transactions that may be in the best interests of stockholders.
Further analysis of payments triggered by a change of control is provided beginning on page 19 of this proxy statement.
Our Executive Compensation Process
The Compensation Committee of our Board of Directors is primarily responsible for determining the compensation for our executives. In determining executive compensation, our Compensation Committee annually reviews the performance of our Chief Executive Officer, together with each of the other executives. The Chief Executive Officer provides the Compensation Committee with his assessment of the performance of each of these executives and makes recommendations with respect to each executive’s (other than his own) appropriate base salary, annual cash incentive bonus goals and potential payments and level of the annual stock option award. Based on this information and analysis, the Compensation Committee then makes the final determination regarding each executive’s compensation.
Section 162(m) Limitation
Section 162(m) of the Internal Revenue Code limits the tax deductibility by a corporation of compensation in excess of $1,000,000 paid to the Chief Executive Officer and any other of its four most highly compensated executive officers. However, compensation which qualifies as “performance based” is excluded from the $1,000,000 limit. The Compensation Committee believes that our stock option grants to date meet the “performance based” criteria and are, therefore, exempt from the limitations on deductibility. The Compensation Committee presently expects that total cash compensation payable for any year to any executive will not exceed the $1,000,000 limit of Section 162(m).
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COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis report beginning on page 9 of this proxy statement with management. Based on that review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
The foregoing report has been furnished by the members of the Compensation Committee:
DANIEL M. MULVENA,Chairman and
JAMES W. BIONDI, M.D.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All executive officer compensation decisions are made by the Compensation Committee. The current members of the Compensation Committee are Mr. Mulvena and Dr. Biondi, neither of whom is an officer or employee of the Company. The Company is not aware of any compensation committee interlocks or relationships involving members of the Compensation Committee requiring disclosure in this proxy statement.
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows, for the fiscal year ended September 30, 2007, the compensation of the person who served as Chief Executive Officer of the Company, Chief Financial Officer of the Company, and each of the three most highly compensated executive officers of the Company, other than the Chief Executive Officer and Chief Financial Officer, whose total compensation exceeded $100,000 for the year ended September 30, 2007.
SUMMARY COMPENSATION TABLE(1)
Name and Principal Position | Year | Salary ($) | Bonus ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||
Richard A. Packer Chief Executive Officer and President | 2007 | $ | 375,000 | $ | 80,000 | $ | 360,669 | $ | 345,000 | $ | 5,790 | $ | 1,166,459 | |||||||
A. Ernest Whiton Chief Financial Officer and Vice President, Administration | 2007 | $ | 250,000 | $ | 33,000 | $ | 108,201 | $ | 144,000 | $ | 5,790 | $ | 540,991 | |||||||
Alexander N. Moghadam Vice President—International Operations | 2007 | $ | 200,000 | $ | 7,000 | $ | 142,305 | $ | 164,300 | $ | 5,544 | $ | 519,149 | |||||||
Steven K. Flora Vice President—North American Sales | 2007 | $ | 240,000 | $ | 12,500 | $ | 86,158 | $ | 133,000 | $ | 5,756 | $ | 477,414 | |||||||
Ward M. Hamilton Vice President—Marketing | 2007 | $ | 200,000 | $ | 15,000 | $ | 72,134 | $ | 100,000 | $ | 5,622 | $ | 392,756 | |||||||
| (1) | We do not maintain any pension plans or non-qualified deferred compensation plans. |
| (2) | Bonus payments include awards to Messrs. Packer, Whiton, Moghadam, Flora, and Hamilton discussed in the Compensation Discussion and Analysis, based on individual management objectives, as described earlier in this proxy statement. Bonus payments were accrued in the year indicated and paid in the succeeding fiscal year. Thus, the 2007 bonus was paid in fiscal 2008. |
| (3) | Amounts listed reflects the dollar amount recognized for financial statement reporting purposes in fiscal year 2007 in accordance with SFAS No. 123R on stock option awards and thus includes amounts from awards granted prior to fiscal year 2007. Information related to the financial reporting of stock options are presented in Footnote A to the Consolidated Financial Statements presented in our Annual Report on Form 10-K for the year ended September 30, 2007 (the “2007 Form 10-K”). |
| (4) | Non-equity incentive plan payments include awards to Messrs. Packer, Whiton, Moghadam, Flora, and Hamilton discussed in the Compensation Discussion and Analysis, based on financial performance goals, as described earlier in this proxy statement. Bonus payments were accrued in the year indicated and paid in the succeeding fiscal year. Thus, the 2007 non-equity incentive plan payments were paid in fiscal 2008. |
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| (5) | The table below shows the components of this column, which include the Company’s match for each individual’s 401(k) Plan contributions and imputed income related to life insurance benefits: |
Name | 401(k) Match(a) | Life Insurance | Total “All Other Compensation” | ||||||
Richard A. Packer | $ | 4,950 | $ | 840 | $ | 5,790 | |||
A. Ernest Whiton | $ | 4,950 | $ | 840 | $ | 5,790 | |||
Alexander N. Moghadam | $ | 4,872 | $ | 672 | $ | 5,544 | |||
Steven K. Flora | $ | 4,950 | $ | 806 | $ | 5,756 | |||
Ward M. Hamilton | $ | 4,950 | $ | 672 | $ | 5,622 | |||
| (a) | Amounts represent the Company’s match for 401(k) Plan contributions made by the executive in calendar year 2006. |
Grants of Plan-Based Awards
The following table contains information concerning grants of plan based awards under the Company’s equity incentive plans to the named executive officers during the year ended September 30, 2007.
GRANTS OF PLAN-BASED AWARDS(1)
Name | Grant Date | All Other Option Awards: Number of Securities Underlying Options (#)(2)(3) | Exercise or Base Price of Option Awards ($/Sh)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | |||||||
Richard A. Packer | 11/14/2006 | 100,000 | (5) | $ | 20.23 | $ | 1,054,000 | ||||
A. Ernest Whiton | 11/14/2006 | 30,000 | (5) | $ | 20.23 | $ | 316,200 | ||||
Alexander N. Moghadam | 11/14/2006 | 20,000 | (5) | $ | 20.23 | $ | 210,800 | ||||
Steven K. Flora | 11/14/2006 | 20,000 | (5) | $ | 20.23 | $ | 210,800 | ||||
Ward M. Hamilton | 11/14/2006 | 20,000 | (5) | $ | 20.23 | $ | 210,800 | ||||
| (1) | We do not maintain any non-equity incentive plans that are required to be disclosed under this table. |
| (2) | Stock options granted under the Amended and Restated 2001 Stock Incentive Plan (the “2001 Plan”). Such options vest fully upon a Change of Control, as defined in the 2001 Plan. |
| (3) | The number of securities underlying the option awards and the exercise price per share have been adjusted to reflect the Company’s two-for-one stock split, which was effective February 20, 2007. These adjustments do not impact the fair value of the option award on the date of grant. |
| (4) | The amounts included in this column represent the full grant date fair value of the awards computed in accordance with SFAS No. 123R. Information related to the financial reporting of stock options are presented in Footnote A to the Consolidated Financial Statements presented in our 2007 Form 10-K. |
| (5) | The stock option vests in four equal annual installments commencing on November 14, 2007. |
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Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information with respect to the named executive officers concerning unexercised stock option awards as of September 30, 2007.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END(1)
Option Awards(2) | ||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | |||||||
Richard A. Packer | 150,000 | 0 | — | $ | 19.13 | 11/15/2009 | ||||||
| 10,000 | 0 | — | $ | 21.47 | 11/27/2010 | |||||||
| 10,000 | 0 | — | $ | 20.06 | 2/8/2011 | |||||||
| 25,000 | 0 | — | $ | 19.96 | 4/17/2012 | |||||||
| 9,000 | 0 | — | $ | 18.38 | 4/16/2013 | |||||||
| 0 | 75,000 | (3) | — | $ | 11.26 | 11/15/2015 | ||||||
| 0 | 100,000 | (4) | — | $ | 20.23 | 11/14/2016 | ||||||
A. Ernest Whiton | 5,000 | 0 | — | $ | 21.47 | 11/27/2010 | ||||||
| 5,000 | 0 | — | $ | 20.06 | 2/8/2011 | |||||||
| 5,000 | 0 | — | $ | 11.48 | 4/27/2011 | |||||||
| 5,000 | 0 | — | $ | 16.27 | 7/25/2011 | |||||||
| 5,000 | 0 | — | $ | 18.08 | 11/8/2011 | |||||||
| 5,000 | 0 | — | $ | 17.84 | 2/12/2012 | |||||||
| 5,000 | 0 | — | $ | 19.96 | 4/17/2012 | |||||||
| 5,000 | 0 | — | $ | 15.07 | 7/17/2012 | |||||||
| 7,000 | 0 | — | $ | 17.56 | 11/16/2012 | |||||||
| 7,000 | 0 | — | $ | 17.23 | 2/13/2013 | |||||||
| 7,000 | 0 | — | $ | 18.38 | 4/16/2013 | |||||||
| 7,000 | 0 | — | $ | 17.27 | 7/16/2013 | |||||||
| 4,500 | 0 | — | $ | 15.80 | 4/16/2014 | |||||||
| 4,500 | 0 | — | $ | 15.79 | 7/21/2014 | |||||||
| 4,500 | 0 | — | $ | 16.52 | 11/9/2014 | |||||||
| 4,500 | 0 | — | $ | 16.64 | 2/8/2015 | |||||||
| 7,500 | 22,500 | (3) | — | $ | 11.26 | 11/15/2015 | ||||||
| 0 | 30,000 | (4) | — | $ | 20.23 | 11/14/2016 | ||||||
Alexander N. Moghadam | 15,000 | 0 | — | $ | 16.64 | 2/8/2015 | ||||||
| 7,500 | 7,500 | (5) | — | $ | 12.00 | 4/22/2015 | ||||||
| 7,500 | 7,500 | (6) | — | $ | 13.03 | 7/21/2015 | ||||||
| 2,500 | 7,500 | (3) | — | $ | 11.26 | 11/15/2015 | ||||||
| 3,750 | 11,250 | (3) | — | $ | 11.26 | 11/15/2015 | ||||||
| 0 | 20,000 | (4) | — | $ | 20.23 | 11/14/2016 | ||||||
Steven K. Flora | 5,000 | 0 | — | $ | 21.47 | 11/27/2010 | ||||||
| 5,000 | 0 | — | $ | 20.06 | 2/8/2011 | |||||||
| 5,000 | 0 | — | $ | 16.88 | 11/8/2011 | |||||||
| 5,000 | 0 | — | $ | 17.84 | 2/12/2012 | |||||||
| 5,000 | 0 | — | $ | 19.96 | 4/17/2012 | |||||||
| 4,500 | 0 | — | $ | 17.56 | 11/6/2012 | |||||||
| 4,500 | 0 | — | $ | 17.23 | 2/13/2013 | |||||||
| 4,500 | 0 | — | $ | 18.38 | 4/16/2013 | |||||||
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END(1)
Option Awards(2) | ||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | |||||||
| 4,500 | 0 | — | $ | 17.26 | 7/16/2013 | |||||||
| 4,500 | 0 | — | $ | 15.80 | 4/16/2014 | |||||||
| 4.500 | 0 | — | $ | 15.79 | 7/21/2014 | |||||||
| 4,500 | 0 | — | $ | 16.52 | 11/9/2014 | |||||||
| 4,500 | 0 | — | $ | 16.64 | 2/8/2015 | |||||||
| 0 | 22,500 | (3) | — | $ | 11.26 | 11/15/2015 | ||||||
| 0 | 20,000 | (4) | — | $ | 20.23 | 11/14/2016 | ||||||
Ward M. Hamilton | 5,000 | 0 | — | $ | 3.44 | 11/20/2007 | ||||||
| 10,000 | 0 | — | $ | 3.44 | 11/20/2007 | |||||||
| 5,000 | 0 | — | $ | 21.47 | 11/27/2010 | |||||||
| 5,000 | 0 | — | $ | 20.06 | 2/8/2011 | |||||||
| 5,000 | 0 | — | $ | 11.48 | 4/27/2011 | |||||||
| 5,000 | 0 | — | $ | 15.61 | 7/25/2011 | |||||||
| 5,000 | 0 | — | $ | 16.88 | 11/8/2011 | |||||||
| 5,000 | 0 | — | $ | 17.84 | 2/12/2012 | |||||||
| 5,000 | 0 | — | $ | 19.96 | 4/17/2012 | |||||||
| 5,000 | 0 | — | $ | 14.54 | 7/17/2012 | |||||||
| 3,500 | 0 | — | $ | 17.56 | 11/6/2012 | |||||||
| 3,500 | 0 | — | $ | 17.23 | 2/13/2013 | |||||||
| 3,500 | 0 | — | $ | 18.38 | 4/16/2013 | |||||||
| 3,500 | 0 | — | $ | 17.27 | 7/16/2013 | |||||||
| 2,500 | 0 | — | $ | 15.80 | 4/16/2014 | |||||||
| 2,500 | 0 | — | $ | 15.79 | 7/21/2014 | |||||||
| 2,500 | 0 | — | $ | 16.52 | 11/9/2014 | |||||||
| 2,500 | 0 | — | $ | 16.64 | 2/8/2015 | |||||||
| 5,000 | 15,000 | (3) | — | $ | 11.26 | 11/15/2015 | ||||||
| 0 | 20,000 | (4) | — | $ | 20.23 | 11/14/2016 | ||||||
| (1) | The number of securities underlying the options awards, and the exercise price per share have been adjusted to reflect the Company’s two-for-one stock split, which was effective February 20, 2007. |
| (2) | None of the named executive officers have been granted stock awards. |
| (3) | The option vests in four equal annual installments commencing on November 15, 2006. |
| (4) | The option vests in four equal annual installments commencing on November 14, 2007. |
| (5) | The option vests in four equal annual installments commencing on April 22, 2006. |
| (6) | The option vests in four equal annual installments commencing on July 21, 2006. |
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Option Exercises and Stock Vested
The following table sets forth information with respect to the named executive officers concerning the exercise of stock options during the year ended September 30, 2007.None of the named executive officers listed in the table below have stock awards.
OPTION EXERCISES AND STOCK VESTED
| Option Awards | ||||||
Named Executive Officer | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($)(2) | ||||
Richard A. Packer | 4,000 | (3) | $ | 110,160 | ||
| 25,000 | (3) | $ | 510,250 | |||
| 10,000 | (3) | $ | 201,900 | |||
| 24,000 | (3) | $ | 398,280 | |||
| 1,000 | (3) | $ | 16,465 | |||
| 12,500 | (3) | $ | 196,812.50 | |||
| 12,500 | (3) | $ | 196,687.50 | |||
| 12,500 | (3) | $ | 187,687.50 | |||
| 10,000 | (3) | $ | 152,600 | |||
| 12,500 | (3) | $ | 186,250 | |||
| 9,000 | (3) | $ | 128,745 | |||
| 9,000 | (3) | $ | 128,430 | |||
| 9,000 | (3) | $ | 125,775 | |||
| 25,000 | (3) | $ | 342,375 | |||
| 25,000 | (3) | $ | 336,500 | |||
A. Ernest Whiton | 10,000 | (3) | $ | 211,490 | ||
| 10,000 | (3) | $ | 271,640 | |||
| 10,000 | $ | 192,490 | ||||
| 8,500 | $ | 187,671.50 | ||||
Alexander N. Moghadam | — | — | ||||
Steven K. Flora | 5,000 | (3) | $ | 72,275 | ||
| 5,000 | (3) | $ | 51,625 | |||
| 5,000 | (3) | $ | 56,950 | |||
| 7,500 | (3) | $ | 110,062.50 | |||
Ward M. Hamilton | — | — | ||||
| (1) | Amounts shown represent the aggregate number of shares acquired upon option exercise. |
| (2) | Amounts reflect the difference between the exercise price of the option and the market price at the time of exercise. |
| (3) | The number of shares acquired upon exercise, the exercise price per share, and the market price at the time of exercise have each been adjusted to reflect the Company’s two-for-one stock split, which was effective February 20, 2007. These adjustments do not impact the aggregate amount of value realized upon exercise. |
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Potential Payments Upon Termination or Change of Control
The named executive officers are entitled to certain compensation in the event of termination of their employment. This section is intended to discuss these post-employment payments, assuming separation from employment on September 28, 2007, the last business day of the fiscal year, on the terms currently in effect between the named executive officers and us.
Employment Agreement with Richard A. Packer
We have an employment agreement with Mr. Packer (the “Employment Agreement”). Under the Employment Agreement, if we terminate Mr. Packer’s employment without Cause, as defined in the Employment Agreement, following a 30 day notice period:
| • | we will continue to pay Mr. Packer his base salary, in effect at the time of the termination, for a period of 12-months; |
| • | we will provide Mr. Packer with reasonable and customary outplacement services for the shorter of (i) the 12-month period following termination, or (ii) until Mr. Packer accepts a new position; and |
| • | any stock options held by Mr. Packer will continue to vest over the 12-month period following his termination, as if Mr. Packer were still employed by the Company. |
Furthermore, the Employment Agreement provides that all of Mr. Packer’s stock options will fully vest upon the occurrence of a Change of Control, as defined in the 1992 Stock Incentive Plan.
The Employment Agreement also contains a provision that generally prevents Mr. Packer from competing with us or attempting to hire our employees for three years following Mr. Packer’s termination of employment for any reason.
Severance Agreements
In addition to the Employment Agreement with Mr. Packer, we have also entered into a Senior Executive Severance Agreement with Mr. Packer, dated January 21, 2000, an Amended and Restated Executive Severance Agreement with Mr. Whiton, dated April 1, 2002, and Executive Severance Agreements with each of Messrs. Flora, dated May 6, 2002, Hamilton, dated May 7, 2002, and Moghadam, dated August 10, 2005 (each a “Severance Agreement” and collectively, the “Severance Agreements”). The Severance Agreements provide for certain payments to be made to each of Messrs. Packer, Whiton, Flora, Hamilton, and Moghadam in connection with a termination of employment following a Change of Control, as defined in each Severance Agreement.
Severance Agreement with Mr. Packer
If, within 36 months of a Change of Control, Mr. Packer is terminated by the Company for any reason, or if Mr. Packer terminates his employment for any reason, Mr. Packer is entitled to:
| • | a lump sum payment equal to two and one-half times the sum of: (i) Mr. Packer’s salary in effect immediately prior to such termination of employment or the Change of Control (whichever is greater), and (ii) Mr. Packer’s most recently paid bonus; |
| • | continued health and dental insurance coverage for 30 months following termination; and |
| • | reasonable legal and arbitration fees and expenses incurred by Mr. Packer in enforcing his Severance Agreement. |
If, following a Change of Control of the Company, Mr. Packer becomes subject to excise taxes pursuant to Section 4999 of the Internal Revenue Code, the Company will reimburse Mr. Packer for all excise taxes that are imposed pursuant to Section 4999 as well as any income and excise taxes that are payable by Mr. Packer as a result of any such reimbursements for Section 4999 excise taxes.
Mr. Packer’s Severance Agreement will terminate upon the earlier of (i) the termination of Mr. Packer’s employment prior to a Change of Control; (ii) a termination of Mr. Packer’s employment that does not qualify him for the severance benefits set forth above following a Change of Control; or (iii) 36 months following a Change of Control.
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Severance Agreement with Mr. Whiton
If, within 18 months after a Change of Control, Mr. Whiton’s employment terminates in connection with a Terminating Event (defined in the Severance Agreement generally to mean (i) the Company’s termination of Mr. Whiton’s employment for any reason other than certain enumerated reasons, such as willful dishonesty, conviction of a crime, or failure to perform his duties to the Company, or (ii) Mr. Whiton’s termination of his employment for any reason), Mr. Whiton is entitled to:
| • | a lump sum payment equal to two times the sum of (i) Mr. Whiton’s salary in effect immediately prior to the Terminating Event or Change of Control (whichever is greater), and (ii) the average amount of the bonuses paid to Mr. Whiton over the prior three years; |
| • | continued health and dental insurance coverage for 18 months following termination; and |
| • | reasonable legal and arbitration fees and expenses incurred by Mr. Whiton in enforcing his Severance Agreement. |
If following a Change of Control of the Company, Mr. Whiton becomes subject to excise taxes pursuant to Section 4999 of the Internal Revenue Code, the Company can reduce (but not below zero) the severance payments to Mr. Whiton so that the payments will not trigger the excise tax, unless Mr. Whiton would receive greater benefit through the receipt of all severance payments and benefits described above following the payment of all the applicable excise taxes payable under such section.
Mr. Whiton’s Severance Agreement will terminate upon the earliest of (i) termination of Mr. Whiton’s employment prior to a Change of Control, (ii) a termination of Mr. Whiton’s employment after a Change of Control that does not constitute a Terminating Event or (iii) 18 months following a Change of Control.
Severance Agreements with each of Messrs. Flora, Hamilton, and Moghadam
The Severance Agreements with each of Messrs. Flora, Hamilton, and Moghadam provide that if, within 18 months after a Change of Control, the applicable executive’s employment terminates in connection with a Terminating Event (defined in each Severance Agreement generally to mean (i) the Company’s termination of an executive’s employment for any reason other than certain enumerated reasons, such as willful dishonesty, conviction of a crime or failure to perform the executive’s duties to the Company, or (ii) the Executive’s termination of his employment for Good Reason, as defined in each executive’s respective Severance Agreement), the applicable executive is entitled to:
| • | a lump sum payment equal to one and one-half times the sum of (i) the executive’s salary in effect immediately prior to the Terminating Event or Change of Control (whichever is greater), and (ii) the average amount of the bonuses paid to the executive over the prior three years; |
| • | continued health and dental insurance coverage for 18 months following termination; and |
| • | reasonable legal and arbitration fees and expenses incurred by such executive in enforcing his Severance Agreement. |
If, following a Change of Control of the Company, Messrs. Flora, Hamilton or Moghadam becomes subject to excise taxes pursuant to Section 4999 of the Internal Revenue Code, the Company can reduce (but not below zero) the severance payments to the applicable executive so that the payments will not trigger the excise tax, unless the executive would receive a greater benefit through the receipt of all severance payments and benefits described above, following the executive’s payment of all applicable excise taxes payable pursuant to such section.
Messrs. Flora, Hamilton and Moghadam’s Severance Agreements will each terminate upon the earliest of (i) termination of the executive’s employment prior to a Change of Control, (ii) a termination of the executive’s employment after a Change of Control that does not constitute a Terminating Event or (iii) 18 months following a Change of Control.
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Acceleration of Options upon a Change of Control
Each of the Company’s stock option and incentive plans provide that, upon a Change of Control, as defined in the applicable plan, each stock option will fully vest and the conditions and restrictions on any restricted stock award will be removed.
The following table outlines the post-employment payments and payments upon a Change of Control of the Company that would be made, assuming separation from the Company or a Change of Control of the Company, on September 28, 2007, the last business day of the fiscal year:
| Prior to a Change of Control | Upon a Change of Control | Following a Change of Control | |||||||||||||||||||||||||
Payments and | Involuntary Termination without Cause | Whether or not Terminated | Involuntary Termination by the Company for any reason | Involuntary Termination by the Company without cause | Termination by the Executive for any reason | Termination by the Executive for Good Reason | Death or Disability | ||||||||||||||||||||
Richard A. Packer | |||||||||||||||||||||||||||
Severance | $ | 375,000 | (1) | $ | 0 | $ | 1,875,000 | (2) | $ | 2,250,000 | (1)(2) | $ | 1,875,000 | (2) | $ | 1,875,000 | (2) | $ | 0 | ||||||||
Vesting of Stock Option Awards | $ | 509,000 | (3) | $ | 1,668,500 | (4) | $ | 1,668,500 | (4) | $ | 1,668,500 | (4) | $ | 1,668,500 | (4) | $ | 1,668,500 | (4) | $ | 0 | |||||||
Other Benefits | $ | 20,000 | (5) | $ | 0 | $ | 40,501.50 | (6) | $ | 60,501.50 | (7) | $ | 40,501.50 | (6) | $ | 40,501.50 | (6) | $ | 0 | ||||||||
Tax Gross-Up | $ | 0 | $ | 0 | $ | 804,574 | $ | 1,002,074 | $ | 804,574 | $ | 804,574 | $ | 0 | |||||||||||||
Total | $ | 904,000 | $ | 1,668,500 | $ | 3,584,001.5 | (8) | $ | 3,959,001.50 | (8) | $ | 3,584,001.5 | (8) | $ | 3,584,001.5 | (8) | $ | 0 | |||||||||
A. Ernest Whiton | |||||||||||||||||||||||||||
Severance | $ | 0 | $ | 0 | $ | 0 | $ | 635,000 | (9) | $ | 635,000 | (9) | $ | 635,000 | (9) | $ | 0 | ||||||||||
Vesting of Stock Option Awards | $ | 0 | $ | 500,813 | (10) | $ | 500,813 | (10) | $ | 500,813 | (10) | $ | 500,813 | (10) | $ | 500,813 | (10) | $ | 0 | ||||||||
Other Benefits | $ | 0 | $ | 0 | $ | 0 | $ | 24,300.90 | (11) | $ | 24,300.90 | (11) | $ | 24,300.90 | (11) | $ | 0 | ||||||||||
Tax Gross-Up | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||
Total | $ | 0 | $ | 500,813 | $ | 500,813 | $ | 525,113.90 | $ | 525,113.90 | (12) | $ | 525,113.90 | (12) | $ | 0 | |||||||||||
Alexander N. Moghadam | |||||||||||||||||||||||||||
Severance | $ | 0 | $ | 0 | $ | 0 | $ | 444,806.25 | (13) | $ | 0 | $ | 444,806.25 | (13) | $ | 0 | |||||||||||
Vesting of Stock Option Awards | $ | 0 | $ | 589,981 | (14) | $ | 589,981 | (14) | $ | 589,981 | (14) | $ | 589,981 | (14) | $ | 589,981 | (14) | $ | 0 | ||||||||
Other Benefits | $ | 0 | $ | 0 | $ | 0 | $ | 24,300.90 | (11) | $ | 0 | $ | 24,300.90 | (11) | $ | 0 | |||||||||||
Tax Gross-Up | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||
Total | $ | 0 | $ | 589,981 | $ | 589,981 | $ | 614,281.90 | $ | 633,031 | 614,281.90 | $ | 0 | ||||||||||||||
Steven K. Flora | |||||||||||||||||||||||||||
Severance | $ | 0 | $ | 0 | $ | 0 | $ | 474,249.99 | (13) | $ | 0 | $ | 474,249.99 | (13) | $ | 0 | |||||||||||
Vesting of Stock Option Awards | $ | 0 | $ | 443,863 | (15) | $ | 443,863 | (15) | $ | 443,863 | (15) | $ | 443,863 | (15) | $ | 443,863 | (15) | $ | 0 | ||||||||
Other Benefits | $ | 0 | $ | 0 | $ | 0 | $ | 24,300.90 | (11) | $ | 0 | $ | 24,300.90 | (11) | $ | 0 | |||||||||||
Tax Gross-Up | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||
Total | $ | 0 | $ | 443,863 | $ | 443,863 | $ | 468,163.90 | $ | 443,863 | $ | 468,163.90 | $ | 0 | |||||||||||||
Ward M. Hamilton | |||||||||||||||||||||||||||
Severance | $ | 0 | $ | 0 | $ | 0 | $ | 362,499.99 | (13) | $ | 0 | $ | 362,499.99 | (13) | $ | 0 | |||||||||||
Vesting of Stock Option Awards | $ | 0 | $ | 333,875 | (16) | $ | 333,875 | (16) | $ | 333,875 | (16) | $ | 333,875 | (16) | $ | 333,875 | (16) | $ | 0 | ||||||||
Other Benefits | $ | 0 | $ | 0 | $ | 0 | $ | 24,300.90 | (11) | $ | 0 | $ | 24,300.90 | (11) | $ | 0 | |||||||||||
Tax Gross-Up | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||
Total | $ | 0 | $ | 333,875 | $ | 333,875 | $ | 358,175.90 | $ | 333,875 | $ | 358,175.90 | $ | 0 | |||||||||||||
| (1) | The Company will continue to pay Mr. Packer his base salary in effect at the time of termination for a period of 12 months following Mr. Packer’s termination without Cause prior to a Change of Control, following a 30 day notice period, as if Mr. Packer had continued to be employed by the Company. |
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| (2) | Mr. Packer is entitled to two and one-half times the sum of: (i) Mr. Packer’s salary in effect immediately prior to the termination of his employment or the Change of Control (whichever is greater), and (ii) Mr. Packer’s most recently paid bonus. For purposes of this calculation, we have assumed that the terminating event and the Change of Control both occurred on September 28, 2007. |
| (3) | Upon Mr. Packer’s termination without Cause, following a 30 day notice period, Mr. Packer’s stock options will continue to vest for the following 12 months, as if he were still employed. As a result, Mr. Packer would be entitled to an incremental value of $509,000, attributable to gains realized for the continued vesting of his unvested stock option grants as of September 30, 2007. All values have been calculated using the closing price of $25.92 on September 28, 2007, the last trading day of the fiscal year. |
| (4) | Upon a Change of Control, Mr. Packer’s unvested stock options will fully vest, resulting in an incremental value of $1,668,500, attributable to gains realized for the acceleration of his unvested stock options as of September 28, 2007. All values have been calculated using the closing price of $25.92 on September 28, 2007, the last trading day of the fiscal year. |
| (5) | This represents amounts for reasonable and customary outplacement services for the 12-month period following Mr. Packer’s termination without cause prior to a Change of Control, assuming that Mr. Packer received such services for the entire 12-month period. |
| (6) | This represents the value of continuing Mr. Packer’s health and dental insurance coverage for 30 months following termination of his employment. |
| (7) | This represents: (a) $20,000 for reasonable and customary outplacement services for the 12-month period following Mr. Packer’s termination without cause prior to a Change of Control, assuming that Mr. Packer received such services for the entire 12-month period; and (b) $40,501.50, the value of continuing Mr. Packer’s health and dental insurance coverage for 30 months following termination of his employment. |
| (8) | The Severance Agreement between the Company and Mr. Packer does not distinguish between termination if his employment is terminated by the Company with or without cause or if he terminates his employment for any reason or for good reason. Following a Change of Control, if the Company terminates Mr. Packer’s employment for any reason (including without cause) or if Mr. Packer terminates his employment for any reason (including for good reason), Mr. Packer will receive the amount shown. |
| (9) | Mr. Whiton is entitled to two times the sum of (i) Mr. Whiton’s salary in effect immediately prior to the Terminating Event or Change of Control (whichever is greater), and (ii) the average amount of the bonuses paid to Mr. Whiton over the prior three years. For purposes of this calculation, we have assumed that the Terminating Event and the Change of Control both occurred on September 28, 2007. |
| (10) | Upon a Change of Control, Mr. Whiton’s unvested stock options will fully vest, resulting in an incremental value of $500,813, attributable to gains realized for the acceleration of his unvested stock options as of September 28, 2007. All values have been calculated using the closing price of $25.92 on September 28, 2007, the last trading day of the fiscal year. |
| (11) | This represents the value of continuing the executive’s health and dental insurance coverage for 18 months following termination of his employment. |
| (12) | The Severance Agreement between the Company and Mr. Whiton does not distinguish between termination if Mr. Whiton terminates his employment for any reason or for good reason. Following a Change of Control, if Mr. Whiton terminates his employment for any reason (with or without good reason), Mr. Whiton will receive the amount shown. |
| (13) | The executive is entitled to one and one-half times the sum of (i) the executive’s salary in effect immediately prior to the Terminating Event or Change of Control (whichever is greater), and (ii) the average amount of the bonuses paid to the executive over the prior three years. For purposes of these calculations, we have assumed that the Terminating Event and the Change of Control both occurred on September 28, 2007. |
| (14) | Upon a Change of Control, Mr. Moghadam’s unvested stock options will fully vest, resulting in an incremental value of $589,981, attributable to gains realized for the acceleration of his unvested stock options as of September 28, 2007. All values have been calculated using the closing price of $25.92 on September 28, 2007, the last trading day of the fiscal year. |
| (15) | Upon a Change of Control, Mr. Flora’s unvested stock options will fully vest, resulting in an incremental value of $443,863, attributable to gains realized for the acceleration of his unvested stock options as of September 28, 2007. All values have been calculated using the closing price of $25.92 on September 28, 2007, the last trading day of the fiscal year. |
| (16) | Upon a Change of Control, Mr. Hamilton’s unvested stock options will fully vest, resulting in an incremental value of $333,875, attributable to gains realized for the acceleration of his unvested stock options as of September 28, 2007. All values have been calculated using the closing price of $25.92 on September 28, 2007, the last trading day of the fiscal year. |
The amounts shown in the above table does not include payments and benefits to the extent they have been earned prior to the termination of employment or are provided on a non-discriminatory basis generally to salaried employees upon termination of employment. This includes accrued salary and vacation pay.
22
DIRECTOR COMPENSATION
Beginning in calendar 2006, non-employee directors of the Company received: (1) a $22,000 annual retainer, payable quarterly, (2) a $4,000 annual retainer for the Chairman of each of the Compensation Committee and the Nominating and Corporate Governance Committee, payable quarterly, (3) a $6,000 annual retainer for the Audit Committee Chairman, payable quarterly, (4) a $2,000 meeting fee for each Board of Directors meeting attended, (5) a $750 meeting fee for each Compensation Committee and Nominating and Corporate Governance Committee meeting attended, (6) a $1,000 meeting fee for each Audit Committee meeting attended, and (7) a $500 meeting fee for each telephonic meeting of the Board or a Committee of the Board attended. In addition, non-employee directors are eligible to receive awards of options to purchase shares of the Company’s Common Stock under the 2006 Non-Employee Director Stock Option Plan. The Company also reimburses the non-employee directors for reasonable expenses incurred in connection with their attendance at Board meetings.
Non-Employee Directors’ Stock Option Plan.
The Company’s Non-Employee Directors’ Stock Option Plan, which was adopted in April 1996 and expired in April 2006, provided that each director of the Company who was not also an employee of the Company would be granted options to purchase 20,000 shares of the Company’s Common Stock (as adjusted for the Company’s two-for-one stock split, effective as of February 20, 2007). Each non-employee director of the Company who served in such position on April 23, 1996, the effective date of the plan, received an option grant as of that date. Each non-employee director who was first elected to the Board of Directors after that date was automatically granted an option to purchase 20,000 shares of Common Stock on the date such person was initially elected to the Board (as adjusted for the Company’s two-for-one stock split, effective as of February 20, 2007). The exercise price of options granted under the plan was 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. Additionally, all options granted under the plan vest fully upon a change of control, as described in the plan.
2006 Non-Employee Director Stock Option Plan.
On November 15, 2005, the Board of Directors of the Company adopted the 2006 Non-Employee Director Stock Option Plan, which was approved by the shareholders on January 25, 2006.
The 2006 Non-Employee Director Stock Option Plan provides that each eligible director who is first elected to the Board of Directors after the Company’s 2006 Annual Meeting of Shareholders receives a non-qualified option to purchase 20,000 shares of Common Stock (as adjusted for the Company’s two-for-one stock split, effective as of February 20, 2007) upon election to the Board of Directors. Incentive stock options may not be granted under the 2006 Non-Employee Director Stock Option Plan. The Board of Directors may also grant, from time to time, additional options to non-employee directors. All options granted under this plan vest in four equal annual installments over a four-year period beginning on the first anniversary of the date of grant. The exercise price of the options granted to eligible directors is the fair market value of the Common Stock on the date of grant. Generally, vested options expire six months following the date a director retires from the Board of Directors. Additionally, all options granted under the plan vest fully upon a change of control, as described in the plan.
On November 14, 2006, the Company awarded to each of its non-employee directors a non-qualified stock option to purchase 4,000 shares of Common Stock (as adjusted for the Company’s two-for-one stock split, effective as of February 20, 2007) pursuant to the 2006 Non-Employee Director Stock Option Plan. The exercise price of each stock option is $20.23 per share (the closing price of the Common Stock on the date of grant, as adjusted for the Company’s two-for-one stock split, effective as of February 20, 2007).
23
Director Summary Compensation Table
The table below summarizes the compensation paid to non-employee directors for the fiscal year ended September 30, 2007. Directors who are employees receive no additional compensation for Board service.
DIRECTOR COMPENSATION(1)(2)
Name | Fees Earned or Paid in Cash ($)(3) | Option Awards ($)(4) | Other Compensation ($)(5) | Total ($) | ||||||||
James W. Biondi, M.D. | $ | 36,250 | $ | 14,427 | $ | 66,775 | $ | 117,452 | ||||
Thomas M. Claflin, II | $ | 35,500 | $ | 14,427 | $ | 66,775 | $ | 116,702 | ||||
Robert J. Halliday | $ | 34,000 | $ | 14,427 | $ | 66,775 | $ | 115,202 | ||||
William J. Mercer(6) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||
Daniel M. Mulvena | $ | 37,750 | $ | 14,427 | $ | 66,775 | $ | 118,952 | ||||
Benson F. Smith | $ | 40,000 | $ | 14,427 | $ | 66,775 | $ | 121,202 | ||||
John J. Wallace(7) | $ | 16,000 | $ | 26,953 | $ | 8,200 | $ | 51,153 | ||||
| (1) | Mr. Packer, our Chief Executive Officer and President, is not included in this table as he is an employee of the Company and receives no compensation for his services as a director. The compensation received by Mr. Packer as an employee of the Company is shown in the Summary Compensation Table. |
| (2) | We do not maintain any non-equity incentive plans, pension plans, or non-qualified deferred compensation plans for the benefit of our directors. No directors received any other compensation other than what is listed above. |
| (3) | Total reflects fees and retainers earned. |
| (4) | Amounts listed reflects the dollar amount recognized for financial statement reporting purposes in fiscal year 2007 in accordance with SFAS No. 123R on stock option awards and thus includes amounts from awards granted prior to fiscal year 2007. Information related to the financial reporting of stock options are presented in Footnote A to the Consolidated Financial Statements presented in our 2007 Form 10-K. |
| (5) | Assuming a Change of Control of the Company on September 30, 2007, the directors’ stock options would have fully vested, as described in the Company’s 2006 Non-Employee Director Stock Option Plan and Non-Employee Director Stock Option Plan. The amounts listed reflect the incremental value attributable to gain realized upon the acceleration of the unvested stock option grants that would have vested upon the Change of Control of the Company and have not actually been received by the directors. All values have been calculated using the closing price of $25.92 on September 28, 2007, the last trading day of the fiscal year. |
| (6) | Mr. Mercer passed away on October 11, 2006. |
| (7) | Mr. Wallace was elected to the Board of Directors in April 2007. |
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The following table sets forth information with respect to the directors concerning outstanding stock option awards as of September 30, 2007.
Name | Grant Date | Number of (Exerciseable) | Number of (Unexerciseable) | Option Exercise Price ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(1) | ||||||||
James W. Biondi, M.D. | 2/4/1999 | 20,000 | 0 | $ | 5.44 | $ | 29,077 | ||||||
| 11/6/2002 | 2,000 | 0 | $ | 17.56 | $ | 22,120 | |||||||
| 11/9/2004 | 2,000 | 0 | $ | 16.52 | $ | 19,440 | |||||||
| 11/15/2005 | 1,000 | 3,000 | (2) | $ | 11.26 | $ | 23,620 | ||||||
| 11/14/2006 | 0 | 4,000 | (3) | $ | 20.23 | $ | 42,160 | ||||||
Thomas M. Claflin, II | 11/6/2002 | 2,000 | 0 | $ | 17.56 | $ | 22,120 | ||||||
| 11/9/2004 | 2,000 | 0 | $ | 16.52 | $ | 19,440 | |||||||
| 11/15/2005 | 1,000 | 3,000 | (2) | $ | 11.26 | $ | 23,620 | ||||||
| 11/14/2006 | 0 | 4,000 | (3) | $ | 20.23 | $ | 42,160 | ||||||
Robert J. Halliday | 7/16/2003 | 20,000 | 0 | $ | 17.26 | $ | 207,800 | ||||||
| 11/9/2004 | 2,000 | 0 | $ | 16.52 | $ | 19,440 | |||||||
| 11/15/2005 | 1,000 | 3,000 | (2) | $ | 11.26 | $ | 23,620 | ||||||
| 11/14/2006 | 0 | 4,000 | (3) | $ | 20.23 | $ | 42,160 | ||||||
Daniel M. Mulvena | 11/6/2002 | 2,000 | 0 | $ | 17.56 | $ | 22,120 | ||||||
| 11/9/2004 | 2,000 | 0 | $ | 16.52 | $ | 19,440 | |||||||
| 11/15/2005 | 1,000 | 3,000 | (2) | $ | 11.26 | $ | 23,620 | ||||||
| 11/14/2006 | 0 | 4,000 | (3) | $ | 20.23 | $ | 42,160 | ||||||
Benson F. Smith | 2/8/2000 | 20,000 | 0 | $ | 17.56 | $ | 93,859 | ||||||
| 11/6/2002 | 2,000 | 0 | $ | 17.56 | $ | 22,120 | |||||||
| 11/9/2004 | 2,000 | 0 | $ | 16.52 | $ | 19,440 | |||||||
| 11/15/2005 | 1,000 | 3,000 | (2) | $ | 11.26 | $ | 23,620 | ||||||
| 11/14/2006 | 0 | 4,000 | (3) | $ | 20.23 | $ | 42,160 | ||||||
John J. Wallace | 4/27/2007 | 0 | 20,000 | (4) | $ | 25.51 | $ | 264,800 | |||||
| (1) | The amounts included in this column represent the full grant date fair value of the option awards computed in accordance with SFAS No. 123R. Information related to the financial reporting of stock options are presented in Footnote A to the Consolidated Financial Statements presented in our 2007 Form 10-K. |
| (2) | The option vests in four equal annual installments commencing on November 15, 2006. |
| (3) | The option vests in four equal annual installments commencing on November 14, 2006. |
| (4) | The option vests in four equal annual installments commencing on April 27, 2008. |
25
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has:
| • | Reviewed and discussed the audited financial statements with management. |
| • | Discussed with the independent registered public accounting firm, Ernst & Young LLP, the matters required to be discussed by SAS 61. |
| • | Received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1, and has discussed with the independent registered public accounting firm its independence. |
| • | Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. |
Submitted by the Audit Committee for
fiscal 2007
BENSON F. SMITH,Chairman,
JAMES W. BIONDI, M.D.,
ROBERT J. HALLIDAY
and JOHN J. WALLACE
(As currently constituted)
26
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has selected the accounting firm of Ernst & Young LLP to serve as its independent registered public accounting firm for the 2008 fiscal year, subject to approval of Ernst & Young LLP’s proposed fee schedule. Ernst & Young LLP has served as the Company’s independent registered public accounting firm 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 or she so desires, and will be available to respond to appropriate questions.
Audit Fees
During fiscal 2007, the aggregate fees and expenses billed for professional services rendered by Ernst & Young LLP for the audit of the Company’s annual financial statements, review of the Company’s quarterly financial statements, internal control reporting, statutory filings, and services related to registration statements totaled $968,000. During fiscal 2006, the aggregate fees and expenses billed by Ernst & Young LLP for such services totaled $984,000.
Audit-Related Fees
During fiscal 2007, the aggregate fees and expenses billed by Ernst & Young LLP related to services for accounting consultations totaled $83,000. During fiscal 2006, the aggregate fees and expenses billed for such services totaled $55,000.
Tax Fees
During fiscal 2007, the aggregate fees and expenses billed for professional services rendered by Ernst & Young LLP for tax compliance, tax advice, and tax planning totaled $122,399. During fiscal 2006, the aggregate fees and expenses billed for professional services rendered by Ernst & Young LLP for such services totaled $93,000.
All Other Fees
During fiscal 2007 and 2006 there were no fees and expenses billed for professional services rendered by Ernst & Young LLP to the Company not covered in the three preceding paragraphs.
The Audit Committee must pre-approve all audit and permitted non-audit services to be provided by our independent registered public accounting firm unless an exception to such pre-approval exists under the Exchange Act or the rules of the Securities and Exchange Commission. Each year, the Audit Committee approves the appointment of the independent registered public accounting firm to audit our financial statements, including the associated fee. All of the services described in the four preceding paragraphs were approved by the Audit Committee. The Audit Committee has considered whether the provisions of such services, including non-audit services, by Ernst & Young LLP is compatible with maintaining Ernst & Young LLP’s independence and has concluded that it is.
27
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Raymond C. Zemlin, the Assistant Secretary of the Company, is a partner in the law firm of Goodwin ProcterLLP, outside counsel to the Company.
Pursuant to the Audit Committee Charter, all related party transactions are reviewed on an ongoing basis by our Audit Committee and all such transactions must be approved by our Audit Committee. The term “related party” includes: directors, director nominees, executive officers, 5% stockholders and their respective immediate family members and other persons sharing their households and generally covers related person transactions that meet the minimum threshold for disclosure under relevant Securities and Exchange Commission rules. Such related person transactions generally involve amounts exceeding $120,000. The purpose of the review is to determine that such transactions are conducted on terms not materially less favorable than what would be usual and customary in transactions between unrelated persons and, in the case of transactions involving directors, to determine whether such transactions affect the independence of a director in accordance with the relevant rules and standards issued by the Securities and Exchange Commission and the National Association of Securities Dealers.
The Company’s Director of Governance (a member of the Company’s finance and accounting staff), in consultation with the Company’s legal department, identifies any potential related party transactions and if he determines that a transaction constitutes a related person transaction, provides relevant details to the Audit Committee. The Audit Committee reviews relevant information concerning any proposed transaction contemplated by the Company with an individual or entity that is the subject of a disclosed relationship, and approves or disapproves the transaction, with or without conditions.
During the 2007 fiscal year, the Company was not a participant in any related party transactions that required disclosure under this heading.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership of, and transactions in, the Company’s securities with the Securities and Exchange Commission and the NASDAQ Stock Market. Such directors, executive officers, and 10% shareholders are also required to furnish the Company with copies of all Section 16(a) forms they file. Based solely upon a review of reports furnished to the Company, and on written representations from certain reporting persons, the Company believes that, with respect to the fiscal year ended September 30, 2007, each director, executive officer, and 10% shareholder of the Company’s securities made timely filings of all reports required by Section 16 of the Exchange Act, except as described below. Goldman Sachs Asset Management, L.P., pursuant to a Schedule 13G/A filed with the Securities and Exchange Commission on March 9, 2007, reported that it held 12.2% of the Company’s Common Stock and, on October 10, 2007, reported that it held 6.96% of the Company’s Common Stock. However, Goldman Sachs Asset Management, L.P. did not file a Form 3 upon becoming a 10% shareholder and a Form 4 for at least one transaction. Similarly, pursuant to a Schedule 13G filed with the Securities and Exchange Commission on August 10, 2007, FMR Corp. holds 12.71% of the Company’s Common Stock. FMR Corp. did not, however, file a Form 3 upon becoming a 10% shareholder.
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PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors of the Company has selected the accounting firm of Ernst & Young LLP to serve as the independent registered public accounting firm of the Company for the fiscal year ending September 28, 2008. Ernst & Young LLP has served as the Company’s independent registered public accounting firm since 1984. Ernst & Young LLP is considered by management of the Company to be well qualified. A representative of Ernst & Young LLP will be present at the Annual Meeting, will be given the opportunity to make a statement if he or she so desires, and will be available to respond to appropriate questions.
Although the Company is not required to submit the ratification of the selection of its independent registered public accounting firm to a vote of shareholders, the Audit Committee of the Board of Directors believes that it is sound policy to do so. In the event that the majority of the votes cast are against the selection of Ernst & Young LLP, the Audit Committee will consider the vote and the reasons for it in future decisions on the selection of independent registered public accounting firms. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different registered public accounting firm if the Audit Committee believes that such a change would be in the best interests of the Company and its shareholders.
Vote Required For Approval
The affirmative vote of holders of a majority of shares of Common Stock voting on the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm is required to approve the ratification.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
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OTHER MATTERS
Principal and Management Shareholders
Unless otherwise indicated, the following table presents information regarding beneficial ownership of the Company’s Common Stock as of December 3, 2007 by (1) each of the named executive officers and (2) the persons or entities believed by the Company to be beneficial owners of more than 5% of the Company’s Common Stock based on certain filings made under Section 13 of the Exchange Act. All such information was provided by the shareholders listed and reflects their beneficial ownership as of the dates specified in the footnotes to the table. Unless otherwise indicated, the address for the individuals below is our address.
Name and Address of Beneficial Owner | No. of Shares Beneficially Owned (1)(2)(3) | Percent Class | ||
Richard A. Packer(4) | 280,600 | 1.35% | ||
A. Ernest Whiton(5) | 103,500 | * | ||
Alexander N. Moghadam(6) | 47,500 | * | ||
Steven K. Flora(7) | 81,500 | * | ||
Ward M. Hamilton(8) | 97,766 | * | ||
Barclays Global Investors NA(9) | 1,574,172 | 7.68% | ||
45 Fremont Street | ||||
San Francisco, CA 94105 | ||||
Dimensional Fund Advisors, Inc.(10) | 1,345,836 | 6.57% | ||
1299 Ocean Avenue, 11th Floor, | ||||
Santa Monica, CA 90401 | ||||
Goldman Sachs Asset Management, L.P.(11) | 1,426,029 | 6.96% | ||
32 Old Slip | ||||
New York, NY 10005 | ||||
FMR Corp.(12) | 2,604,195 | 12.71% | ||
82 Devonshire Street | ||||
Boston, MA 02109 | ||||
Renaissance Technologies Corp.(13) | 1,204,046 | 5.88% | ||
800 Third Avenue | ||||
New York, NY 10022 | ||||
HealthCor Management, L.P. and related entities(14) | 1,275,000 | 6.22% | ||
Carnegie Hall Tower | ||||
152 West 57th Street, 47th Floor | ||||
New York, NY 10019 | ||||
| * | Less than 1%. |
| (1) | The persons named in this 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) | The share numbers in this table reflect the Company’s two-for-one stock split, which became effective on February 20, 2007. |
| (3) | Our calculation of the percentage of shares beneficially owned by the shareholders in this table is based upon the number of shares of our Common Stock outstanding as of December 3, 2007 (20,487,469), plus for each listed beneficial owner, any shares of Common Stock that the listed beneficial owner has the right to acquire within 60 days after December 3, 2007. The number of shares beneficially owned by holders of 5% or more of our voting securities is based on the applicable filings with the Securities and Exchange Commission. |
| (4) | Includes 254,000 shares of Common Stock issuable upon exercise of stock options, which are exercisable within 60 days after December 3, 2007. Does not include options to purchase 175,000 shares of Common Stock, which are not exercisable within 60 days of December 3, 2007. |
30
| (5) | Represents 103,500 shares of Common Stock issuable upon exercise of options, which are exercisable within 60 days of December 3, 2007. Does not include options to purchase 47,500 shares of Common Stock, which are not exercisable within 60 days of December 3, 2007. |
| (6) | Represents 47,500 shares of Common Stock issuable upon exercise of options, which are exercisable within 60 days after December 3, 2007. Does not include options to purchase 57,500 shares of Common Stock, which are not exercisable within 60 days of December 3, 2007. |
| (7) | Includes 8,000 shares of Common Stock held by Robert W. Baird & Co., Inc. TTEE FBO Steven K. Flora IRA. Includes 73,500 shares of Common Stock issuable upon exercise of options, which are exercisable within 60 days after December 3, 2007. Does not include options to purchase 40,000 shares of Common Stock, which are not exercisable within 60 days of December 3, 2007. |
| (8) | Includes 79,000 shares of Common Stock issuable upon exercise of options, which are exercisable within 60 days after December 3, 2007. Does not include options to purchase 32,500 shares of Common Stock, which are not exercisable within 60 days of December 3, 2007. |
| (9) | Based on the share information set forth in a Schedule 13G filed with the Securities and Exchange Commission on September 11, 2006. Includes 130,384 shares held by its affiliate, Barclays Global Fund Advisors. |
| (10) | Based on the share information set forth in a Schedule 13G filed with the Securities and Exchange Commission on February 6, 2006. |
| (11) | Based on the share information set forth in a Schedule 13G/A filed with the Securities and Exchange Commission on October 10, 2007. |
| (12) | Based on the share information set forth in a Schedule 13G filed with the Securities and Exchange Commission on August 10, 2007. Members of the family of Edward C. Johnson 3d, Chairman of FMR Corp., are the predominant owners, directly or through trusts, of Series B shares of common stock of FMR Corp., representing 49% of the voting power of FMR Corp. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B shares will be voted in accordance with the majority vote of Series B shares. Accordingly, through their ownership of voting common stock and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR Corp. Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the sole power to vote or direct the voting of the shares owned directly by the Fidelity funds, which power resides with the funds’ Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the funds’ Boards of Trustees. Pyramis Global Advisors Trust Company (“PGATC”), 53 State Street, Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and a bank as defined in Section 3(a)(6) of the Exchange Act, is the beneficial owner of 512,996 shares as a result of its serving as investment manager of the institutional account(s). Edward C. Johnson 3d and FMR Corp., through its control of PGATC, each has sole dispositive power over 512,996 shares and sole power to vote or to direct the voting of 457,574 shares of Common Stock owned by the institutional account(s) managed by PGATC as reported above. |
| (13) | Based on the share information set forth in a Schedule 13G/A filed with the Securities and Exchange Commission on March 16, 2007. Dr. James H. Simons is a control person of Renaissance Technologies Corp. (“RTC”) and has sole dispositive power over 1,204,046 shares and sole power to vote or to direct the voting of 1,196,824 shares of Common Stock owned by RTC. |
| (14) | Based on share information set forth in a Schedule 13G filed with the Securities and Exchange Commission on November 9, 2007. Collectively, HealthCor, L.P., HealthCor Offshore, Ltd., HealthCor Hybrid Offshore, Ltd. and HealthCor Strategic, LLC (each a “Fund” and together, the “Funds”) are the beneficial owners of a total of 1,275,000 shares of our Common Stock. By virtue of its position as the investment manager of the Funds, HealthCor Management, L.P. may be deemed a beneficial owner of all the shares of Common Stock owned by the Funds. HealthCor Associates, LLC is the general partner of HealthCor Management, L.P. and thus may also be deemed to beneficially own the shares of Common Stock that are beneficially owned by the Funds. HealthCor Group LLC is the general partner of HealthCor Capital, L.P., which is in turn the general partner of HealthCor, L.P. Accordingly, each of HealthCor Capital L.P. and HealthCor Group, LLC may be deemed to beneficially own the shares of Common Stock that are beneficially owned by HealthCor, L.P. As the Managers of HealthCor Associates, LLC, Arthur Cohen and Joseph Healey exercise both voting and investment power with respect to these shares of Common Stock and, therefore, each may be deemed a beneficial owner of such Common Stock. Each of these reporting persons disclaims any beneficial ownership of any such shares of Common Stock in excess of their actual pecuniary interest therein. |
31
Amendment to By-Laws
On January 24, 2007, the Board of Directors approved amendments to the Amended and Restated By-Laws of the Company to allow for uncertificated shares of the Company. These amendments are effective as of January 24, 2007. The purpose for these amendments is to ensure that the Company could become eligible to participate in a Direct Registration Program, as required by NASDAQ Rule 4350. A copy of the Certificate of Amendment to the Company’s Amended and Restated By-Laws was filed as Exhibit 3.1 to the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 25, 2007.
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.
Shareholder Proposals
For a proposal of a shareholder to be included in the Company’s proxy statement for the Company’s 2009 Annual Meeting of Shareholders, it must be received at the principal executive offices of the Company on or before August 23, 2008. 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 Amended and Restated By-Laws provide that any shareholder wishing to nominate a director or have a shareholder proposal considered at an annual meeting must provide written notice of such nomination or proposal and appropriate supporting documentation, as set forth in the Amended and Restated 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 shareholders or special meeting in lieu thereof (the “Anniversary Date”) or (b) in the case of a special meeting of shareholders in lieu of the annual meeting or in the event that the annual meeting of shareholders 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 Company, 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 shareholders 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 Company, on the next succeeding business day). For next year’s scheduled annual meeting, the deadline for submission of notice is November 10, 2008. Any proposal or nomination submitted after November 10, 2008 will be untimely. Any such proposal should be mailed to: ZOLL Medical Corporation, 269 Mill Road, Chelmsford, Massachusetts 01824, Attention: Secretary.
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.
ZOLL MEDICAL CORPORATION
December 21, 2007
32
ZOLL Medical Corporation
| Using black ink pen mark your votes with an X as shown in this example. Please do not write outside of the designated areas. | x |
Annual Meeting Proxy Card
Ú PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.Ú
| ||
| A | Proposals – The Board of Directors recommends a voteFOR all nominees listed andFOR Proposal 2. |
| 1. | Proposal to elect the following persons as Class I Directors to serve |
| until the 2011 Annual Meeting and until their successors are duly |
| elected and qualified: |
| For | Withhold | For | Withhold | For | Withhold | |||||||||||
| 01 – Daniel M. Mulvena | ¨ | ¨ | 02 – Benson F. Smith | ¨ | ¨ | 03 – John J. Wallace | ¨ | ¨ |
| and to elect the following person as an additional Class III Director to |
| serve until the 2010 Annual Meeting and until his successor is duly |
| elected and qualified. |
| For | Withhold | |||||
| 04 - Lewis H. Rosenblum | ¨ | ¨ |
| For | Against | Abstain | ||||||||||
2. | Proposal to ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 28, 2008. | ¨ | ¨ | ¨ | 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. |
| B | Non-voting Items |
| Change of Address – Please print new address below. |
| C | Authorized Signatures - This section must be completed for your vote to be counted. – Date and Sign Below |
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint holders must sign. When sighing as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title.
Date (mm/dd/yyyy) – Please print date below
| Signature 1 –Please keep signature within the box | Signature 2 – Please keep signature within the box | ||||||||||
| / / |
ZOLL MEDICAL CORPORATION
Dear Shareholder,
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 on the reverse side 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 Shareholders to be held January 23, 2008.
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
| Ú PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.Ú | ||
Proxy - Zoll Medical Corporation
Annual Meeting of Shareholders
January 23, 2008
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Richard A. Packer and A. Ernest Whiton 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 7, 2007 at the Annual Meeting of Shareholders to be held at the Conference Center at Goodwin ProcterLLP, Exchange Place, Boston, Massachusetts 02109 on January 23, 2008, 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 shareholder(s). If no direction is given, this proxy will be voted FOR the election of the three nominees for Class I Directors, FOR the election of the one nominee for Class III Director and FOR the ratification of the selection of Ernst & Young LLP LLP as the Company’s independent registered public accounting firm; with discretionary authority to vote upon such other matters that may properly come before the meeting. The Board of Directors recommends a vote FOR Proposals 1 and 2. A shareholder 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.