<PAGE>
(Schedule 14A -- to come)
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
OEC MEDICAL SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MERRILL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
OEC MEDICAL SYSTEMS, INC.
384 WRIGHT BROTHERS DRIVE
SALT LAKE CITY, UTAH 84116
April 7, 1994
TO OUR STOCKHOLDERS:
You are invited to attend the Annual Meeting of Stockholders of OEC Medical
System, Inc. (the "Company"), which will be held at 10:00 a.m. on Thursday, May
26, 1994, at the Salt Lake City Marriott, 75 South West Temple, Salt Lake City,
Utah.
At this important meeting, you will be asked to vote on the election of
directors and to ratify the selection of Deloitte & Touche as the Company's
accountants. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS TO THE STOCKHOLDERS
OF THE COMPANY THAT THEY VOTE FOR THE NOMINEES TO THE BOARD OF DIRECTORS AND THE
RATIFICATION OF THE COMPANY'S SELECTION OF DELOITTE & TOUCHE.
Your vote is important to the Company. Whether or not you plan to attend the
meeting, please return a completed proxy card in the enclosed envelope. If you
do attend the meeting and wish to vote in person, you may withdraw your proxy
and vote your shares personally.
We look forward to seeing you at the meeting.
Sincerely,
David J. Rose
President and
Chief Executive Officer
<PAGE>
OEC MEDICAL SYSTEMS, INC.
384 WRIGHT BROTHERS DRIVE
SALT LAKE CITY, UTAH 84116
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1994
The Annual Meeting of the Stockholders of OEC Medical Systems, Inc. (the
"Company") will be held at 10:00 a.m. MDT on Thursday, May 26, 1994, at the Salt
Lake City Marriott, 75 South West Temple, Salt Lake City, Utah for the following
purposes:
1. To elect five directors of the Company. Management's nominees for
election are Edwin Macrae, Allan May, Ruediger Naumann-Etienne, Chase
Peterson and David Rose.
2. To ratify the appointment of Deloitte & Touche, certified public
accountants, as independent auditors.
3. To transact such other business as may properly come before the meeting
and any adjournment thereof.
Stockholders of record at the close of business on March 31, 1994 will
receive this notice and are entitled to vote at the meeting.
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY
IN THE ENCLOSED REPLY ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
Allan W. May
Secretary
Dated: April 7, 1994
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE>
OEC MEDICAL SYSTEMS, INC.
384 WRIGHT BROTHERS DRIVE
SALT LAKE CITY, UTAH 84116
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1994
This Proxy Statement is furnished in connection with the solicitation by and
on behalf of the Board of Directors of OEC Medical Systems, Inc. ("OEC" or the
"Company") of proxies to be used at the Annual Meeting of Stockholders (the
"Annual Meeting"), which will be held on May 26, 1994, at 10:00 a.m., Mountain
Daylight Time, at the Salt Lake City Marriott, 75 South West Temple, Salt Lake
City, Utah or at any adjournment or postponement thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders. This Proxy
Statement and the accompanying Proxy were first mailed to stockholders on or
about April 7, 1994. A copy of the Company's Annual Report to Stockholders for
1993 accompanies this Proxy Statement.
The entire cost of soliciting proxies, including the costs of preparing,
assembling, printing and mailing this Proxy Statement, the Proxy and any
additional soliciting material furnished to stockholders, will be borne by OEC.
Arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy materials to the beneficial owners of
stock, and such persons may be reimbursed for their expenses. The Company has
employed D.F. King, a proxy solicitation firm, to solicit proxies. The amounts
to be paid to such proxy solicitation firm are not expected to exceed $15,000.
Proxies may be solicited by directors, officers or regular employees of the
Company in person or by telephone, telegram or other means. No additional
compensation will be paid to such individuals for any such services.
The Company's principal executive offices are located at 384 Wright Brothers
Drive, Salt Lake City, Utah 84116.
VOTING RIGHTS
The close of business on March 31, 1994 was the record date for stockholders
entitled to notice of and to vote at the Annual Meeting (the "Record Date"). As
of that date, OEC had outstanding 12,412,123 shares of Common Stock. All of the
outstanding shares of Common Stock on the Record Date are entitled to vote at
the Annual Meeting, and stockholders of record entitled to vote at this meeting
will have one vote for each share so held on the matters to be voted upon,
including voting on the election of directors.
REVOCATION OF PROXIES
Any person giving a proxy has the power to revoke it at any time before its
exercise. A proxy may be revoked by filing with the Secretary of the Company at
the Company's principal executive offices as set forth above an instrument of
revocation or a duly executed proxy bearing a later date, or by attending the
Annual Meeting and voting in person. Subject to any such revocation, all shares
represented by properly executed proxies will be voted in accordance with
specifications on the enclosed proxy. If no such specifications are made,
proxies will be voted FOR the election of the five nominees for director and FOR
the ratification of Deloitte & Touche as the Company's independent auditors for
the fiscal year ending December 31, 1994. Management does not know of any
matters to be presented at this Annual Meeting other than those set forth in
this Proxy Statement and in the Notice accompanying this Proxy Statement. If
other matters
1
<PAGE>
should properly come before the meeting, the proxy holders will vote on such
matters in accordance with their best judgment. Abstentions and broker non-votes
are each included in the determination of the number of shares present for
quorum purposes. Abstentions are counted in tabulations of the votes cast on
proposals presented to stockholders, whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
PROPOSAL NO. 1
NOMINATION AND ELECTION OF DIRECTORS
In connection with the restructuring of the Company in September 1993, Mr.
Stafford indicated that he intended to resign from the board at such time
following the restructuring as the board designated an alternative director who
can bring the necessary support and expertise. Dr. Chase Peterson was appointed
to the board in October, 1993, and Mr. Allan May was appointed to the board in
February 1994. Given these appointments, Mr. Stafford has determined not to
stand for reelection to the board in 1994. Accordingly, five directors are to be
elected at the 1994 Annual Meeting, each to serve until the next annual meeting
of stockholders and until his successor shall be elected and qualified, or until
his earlier death, resignation or removal. The five candidates receiving the
highest number of affirmative votes of the shares entitled to vote at the Annual
Meeting will be elected directors of the Company.
If any nominee is not available for election (a contingency the Company does
not now foresee) it is the intention of the Board of Directors to recommend the
election of a substitute nominee, and proxies in the accompanying form will be
voted for the election of any substitute nominee, unless authority to vote such
proxies in the election of directors has been withheld. Unless you request on
your proxy form that voting of your proxy be withheld for any one or more of the
following nominees for director, your proxy will be voted for the election of
the five nominees listed below.
INFORMATION WITH RESPECT TO NOMINEES
The names of and certain information with respect to the persons nominated
by the Board of Directors for election as directors are included below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- --- --------------------------------------------------
<S> <C> <C>
David J. Rose 48 President, Chief Executive Officer and Director
Edwin W. Macrae 72 Director
Ruediger Naumann-Etienne 47 Chairman of the Board
Allan W. May 46 Director
Chase N. Peterson 64 Director
</TABLE>
Edwin W. Macrae is a retired general partner and vice chairman of Arthur
Young & Company, certified public accountants. He has been a Director of the
Company since April 1983.
Allan May has been Senior Vice President, General Counsel and Secretary of
Diasonics Ultrasound, Inc. since April 1993. He was Senior Vice-President of the
Company from March 1989 to September 1993; Vice President, General Counsel and
Secretary from June 1988 to March 1989; and Secretary from July 1988 to
September 1993. Mr. May served as Chief Operating Officer of the Tigera Group,
Inc. (formerly Fortune Systems Corporation), a manufacturer of computer software
and hardware, from August 1987 to June 1988. He became a director of the Company
in February 1994.
Ruediger Naumann-Etienne has been Managing Director of Intertec since July
1990. He was President and Chief Operating Officer of the Company from December
1987 to July 1990 and Executive Vice President and Chief Financial Officer from
April 1984 to September 1988. He has been a director of the Company since
January 1989, and was named Chairman of the Board in September 1993.
2
<PAGE>
Chase N. Peterson, M.D. has been a Professor of Internal Medical (Clinical)
at the University of Utah since 1983 and a Professor of Family and Preventive
Medicine (Clinical) since 1991. He was the President Emeritus of the University
of Utah from 1983 through 1991. He is a graduate of Harvard College and Harvard
Medical School. He has been a Director of the Company since October 1993.
David J. Rose has been President and CEO of the Company since September
1993. Before that he was President of OEC-Diasonics, Inc from March 1992. He was
Vice President, Sonotron Holding, AG, from April 1987 to March 1992, and from
June 1980 to April 1987 he was the Managing Director, Sonotron U.K., Ltd. He has
been a Director of the Company since September 1993.
COMMITTEES OF THE OEC BOARD. OEC has standing Audit, Nominations and
Compensation Committees. The Audit Committee, currently consisting of Messrs.
Macrae, May and Peterson recommends to the Board, subject to stockholder
approval, the engagement of the independent auditors and reviews the
independence of the auditors and the scope and results of OEC's procedures for
evaluating the adequacy of its system of internal accounting controls. The
Nominations Committee, currently consisting of Messrs. Naumann-Etienne, Peterson
and Rose, selects and nominates to the Board nominees for election as directors.
The Compensation Committee, currently consisting of Messrs. Macrae and Stafford,
reviews and recommends to the Board the remuneration arrangements for senior
management of OEC, administers its compensation and employee benefit plans and
administers the Company's Stock Option/Stock Purchase Plan and the Employee
Incentive Stock Acquisition Plan.
COMPENSATION
The following table provides certain summary information concerning the
compensation paid or accrued by the Company and its subsidiaries to or on behalf
of the Company's Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company whose compensation for the 1993
fiscal year was in excess of $100,000, as well as the former Chief Executive
Officer of the Company and two additional persons who were executive officers of
the Company but whose employment with the Company terminated during 1993,
(collectively, the "Named Officers") for each of the fiscal years ended December
31, 1993, 1992 and 1991, respectively. Such compensation was paid for services
rendered in all capacities to the Company or its subsidiaries.
3
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
AWARDS
-------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
---------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS COMPENSATION($)(2)
- ----------------------------------------------- --------- ----------- --------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
DAVID J. ROSE (3) ............................. 1993 $ 224,992 $ 28,375 180,000 $ 6,419
President and Chief Executive Officer 1992 237,455 70,000 15,000 5,115
1991 -- -- -- --
RANDY W. ZUNDEL ............................... 1993 139,466 17,750 70,000 3,909
Chief Financial Officer 1992 136,380 25,250 -- 3,407
1991 116,153 63,035 9,000 --
GARY N. KILMAN ................................ 1993 111,872 63,934 60,000 3,185
Vice President, Sales 1992 109,382 80,556 -- 2,000
1991 99,423 87,020 9,000 --
LARRY E. HARRAWOOD ............................ 1993 115,981 33,457 70,000 4,953
Vice President, Marketing 1992 111,225 54,008 -- 4,119
1991 99,423 51,143 9,600 --
BARRY K. HANOVER (4) .......................... 1993 100,006 10,025 50,000 2,212
Vice President, Engineering 1992 17,769 -- -- --
1991 -- -- -- --
STEWART CARRELL (5) ........................... 1993 449,117 -- -- 498,284
Former Chief Executive Officer, Diasonics, 1992 416,746 -- 25,000 36,797
Inc. 1991 416,011 -- -- --
RODERICK A. YOUNG (6) ......................... 1993 66,670 -- -- 316,456
Former President, FOCAL Surgery, Inc. 1992 278,352 -- 15,000 6,195
1991 285,348 -- 30,000 --
KARL RUDOW (7) ................................ 1993 208,955 25,102 -- 29,851
Former Executive Vice President Sonotron 1992 316,951 -- -- --
Holding, AG 1991 333,566 -- 50,000 --
<FN>
- ------------------------
(1) Includes salary deferred under the Company's 401(k) Savings Plan.
(2) Information is provided for only the 1992 and 1993 fiscal years, as
permitted under applicable regulations of the Securities and Exchange
Commission. For each such year, the indicated amount for each Named
Officer was comprised of (i) the contributions made by the Company to the
Company's 401(k) Savings Plan on behalf of each such officer which match
his salary deferral contributions to such plan, up to a maximum match of
$2,000 per participant, (ii) the insurance premiums paid by the Company on
the special term life insurance policies provided each Named Officer set
forth below, and (iii) other items disclosed in footnotes 5, 6 and 7
below:
PLAN INSURANCE
CONTRIBUTION PREMIUM
1993/1992 1993/1992
--------------- ---------------
Mr. Rose........................... 0/0 $ 6,419/5,115
Mr. Zundel......................... $ 2,000/2,000 1,909/1,407
Mr. Kilman......................... 2,000/2,000 1,185/0
Mr. Harrawood...................... 2,000/2,000 2,953/2,119
Mr. Hanover........................ 2,000/0 212/0
Mr. Carrell........................ 2,000/2,000 50,041/34,797
Mr. Young.......................... 0/0 8,543/6,195
Mr. Rudow.......................... 0/0 0/0
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
<FN>
(3) Mr. Rose was appointed an executive officer of the Company during June
1992. The reported compensation for the 1992 fiscal year includes
compensation earned for such year prior to the time of his appointment.
(4) Mr. Hanover began his employment with the Company in October, 1992.
(5) Mr. Carrell resigned from the Company in September 1993 in connection with
the restructuring of Diasonics, Inc. Mr. Carrell is to be continued in
employee status through December 31, 1994. In December, 1993, the Company
paid Mr. Carrell an additional amount of $446,243 in severance benefits,
representing his salary for the 1994 fiscal year. This latter amount is
included as part of All Other Compensation reported for Mr. Carrell for the
1993 fiscal year.
(6) Mr. Young resigned in April 1993 from his position as President of Focal
Surgery, Inc., the Company's wholly-owned subsidiary prior to the
restructuring. However, he is to continue in employee status through March
1994, and so the salary paid to him during 1993 subsequent to his
resignation and the salary payable to him for the 1994 fiscal year which
has been accrued by the Company in the 1993 fiscal year are reported as All
Other Compensation for Mr. Young for such fiscal year.
(7) All Other Compensation includes consulting fees paid by the Company to Mr.
Rudow for the period July 1, 1993 to September 30, 1993 following his
retirement on July 1, 1993. On October 1, 1993, the Company's obligations
under this consulting arrangement was assumed by Diasonics Ultrasound, Inc.
in connection with the restructuring.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options under the Company's 1990 Stock Option/Stock Purchase Plan for the 1993
fiscal year to each of the Named Officers. No stock appreciation rights were
granted during such fiscal year to the Named Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION FOR
SECURITIES GRANTED TO OPTION TERM
UNDERLYING EMPLOYEES IN EXERCISE PRICE EXPIRATION ------------------------
NAME OPTIONS GRANTED FISCAL YEAR $(SH)(3) DATE 5%(4) 10%($)(4)
- ------------------------------ --------------- ------------ -------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
David Rose.................... 180,000(1)(2) 27.2% 6.125 11/24/03 $ 693,356 $ 1,757,101
Randy W. Zundel............... 70,000(1)(2) 10.6% 6.125 11/24/03 269,638 688,317
Gary N. Kilman................ 60,000(1)(2) 9.1% 6.125 11/24/03 231,118 585,700
Larry E. Harrawood............ 70,000(1)(2) 10.6% 6.125 11/24/03 269,638 688,317
Barry K. Hanover.............. 50,000(1)(2) 7.6% 6.125 11/24/03 192,598 488,083
Stewart Carrell............... 0 -- -- -- -- --
Roderick A. Young............. 0 -- -- -- -- --
Karl Rudow.................... 0 -- -- -- -- --
<FN>
- ------------------------
(1) Each option was granted on November 24, 1993 under the OEC Plan. Sixty
(60%) percent of each such option will become exercisable for 6.25% of the
option shares upon the optionee's completion of each three (3)-month
period of service over the 48-month period measured from the grant date.
Forty (40%) percent of each option will become exercisable for the
remaining option shares upon the optionee's completion of six (6) years of
service measured from the grant date. However, the exercisability of each
such option will be accelerated as follows: if the average closing selling
price per share of Common Stock for any period of 30 trading days prior to
November 23, 1999 exceeds the option exercise price by $3.00, then the
option will become immediately exercisable for one-third of the option
shares; if the average
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
closing selling price for any period of 30 trading days prior to November
23, 1999 exceeds the option exercise price by $5.00, then the option will
become immediately exercisable for an additional one-third of the option
shares; and if the average closing selling price for any period of 30
trading days prior to November 23, 1999 equals or exceeds twice the option
exercise price, then the option will become immediately exercisable for
the remaining one-third of the option shares.
(2) Each option will also become immediately exercisable for all of the option
shares should any of the following acceleration events occur after the
option has been outstanding for at least six (6) months: (a) the
acquisition of the Company, merger or sale of substantially all of the
Company assets or 50% or more of the outstanding Common Stock, (b) the
successful completion of a hostile tender offer for 40% or more of the
outstanding Common Stock, (c) a change in the composition of more than
one-third of the Board members by proxy contest for Board membership or
(d) the dissolution or liquidation of the Company. Each option has a
maximum term of 10 years, subject to earlier termination upon the
optionee's cessation of service.
The Plan Administrator has the discretionary authority to grant special
stock appreciation rights in tandem with one or more outstanding options
under the OEC Plan. Upon the occurrence of any of the acceleration events
specified above, each option with such a right outstanding for at least 6
months may be surrendered to the Company for a cash distribution based
upon the fair market value of the Common Stock at the time of surrender.
None of the options granted to the Named Officers during the 1993 fiscal
year included such a stock appreciation right.
(3) The exercise price may be paid in cash, in shares of Company Common Stock
valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares. The
optionee may be permitted, subject to the approval of the Plan
Administrator, to apply a portion of the shares purchased under the option
(or to deliver existing shares of Company Common Stock) in satisfaction of
the federal and state income tax liability incurred by the optionee in
connection with such exercise. The Plan Administrator also has the
discretionary authority to reprice outstanding options through the
cancellation of those options and the grant of replacement options with an
exercise price equal to the lower fair market value of the option shares
on the regrant date.
(4) The 5% and 10% assumed annual rates of compound stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There is
no assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
10-year option term will be at the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the Company Common Stock
appreciates over the option term, no value will be realized from the
option grants made to the executive officers.
</TABLE>
OPTION EXERCISES AND HOLDINGS
The following table provides information, with respect to the Named
Officers, concerning the exercise of options during the fiscal year ended
December 31, 1993 and unexercised options held as of the end of such fiscal
year. No stock appreciation rights were exercised during the 1993 fiscal year,
nor were any stock appreciation rights outstanding at the end of such fiscal
year.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
VALUE IN-THE-MONEY OPTIONS AT
REALIZED NUMBER OF SECURITIES FY-END (MARKET PRICE OF
(MARKET PRICE UNDERLYING UNEXERCISED SHARES AT FY-END ($6.875)
SHARES AT EXERCISE OPTIONS AT FY-END(1) LESS EXERCISE PRICE)(1)
ACQUIRED ON LESS EXERCISE -------------------------- --------------------------
NAME EXERCISE(#) PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David J. Rose........... -- -- 28,200 190,550 $ 9,078 $ 85,271
Randy W. Zundel......... -- -- 19,449 75,550 7,663 48,967
Gary N. Kilman.......... -- -- 10,912 65,087 (3,779) 45,550
Larry E. Harrawood...... -- -- 19,805 75,295 11,621 48,401
Barry K. Hanover........ -- -- -- 50,000 -- 37,500
Stewart Carrell......... -- -- 293,750 16,250 2,019,531 111,719
Roderick A. Young....... 122,680 $ 238,133 -- -- -- --
Karl Rudow.............. -- -- 105,000 22,500 96,375 (24,188)
<FN>
- ------------------------------
(1) Includes options granted under the OEC Plan prior to the distribution
("Distribution") by the Company of its interests in Diasonics Ultrasound,
Inc. and FOCAL Surgery, Inc. to its shareholders on September 30, 1993
which were adjusted to reflect such Distribution ("OEC Adjusted Options").
Pursuant to the Distribution, each option (the "Diasonics Option")
outstanding under the OEC Plan which was not exercised prior to the
Distribution was split into three separately exercisable options -- the OEC
Adjusted Option, the Diasonics Ultrasound Adjusted Option and the FOCAL
Surgery Adjusted Option (together, the "Adjusted Options"). Each OEC
Adjusted Option covers the same number of shares of Common Stock as the
number of shares subject to the Diasonics Option to which it relates.
Each OEC Adjusted Option in general has the same terms and conditions
(including the same vesting/exercise schedule) as in effect for the
Diasonics Option immediately prior to the Distribution. However, the per
share exercise price in effect under the Diasonics Option immediately prior
to the Distribution was allocated among each of the Adjusted Options on the
basis of the relative fair market values of the underlying common stock of
each of the three companies after the Distribution.
For purposes of vesting and continued exercisability of each OEC Adjusted
Option, employment or service (whether as an employee, consultant or
non-employee director) with any one of the three companies or their
respective subsidiaries will be treated as services and employment with the
Company, as if the Distribution did not take place. Accordingly, each of
the OEC Adjusted Options held by an individual after the Distribution will
continue to vest and remain outstanding for so long as that individual
remains in the employ or service of any one of the three companies or their
subsidiaries. Each OEC Adjusted Option will, however, terminate and cease
to be exercisable upon the EARLIEST to occur of (i) the specified
expiration date of the original Diasonics Option, (ii) the expiration of
the three (3)-month period following the date the option holder ceases all
employment and service relationships with the three companies and their
subsidiaries or (iii) the expiration of the twelve (12)-month period
following the date of the option holder's death or permanent disability if
such individual dies or becomes disabled while in the service of one or
more of the companies.
The number of shares of Company Common Stock held by each Named Officer
under his OEC Adjusted Option at the end of the 1993 fiscal year is as
follows: Mr. Rose 27,350 shares; Mr. Zundel 18,549 shares; Mr. Kilman
10,125 shares; Mr. Hanover 0 shares; Mr. Harrawood 19,050 shares; Mr.
Carrell 292,500 shares; Mr. Rudow 127,500 shares; and Mr. Young 0 shares.
</TABLE>
PENSION BENEFIT. Under his employment agreement with the Company, Mr.
Carrell is entitled to an annual retirement benefit commencing on his 65th
birthday equal to $200,000, less his Social Security benefits. Having retired,
if Mr. Carrell elects to and commences receiving benefits before his 65th
birthday, the amount of the benefit would be actuarially reduced to reflect the
early commencement of payment. Mr. Carrell's retirement benefit is forfeitable
if he renders substantial services to a competitor of the Company without the
consent of the Company's Board of Directors. The Company has agreed to establish
a rabbi trust to which it will contribute sufficient funds to purchase an
annuity contract which will ultimately pay retirement benefits. The trustee will
be chosen by Mr. Carrell, subject to the approval of the Compensation Committee.
This obligation, together with the reserve already established in 1989 for
purposes of funding this retirement obligation, have remained with the Company.
Upon any breach by the Company of this agreement, the annuity will be grossed up
to cover estimated taxes in excess of
7
<PAGE>
those that would have been paid on the annuity payments and cashed out and
delivered to Mr. Carrell. All legal fees of Mr. Carrell resulting from any
Company breach would be paid by the Company.
DIRECTOR'S COMPENSATION. As Chairman of the Board of Directors, Ruediger
Naumann-Etienne receives annual compensation of $120,000. All other non-employee
members of the Board are each be paid an annual retainer of $20,000 plus
reimbursement of all out-of-pocket costs incurred in connection with their
attendance at Board or committee meetings. In addition, the OEC Medical systems,
Inc. 1990 Stock Option/Stock Purchase Plan contains an automatic option grant
program for the non-employee Board members. Under that program, each non-
employee Board member not previously an employee of the Company (or any
Affiliated Corporation) automatically receives a non-statutory option grant for
5,000 shares of Common Stock upon his initial election or appointment to the
Board and each individual re-elected as a non-employee Board member at one or
more Annual Stockholders Meetings also receives an automatic option grant on the
date of each such Annual Meeting for an additional 5,000 shares (provided such
individual has not received an initial automatic grant within the preceding six
months). Each grant will have an exercise price per share equal to the market
price of the Common Stock on the grant date. The maximum number of shares of
Common Stock purchasable per non-employee Board member under the automatic
option grant program is limited to 15,000 shares. Each grant will become
exercisable over the optionee's period of Board service in three equal annual
installments, beginning one year after the grant date. However, in the event
there is a change in control of the Company whether effected by merger, sale of
substantially all of the Company's assets or 50% or more of the outstanding
Common Stock or the completion of a hostile tender offer for 40% or more of the
outstanding Common Stock, or in the event there is a change in the composition
of one-third or more of the Board members effected through a contested election
of Board members or in the event of dissolution or liquidation of the Company,
then each automatic grant outstanding for at least six months will immediately
accelerate and become exercisable for all of the option shares. Each of the
automatic grants will have a maximum term of ten years measured from the grant
date, subject to earlier termination upon the optionee's cessation of Board
service. Upon the successful completion of a hostile tender offer for 40% or
more of the outstanding Common Stock, options will automatically be canceled in
return for a cash distribution from the Company based upon tender-offer price of
the shares of Common Stock subject to the canceled options. Mr. Macrae received
an automatic option grant for 5,000 shares at an exercise price of $7.76 per
share on the date of the 1993 Annual Stockholders' Meeting. This constitutes Mr.
Macrae's last grant under the automatic option grant program. In connection with
his appointment to the Board of Directors on October 1, 1993, Dr. Peterson
received an automatic option grant for 5000 shares with an exercise price of
$7.50 per share.
Each option held by the non-employee Board members under the Stock
Option/Stock Purchase Plan at the time of the Company's distribution
("Distribution") of its interests in Diasonics Ultrasound, Inc. and FOCAL
Surgery, Inc. to its shareholders on September 30, 1993 was split into three
separately exercisable options the OEC Adjusted Option, the Diasonics Ultrasound
Adjusted Option and the FOCAL Surgery Adjusted Option (together, the "Adjusted
Options"). Accordingly, each of the options held by the non-employee Board
members was split into three separate options and the exercise price per share
was allocated among those three options on the basis of the relative fair market
values of the underlying common stock of the three companies after the
Distribution. For further information concerning these option adjustments, see
footnote 1 to the table titled "Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values."
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission and the New
8
<PAGE>
York Stock Exchange initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten-percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely upon review of copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater than ten-percent stockholders for the
1993 fiscal year were complied with, except: Stewart Carrell, David Rose, and
Allan W. May, each of whom filed late on Form 5 reporting, in each case, one
transaction.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, subject to review by
the full Board, is responsible for the establishment of remuneration
arrangements for senior management and the administration of compensation and
employee benefits plans, and sets the base salary of the Company's executive
officers, approves individual bonus programs for executive officers, and
administers the Company's Stock Option/Stock Purchase Plan under which grants
may be made to executive officers and other key employees. The following is a
summary of policies of the Committee that affect the compensation paid to
executive officers, as reflected in the tables and text set forth elsewhere in
the Proxy Statement.
The objectives of Company's executive compensation program is to motivate
and retain current executives and to attract future ones.
The Company's executive compensation program is designed to: (1) provide a
direct and substantial link between Company performance and executive pay, (2)
consider individual performance and accomplishments and compensate accordingly,
and (3) determine the Company's position in the medical device and high
technology labor markets and be competitive in those labor markets.
The Company positions its executive pay levels at the median of U.S. medical
and technology companies. To this end, the Company tracks executive pay levels
against companies of similar size, i.e., approximately $100 million. The
Committee also considers geographic location and companies that may compete with
OEC in recruiting executive talent.
The data utilized by the Committee in establishing executive compensation
levels is compiled by the Director, Human Resources, who has responsibility to
ensure that compensation is competitive for similar positions. Primarily, two
compensation surveys were used: (1) the 1993 Radford Associates/Alexander &
Alexander Consulting Group's "Management Total Compensation Report", and (2) a
customized survey of Utah based companies prepared by the Industrial Relations
Council, a private Utah employers association, specifically for the Company.
The Company's executive compensation program has three components. Base
salary is used primarily as an attraction and retention device. Base pay is
established within discrete ranges as determined for each position and is
adjusted on a merit review basis each February. Pay is sufficiently variable,
under the program, that 75th percentile performance will result in 75th
percentile pay levels and below median performance levels will result in below
median pay. Base pay increases are determined by long-term contributions to the
Company's performance as well as the individual executive's position, duties,
and responsibilities.
For fiscal 1993, financial performance was below expectations, yet this year
saw tremendous progress in new product development, improved manufacturing
capabilities, and regulatory compliance. In particular, the Chief Executive
Officer's salary increases in the past have been based upon his contribution
toward the Company's achievement of key objectives, such as earnings per share
and profit before tax. In 1993, given the Company's financial performance, the
Chief Executive Officer did not receive a pay increase. All executive officers
as a group, excluding the former Chief Executive Officer and two Named Officers
no longer with the Company, received pay raises averaging 2.7 percent.
9
<PAGE>
Incentive pay is paid on an annual basis, if earned. Incentive pay is
provided through the Management Incentive Plan (MIP). Each year, individual and
financial objectives are established. To the degree a participant meets or
exceeds his/her personal objectives and the business unit and the Company meet
or exceed their financial objectives, the participating executive will receive a
bonus payable in February following the close of the fiscal year.
The measurement of Company financial performance used in determining
individual incentive pay is profit before tax (PBT). Payments are made based
upon performance versus the target. Performance above the target results in
proportionately higher bonus payouts (up to 150% of the target bonus). Likewise,
below target performance results in proportionately lower bonus payouts (50% of
the target bonus at 75% of target achievement), and all bonuses become
discretionary if performance is below 75% of target performance.
Since earnings per share performance for fiscal 1993 was below the minimum
threshold, yet significant progress was made in new product development,
improved manufacturing capabilities, and regulatory compliance, the Chief
Executive Officer received a discretionary bonus of $28,375, and all executive
officers as a group received discretionary bonuses of $125,166.
Long-term incentives are provided through stock options. The stock option
plan is intended to provide incentive to key employees of the Company and
attract new employees with outstanding qualifications, in addition to incenting
executives to make the types of decisions that will continue to improve Company
performance in the long term. The number of shares subject to each option grant
is based upon the officer's tenure, level of responsibility and relative
position with the Company. The Company has established certain general
guidelines in making option grants to the executive officers in an attempt to
target a fixed number of option shares based upon the individual's position with
the Company and his existing holdings of vested options. However, the Committee
does not adhere strictly to these guidelines and will vary the size and terms of
the option grant made to each executive officer as it feels the circumstances
warrant. Each grant allows the officer to acquire shares of the Company's common
stock at a fixed price per share (the market price on the grant date) over a
specified period of time (up to 10 years). The options granted to the executive
officers in September 1993 were comprised of two components. The first component
was a regular service option which is to vest in periodic installments over a
period of 4 years, contingent upon the executive officer's continued employment
with the Company. Accordingly, these service options will provide a return to
the executive officer only if he remains in the Company's employ, and then only
if the market price of the Company's common stock appreciates over the option
term. The second component contains performance milestones tied directly to the
appreciation in the market price of the Company's common stock. Accordingly,
these performance options will become exercisable if the market price of the
Company's common stock increases to the designated levels over the next six
years; otherwise, the option will vest only if the optionee completes six years
of continuous employment with the Company measured from the grant date. As a
result, both the service and performance options will have value to the
executive officers only if shareholder value is increased through appreciation
in the market price of the Company's common stock.
In total, about one-third of the Chief Executive Officer's annual
compensation is variable upon meeting the financial target. Looking forward over
a five-year term and calculating the values of stock options, about 60% of the
Chief Executive Officer's total compensation will be variable. The Chief
Executive Officer's targeted pay mix is heavily weighted toward long-term
incentives and, therefore, long-term corporate and stock market performance.
As a result of federal tax legislation enacted in 1993, the maximum amount
of compensation (whether paid in cash or in stock or other property) which the
Company will be allowed to deduct for federal tax purposes will be limited to $1
million per year for each of the Company's five highest paid executive officers,
beginning with the 1994 fiscal year. The cash compensation to be paid to each of
the Company's executive officers for the 1994 fiscal year, however, is not
expected
10
<PAGE>
to exceed the $1 million limitation, and the Compensation Committee has decided
to defer any changes to the Company's executive compensation programs until
final Treasury Regulations are issued with respect to the limitation.
Submitted by the Compensation Committee of the Company's Board of Directors:
Edwin Macrae
Walter V. Stafford
EMPLOYMENT CONTRACTS AND CHANGE OF EMPLOYMENT ARRANGEMENTS
Except as noted below, the Company does not have any employment contracts or
severance agreements in effect with the Named Officers. However, outstanding
options held by such individuals under the 1990 Stock Option/Stock Purchase Plan
will become immediately exercisable in the event of certain changes in control
or ownership of the Company, as described in footnote 3 to the Option Grant
table above.
Under his employment contract with the Company, Mr. Carrell became entitled
to certain severance benefits in connection with his termination of employment
on September 30, 1993. Mr. Carrell was paid a cash amount in 1993 representing
salary continuation payments through December 31, 1994. In addition, Mr. Carrell
is entitled to life and health insurance coverage through December 31, 1995.
The Company entered into a consulting arrangement with Karl Rudow in
connection with his retirement on July 1, 1993 as Executive Vice-President of
Sonotron. Pursuant to such consulting arrangement Mr. Rudow is entitled to
receive one-half of his base salary, or approximately $160,000 per year, until
December 1996. The Company's obligations under this consulting agreement were
assumed by Diasonics Ultrasound, Inc. in connection with the restructuring.
Mr. Young is entitled to receive medical and health insurance benefits
coverage through March 31, 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors for the 1993 fiscal year were Edwin Macrae and Walter V. Stafford. Mr.
Macrae has never been an officer or employee of the Company. However, Mr.
Stafford served as Senior Vice-President of the Company from June 1988 through
November 1989 and Secretary and General Counsel from 1982 through June 1988.
No executive officer of the Company served on the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative stockholder
returns for the Company, the Standard & Poor 500 Stock Index and the DJ Medical
& Biotech Index for December 31, 1988 through December 31, 1993.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings made by the Company under those
statutes, neither the preceding Compensation Committee Report on Executive
Compensation nor the Comparison of Cumulative Total Return graph shall be
incorporated by reference into any such filings; nor shall such report or graph
be incorporated by reference into any future filings made by the Company under
these statutes.
11
<PAGE>
[GRAPHIC]
- ------------------------
*Assumes $100 was invested in each of the Company's stock, the S&P 500 index and
the Dow Jones Medical and Biotechnology Index as of December 31, 1988. Total
shareholder return assumes reinvestment of dividends. While the Company has
paid no cash dividends, it did declare a distribution of the stock of its
wholly-owned ultrasound business, Diasonics Ultrasound, Inc. (including its
wholly-owned subsidiary, FOCAL Surgery, Inc.) effective October 1, 1993. The
distribution of that stock has been treated as a dividend of the equivalent
cash value of shares of Diasonics Ultrasound, Inc. and FOCAL Surgery Inc. for
purposes of computing the effect of dividend reinvestment in computing
shareholder return in this graph. The equivalent cash value of shares
distributed was computed based on the average of bid and ask prices for each of
Diasonics Ultrasound, Inc. common, when-issued NASDAQ, and FOCAL Surgery, Inc.
common, when-issued OTC, as of October 1, 1993.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 31, 1994 concerning
beneficial ownership of Common Stock by each of the directors, nominees for
directors, and executive officers named in the Company's Summary Compensation
Table, all directors and officers as a group, known beneficial holders of more
than 5% of the outstanding Common Stock and all directors and executive officers
as a group. All information is based on information known to OEC with respect to
such persons' beneficial ownership of shares of Company common stock as
12
<PAGE>
of March 31, 1994. Unless otherwise noted, the listed persons have sole voting
and dispositive powers with respect to the shares held in their names, subject
to community property laws, if applicable:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP PERCENT OF CLASS
------------------- -----------------
<S> <C> <C>
Forstmann-Leff Assoc., Inc. ................................. 1,460,885 11.7%
FLA Asset Management, Inc.
Stamford Advisors Corp.
55 East 52nd Street
New York, NY 10055 (1)
State of Wisconsin .......................................... 1,185,000 9.5%
Investment Board
121 East Wilson Street
Madison, WI 53703 (1)
Stewart Carrell (2)(3)....................................... 476,162 3.8%
Ruediger Naumann-Etienne (2)................................. 121,500 1.0%
Edwin W. Macrae (2).......................................... 12,001 *
David J. Rose (2)............................................ 46,446 *
Walter V. Stafford (2)(4).................................... 65,130 *
Allan W. May (2)............................................. 77,562 *
Randy W. Zundel (2).......................................... 26,200 *
Gary N. Kilman (2)........................................... 16,750 *
Larry E. Harrawood (2)....................................... 37,171 *
Barry K. Hanover (2)......................................... 1,875 *
Roderick A. Young (2)........................................ -- *
Karl Rudow (2)............................................... 110,000 1.0%
All executive officers and directors as a group (10 persons)
(5)......................................................... 993,483 8.0%
<FN>
- ------------------------
* Less than 1%.
(1) Information provided pursuant to Schedule 13G reports filed with the
Securities Exchange Commission in February 1994.
(2) Includes shares subject to options to purchase common stock which are
currently exercisable or will become exercisable within 60 days of March
31, 1994, as follows: Dr. Naumann-Etienne, 121,500: Mr. Macrae, 7,001; Mr.
Rose, 43,400; Mr. Stafford, 65,130; Mr. May, 76,000; Mr. Zundel, 26,200;
Mr. Kilman, 16,750; Mr. Harrawood, 26,390; Mr. Hanover, 3,750; Mr.
Carrell, 296,250; and Mr. Rudow, 110,000.
(3) Includes 1,000 shares owned by Mr. Carrell's son as to which he disclaims
beneficial ownership.
(4) Includes 17,445 shares beneficially owned by Mr. Stafford's ex-spouse and
as to which he disclaims beneficial ownership.
(5) Includes options to purchase 792,371 shares of common stock which are
currently exercisable or will become exercisable within 60 days of March
31, 1994.
</TABLE>
PROPOSAL NO. 2: RATIFICATION OF INDEPENDENT AUDITORS
The firm of Deloitte & Touche served as independent auditors for the Company
for the year ended December 31, 1993. The Board of Directors has appointed,
subject to the ratification by the stockholders, Deloitte & Touche as
independent auditors for the year ending December 31,
13
<PAGE>
1994. Representatives of Deloitte & Touche are expected to be present at the
meeting with the opportunity to make a statement, if they desire to do so, and
to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS TO THE STOCKHOLDERS THAT THEY VOTE FOR
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE.
STOCKHOLDERS' PROPOSALS
Proposals of stockholders that are intended to be presented at the 1995
annual meeting of stockholders of the Company must be received by December 9,
1994 in order to be considered for inclusion in the proxy statement and proxy
relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no other matter to be acted upon at the
meeting. However, if any other matter is properly brought before the meeting,
the persons named in the accompanying form of Proxy will vote thereon in
accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Allan W. May
Secretary
14
<PAGE>
OEC MEDICAL SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Ruediger Naumann-Etienne and Allan W. May, jointly
and severally, as proxies, with full power of substitution, to vote all the
shares of Common Stock of OEC Medical Systems, Inc. (The "Company") which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders to be
held at the Salt Lake City Marriott, 75 South West Temple, Salt Lake City, Utah
on Thursday, May 26, 1994; at 10 a.m. Utah time, as instructed on the reverse,
and upon all matters which may properly be considered at such meeting or any
adjournment thereof. To vote in accordance with the Board of Directors
recommendations, merely sign below; no boxes need be checked.
(Continued on the other side)
See Reverse
Side
<PAGE>
<TABLE>
<S> <C>
/ X / PLEASE MARK
YOUR CHOICES
------------------ --------------- LIKE THIS
ACCOUNT NUMBER COMMON
FOR AGAINST ABSTAIN
1. Election of Directors: Edwin Macrae, 2. Ratification of Deloitte & Touche / / / / / /
Allan May, Ruediger Naumann-Etienne, as independent auditors for 1994.
Chase Peterson and David Rose.
(INSTRUCTION: To withhold authority to
vote for any individual nominee, strike
a line through the nominee name in the
line above.)
The proxies designated on the reverse are directed to vote as instructed above,
FOR all nominees listed WITHHOLD AUTHORITY or, if no instruction is made, to vote in accordance with the recommendations of
above (Except any to vote for all the Board of Directors, and in accordance with the descretion of the proxies on
nominee whose name nominees listed such other matters as may properly come before the meeting. Such authority
has been struck out) above includes the right, in the discretion of the proxies, and each of them, to
emulate votes for the election of Directors in each class and thereby
/ / / / distribute, in such proportions within each class as the proxies see fit, the
votes represented by this proxy among the nominees in each class named above.
---------------------------------------------------------------------------------
Signature (and Title)
---------------------------------------------------------------------------------
Date
---------------------------------------------------------------------------------
Signature if held jointly
(If signing as attorney, executor, administrator, trustee or guardian, or for a
corporation, please give your title. When shares are in the name of more than
one person, each should sign.
</TABLE>
