<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
OEC Medical Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Merrill Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
OEC MEDICAL SYSTEMS, INC.
384 WRIGHT BROTHERS DRIVE
SALT LAKE CITY, UTAH 84116
April 27, 1995
TO OUR STOCKHOLDERS:
You are invited to attend the Annual Meeting of Stockholders of OEC Medical
Systems, Inc. (the "Company"), which will be held at 10:00 a.m. on Thursday,
June 8, 1995, 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 LLP 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 LLP FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1995.
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,
(paste-up)
Ruediger Naumann-Etienne
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
<PAGE>
OEC MEDICAL SYSTEMS, INC.
384 WRIGHT BROTHERS DRIVE
SALT LAKE CITY, UTAH 84116
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 1995
------------------------
The Annual Meeting of the Stockholders of OEC Medical Systems, Inc. (the
"Company") will be held at 10:00 a.m. MDT on Thursday, June 8, 1995, 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 Gregory Hinckley, Benno Lotz, Allan May, Ruediger
Naumann-Etienne and Chase Peterson.
2. To ratify the appointment of Deloitte & Touche LLP, certified public
accountants, as independent auditors for the fiscal year ending December
31, 1995.
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 April 13, 1995 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
(paste-up)
Allan W. May
SECRETARY
Dated: April 27, 1995
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 JUNE 8, 1995
------------------------
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 June 8, 1995, 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 Proxy were first mailed to stockholders on or about April 27,
1995. A copy of the Company's Annual Report to Stockholders for 1994 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 Chemical Bank, 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 April 13, 1995 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 12,566,896 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 LLP as the Company's independent auditors
for the fiscal year ending December 31, 1995. 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 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
<PAGE>
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
Five directors are to be elected at the 1995 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
Edwin Macrae, a director of the Company since 1983 is retiring from the
board of directors and will not stand for reelection. The Company wishes to
thank Mr. Macrae for his many years of dedication, guidance and advice to
management. 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 AND OTHER INFORMATION
- --------------------------------- --- ---------------------------------------------------------------
<S> <C> <C>
Gregory K. Hinckley 48 Director
Benno P. Lotz 64 Director
Allan W. May 47 Director
Ruediger Naumann-Etienne 48 Chairman of the Board, President, Chief Executive Officer and
Director
Chase N. Peterson 65 Director
</TABLE>
Gregory K. Hinckley has been Vice President and Chief Financial Officer of
VLSI Technology, Inc., since 1992. VLSI is a semiconductor company with $600
million in revenues. From 1989 to 1991, he was Vice President and Chief
Financial Officer of Crowley Maritime Corporation, and from 1983 until 1991 he
was the Chief Financial Officer of Bio-Rad Laboratories, Inc. He is also a
director of Advanced Molecular Systems, Inc.
Benno P. Lotz is a self-employed management consultant. From 1976 to 1983,
he was President and Chief Executive Officer of Orthopedic Equipment Company,
Inc. In 1983, when this company became a subsidiary of Diasonics, he was named
Chairman and General Manager of this entity, a position which he held until his
retirement in 1991. He has been a director of the Company since March 1995.
Allan May has been Senior Vice President, Strategic Development, and General
Counsel and Secretary of the Company since November, 1994; he held various
positions with the Company's predecessor, Diasonics, Inc. from March 1989 to
September 1993. He was Senior Vice President, Business Development, and General
Counsel, and Secretary of Diasonics Utrasound, Inc. from October 1993 through
October, 1994. Mr. May served as Chief Operating Officer of Tigera Group, Inc.
(formerly Fortune Systems Corporation) from 1987 to 1988. He became a director
of the Company in February 1994.
Ruediger Naumann-Etienne was appointed President and Chief Executive Officer
in February 1995. He has been a director of the Company since January 1989, and
was named Chairman of the
2
<PAGE>
Board in September 1993. 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 was also Managing
Director of Intertec from July 1990.
Chase N. Peterson, M.D. has been Professor of Internal Medicine (Clinical)
at the University of Utah since 1983 and Professor of Family and Preventive
Medicine (Clinical) since 1991. He was President 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.
COMMITTEES OF THE OEC BOARD. During 1994, there were seven meetings of the
Board of Directors of the Company. 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
the adequacy of its system of internal accounting controls. The Nominations
Committee, currently consisting of Messrs. Naumann and Peterson, selects and
nominates to the Board nominees for election as directors. The Compensation
Committee, currently consisting of Messrs. Macrae and Peterson, 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 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 for the 1994 fiscal year for
services rendered in each of the fiscal years ended December 31, 1994, 1993 and
1992, respectively. The individuals named in such tables are designated the
"Named Officers."
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 Rose (3) 1994 224,993 253 4,000 29,945(3)
former President and Chief 1993 224,992 28,375 180,000 6,419
Executive Officer 1992 237,455 70,000 15,000 5,115
Randy Zundel 1994 147,396 22,453 -- 14,403
Chief Financial Officer 1993 139,466 17,750 70,000 3,909
1992 136,380 25,250 -- 3,407
Gary Kilman 1994 115,472 61,091 -- 17,668
Vice President, Sales 1993 111,872 63,934 60,000 3,185
1992 109,382 80,556 -- 2,000
Larry Harrawood 1994 138,208 17,104 -- 15,673
Vice President, Marketing 1993 115,981 33,457 70,000 4,953
1992 111,225 54,008 -- 4,119
Barry Hanover 1994 104,634 12,640 -- 10,834
Vice President, Engineering 1993 100,006 10,025 50,000 2,212
1992 17,769 -- -- --
<FN>
- ------------------------
(1) Includes salary deferred under the Company's 401(k) Savings Plan.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
(2) For the 1994 fiscal 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, and (ii) the imputed cost of life insurance coverage provided
by the split dollar life insurance policy which the Company maintains for
each Named Officer plus the value to the Named Officer of the benefit
provided by the Company's payment of the premium on such insurance policy.
PLAN CONTRIBUTION INSURANCE BENEFIT
----------------- -----------------
1994 1994
----------------- -----------------
Mr. Rose.............................. -- $29,945
Mr. Zundel............................ $2,000 12,403
Mr. Kilman............................ 2,000 15,668
Mr. Harrawood......................... 2,000 13,673
Mr. Hanover........................... 2,000 8,834
(3) Mr. Rose resigned as an officer and director of the Company on February 10,
1995. Please see section entitled "Employment Contracts and Changes of
Employment Arrangements" for further information concerning Mr. Rose's
severance benefits. Mr. Naumann assumed the positions of president and
chief executive officer in February 1995. Information describing his
remuneration as a director of the Company is contained in "Director's
Compensation."
</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 1994
fiscal year to each of the Named Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED TO OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------
NAME GRANTED (#) FISCAL YEAR $(SH) (3) DATE 5% (4) 10% (4)
- ------------------------- ----------- ------------ -------------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
David Rose............... 4,000(1)(2) 16.4% 5.37 5/26/04 $13,540 $34,265
Randy Zundel............. -- -- -- -- -- --
Gary Kilman.............. -- -- -- -- -- --
Larry Harrawood.......... -- -- -- -- -- --
Barry Hanover............ -- -- -- -- -- --
<FN>
- ------------------------
(1) This option was granted on May 26, 1994 under the OEC Plan and will become
exercisable for 25% of the option shares upon the optionee's completion of
each three (3) month period of service over the 12-month period measured
from the grant date.
(2) This 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, by 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. The option has a maximum
term of 10 years, subject to earlier termination upon the optionee's
cessation of service.
(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.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
(4) 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 last fiscal year and
unexercised options held as of the end of the fiscal year. No stock appreciation
rights were exercised during the last fiscal year, nor were any stock
appreciation rights outstanding at the end of such fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE- MONEY OPTIONS AT
VALUE REALIZED NUMBER OF SECURITIES FY-END (MARKET PRICE SHARES
(MARKET PRICE UNDERLYING UNEXERCISED AT FY- END [$6.50] LESS
AT EXERCISE OPTION AT FY-END (1) EXERCISE PRICE)(1)
SHARES ACQUIRED LESS EXERCISE --------------------------- ---------------------------
NAME ON EXERCISE (#) PRICE)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David J. Rose............. -- -- 56,600 162,150 $35,026 $59,741
Randy W. Zundel........... -- -- 34,983 60,017 14,246 21,612
Gary N. Kilman............ -- -- 24,350 51,650 4,589 18,491
Larry E. Harrawood........ -- -- 35,133 59,967 17,776 21,554
Barry K. Hanover.......... -- -- 9,166 40,834 3,437 15,313
<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 service 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.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
The number of shares of Company Common Stock purchasable by each Named
Officer under his OEC Adjusted Option at the end of the 1994 fiscal year is
as follows: Mr. Rose 27,350 shares; Mr. Zundel 18,549 shares; Mr. Kilman
10,125 shares; Mr. Harrawood 19,050 shares; Mr. Hanover 0 shares.
(2) Each FOCAL Surgery Adjusted Option held by each of the Named Officers
expired without being exercised. Each Diasonics Ultrasound Adjusted Option
was canceled for a cash payment in the amount of $5.5125 per option share
less the option exercise price in connection with the acquisition of
Diasonics Ultrasound by Elbit, Ltd. on October 19, 1994. Accordingly, the
following amounts were received by each of the Named Officers in connection
with the cancellation of his Diasonics Ultrasound Adjusted Option: Mr.
Rose, $81,162; Mr. Zundel, $48,525; Mr. Kilman, $32,974; Mr. Harrawood,
$67,806; Mr. Hanover, 0.
</TABLE>
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 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 connection with the termination of the Administrative Services Agreement
with Diasonics Ultrasound, Inc. during the fourth quarter of 1994, Diasonics
Ultrasound paid the Company $300,000 and the Company assumed various
obligations, including the obligation to pay $300,000 to Allan May in deferred
compensation for prior services.
In addition, the OEC Medical Systems, Inc. 1990 Stock Option/Stock Purchase
Plan contains an automatic option grant program for non-employee Board members
who have not previously been in the employ of the Company or any affiliated
companies. Under that program, each non-employee Board member 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 eligible 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 the tender-offer price of the shares of Common Stock
subject to the canceled options. Mr. Peterson received an automatic option grant
for 5,000 shares at an exercise price of $5.375 upon his reelection to the Board
at the 1994 Annual Stockholders' Meeting.
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 York Stock
6
<PAGE>
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
1994 fiscal year were complied with, except David Rose and Allan May, each of
whom filed late one 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. In addition, the Compensation Committee 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. David Rose, Chief Executive Officer
during 1994, resigned on February 10, 1995. Amounts received by him in
connection with his resignation are described in "Employment Contracts and
Change of Employment Arrangements" section below.
The objectives of the Company's executive compensation program are 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
verify that compensation is competitive for similar positions. Primarily, three
compensation surveys were used: (1) the 1994 Radford Associates/ Alexander &
Alexander Consulting Group's "Management Total Compensation Report", (2) the Hay
Group's, "Compensation and Benefits Strategies for 1995 and Beyond", and (3) a
December of 1993 customized, senior level, executive survey of Utah based
companies prepared specifically for the Company by the Industrial Relations
Council, a private Utah employers association.
The Company's executive compensation program has three components; (1) base
salary, (2) short-term incentives, and (3) long-term incentives. 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.
The Chief Executive Officer's salary increase is based upon his contribution
toward the Company's achievement of key objectives, such as earnings per share
and profit before tax. In 1994, given the Company's financial performance, the
Chief Executive Officer did not receive a pay increase. While financial
performance was below expectations, the year nonetheless saw the introduction of
the Series 9600 Digital Mobile Imaging System, completion of design and
preproduction units of the
7
<PAGE>
UroView 2600 Digital Imaging System, significant cost reduction and cost
containment results, and a reduction in total employment. Accordingly, all other
executive officers received base salary increases averaging 5.2 percent.
Short-term 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). All bonuses become discretionary
if performance is below 75% of target performance. Since financial performance
for fiscal 1994 was below expectations, the Chief Executive Officer did not
receive a bonus, and all other executive officers as a group received
discretionary bonuses totaling $113,541.
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/her 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 ten years). In 1994 no options were
granted to executive officers, except 4,000 shares which were granted to David
Rose to replace 4,000 options which were expiring under previous grants made by
the Company's predecessor.
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 1995 fiscal year, however, is not
expected to exceed the $1 million limitation, and the Compensation Committee has
decided not to make any changes to the Company's executive compensation
programs.
Submitted by the Compensation
Committee of the Company's Board of
Directors.
Edwin Macrae
Dr. Chase N. Peterson
8
<PAGE>
EMPLOYMENT CONTRACTS AND CHANGE OF EMPLOYMENT ARRANGEMENTS
In connection with his resignation, David Rose became entitled to certain
separation benefits. These include one year of base salary continuation
payments, totaling $225,000, continued medical care coverage, a lump sum cash
payment of $45,000 at the time of his resignation, and continued vesting of his
existing stock options until August 10, 1995, after which time he will have 90
days in which to exercise vested options; unvested options will be automatically
canceled.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a current or former employee of
the Company. 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, 1994.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the 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.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG OEC MEDICAL SYSTEMS, INC., THE S&P 500 INDEX
AND THE DOW JONES MEDICAL & BIOTECHNOLOGY INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OEC S&P 500 MED & BIO TECH INDEX
<S> <C> <C> <C>
12/89 100 100 100
12/90 63 97 138
12/91 132 128 335
12/92 68 136 289
12/93 49 150 252
12/94 46 152 288
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
<FN>
- ------------------------
* 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.
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 31, 1995 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 of March
31, 1995. 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>
<S> <C> <C>
Forstmann-Leff Assoc., Inc. .............................. 2,901,255 23.2%
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)
David J. Rose (2)......................................... 78,846 *
Randy W. Zundel (2)....................................... 42,454 *
Gary N. Kilman (2)........................................ 29,950 *
Larry E. Harrawood (2).................................... 56,674 *
Barry K. Hanover (2)...................................... 15,727 *
Gregory K. Hinckley....................................... -- *
Benno P. Lotz (2)......................................... 12,520 *
Edwin W. Macrae (2)....................................... 16,001 *
Allan W. May (2).......................................... 110,562 *
Ruediger Naumann-Etienne (2).............................. 121,500 1.0%
Chase Peterson (2)........................................ 4,333 *
All executive officers and directors as a group (11 482,567 3.8%
persons) (3).............................................
<FN>
- ------------------------
(*) Less than 1%.
(1) Information provided pursuant to Schedule 13G reports filed with the
Securities Exchange Commission in February 1995.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
(2) Includes options to purchase common stock which are currently exercisable
or will become exercisable within 60 days of March 31, 1995, as follows:
Mr. Rose, 73,800; Mr. Zundel, 41,433; Mr. Kilman, 29,950; Mr. Harrawood,
41,543; Mr. Hanover, 12,916; Dr. Naumann-Etienne, 121,500; Mr. Macrae,
10,001; Mr. May, 107,000; Mr. Lotz, 12,520; Mr. Peterson, 3,333.
(3) Includes options to purchase 453,996 shares of common stock which are
currently exercisable or will become exercisable within 60 days of March
31, 1995.
</TABLE>
PROPOSAL NO. 2: RATIFICATION OF INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP served as independent auditors for the
Company for the year ended December 31, 1994. The Board of Directors has
appointed, subject to the ratification by the stockholders, Deloitte & Touche
LLP as independent auditors for the year ending December 31, 1995.
Representatives of Deloitte & Touche LLP 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 LLP.
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 23,
1995 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
(paste-up)
Allan W. May
SECRETARY
11
<PAGE>
/X/ PLEASE MARK YOUR CHOICES LIKE THIS
------
Common
1. Election of Directors: Gregory Hinckley, Benno Lote, Allan May, Ruediger
Naumann-Etienne and Chase Peterson.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee name in the line above.)
FOR all nominees listed above WITHHOLD AUTHORITY to vote
(Except any nominee whose name for all nominees listed above
has been struck out)
/ / / /
2. Ratification of Deloitte & Touche LLP as independent auditors for 1995.
FOR
/ /
The proxies designated on the reverse are directed to vote as instructed above,
or, if no instruction is made, to vote in accordance with the recommendations of
the Board of Directors, and in accordance with the descretion of the proxies on
such other matters as may properly come before the meeting. Such authority
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
- -------------------------------------------------------------------------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
/\ FOLD AND DETACH HERE /\
<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, June 8, 1995; 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
/\ FOLD AND DETACH HERE /\
