<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
OEC MEDICAL SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(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> 2
OEC MEDICAL SYSTEMS, INC.
384 WRIGHT BROTHERS DRIVE
SALT LAKE CITY, UTAH 84116
April 15, 1997
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
15, 1997, at the Salt Lake City Little America Hotel, 500 South Main, 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, 1997.
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,
/s/ RUEDIGER NAUMANN-ETIENNE
Ruediger Naumann-Etienne
Chairman, President and
Chief Executive Officer
<PAGE> 3
OEC MEDICAL SYSTEMS, INC.
384 WRIGHT BROTHERS DRIVE
SALT LAKE CITY, UTAH 84116
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1997
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 15, 1997, at the Salt
Lake City Little America Hotel, 500 South Main, Salt Lake City, Utah for the
following purposes:
1. To elect five directors of the Company. Management's nominees for
election are Gregory K. Hinckley, Benno P. Lotz, Allan W. May, Ruediger
Naumann-Etienne and Chase N. Peterson.
2. To ratify the appointment of Deloitte & Touche LLP, certified public
accountants, as independent auditors for the fiscal year ending December
31, 1997.
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 10, 1997 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
/s/ ALLAN W. MAY
Allan W. May
Secretary
Dated: April 15, 1997
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> 4
OEC MEDICAL SYSTEMS, INC.
384 WRIGHT BROTHERS DRIVE
SALT LAKE CITY, UTAH 84116
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1997
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 15, 1997, at 10:00 a.m., Mountain
Daylight Time, at the Salt Lake City Little America Hotel, 500 South Main, 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 15, 1997. A copy of the Company's Annual Report to Stockholders for 1996
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 Chase Mellon Shareholder Services, 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 10, 1997 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 13,249,081 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, 1997. 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 quorum purposes. Abstentions are counted in tabulations of the votes
cast on proposals presented
<PAGE> 5
to stockholders and are treated as negatives votes, 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 1997 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 AND OTHER INFORMATION
- -------------------------- --- ---------------------------------------
<S> <C> <C>
Gregory K. Hinckley 50 Director
Benno P. Lotz 66 Director
Allan W. May 49 Director
Ruediger Naumann-Etienne 50 Chairman of the Board, President,
Chief Executive Officer and Director
Chase N. Peterson 67 Director
</TABLE>
Gregory K. Hinckley is Executive Vice President, Chief Operating Officer
and Chief Financial Officer of Mentor Graphics Corporation. From 1992 to 1996,
he was Senior Vice President and Chief Financial Officer of VLSI Technology,
Inc. From 1989 to 1991, he was Senior Vice President and Chief Financial Officer
of Crowley Maritime Corporation, and from 1983 until 1991 he was the Vice
President & Chief Financial Officer of Bio-Rad Laboratories, Inc. He has been a
director of the Company since June 1995.
Benno P. Lotz is a self-employed management consultant. From 1983 until his
retirement in 1991, he was Chairman and General Manager of OEC-Diasonics, a
subsidiary of the Company's predecessor, Diasonics, Inc. From 1976 to 1983, he
was President and Chief Executive Officer of Orthopedic Equipment Company, Inc.
The Company was acquired by Diasonics, Inc. in 1983. He has been a director of
the Company since March 1995.
Allan May is Vice Chairman and CEO of MAST Immunosystems, Inc. From
September 1993 to November 1996 he was Vice President and General Counsel of the
Company. He has been Secretary of OEC since September 1993. 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 has been a director
of the Company since February 1994.
Ruediger Naumann-Etienne was appointed President and Chief Executive
Officer in February 1995. He was named director and Chairman of the Board in
September 1993. He was President and Chief Operating Officer of the Company's
predecessor from December 1987 to July 1990 and Executive Vice President and
Chief Financial Officer from April 1984 to September 1988. He has also been
Managing Director of Intertec from July 1990.
2
<PAGE> 6
Chase N. Peterson, MD 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 1996, there were six meetings of the
Board of Directors of the Company. OEC has standing Audit, Nominations and
Compensation Committees. Each director attended or participated in at least 75%
of the aggregate of (i) the total number of Board meetings held during the 1996
fiscal year and (ii) the total number of meetings held during such year by each
Committee on which he served. The Audit Committee, currently consisting of
Messrs. Hinckley, Lotz, 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. May and Peterson, selects and
nominates to the Board nominees for election as directors. The Compensation
Committee, currently consisting of Messrs. Hinckley 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 Option/Stock Purchase Plan and the Employee Incentive Stock
Acquisition Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
NOMINEES TO THE BOARD OF DIRECTORS.
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 1996 fiscal year for
services rendered in each of the fiscal years ended December 31, 1996, 1995 and
1994, 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>
Ruediger Naumann-Etienne(3) 1996 206,963 138,192 50,000 --
President and Chief Executive 1995 200,000 100,000 100,000 --
Officer 1994 -- -- -- --
Randy Zundel 1996 160,857 110,254 30,000 19,219
Executive Vice President, 1995 153,465 77,214 70,000 17,879
COO and CFO 1994 147,396 22,453 -- 14,403
Barry Hanover 1996 123,488 65,081 25,000 13,127
Executive Vice President, 1995 108,878 44,740 50,000 11,782
Engineering and Chief Technical 1994 104,634 12,640 -- 10,834
Officer
Larry Harrawood 1996 151,390 85,304 20,000 19,045
Vice President, 1995 145,169 58,544 60,000 17,730
Marketing and Business Development 1994 138,208 17,104 -- 15,673
Gary Kilman 1996 124,562 110,177 20,000 18,937
Vice President, Sales 1995 120,012 88,932 50,000 21,367
1994 115,472 61,091 -- 17,668
</TABLE>
- ---------------
(1) Includes salary deferred under the Company's 401(k) Savings Plan.
3
<PAGE> 7
(2) For the 1996 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 $3,000 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.
<TABLE>
<CAPTION>
PLAN CONTRIBUTION INSURANCE BENEFIT
----------------- -----------------
1996 1996
----------------- -----------------
<S> <C> <C>
Mr. Naumann.................................. $ -- $ --
Mr. Zundel................................... 3,000 16,219
Mr. Hanover.................................. 3,000 10,127
Mr. Harrawood................................ 3,000 16,045
Mr. Kilman................................... 3,000 15,937
</TABLE>
- ---------------
(3) Dr. Naumann-Etienne was paid $120,000 in 1994 as compensation under a
consulting agreement for his role as Chairman of the Board of Directors. Dr.
Naumann-Etienne became an employee of the Company on March 1, 1996.
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 1996
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
OPTIONS GRANTED TO FOR OPTION TERM
GRANTED EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------
NAME (#)(1) FISCAL YEAR $(SH)(2) DATE 5%(3) 10%(3)
- ------------------------- ------- ------------ -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ruediger Naumann-Etienne 50,000 8.6% $11.75 9/05/06 $369,500 $936,300
Randy Zundel 30,000 5.2% 11.75 9/05/06 221,700 561,800
Barry Hanover 25,000 4.3% 11.75 9/05/06 184,700 468,100
Larry Harrawood 20,000 3.5% 11.75 9/05/06 147,800 374,500
Gary Kilman 20,000 3.5% 11.75 9/05/06 147,800 374,500
</TABLE>
- ---------------
(1) Each of these options was granted September 5, 1996 under the OEC Stock
Option Plan and will become exercisable in the following manner: 6.25% will
vest each quarter over four years, with total vesting complete September 5,
2000. Each option will become immediately exercisable for all the option
shares should any of the following change in control events occur while the
optionee continues in the Company's service: (i) the acquisition of the
Company by merger or sale of all or substantially all of the Company's
assets or 50% or more of the Company's outstanding common stock, (ii) the
successful completion of a hostile tender offer for more than 40% of the
Company's outstanding common stock, (iii) a change in the composition of
more than one-third of the Board members by proxy contest or (iv) the
dissolution or liquidation of the Company.
(2) 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.
(3) 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.
4
<PAGE> 8
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>
NUMBER OF SECURITIES
VALUE REALIZED UNDERLYING UNEXERCISED
SHARES ACQUIRED (MARKET PRICE AT OPTION AT FY-END(1)
ON EXERCISE LESS -----------------------------
NAME EXERCISE (#) EXERCISE PRICE) EXERCISABLE UNEXERCISABLE
- ------------------------- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Ruediger Naumann-Etienne -- -- 184,625 46,875
Randy W. Zundel 20,000 176,726 136,375 38,625
Barry K. Hanover -- -- 94,062 30,937
Larry E. Harrawood 10,000 50,000 135,850 29,250
Gary N. Kilman 26,000 158,587 92,250 27,750
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS AT
FY-END (MARKET PRICE
SHARES AT FY-END [$15.00]
LESS EXERCISE PRICE)(1)
----------- -------------
NAME EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- -------------
<S> <C> <C>
Ruediger Naumann-Etienne $ 1,708,081 $ 152,344
Randy W. Zundel 1,200,416 184,594
Barry K. Hanover 844,764 142,733
Larry E. Harrawood 1,201,085 154,125
Gary N. Kilman 805,230 140,812
</TABLE>
- ---------------
(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.
The number of shares of Company Common Stock purchasable by each Named
Officer under his OEC Adjusted Option at the end of the 1996 fiscal year is
as follows: Mr. Naumann-Etienne 81,500 shares; Mr. Zundel 18,010 shares;
Mr. Hanover 0 shares; Mr. Harrawood 15,100 shares; Mr. Kilman 16,000
shares.
Employment Contracts and Change of Control Arrangements. No executive
officers of the Company have employment agreements with the Company, however,
the Company has entered into severance agreements with Ruediger Naumann-Etienne
and Randy Zundel, such that if they are involuntarily terminated within 24
months following the change of control of the Company, Mr. Naumann is entitled
to receive an amount equal to 24 months salary, plus an amount equal to his 1995
bonus and any unpaid vacation
5
<PAGE> 9
benefits; and Mr. Zundel is entitled to receive an amount equal to 18 months
salary, plus an amount equal to his 1995 bonus and any unpaid vacation benefits.
These agreements will expire on June 30, 1997.
Officer Loan. In order to assist Mr. Naumann-Etienne, the Company's Chief
Executive Officer and a member of the Board of Directors, in the exercise of
certain outstanding stock options about to expire, the Company allowed him to
deliver a promissory note on September 5, 1996 in payment of the exercise price
of the shares of the Company's common stock subject to those options. The note
was a full-recourse obligation in the principal amount of $210,000 and bore
interest at the rate of 5.83% per annum, compounded semi-annually, over the term
of the note. The note was paid in full in a lump sum payment to the Company on
December 4, 1996. The highest outstanding balance under the note during the 1996
fiscal year prior to repayment was $224,390.
Director's Compensation. All 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 addition, the OEC Medical Systems, Inc. 1990 Stock Option/Stock Purchase
Plan contains an automatic option grant program for non-employee Board members.
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. Messrs. Hinckley, Lotz and Peterson each received an
automatic option grant for 5,000 shares upon their re-elections to the Board at
the 1996 Annual Stockholders' Meeting. Each such automatic option grant has an
exercise price of $13.50 per share and will become exercisable on three
successive equal annual installments over the period of continual Board service
measured from the grant date.
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 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
1996 fiscal year were complied with.
6
<PAGE> 10
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 1990 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 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 - $150
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 Senior Manager, Human Resources, who has
responsibility to verify that compensation is competitive for similar positions.
Primarily, three compensation surveys were used: (1) the 1996 Radford
Associates/Alexander & Alexander Consulting Group's "Management Total
Compensation Report", (2) the 1996 Radford Salt Lake Area compensation survey,
and (3) a November 1996 customized, senior level, executive survey of Utah based
companies prepared 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 1996, the Chief Executive Officer
did receive a pay increase of 3.5%. All other executive officers received base
salary increases averaging 5.1 percent. The increased levels of base salary in
effect for the Company's executive officers for the 1996 fiscal year ranged from
the 10 percentile to the 50 percentile of the surveyed compensation data for
comparable positions at similarly sized medical and technology companies. The
Chief Executive Officer's salary was at the 10 percentile.
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
7
<PAGE> 11
financial performance for fiscal 1996 exceeded expectations, the Chief Executive
Officer received a $138,192 bonus, and all other executive officers as a group
received discretionary bonuses totaling $370,816.
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), provided the officer
continues in the Company's employ. In 1996, 145,000 options were granted to
executive officers (see distribution in the preceding Option Grant Table) under
the Company's Stock Option Plan.
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.
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation exceeding
$1 million paid to certain of the corporation's executive officers. The
compensation to be paid to the Company's executive officers for the 1996 fiscal
year did not exceed the $1 million limit per officer, nor is it expected that
the compensation to be paid to the Company's executive officers for fiscal 1997
will exceed that limit. The stockholders approved an amendment to the Company's
1990 Stock Option/Stock Purchase Plan at the 1996 Annual Meeting, which will
allow any compensation deemed paid to an executive officer upon his exercise of
option grants under the Plan to qualify as performance-based compensation which
will not be subject to the $1 million limitation. Since it is very unlikely that
the cash compensation payable to any of the Company's executive officers in the
foreseeable future will approach the $1 million limit, the Committee has decided
at this time not to take any other action to limit or restructure the elements
of cash compensation payable to the Company's executive officer. The Committee
will reconsider this decision should the individual compensation of any
executive officer ever approach the $1 million level.
Submitted by the Compensation Committee of the Company's Board of
Directors.
Gregory K. Hinckley
Dr. Chase N. Peterson
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.
8
<PAGE> 12
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, 1991 through December 31, 1996.
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 statues.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG OEC MEDICAL SYSTEMS, INC., THE S&P 500 INDEX
AND THE DOW JONES MEDICAL & BIOTECHNOLOGY - ALL INDEX
<TABLE>
<CAPTION>
DOW JONES MEDICAL
MEASUREMENT PERIOD OEC MEDICAL &
(FISCAL YEAR COVERED) SYSTEMS, INC. S&P 500 BIOTECHNOLOGY-ALL
<S> <C> <C> <C>
12/91 100 100 100
12/92 52 108 86
12/93 40 118 75
12/94 38 120 86
12/95 57 165 147
12/96 87 203 156
</TABLE>
- ---------------
* 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, 1991.
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.
9
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 31, 1997 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, 1997. 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. 3,131,950 23.9%
FLA Asset Management, Inc.
Stamford Advisors Corp.
55 East 52nd Street
New York, NY 10055(1)
FMR Corp. 1,016,000 7.7%
82 Devonshire Street
Boston, MA 02109(1)
Heartland Advisors, Inc. 747,700 5.9%
790 North Milwaukee Street
Milwaukee, WI 53202(1)
Ruediger Naumann-Etienne(2) 211,750 1.6%
Randy W. Zundel(2) 145,998 1.1%
Barry K. Hanover (2) 89,375 *
Larry E. Harrawood(2) 163,724 1.2%
Gary N. Kilman(2) 97,300 *
Gregory K. Hinckley(2) 1,667 *
Benno P. Lotz(2) 12,187 *
Allan W. May(2) 163,562 1.2%
Chase Peterson(2) 12,667 *
All executive officers and directors as a group 898,230 6.8%
(9 persons)(3)
</TABLE>
- ---------------
(*) Less than 1%.
(1) Information provided pursuant to Schedule 13G reports filed with the
Securities Exchange Commission in February 1997.
(2) Includes options to purchase common stock which are currently exercisable or
will become exercisable within 60 days of March 31, 1997, as follows: Dr.
Naumann-Etienne, 187,750; Mr. Zundel, 143,500; Mr. Hanover, 89,375; Mr.
Harrawood, 142,350; Mr. Kilman, 97,300; Mr. Hinckley, 1,667; Mr. Lotz,
10,687; Mr. May, 160,000; Mr. Peterson, 11,667.
(3) Includes options to purchase 844,296 shares of common stock which are
currently exercisable or will become exercisable within 60 days of March 31,
1997.
10
<PAGE> 14
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, 1996. 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, 1997.
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 1998
Annual Meeting of Stockholders of the Company must be received by December 17,
1997 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
/s/ ALLAN W. MAY
Allan W. May
Secretary
11
<PAGE> 15
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 Little America Hotel, 500 South Main, Salt Lake
City, Utah on Thursday, May 15, 1997; 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 to be checked.
(Continued on the other side)
SEE REVERSE
SIDE
FOLD AND DETACH HERE
<PAGE> 16
________________ /X/ PLEASE MARK YOUR CHOICE
COMMON LIKE THIS
1. Election of Directors: Gregory Hinckley, Benno Lotz, 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 (Except any nominee whose name has
been struck out)
/ / WITHHOLD AUTHORITY to vote for all nominees listed above
2. Ratification of Deloitte & Touche LLP as independent auditors for 1997.
/ / FOR / / AGAINST / / ABSTAIN
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
discretion 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
_______________________________________________________________________
Signature(s)____________________________________________________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
