<PAGE>
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
------------------------
OEC MEDICAL SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
------------------------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(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) Dated filed:
<PAGE>
OEC MEDICAL SYSTEMS, INC.
384 Wright Brothers Drive
Salt Lake City, Utah 84116
April 7, 1999
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 8:00 a.m. on Thursday,
May 13, 1999 at the offices of OEC Medical Systems, Inc., 384 Wright Brothers
Drive, Salt Lake City, Utah, 84116.
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 FOR the ratification of the Company's selection of Deloitte &
Touche LLP as independent auditors for the fiscal year ending December 31,
1999.
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/ Joseph W. Pepper
--------------------
Joseph W. Pepper
President & CEO
<PAGE>
OEC MEDICAL SYSTEMS, INC.
384 Wright Brothers Drive
Salt Lake City, Utah 84116
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 13, 1999
The Annual Meeting of the Stockholders of OEC Medical Systems, Inc. (the
"Company") will be held at 8:00 a.m. MDT on Thursday, May 13, 1999, at the
offices of OEC Medical Systems, Inc., 384 Wright Brothers Drive, Salt Lake
City, Utah, 84116, for the following purposes:
1. To elect six directors of the Company. Management's nominees for
election are Gregory K. Hinckley, Benno P. Lotz, Allan W. May, Ruediger
Naumann-Etienne, Joseph W. Pepper 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, 1999.
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 1, 1999 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/ Clarence R. Verhoef
------------------------
Clarence R. Verhoef
Secretary
Dated: April 7, 1999
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 13, 1999
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 13, 1999, at 8:00 a.m., Mountain
Daylight Time, at the offices of OEC located at 384 Wright Brothers Drive,
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 7, 1999. A copy of the Company's Annual Report
to Stockholders for 1998 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 ChaseMellon 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 1, 1999 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 12,664,899 outstanding 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 six
nominees for director and FOR the ratification of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending December 31, 1999.
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 to stockholders, whereas broker non-votes are not counted for
purposes of determining whether a proposal has been approved.
1
<PAGE>
PROPOSAL NO. 1
NOMINATION AND ELECTION OF DIRECTORS
Six directors are to be elected at the 1999 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
six 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 six 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
---- --- ------------------------------
<C> <C> <S>
Gregory K. Hinckley 52 Director
Benno P. Lotz 68 Director
Allan W. May 51 Director
Ruediger Naumann-Etienne 52 Chairman of the Board
Joseph W. Pepper 52 President and Chief Executive Officer
Chase N. Peterson 69 Director
</TABLE>
Gregory K. Hinckley has been Executive Vice President, Chief Operating
Officer and Chief Financial Officer of Mentor Graphics Corporation since 1996.
From 1992 to 1996, he was Senior Vice President and Chief Financial Officer of
VLSI Technology, Inc. He is also a director of Amkor Technology, Inc. and has
been a director of the Company since June 1995.
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 that entity became a subsidiary of the Company's
predecessor, Diasonics, Inc., he was named Chairman and General Manager of
OEC-Diasonics, Inc., a position that he held until his retirement in 1991. He
has been a director of the Company since March 1995.
Allan May has been President and Chief Operating Officer of Intella
Interventional Systems, Inc. since August 1997. From November 1996 to August
1997, he was President and CEO of MAST Immunosystems, Inc. Prior to that, he
had been Senior Vice President, Strategic Development, General Counsel and
Secretary of the Company since 1994. He was Senior Vice President, Business
Development and General Counsel and Secretary of Diasonics Utrasound, Inc.
from October 1993 through October 1994. He has been a director of the Company
since February 1994.
Ruediger Naumann-Etienne is Chairman of the Board. He was President and
Chief Executive Officer of OEC from 1995 to 1997, a position, which he
resigned in May 1997 when Joseph W. Pepper joined the Company. He has been a
director of the Company since 1989, and was named Chairman in September 1993.
He
2
<PAGE>
was President and Chief Operating Officer of the Company from 1987 to 1990 and
Executive Vice President and Chief Financial Officer from 1984 to 1988. He has
also been Managing Director of Intertec since 1990.
Joseph W. Pepper was named President and Chief Executive Officer, and
appointed to the Board of Directors of OEC, in May 1997. Prior to joining OEC,
he was President of the Medical Devices Division of Ohmeda, Inc. from 1995 to
1997. From 1992 to 1995, he was President of Ohmeda's Medical Systems
Division, and from 1988 to 1992, he was Vice President in charge of the
Monitoring Business Unit. Prior to that, Mr. Pepper held engineering
management positions at General Electric and at the Electric Power Research
Institute. He is a director on the board of Heartlab, Inc.
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. Dr. Peterson is a director on the boards of First
Security Corporation, O.C. Tanner, Utah Power, The Homeless Health Clinic,
Grand Canyon Trust, and Utah Open Lands. He has been a Director of the Company
since October 1993.
Committees of the OEC Board. During 1998, there were eight 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
1998 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
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.
3
<PAGE>
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 (the "Named
Officers") whose salary and bonus for the 1998 fiscal year was in excess of
$100,000, for services rendered in each of the fiscal years ended December 31,
1998, 1997 and 1996, respectively.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
------------------ ---------------------
Name and Number of All Other
Principal Salary Securities Underlying Compen-
Position Year ($)(/1/) Bonus ($) Options sation ($)(/2/)
--------- ---- -------- --------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Joseph W. Pepper(/3/)... 1998 270,005 175,500 20,000 43,467
President and Chief
Executive Officer 1997 168,234 211,975 150,000 151,412
1996 -- -- -- --
Randy W. Zundel......... 1998 177,524 116,025 10,000 18,908
Executive Vice
President, Chief
Operating & 1997 169,190 133,754 -- 20,182
Chief Financial Officer 1996 160,857 110,254 30,000 19,219
Barry K. Hanover........ 1998 140,972 14,175 10,000 14,572
Executive Vice
President, Engineering
& Chief 1997 134,032 86,881 -- 15,032
Technical Officer 1996 123,488 65,081 25,000 13,127
Larry E. Harrawood...... 1998 163,926 85,574 10,000 18,083
Executive Vice
President, Clinical &
Market 1997 158,323 103,176 -- 20,009
Development 1996 151,390 85,304 20,000 19,045
F. Daniel Edwards....... 1998 94,597 128,278 7,500 3,000
Vice President, US Sales
& Sales Support 1997 87,717 112,324 7,500 3,000
Marketing 1996 79,997 91,221 37,300 3,000
</TABLE>
- --------
(1) Includes salary deferred under the Company's 401(k) Saving Plan.
(2) For the 1998 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
1998 1998
----------------- -----------------
<S> <C> <C>
Mr. Pepper.................................. 3,000 40,467
Mr. Zundel.................................. 3,000 15,908
Mr. Hanover................................. 3,000 11,572
Mr. Harrawood............................... 3,000 15,083
Mr. Edwards................................. 3,000 --
</TABLE>
(3) Dr. Joseph W. Pepper joined OEC Medical Systems, Inc. in May 1997 as
President and CEO. He was paid $143,755 to cover his relocation expenses to
Salt Lake City, Utah.
4
<PAGE>
Option Grants in Last Fiscal Year
The following table contains information concerning the grant of stock
options under the Company's 1998 Stock Option Plan for the 1998 fiscal year to
each of the Named Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
for Option Term
----------------------------
% of Total
Options Options Granted
Granted to Employees in Exercise Price Expiration
Name (#)(/1/) Fiscal Year $(Sh)(/2/) Date 5%(/3/) 10%(/3/)
---- ------- --------------- -------------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Joseph W. Pepper........ 20,000 7.6% 20.25 6/16/08 254,702 645,466
Randy W. Zundel......... 10,000 3.8% 20.25 6/16/08 127,351 322,733
Barry K. Hanover........ 10,000 3.8% 20.25 6/16/08 127,351 322,733
Larry E. Harrawood...... 10,000 3.8% 20.25 6/16/08 127,351 322,733
F. Daniel Edwards....... 7,500 2.8% 20.25 6/16/08 95,513 242,050
</TABLE>
(1) These options were granted June 16, 1998. They 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) an acquisition of the Company by merger or sale of substantially all of
the Company's assets or 50% or more of the Company's outstanding common stock
that causes the optionee to lose his/her status as employee, consultant or
board member within one year of the closing date, (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.
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.
5
<PAGE>
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
(Market price Underlying Unexercised shares at FY-end [$31.44]
at exercise Options at FY-End (1) less exercise price) (1)
Shares acquired less exercise ------------------------- -------------------------
Name on exercise (#) price) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph W. Pepper........ 3,500 $ 15,531 74,000 92,500 $1,042,375 $1,309,500
Randy W. Zundel......... 29,010 490,010 134,115 21,875 3,279,654 356,289
Barry K. Hanover........ 13,000 222,303 87,897 20,103 2,151,008 317,867
Larry E. Harrawood...... 26,600 429,435 127,500 17,500 3,168,906 270,156
F. Daniel Edwards....... -- -- 24,757 14,012 442,763 213,662
</TABLE>
- --------
(1) Includes options granted under a predessor plan (the "OEC Plan") prior
to the distribution ("Distribution") by the Company of its interests in
Diasonics Ultrasound, Inc. and FOCAL Surgery, Inc. to its stockholders 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 1998 fiscal year is as
follows: Dr. Pepper -0- shares; Mr. Zundel 9,000 shares; Mr. Hanover -0-
shares; Mr. Harrawood -0- shares; Mr. Edwards -0- shares.
Director's Compensation. As Chairman of the Board of Directors, Ruediger
Naumann-Etienne receives annual compensation of $120,000 and is eligible for
participation in the management incentive plan, which resulted in a bonus for
1998 of $78,000. All other non-employee members of the Board are 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.
The Company's 1998 Stock Option 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 3,000
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
6
<PAGE>
also receives an automatic option grant on the date of each such Annual
Meeting for an additional 3,000 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. 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, May and Peterson
received an automatic option grant for 3,000 shares upon re-election to the
Board at the 1998 Annual Meeting pursuant with the 1998 Stock Option Plan.
Each such automatic option grant had an exercise price of $20.25 per share and
will become exercisable on three successive equal annual installments over the
period of continual Board service measured from the grant date. Upon re-
election to the board at the 1998 Annual Meeting, Dr. Naumann received an
option grant for 10,000 shares.
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 1998 fiscal year were filed in compliance with SEC guidelines.
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 Plan and the
1998 Stock Option 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.
7
<PAGE>
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-$200 million in
revenue. 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 Vice President, Human Resources, who has
responsibility to verify that compensation is competitive for similar
positions. Primarily, three compensation surveys were used: (1) the 1998
Radford Associates/Alexander & Alexander Consulting Group's "Management Total
Compensation Report", (2) the 1998 Radford Salt Lake Area compensation survey,
and (3) a November 1998 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.
Dr. Joseph W. Pepper's salary as Chief Executive Officer was established by
the committee who established his level of base compensation at $270,000 per
year, based upon negotiation with Dr. Pepper and the compensation levels in
effect for chief executive officers at similar sized medical and technology
companies on the basis of the compensation surveys of these companies. Dr.
Pepper's base compensation level is at the 25th 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 meets or exceeds its 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 operating income. Payments are made based upon
performance versus the target. Performance above the target results in
proportionately higher bonus payouts. Likewise, below target performance
results in proportionately lower bonus payouts (50 percent of the target bonus
at 75 percent of target achievement). All bonuses become discretionary if
performance is below 75 percent of target performance. Since financial
performance for fiscal 1998 exceeded expectations, the Chief Executive Officer
received a $175,500 bonus and all other executive officers as a group received
bonuses totaling $344,052.
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 1998, 57,500
options were granted to executive officers (see distribution in the preceding
Option Grant Table) under the Company's 1998 Stock Option Plan.
8
<PAGE>
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 1998
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 1999 will exceed that limit. Any compensation deemed paid to an
executive officer upon his exercise of option grants qualifies 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
EMPLOYMENT CONTRACTS AND CHANGE OF EMPLOYMENT ARRANGEMENTS
No executive officers of the Company have employment agreements with the
Company.
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 that has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
9
<PAGE>
PERFORMANCE GRAPH
The following graph shows (i) a five-year comparison of cumulative
stockholder returns for the Company, Standard & Poors MIDCAP400 and Standard &
Poors Healthcare (Medical Products & Supplies), the Company's newly selected
indices, for December 31, 1993 through December 31, 1998.
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.
[PERFORMANCE GRAPH APPEARS HERE]
Cumulative Total Return
---------------------------------------------
12/93 12/94 12/95 12/96 12/97 12/98
OEC MEDICAL SYSTEMS, INC. 100 95 142 218 290 457
S & P MIDCAP 400 100 96 126 150 199 228
S & P HEALTH CARE
(MEDICAL PRODUCTS & SUPPLIES) 100 119 200 230 287 413
(1) Assumes $100 was invested in each of the Company's stock, the Standard &
Poors MIDCAP400 and Standard & Poors Healthcare (Medical Products &
Supplies) as of December 31, 1993. Total stockholder return assumes
reinvestment of dividends.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 31, 1999 concerning
beneficial ownership of Common Stock by each of the directors, nominees for
directors, and the named Officers in the Summary Compensation Table, 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 the Company with respect to such persons' beneficial
ownership of shares of Company common stock as of March 31, 1999. 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>
Number of
Shares Approximate
Beneficially Percentage
Name of Beneficial Owner Owned Ownership
------------------------ ------------ -----------
<S> <C> <C>
Forstmann-Leff Assoc., Inc. ......................... 3,026,050 23.8%
FLA Asset Management, Inc.
Stamford Advisors Corp.
55 East 52nd Street
New York, NY 10055(/1/)
FMR Corporation...................................... 1,312,000 10.3%
82 Devonshire Street
Boston, MA 02109(/1/)
Peter B. Cannell & Co., Inc.......................... 711,781 5.6%
645 Madison Avenue,
New York, NY 10022(/1/)
Ruediger Naumann-Etienne(/2/)........................ 171,852 1.3%
Joseph W. Pepper(/2/)................................ 95,432 *
Randy W. Zundel(/2/)................................. 139,351 1.1%
Barry K. Hanover(/2/)................................ 88,628 *
Larry E. Harrawood(/2/).............................. 151,324 1.2%
F. Dan Edwards(/2/).................................. 16,381 *
Gregory K. Hinckley(/2/)............................. 12,418 *
Benno P. Lotz(/2/)................................... 14,142 *
Allan W. May(/2/).................................... 134,646 1.1%
Chase N. Peterson(/2/)............................... 20,084 *
All executive officers and directors as a group (10 844,258 6.6%
persons)(/3/).......................................
</TABLE>
- --------
(*) Less than 1%.
(1) Information provided pursuant to Schedule 13G reports filed with the
Securities Exchange Commission in February 1999.
(2) Includes options to purchase common stock which are currently exercisable
or will become exercisable within 60 days of March 31, 1999, as follows:
Dr. Naumann-Etienne, 133,125; Dr. Pepper, 90,250 shares; Mr. Zundel,
136,615; Mr. Hanover, 86,875; Mr. Harrawood, 129,375 shares; Mr. Edwards,
16,381; Mr. Hinckley, 12,418 shares; Mr. Lotz, 5,642; Mr. May, 134,084;
Mr. Peterson, 19,084.
(3) Includes options to purchase 763,849 shares of common stock, which are
currently exercisable or will become exercisable within 60 days of March
31, 1999.
11
<PAGE>
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, 1998. 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, 1999.
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 2000
Annual Meeting of Stockholders of the Company must be received by December 26,
1999 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/ Clarence R. Verhoef
----------------------------------
Clarence R. Verhoef
Secretary
12
<PAGE>
OEC MEDICAL SYSTEMS, INC.
This Proxy is solicited on behalf of the Board of Directors
The undersigned appoints Joseph W. Pepper and Clarence R. Verhoef,
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 offices of OEC Medical Systems, Inc., 384 Wright Brothers Drive,
Salt Lake City, Utah 84116 on Thursday, May 13, 1999; at 8 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)
<PAGE>
1. Election of Directors: Gregory K. Hinckley,
Benno P. Lotz, Allan W. May, Ruediger Naumann-
Etienne, Joseph W. Pepper and Chase N. Peterson
2. Ratification of Deloitte & Touche LLP as
independent auditors for 1999.
FOR all nominees listed
(Except any Nominee whose
name has been struck out)
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(s)
-------------------------------------------------------------------
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.
