<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SUNRISE MEDICAL 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] $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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO of SUNRISE MEDICAL]
2382 FARADAY AVENUE, SUITE 200
CARLSBAD, CALIFORNIA 92008
----------------
NOTICE OF ANNUAL MEETING TO BE HELD ON NOVEMBER 21, 1996
----------------
Dear Stockholder:
On behalf of the board of directors, you are cordially invited to attend the
Annual Meeting of Stockholders of Sunrise Medical Inc. to be held at the Del
Mar Hilton, 15575 Jimmy Durante Boulevard, Del Mar, California, on Thursday,
November 21, 1996, commencing at 2:00 p.m. We look forward to the opportunity
of greeting personally those stockholders who are able to attend.
At the meeting, you are being asked to:
1.Elect members of the board of directors; and
2. Transact such other business as may properly come before the meeting
or any adjournments thereof.
During the course of the meeting, management will report on the current
activities of Sunrise and comment on its future plans. A discussion period is
planned so that stockholders will have an opportunity to ask questions and
present their comments.
The board of directors fixed the close of business on September 23, 1996 as
the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any continuation or adjournment
thereof. If you plan to be present, please notify our director of corporate
communications, Marcia Vaughan (at 619/930-1500), so that identification can
be prepared for you. Thank you for your interest and consideration.
Sincerely,
[LOGO of SIGNATURE]
Steven A. Jaye
Vice president, general counsel
and secretary
October 21, 1996
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE MEETING.
ACCORDINGLY, PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY WITHOUT DELAY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF
YOU ATTEND THE MEETING.
<PAGE>
[LOGO of SUNRISE MEDICAL]
2382 FARADAY AVENUE, SUITE 200
CARLSBAD, CALIFORNIA 92008
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 21, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the board of directors of Sunrise Medical Inc., a Delaware
corporation (the "company" or "Sunrise"), for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Del Mar Hilton, 15575
Jimmy Durante Boulevard, Del Mar, California, on Thursday, November 21, 1996,
commencing at 2:00 p.m., and any postponement or adjournment thereof. It is
anticipated that this Proxy Statement, together with the proxy and the 1996
Annual Report to Stockholders, will first be mailed to the company's
stockholders on or about October 21, 1996.
Any stockholder of record giving a proxy has the power to revoke it at any
time before it is voted by filing with the secretary of the company a notice
in writing revoking it, by duly executing a proxy bearing a later date, or by
attending the Annual Meeting and, prior to the voting of the proxy, indicating
to the secretary of the meeting a desire to vote his or her shares in person.
Holders whose shares are in street name should consult with their brokers
concerning procedures for revocation. Subject to such revocation, all shares
represented by a properly executed proxy will be voted as directed by the
holder on the proxy card. If no choice is specified, proxies will be voted FOR
the directors nominated by the board of directors.
The affirmative vote of the holders of a plurality of the shares of the
company's Common Stock represented in person or by proxy and entitled to vote
at the Annual Meeting will be required to elect each director to be elected at
the Annual Meeting. The affirmative vote of the holders of a majority of the
shares of the company's Common Stock represented in person or by proxy and
entitled to vote at the Annual Meeting will be required for the approval of
any other matter presented at the Annual Meeting for approval.
The election inspector will treat shares represented by properly signed and
returned proxies that reflect abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum.
Abstentions do not constitute a vote "for" or "against" any matter and thus
will be disregarded in the calculation of votes cast for or against a matter.
For the purposes of determining the outcome of any matter, "broker non-votes"
(i.e., shares held by brokers or nominees that are represented at the meeting
by properly signed and returned proxies but with respect to which the broker
or nominee is not empowered to vote on a particular matter) will be treated by
the election inspector as not present and not entitled to vote with respect to
that matter (although such shares may be entitled to vote on other matters),
but will be deemed to be present and entitled to vote for quorum purposes.
The company will bear the entire expense of this proxy solicitation. Copies
of solicitation material may be furnished to brokerage houses, fiduciaries,
and custodians to forward to their principals, and the company may reimburse
them for their reasonable expenses in connection therewith. Solicitation may
be made by telephone or otherwise by officers, directors or regular employees
of the company (who will receive no compensation therefor other than their
regular compensation).
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The close of business on September 23, 1996 was fixed as the record date for
determination of holders of the company's Common Stock, $1.00 par value (the
"Common Stock"), entitled to notice of and to vote at the Annual Meeting. On
that date, there were outstanding and entitled to vote 18,858,649 shares of
Common Stock. Subject to cumulative voting rights in the election of directors
(see "Election of Directors"), holders of Common Stock are entitled to one
vote per share on each matter submitted to or acted upon by the stockholders
at the Annual Meeting. The presence, either in person or by proxy, of persons
entitled to cast a majority of such votes constitutes a quorum for the
transaction of business at the Annual Meeting.
ELECTION OF DIRECTORS
Eight directors, comprising the entire membership of the board of directors
of the company, are to be elected at the Annual Meeting. Unless otherwise
instructed, the proxy holders intend to vote the shares represented by the
proxies received by them for the eight nominees shown below for a term of one
year and until their successors are duly elected and qualified.
If at the time of the Annual Meeting any of such nominees should be unable
or decline to serve, the authority provided in the proxy to vote for the
election of directors may be exercised to vote for a substitute or
substitutes. Management has no reason to believe that any substitute nominee
or nominees will be required.
Stockholders are entitled to cumulative voting rights in the election of
directors. Under cumulative voting, each stockholder is entitled to a number
of votes equal to the number of directors to be elected multiplied by the
number of shares of Common Stock the stockholder is entitled to vote. Such
votes may be cast for one nominee or distributed among two or more candidates.
The proxy solicited by the board of directors confers discretionary authority
on the proxy holders to cumulate votes so as to elect the maximum number of
nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NAMED NOMINEE
NOMINEES FOR DIRECTORS
<TABLE>
<CAPTION>
CURRENT POSITIONS DIRECTOR OF THE
NAME AGE WITH THE COMPANY COMPANY SINCE
---- --- ----------------------------------- ---------------
<S> <C> <C> <C>
Richard H. Chandler..... 53 Chairman of the board and president 1983
Lee A. Ault III......... 60 Director 1988
Lloyd E. Cotsen......... 67 Director 1989
Babette Heimbuch........ 48 Director 1994
Murray H. Hutchison..... 57 Director 1983
William L. Pierpoint.... 58 Director 1985
Joseph Stemler.......... 65 Director 1989
John R. Woodhull........ 63 Director 1986
</TABLE>
The business experience, principal occupations and employment of each of the
nominees for at least the past five years are as follows:
RICHARD H. CHANDLER has served as chairman of the board of directors and
chief executive officer of the company since its inception in January 1983
through the present. In January 1996 he also became president of the company,
a position he previously held from January 1983 until July 1993. From 1982 to
1983, he was president of the Richard H. Chandler Company, a management
consulting firm, during which period he planned the formation of the company.
From 1979 to 1982, he was president and chief executive officer of Abbey
Medical, Inc. From 1974 to 1979 he held senior management positions with the
Sara Lee Corporation, ending
2
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as a group vice president and including two years when he was president of its
Abbey Medical/Abbey Rents division. Mr. Chandler participated in the leveraged
buy-out of Abbey Medical from Sara Lee Corporation in June 1979 and arranged
for its sale to American Hospital Supply Corporation in April 1981.
LEE A. AULT III was elected a director of the company on January 28, 1988.
From 1968 until January 1992, Mr. Ault was chief executive officer of
Telecredit, Inc., a payment services company, serving as its president from
1968 until 1983 and as chairman from 1983 until January 1992. Following the
acquisition of Telecredit by Equifax Inc., a New York Stock Exchange ("NYSE")
listed information services company in December 1990, Telecredit became a
subsidiary of Equifax, and Mr. Ault was also named senior vice president and a
director of Equifax. He has since retired as an executive of Equifax, but is
still a member of the board of directors of Equifax, as well as the board of
directors of Alex. Brown & Sons Incorporated and Viking Office Products, Inc.
From time to time Alex. Brown & Sons Incorporated has and may make a market in
the securities of the company and publish research reports covering the
company.
LLOYD E. COTSEN was elected a director of the company on August 30, 1989.
Mr. Cotsen served as chief executive officer of Neutrogena Corporation, a
publicly-owned skin care and hair care products company from 1973 to 1995. He
also served as president and chairman of the board of directors of Neutrogena
for portions of this time. He retired from all positions with Neutrogena at
the end of July 1995. Mr. Cotsen is currently a private investor and also a
director of Darwin Molecular Corporation, a privately held company.
BABETTE HEIMBUCH was elected a director of the company on January 21, 1994.
Since 1982 Ms. Heimbuch has held positions of increasing responsibility with
First Federal Bank of California and its parent company, FirstFed Financial
Corp., a NYSE-listed company, and currently serves as president and chief
operating officer of both companies. She has been a director of FirstFed
Financial Corp. since 1987 and a director of First Federal Bank of California
since 1986. Ms. Heimbuch also serves on the board of trustees of Santa Monica-
UCLA Medical Center and the UCLA Medical Center and the board of directors of
the Western League of Savings Institutions.
MURRAY H. HUTCHISON was elected a director of the company on May 10, 1983.
Mr. Hutchison was chairman of International Technology Corporation, a NYSE-
listed environmental management company, from 1976 to 1994, and was its chief
executive officer from 1976 to 1992. Mr. Hutchison is currently a private
investor and is chairman of the board of directors for Advanced Access Inc.
and also serves on the board of directors of the Winston Tire Company, the
Olson Company and Epic Solutions, all privately held companies.
WILLIAM L. PIERPOINT was elected a director of the company on October 30,
1985. From 1977 to 1988, he was president and chief executive officer of
Summit Health Ltd., a publicly-owned, integrated health care company. Mr.
Pierpoint is a certified public accountant, and since 1988 has been a private
investor. In 1995 he became vice chairman of Strategic Partners Inc. (dba
Cherokee Uniforms), a privately held company.
JOSEPH STEMLER was elected a director of the company on January 26, 1989.
Mr. Stemler joined the Scholle Corporation, a privately held company, as its
chief executive officer and chairman of its board of directors in February
1996. From 1989 through July 1995, Mr. Stemler served as president, chief
executive officer and a director of La Jolla Pharmaceutical Company, a
biotechnology company. He currently serves as chairman of the board of
directors of La Jolla Pharmaceutical Company. Mr. Stemler became president and
chief executive officer of Quidel Corporation in 1985, chairman and chief
executive officer in 1988, chairman in 1990 and vice chairman in 1991. Mr.
Stemler was president and chief executive officer of Bentley Laboratories,
Inc. from 1978 to 1985. Mr. Stemler also serves on the board of directors of
Safeskin Corporation, a publicly traded company.
JOHN R. WOODHULL was elected a director of the company on September 29,
1986. Mr. Woodhull is chairman, president and chief executive officer of
Logicon, Inc., a NYSE-listed company which provides electronic systems and
high-technology services to industry and government. Mr. Woodhull joined
Logicon in 1964, was elected to the board of directors a year later, and
attained the position of president and chief executive officer in 1969. Mr.
Woodhull also serves on the board of directors of Adams Business Forms, Inc.,
FirstFed Financial Corp., First Federal Bank of California and YMCA of
Metropolitan Los Angeles.
3
<PAGE>
MEETINGS AND ATTENDANCE
The board of directors met nine times during the fiscal year ended June 28,
1996. The executive committee did not meet in 1996, while the audit committee
met two times, and the compensation committee met three times. In addition,
the special committee met 26 times during fiscal 1996. All directors attended
at least 75% of the aggregate of (i) the total number of meetings of the board
and (ii) the total number of meetings of the committees of the board on which
such directors served.
COMMITTEES
Audit Committee. The audit committee of the board of directors is comprised
solely of outside directors. The audit committee meets periodically with the
independent auditors, the company's internal audit department and financial
management of the company to ensure that each is carrying out its
responsibilities. Both the independent auditors and the internal audit
department have free and direct access to the audit committee. The company's
independent auditors are recommended by the audit committee and selected by
the board of directors. Members of the audit committee are Messrs. Cotsen,
Pierpoint and Stemler and Ms. Heimbuch. Mr. Pierpoint serves as chair.
Compensation, Stock Option and Nominating Committees. The compensation
committee, consisting solely of outside directors, meets with management and
makes recommendations to the board concerning executive officer and key
employee compensation and concerning payments to be made under the Management
Incentive Bonus Plan and the Special Bonus Plan, as well as company
contributions to be made under the Profit Sharing/Savings Plan. The
compensation committee also functions as the stock option committee,
administering the Amended and Restated Stock Option Plan for Key Associates
(the "1983 Stock Option Plan") and the 1993 Stock Option Plan. In addition,
this committee functions as a nominating committee regarding vacancies in the
board of directors. Members of the compensation committee are Messrs. Ault,
Hutchison and Woodhull, with Mr. Hutchison serving as chair.
Executive Committee. The executive committee, consisting of Messrs.
Chandler, Hutchison and Pierpoint, meets on an as-needed basis with the
authority to make board-level decisions between regularly scheduled board
meetings. Mr. Chandler is chair of this committee.
Special Committee. The special committee, comprised of all of the outside
directors of the company, was formed in October 1995 to direct an
investigation into financial reporting irregularities at the company's Bio
Clinic subsidiary, and to take action with respect to the results of such
investigation. Ms. Heimbuch serves as chair of the special committee.
DIRECTOR COMPENSATION
Outside directors are paid a $2,000 per year retainer and $1,000 for each
board meeting attended. In addition, committee members are paid $500 per
meeting, if a separate committee meeting is held the same day as a board
meeting, and $750 if a committee meeting is held on a day other than a
scheduled board meeting ($500 if a committee meeting is telephonic). Committee
chairs also receive a $1,500 annual retainer. Each outside director is granted
an option under the company's 1993 Stock Option Plan to purchase 5,000 shares
of Common Stock upon his or her initial election to the board and every four
years thereafter if still a director. Ms. Heimbuch and Mr. Hutchison each
earned an additional $12,000 during fiscal 1996 in consideration of the
additional responsibilities they assumed in connection with special committee
matters. The company has no other contracts or other arrangements pursuant to
which any non-employee director was compensated during the year.
4
<PAGE>
COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS
The compensation committee of the board of directors (the "Committee") is
responsible for establishing and overseeing the policies that govern company
compensation and benefit practices. As part of these functions, the Committee
evaluates the performance of the chief executive officer, reviews with senior
management the performance of executive officers generally, and determines
their respective compensation levels in terms of salary, bonuses and related
benefits. All determinations of the Committee are subject to board approval,
other than stock and option based compensation, which is determined solely by
the Committee. The Committee has established a number of objectives which
serve as guidelines in making all compensation decisions, including:
. The integration of compensation programs with the company's strategic
focus in order to achieve its long-term competitive objectives and
strategic intent;
. The reward of annual financial performance through group bonus incentives
that pay for performance and treat each divisional team independently;
. The encouragement of consistent, long-term enhancement of stockholder
value by providing multi-year performance incentives through a contingent
long-term special bonus plan and equity ownership through stock options;
and
. The development and implementation of a competitive total compensation
program which enables the company to attract and retain high-caliber
employees ("Associates") at all levels.
COMPENSATION PHILOSOPHY
The company's compensation philosophy rewards individual and team
performance on the basis of both quantitative and qualitative factors.
Associates at all levels participate in one or more of the company's various
bonus plans. Of the eight plans currently in effect, two apply to senior
executives; the other six are aimed more broadly at different groups,
including middle managers, engineers, sales Associates and hourly factory and
office Associates.
The company is comprised of a group of operating subsidiaries (referred to
by the company as "divisions"), each led by its own management team. Some
divisions are devoted to manufacturing a particular product line, while others
focus on distributing the company's products in a specific country or
geographic region. Each division's performance is measured and rewarded with
year-end bonuses computed independently of the others, while the company's
stock option program encourages key managers at all divisions to focus on the
company's performance as a whole.
The company's compensation philosophy and programs require that bonuses be
based on achievement of both team financial goals (i.e., corporate or
division) and individual performance objectives. However, no bonus is paid
unless that division delivers a profit increase for the year. Similarly,
corporate office executives receive no bonus unless corporate earnings per
share have increased over the prior year. Even if a bonus is earned based on
profit performance, the executive must still accomplish his or her personal
objectives for the year in order to qualify for the designated amount.
In applying this compensation philosophy, the Committee believes that the
components of executive compensation should include base salary, annual and
long-term incentive compensation, stock option grants and other benefits. A
brief summary of each component follows.
BASE SALARY
Base salaries are competitive with market rates and are based on an internal
evaluation of the responsibilities required for each position. The Committee
relies on outside industry surveys to assess salary competitiveness, as well
as reviewing hiring and turnover patterns within the company. During fiscal
1995, the Committee commissioned a report (the "1995 Report") from an
independent consulting firm regarding executive
5
<PAGE>
compensation paid by other companies having similar revenues and businesses
("Comparable Employers"). In determining the group of Comparable Employers,
the independent consultant assembled market data on medical device
manufacturers with similar revenues. The Comparable Employers group is similar
in composition to the S&P Medical Products & Supplies Index included in the
stock price performance graph in this proxy statement. The Committee believes
that total cash compensation for company executives should be targeted within
the 25th to 75th percentile of executives at Comparable Employers when the
company meets commensurately challenging financial goals. Where executives
fall within that range will depend on their seniority and their consistency in
performance. This approach is consistent with the Committee's responsibility
to link executive compensation with the company's financial performance while
also reflecting competitive market data.
Salary increases are based on annual supervisor reviews and are intended to
reflect individual as well as group performance, as well as the results of the
industry surveys referenced above. Annual increases for salaried Associates
are all awarded on the same day (the Monday closest to September 1) so as to
ensure fairness across the company and to incorporate both the previous fiscal
year's operating results and individual performances. The company provides
opportunities for compensation above the base salary level through its annual
and long-term incentive compensation programs.
ANNUAL INCENTIVE COMPENSATION
The company has used throughout its history a Management Incentive Bonus
Plan (the "MIB Plan") pursuant to which members of management are eligible to
receive annual cash bonuses. Generally, each bonus will be based on both the
achievement of individual objectives agreed upon by the manager and his or her
immediate supervisor, and upon attainment of certain earnings targets by the
company as a whole (in the case of corporate management), or by the division
(in the case of division management). With regard to the company's
performance, the two primary measures used for determining bonuses are the
company's earnings per share ("EPS") growth and its return on equity, both of
which influence stockholder value. A division's performance is measured
against goals for earnings growth (after a capital charge on any cash drawn),
and levels of return on net assets. No bonus is paid at either the corporate
or divisional level unless earnings exceed prior year results. Earnings goals
are approved annually by the board of directors and are tied to the company's
operating plan. The maximum payout that can currently be earned under the MIB
Plan ranges from 10% to 80% of a person's annual salary, depending upon his or
her position.
LONG-TERM INCENTIVE COMPENSATION
The company adopted a Special Bonus Plan (the "SBP" or "SB Plan") in 1990
for the purpose of providing incentive cash bonuses to certain executives of
the company and its divisions, contingent upon their unit's consistently
exceeding its earnings targets over a moving three-year performance period.
The awards are calculated based on a percentage of the amount by which actual
base year earnings exceed the target, without a ceiling. Awards under this
program for the chief executive officer, chief financial officer, senior vice
presidents and division presidents are calculated at 10% of their base salary
when on-target earnings are reached and 20% of their base salary if maximum
earnings are achieved. All other participating executives receive awards based
on a calculation of 5% of their base salary when on-target earnings are
reached and 10% of their base salary if maximum earnings are achieved. If
earnings exceed the maximum, 15% of such earnings excess will be shared with
the management team that delivered it, in the form of an additional contingent
SBP award. After the close of each of the two succeeding fiscal years, cash
payouts equal to 50% of the bonus previously accrued will be made to eligible
executives still employed on such dates, but only if the earnings goals for
that year have been exceeded. Any incentive bonus not so earned by an
executive will be forfeited and used to help make up the profit shortfall. The
SBP supplements the yearly awards of the MIB Plan and is designed to encourage
multi-year, sustained growth. Because the SBP is uncapped and rewards
performance over a three-year period, the SBP provides complementary
incentives to the annual MIB Plan.
6
<PAGE>
STOCK OPTIONS
Certain management Associates of the company are eligible to receive
periodic grants of non-qualified and incentive stock options pursuant to the
1993 Stock Option Plan. The Committee establishes the terms of options granted
under the 1993 Plan. Options which have been granted under the 1993 Plan
become exercisable in four equal annual increments beginning on the first
anniversary date of the grant. The option price, which is determined by the
Committee, must, for incentive stock options, be equal to at least 100% of the
fair market value of the shares covered by the option on the date of grant.
Options are granted to certain management and senior technology Associates and
are intended to retain them and motivate them to improve the company's long-
term stock market performance, aligning their interests with those of
stockholders. In determining the number of options to be granted to an
Associate, the Committee makes a subjective determination based on a number of
factors, including the individual's level and scope of responsibility, job
performance, and the overall competitiveness of his or her compensation
package compared to outside industry surveys.
PROFIT SHARING CONTRIBUTION
The company contributes to a Profit Sharing/Savings Plan in which all
domestic Associates (except those under certain collective bargaining
agreements) may participate. It is a deferred 401(k) plan which serves as the
company's only form of retirement plan for Associates in the United States.
Annual awards for Associates under the profit sharing portion of the plan can
vary from 4% to 6% of compensation, contingent upon attainment of certain
earnings targets by the company as a whole in the case of corporate office
Associates, or by the division, in the case of division Associates. The
savings portion of the plan provides Associates with a company matching
contribution which matches their voluntary savings on a dollar-for-dollar
basis up to a maximum of $400. Associates employed outside the United States
have a defined contribution plan in effect which generally mirrors the United
States plan, to the extent appropriate in view of local laws and practices.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The 1995 Report described in "Base Salary" above indicated that the salary
and total compensation package of the company's chief executive officer, Mr.
Richard H. Chandler, were below the median level for the Comparable Employers.
As a result, the Committee increased Mr. Chandler's fiscal 1996 base salary by
$75,000 on September 1, 1995. This increase brought Mr. Chandler's fiscal 1996
base salary to approximately the median of the Comparable Employers group.
In determining the fiscal 1996 bonus compensation for Mr. Chandler, the
Committee at its August 1996 meeting followed its established guidelines as
outlined above. Due to the company's losses for fiscal 1996, the Committee
concluded that Mr. Chandler and each of the other Corporate Office executive
officers would not be granted an MIB bonus or SBP accrual for fiscal 1996. The
Committee also decided not to increase Mr. Chandler's fiscal 1997 base salary
as a result of the fiscal 1996 losses. The Committee had previously decided
not to award any fiscal 1996 stock options to Mr. Chandler.
Pursuant to the company's SBP, the amounts initially accrued against
earnings in fiscal years 1994 and 1995 as Mr. Chandler's contingent award for
the company's performance in those years as originally reported have been
adjusted to zero to reflect the subsequent restatement of financial results
for fiscal years 1994 and 1995. The company contributed $400 to Mr. Chandler's
401(k) account.
This compensation committee report shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the company specifically
incorporates this report by reference, and shall not otherwise be deemed filed
under such Acts.
Lee A. Ault III Murray M. Hutchison John R. Woodhull
Chairman
7
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COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation of
the company's chief executive officer and the four other most highly-
compensated executive officers (the "Named Officers") for the fiscal years
ended June 28, 1996, June 30, 1995 and July 1, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
---------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ------ --------
OTHER STOCK LTIP ALL OTHER
NAME AND PRINCIPAL FISCAL BONUS ANNUAL OPTION PAYOUTS COMPENSATION
POSITION YEAR SALARY (1) COMPENSATION GRANTS (2) (3)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard H. Chandler..... 1996 $460,577 $ -- -- -- $ -- $ 4,243
Chairman of the board 1995 400,000 124,800 -- 20,000 64,805 10,509
and president 1994 370,000 92,593 -- 25,000 102,150 13,919
Thomas H. O'Donnell(4).. 1996 265,192 14,432 -- 20,000 -- 8,458
Senior vice president, 1995 240,000 102,538 -- 5,000 65,528 8,480
North America (5) 1994 232,000 82,347 -- 5,000 74,998 13,946
Barrie Payne(4)......... 1996 231,653 32,056 -- 20,000 -- 3,861
Senior vice president, 1995 209,000 102,177 -- 5,000 38,834 9,841
Europe (6) 1994 200,000 52,805 -- 5,000 41,800 13,833
Richard Kollisch(7)..... 1996 201,669 24,260 -- 5,000 -- 11,214
President, Sopur 1995 212,738 104,242 -- 5,000 -- 10,637
Medizintechnik GmbH 1994 184,220 15,443 -- 5,000 -- --
Dennis J. McCarthy(4) .. 1996 190,633 87,813 -- 5,000 7,277 9,947
President, Joerns 1995 182,150 -- -- 5,000 -- 7,858
Healthcare, Inc. 1994 168,111 78,126 -- 5,000 3,700 11,381
</TABLE>
- -------------------------------------------------------------------------------
(1) The amounts reflect the bonuses accrued under the Management Incentive
Bonus Plan in the designated fiscal years. See the Compensation Committee
Report to Stockholders for a description of this plan.
(2) The amounts reflect contingent bonuses accrued in prior years under the
Special Bonus Plan which were earned based on performance attained in the
designated fiscal years. See the Compensation Committee Report to
Stockholders for a description of this plan.
(3) Includes amounts allocated by the Company for the accounts of the Named
Officers in fiscal 1996 as follows:
<TABLE>
<CAPTION>
PROFIT SHARING/ LIFE INSURANCE
NAME SAVINGS PLAN PREMIUMS
---- --------------- --------------
<S> <C> <C>
Richard H. Chandler..................... $ 400 $3,843
Thomas H. O'Donnell..................... 6,400 2,058
Barrie Payne............................ 400 3,461
Richard Kollisch........................ 10,171 1,043
Dennis J. McCarthy...................... 8,065 1,882
</TABLE>
The company has no defined benefit or other actuarial plan covering the Named
Officers.
(4) Each of Messrs. O'Donnell, Payne and McCarthy have employment agreements
entitling them to receive a severance payment upon termination of
employment equal to one year's base salary, unless such termination is for
good cause (as defined in the agreements).
(5) During fiscal 1994, 1995 and the first half of fiscal 1996, Mr. O'Donnell
was president of Quickie Designs Inc., a company subsidiary. In January
1996 he was elected senior vice president, North America for the company.
(6) During fiscal 1994, 1995 and the first half of fiscal 1996, Mr. Payne was
managing director of Sunrise Medical Ltd., a company subsidiary. In
January 1996 Mr. Payne was elected senior vice president, Europe for the
company.
(footnotes continued on next page)
8
<PAGE>
(7) Mr. Kollisch's compensation is denominated in German deutsche marks. For
purposes of this table, all amounts have been converted to dollars at the
exchange rate in effect as of the last day of each fiscal year. Mr.
Kollisch and the company entered into an employment agreement as of March
31, 1992, pursuant to which Mr. Kollisch is entitled to receive a
severance payment in the event of the termination of his employment by the
company equal to eight months of salary plus one additional month of
salary for each year he is employed by the company after fiscal 1996,
unless such termination is for good cause (as defined in the agreement).
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth information concerning options granted under
the 1993 Stock Option Plan to the Named Officers during the 1996 fiscal year.
OPTION/SAR GRANTS IN 1996 FISCAL YEAR (1)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATE OF
STOCK PRICE APPRECIATION
FOR OPTION TERM (2)
-------------------------
PERCENT
OF TOTAL
OPTIONS/
SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES OR BASE
GRANTED IN PRICE EXPIRATION
NAME (#) FISCAL YEAR PER SHARE DATE 5% 10%
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard H. Chandler..... 0 0.0% $ -- -- $ -- $ --
Thomas H. O'Donnell..... 20,000 6.2 14.50 3/14/2006 178,307 455,701
Barrie Payne............ 20,000 6.2 14.50 3/14/2006 178,307 455,701
Richard Kollisch........ 5,000 1.6 14.50 3/14/2006 44,577 113,925
Dennis J. McCarthy...... 5,000 1.6 14.50 3/14/2006 44,577 113,925
------------ ------------
Totals............................................................ $ 445,768 $ 1,139,252
Increase in Total Stock Market Capitalization of the company
(under same assumptions) (3)..................................... $229 million $577 million
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) All grants were in the form of incentive stock options. No SARs have been
granted.
(2) Potential realizable value is calculated as the aggregate difference
between the market price of the Common Stock and the option exercise price
assuming that the stock price appreciates at the annual rate shown
(compounded annually) from the date of grant until the end of the option
term. These amounts are calculated based on the requirements promulgated
by the Securities and Exchange Commission and are not an estimate of
future stock price growth.
(3) This line is presented for comparative purposes and reflects, for all
outstanding shares as of June 28, 1996, the aggregate potential realizable
increase in value that would result if the company's stock price were to
increase from the market price on June 28, 1996 ($19.25 per share) by the
same compound annual rates set forth in the table over a 10-year period
ending June 28, 2006. These amounts are not an estimate of future stock
price growth.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during fiscal 1996 and unexercised
options held as of the end of fiscal 1996.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1996 AND JUNE 28, 1996
OPTION/SAR VALUES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
ACQUIRED VALUE AT JUNE 28, 1996 AT JUNE 28, 1996 (2)
ON REALIZED ------------------------- -------------------------
NAME EXERCISE (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard H. Chandler..... 0 $ -- 50,000 32,500 $126,838 $ 6,550
Thomas H. O'Donnell..... 0 -- 62,250 28,750 406,685 98,275
Barrie Payne............ 0 -- 40,085 28,750 302,109 98,275
Richard Kollisch........ 0 -- 31,250 13,750 154,825 27,025
Dennis J. McCarthy...... 0 -- 51,250 13,750 387,325 27,025
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the market value of the underlying shares on the exercise date
minus the option exercise price per share.
(2) Calculated on the basis of the fair market value of the underlying shares
as of June 28, 1996 ($19.25 per share) minus the exercise price.
LONG-TERM INCENTIVE PLAN
The following table sets forth information with respect to the Named
Officers concerning the awards made under the company's Special Bonus Plan
during fiscal 1995 and 1996. See the Compensation Committee's Report to
Stockholders for a description of this plan.
LONG-TERM INCENTIVE PLAN TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS
PERFORMANCE OR UNDER
OTHER PERIOD UNTIL NON-STOCK PRICE-BASED PLANS
MATURATION OR FROM 1995 AND 1996 ACCRUALS
PAYOUT ---------------------------
NAME (FISCAL YEAR) THRESHOLD TARGET MAXIMUM(1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard H. Chandler.............. 1997 $0 -- $ 0
1998 0 -- 0
Thomas H. O'Donnell.............. 1997 0 -- 3,921
1998 0 -- 0
Barrie Payne..................... 1997 0 -- 22,300
1998 0 -- 0
Richard Kollisch................. 1997 0 -- 39,880
1998 0 -- 0
Dennis J. McCarthy............... 1997 0 -- 18,487
1998 0 -- 18,487
- --------------------------------------------------------------------------------
</TABLE>
(1) Represents accruals for fiscal 1995 and 1996 that would be earned assuming
applicable financial performance goals are exceeded. Under the Special
Bonus Plan, the designated amounts will be paid in full if the performance
goals for the designated fiscal year are exceeded, or forfeited if
performance falls short of the goals for that fiscal year. Amounts
reflected for fiscal 1998 may increase by additional accruals in fiscal
1997 if certain fiscal 1997 performance targets are exceeded. Amounts
previously accrued for corporate office executives during fiscal years
1994 and 1995 were adjusted to zero to reflect the restatement of
financial results for these prior years.
10
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total returns
for the company, the S&P 500 Index and the S&P Medical Products and Supplies
Index. The graph assumes that the value of the investment in the company's
Common Stock and each index was $100 at June 30, 1991, and that all dividends
were reinvested.
FIVE-YEAR CUMULATIVE TOTAL RETURN COMPARISON (1)
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period SUNRISE INDUSTRY BROAD
(Fiscal Year Covered) MEDICAL INDEX MARKET
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 1991 $100 $100 $100
FYE 1992 $116.00 $114.19 $113.42
FYE 1993 $200.00 $ 93.66 $128.90
FYE 1994 $176.00 $ 90.29 $130.72
FYE 1995 $250.00 $138.52 $164.80
FYE 1996 $154.00 $181.98 $207.65
</TABLE>
- --------
(1) The graph covers the period from June 30, 1991 to June 30, 1996.
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 23, 1996, the name and
address, the total number of shares of Common Stock beneficially owned (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "1934 Act")), and the percentage of the outstanding shares of the Common
Stock so owned (i) by each person who is known to the company to own
beneficially 5% or more of the outstanding shares of Common Stock, (ii) by
each of the directors, (iii) by the company's chief executive officer and each
of the Named Officers and (iv) by all directors and executive officers as a
group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS(1) OWNERSHIP(2) OF CLASS
---------------------------------------- ------------ --------
<S> <C> <C>
Richard H. Chandler....................... 1,957,758(3) 10.1%
Wisconsin Investment Board................ 1,246,200 6.6%
121 E. Wilson St.
Madison, WI 53702
LGT Asset Management...................... 1,210,000 6.4%
50 California St., 27th Fl.
San Francisco, CA 94111-4624
Lazard Freres & Co........................ 1,150,000 6.1%
Thirty Rockefeller Plaza
New York, NY 10020
Lee A. Ault III........................... 26,000(4) *
Lloyd E. Cotsen........................... 15,750(5) *
Babette Heimbuch.......................... 2,900(6) *
Murray H. Hutchison....................... 27,000(7) *
William L. Pierpoint...................... 24,220(8) *
Joseph Stemler............................ 32,118(9) *
John R. Woodhull.......................... 22,000(10) *
Thomas H. O'Donnell....................... 70,702(11) *
Barrie Payne.............................. 61,995(12) *
Dennis J. McCarthy........................ 56,250(13) *
Richard Kollisch.......................... 36,250(14) *
ALL DIRECTORS & EXECUTIVE OFFICERS
AS A GROUP (21 PERSONS).................... 2,443,931(15) 12.7%(16)
</TABLE>
- --------
* Less than 1%
(1) Except as otherwise indicated, the address of each of the persons named
below is c/o Sunrise Medical Inc., 2382 Faraday Avenue, Suite 200,
Carlsbad, California 92008.
(2) Includes shares held for the benefit of the named person as of August 30,
1996 under the Sunrise 401(k) plan, as well as shares deemed to be
outstanding pursuant to stock options presently exercisable or
exercisable within 60 days after September 23, 1996. On the record date,
September 23, 1996, there were a total of 18,858,649 shares of the
company's Common Stock issued and outstanding.
(3) Includes Mr. Chandler's options to purchase 66,250 shares of Common
Stock. Also includes 15,350 shares held in a non-profit foundation of
which Mr. Chandler and family members are directors, and as to which Mr.
Chandler disclaims beneficial ownership.
(4) Includes Mr. Ault's options to purchase 10,000 shares of Common Stock.
(5) Includes Mr. Cotsen's options to purchase 13,750 shares of Common Stock.
(6) Includes Ms. Heimbuch's options to purchase 2,500 shares of Common Stock.
12
<PAGE>
(7) Includes Mr. Hutchison's options to purchase 12,500 shares of Common
Stock.
(8) Includes Mr. Pierpoint's options to purchase 5,000 shares of Common
Stock.
(9) Includes Mr. Stemler's options to purchase 3,750 shares of Common Stock.
(10) Includes Mr. Woodhull's options to purchase 12,500 shares of Common
Stock.
(11) Includes Mr. O'Donnell's options to purchase 67,500 shares of Common
Stock. Also includes 3,002 units of Common Stock held in the company's
Profit Sharing/Savings Plan for Mr. O'Donnell's benefit as of August 30,
1996.
(12) Includes Mr. Payne's options to purchase 45,025 shares of Common Stock.
(13) Includes Mr. McCarthy's options to purchase 56,250 shares of Common
Stock.
(14) Includes Mr. Kollisch's options to purchase 36,250 shares of Common
Stock.
(15) Includes options to purchase 425,677 shares of Common Stock held by all
directors and executive officers as a group. Also includes 9,687 units of
Common Stock held for the benefit of executive officers under the
company's Profit Sharing/Savings Plan as of August 30, 1996.
(16) Includes the 9,687 units of Common Stock and the 425,677 options referred
to in Note 16 above. The number of outstanding shares of Common Stock for
this purpose is 19,294,013.
COMPLIANCE WITH SECTION 16(a) OF THE 1934 ACT
Section 16(a) of the 1934 Act requires the company's directors and executive
officers, and any persons who are beneficial owners of more than 10 percent of
the Common Stock to report their initial ownership of Common Stock and any
subsequent changes in that ownership to the Securities and Exchange
Commission. Specific due dates for such reports have been established and the
company is required to disclose in this Proxy Statement any failure to file
such reports by such dates during fiscal 1996. All of such filing requirements
were satisfied during such period.
CERTAIN TRANSACTIONS
To assist Mr. Thomas O'Donnell, senior vice president, North America, in his
relocation to the corporate office, the company provided an interest free loan
of $437,000 to Mr. O'Donnell on February 29, 1996. The loan was evidenced by a
promissory note secured by a deed of trust, and has been repaid as of the date
hereof. In addition, the Company agreed to reimburse Mr. O'Donnell for any
loss on the sale of his Fresno residence, and to provide a tax gross up to
assist with any negative tax impact relating to his relocation.
13
<PAGE>
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP has been selected to serve as the company's
independent auditors for the 1997 fiscal year. This firm has audited the
company's financial statements since 1983. One or more representatives of KPMG
Peat Marwick LLP will be present at the Annual Meeting to respond to
appropriate questions and will be given an opportunity to make a statement if
they so desire.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Pursuant to proxy rules 14a-5(e) and 14a-8(a)(3)(i), any proposals of
stockholders intended to be presented at the company's fiscal 1997 Annual
Meeting of Stockholders must be received by the secretary of the company at
the address of the company set forth on the first page of this Proxy Statement
on or before June 20, 1997 in order to be considered for inclusion in the
company's proxy materials for that meeting. In addition, under the company's
Bylaws, nominations of candidates for election to the company's board of
directors and other stockholder proposals must generally be received by the
Secretary of the company not less than 60 days prior to the Annual Meeting in
order to be considered and acted upon at the Annual Meeting.
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the board of
directors knows of no other matter which will be acted upon at the Annual
Meeting. If any other matters are presented properly for action at the Annual
Meeting or at any adjournment thereof, it is intended that the proxies will be
voted with respect thereto in accordance with the best judgment and in the
discretion of the proxy holders, insofar as such proxies are not limited to
the contrary.
Dated October 21, 1996 By order of the board of directors,
[LOGO of SIGNATURE]
Steven A. Jaye
Vice president, general counsel
and secretary
14
<PAGE>
- -------------------------------------------------------------------------------
Please mark -----
your votes as X
indicated in -----
this example
THE SUNRISE MEDICAL BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2:
Item 1-ELECTION OF DIRECTORS
NOMINEES:
Richard H. Chandler Murray Hutchison WITHHELD
Lee A. Ault III William L. Pierpoint FOR FOR ALL
Lloyd E. Cotsen Joseph Stemler [_] [_]
Babette Heimbuch J. R. Woodhull
Item 2-APPROVAL OF THE PROXIES TO VOTE IN THEIR DISCRETION UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY ADJOURNMENT THEREOF.
FOR AGAINST ABSTAIN
[_] [_] [_]
WITHHELD FOR ONE OR MORE: (Write that nominee's name in the space provided
below).
___________________________________________________
WILL ATTEND
MEETING [_]
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 *
<PAGE>
- --------------------------------------------------------------------------------
PROXY
SUNRISE MEDICAL INC.
The undersigned holder of Common Stock acknowledges receipt of a copy of the
Annual Report and the Proxy Statement dated October 21, 1996 and, revoking any
proxy heretofore given, hereby constitutes and appoints Mr. Richard H.
Chandler and Mr. Steven A. Jaye, and each of them, as proxies, each of them
with the power to appoint his substitute, and hereby authorizes each of them
to represent and to vote, cumulatively or otherwise as designated on the
reverse side, all the shares of Common Stock held of record by the undersigned
on September 23, 1996, at the Annual Meeting of Stockholders to be held on
November 21, 1996, at 2:00 P.M. PST at the Del Mar Hilton Hotel and any
adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
INDICATED, IT WILL BE VOTED FOR THE NOMINEES FOR DIRECTORS AND, IN THE
DISCRETION OF THE PROXY HOLDERS, WITH RESPECT TO ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING ENVELOPE.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
