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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 Section240.14a-11(c) or
Section240.14a-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/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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:
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(5) Total fee paid:
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/ / 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:
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(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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[LOGO]
2382 FARADAY AVENUE, SUITE 200
CARLSBAD, CALIFORNIA 92008
------------------------
NOTICE OF ANNUAL MEETING
TO BE HELD ON NOVEMBER 13, 1997
------------------------
DEAR STOCKHOLDER:
The Annual Meeting of Stockholders of Sunrise Medical Inc. will be held at
the Del Mar Hilton, 15575 Jimmy Durante Boulevard, Del Mar, California, on
Thursday, November 13, 1997, starting at
2:00 p.m. We look forward to the opportunity of greeting personally those
stockholders who are able to attend.
At the meeting, we will:
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.
Management will then report on the activities of Sunrise and comment on its
future plans. Stockholders will then be able to ask questions and present their
comments.
The board of directors fixed the close of business on September 19, 1997 as
the record date for determining stockholders entitled to notice of and to vote
at this Annual Meeting. If you plan to be present, please notify our director of
corporate communications, Marcia Vaughan (at 760/930-1500), so that
identification can be prepared for you. Thank you for your interest and
consideration.
Sincerely,
[LOGO]
Steven A. Jaye
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
October 10, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND MAIL
THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. EVEN IF YOU HAVE GIVEN
YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
[LOGO]
2382 FARADAY AVENUE, SUITE 200
CARLSBAD, CALIFORNIA 92008
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 13, 1997
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 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 13, 1997, commencing at
2:00 p.m., and any postponement or adjournment thereof.
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. 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.
The company will bear the entire expense of this proxy solicitation. The
company may reimburse brokerage houses, fiduciaries, and custodians for their
reasonable expenses to forward copies of solicitation materials to their
principals. Solicitation may be made by telephone or otherwise by officers,
directors or Associates (employees) of the company, who will receive no
compensation other than their regular compensation.
The close of business on September 19, 1997 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 19,304,624 shares of
Common Stock. This Proxy Statement and the accompanying proxy card are being
sent to such stockholders on or about October 10, 1997. 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. 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. Unless otherwise
instructed, the proxy holders intend to
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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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NAMED NOMINEE
<TABLE>
<S> <C>
RICHARD H. CHANDLER Mr. Chandler has served as chairman of the board of directors
Age 54 and chief executive officer of the company since its inception
Director since 1983 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 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. 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. From 1974
to 1979 he held senior management positions with Sara Lee
Corporation, ending as a group vice president and including two
years when he was president of its Abbey Medical/Abbey Rents
division.
LEE A. AULT III From 1968 until January 1992, Mr. Ault was chief executive
Age 61 officer of Telecredit, Inc., a payment services company,
Director since 1988 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. Mr. Ault is also a member of
the board of directors of Bankers Trust New York Corporation,
Bankers Trust Company and Viking Office Products, Inc. From
time to time BT Alex. Brown Incorporated, a subsidiary of
Bankers Trust New York Corporation, has and may make a market
in the securities of the company, publish research reports
covering the company and provide advisory services to the
company.
LLOYD E. COTSEN Mr. Cotsen served as chief executive officer of Neutrogena
Age 68 Corporation, a publicly-owned skin care and hair care products
Director since 1989 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.
BABETTE HEIMBUCH Since 1982 Ms. Heimbuch has held positions of increasing
Age 49 responsibility with First Federal Bank of California and its
Director since 1994 parent company, FirstFed Financial Corp., a NYSE-listed
company, and currently serves as president and chief executive
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 advisors of Santa Monica-UCLA Medical Center and the board
of directors of the Western League of Savings Institutions and
the Federal Home Loan Bank of San Francisco.
</TABLE>
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<TABLE>
<S> <C>
MURRAY H. HUTCHISON Mr. Hutchison was chairman of International Technology
Age 58 Corporation, a NYSE-listed environmental management company,
Director since 1983 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.
He also serves on the board of directors of Olsen Company,
Senior Resource Group and Epic Solutions, all privately held
companies, and Cadiz Land Company, a public company.
WILLIAM L. PIERPOINT Mr. Pierpoint was president and chief executive officer of
Age 59 Summit Health Ltd., a publicly-owned, integrated health care
Director since 1985 company from 1977 to 1988. 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 Mr. Stemler joined the Maret Corporation, a privately held
Age 66 company, as its chief executive officer and chairman of its
Director since 1989 board of directors in 1997. He is a director of the Scholle
Corporation, a privately held company, and served as its CEO
and chairman in 1996. From 1989 through 1995, Mr. Stemler
served as president, chief executive officer and a director of
La Jolla Pharmaceutical Company, a publicly held biotechnology
company. He currently serves on the board of directors of La
Jolla Pharmaceutical Company and was chairman through 1996. 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 Mr. Woodhull is president and chief executive officer of
Age 64 Logicon, Inc., which provides electronic systems and
Director since 1986 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. Logicon became a wholly-
owned subsidiary of Northrop Grumman Corporation in August
1997. Logicon was a NYSE-listed company prior to that time. 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.
</TABLE>
If, at the time of the Annual Meeting, any of the above nominees should be
unable or unwilling to serve, the proxy holders may vote the proxies for a
substitute or substitutes. Management has no reason to believe that any
substitute nominee or nominees will be required.
MEETINGS AND ATTENDANCE
The board of directors met six times during the fiscal year ended June 27,
1997. The audit committee met three times, and the compensation committee met
four times in fiscal 1997. The nominating committee acted once by unanimous
written consent. The executive committee did not meet in fiscal 1997. All
directors attended at least three-fourths 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, except for Mr. Cotsen,
who attended four Board meetings.
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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 Ms. Heimbuch and Messrs.
Pierpoint and Stemler, with Mr. Pierpoint serving as chair.
COMPENSATION AND NOMINATING COMMITTEES. The compensation committee,
consisting solely of outside directors, meets with management and makes
recommendations to the board concerning (i) executive officer and key employee
compensation, (ii) payments to be made under the Management Incentive Bonus Plan
and the Special Bonus Plan, and (iii) company contributions to be made under the
Profit Sharing/Savings Plan. The compensation committee also administers the
stock option plans of the company. In addition, this committee functions as a
nominating committee regarding vacancies in the board of directors. For the
fiscal 1998 Annual Meeting of Stockholders, the nominating committee will
consider nominees for directors of the company recommended by stockholders who
submit the person's name and qualifications to the secretary of the company by
June 12, 1998. 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.
DIRECTOR COMPENSATION
Outside directors are paid a $2,000 per year retainer and $1,000 for each
board meeting attended ($500 if a board meeting is telephonic). 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 receive an additional $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. The company has no
other contracts or other arrangements pursuant to which any non-employee
director was compensated during the year.
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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 other highly compensated officers, 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 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
direction 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;
- 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.
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 for different subgroups, 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 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 from time to time on outside industry surveys to assess salary
competitiveness, as well as reviewing hiring and turnover patterns within the
company. The last such survey occurred in fiscal 1995, when the Committee
commissioned a report (the "1995 Report") from an independent consulting firm
regarding executive compensation paid by other companies having similar revenues
and businesses ("Comparable Employers"). The Comparable Employers group was
similar (but not identical) in composition to the S&P Medical Products Index
included in the Stock Price Performance Graph in this proxy statement. In
determining the group of Comparable Employers, the independent consultant
assembled market data on medical device manufacturers with similar revenues. 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
performance. The Committee's objective is to link executive compensation with
the company's financial performance while also reflecting competitive market
factors.
Salary increases are based on annual supervisor reviews and are intended to
reflect individual as well as business unit performance, along with the results
of industry survey results such as the 1995 Report 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.
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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. With
regard to the company's performance, the primary measure used for determining
bonuses is the company's earnings per share growth. An operating unit'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. 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. The maximum payout
that can currently be earned under the MIB Plan ranges from 10% to 80% of a
manager'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 SBP is
designed to encourage multi-year, sustained growth. Depending on the manager's
position, award accruals under this program range from 3% to 10% of base salary
when on-target earnings are reached and 6% to 20% of 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 accrual. After the close of each of the two
succeeding fiscal years, cash payouts equal to 50% of the SBP 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 the company
make up the profit shortfall.
STOCK OPTIONS
Certain management Associates of the company are eligible to receive
periodic grants of non-qualified or 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 CONTRIBUTIONS
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
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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
In determining the fiscal 1997 compensation for the company's chairman and
chief executive officer, Mr. Richard H. Chandler, the Committee followed its
established philosophy and guidelines as outlined above. During its August 1996
meeting, the Board accepted the Committee's recommendation to not increase Mr.
Chandler's fiscal 1997 base salary of $475,000, as a result of the company's
fiscal 1996 losses. Based on the company's results for fiscal year 1997 and
achievement of other objectives pre-established for the year, the Board, at its
August 1997 meeting, accepted the Committee's recommendation to (i) award Mr.
Chandler a fiscal 1997 MIB bonus of $86,821 (18.3% of his base salary), (ii)
increase his base salary to $492,500 (an increase of 3.7%) for the fiscal year
1998 and (iii) grant Mr. Chandler a non-qualified stock option to purchase
25,000 shares of company Common Stock at a price of $16.02 per share. In
addition, in August 1997, the company contributed $6,000 to his 401(k) account
along with the $400 company matching contribution. There was no SBP accrual or
payout for Mr. Chandler in fiscal 1997.
CHANGE IN CONTROL AGREEMENTS
During fiscal 1997, the Committee commissioned a report from an independent
consulting firm regarding Change in Control ("CIC") Agreements provided to
executives at companies having businesses and revenues comparable to those of
Sunrise. The comparable companies group is similar (but not identical) in
composition to the S&P Medical Products & Supplies Index included in the stock
price performance graph in this proxy statement. The report found that 7 of the
10 public medical device companies studied have CIC Agreements for their senior
executives. The consultant recommended provision of CIC Agreements to the
company's key executives for the following reasons: (i) to attract and retain
highly qualified executives and key contributors, (ii) to maintain executives'
focus on enhancing shareholder value, (iii) to maintain executives' focus on
customer service and other functions critical to preserving company value, (iv)
to help executives maintain neutrality in their attitudes toward a prospective
change in control; (v) to keep the management team intact during a transition
and, (vi) to encourage continued strong performance by preserving benefits which
executives have earned or are in the process of earning. On this basis, the
Board accepted the Committee's recommendation at their April 1997 meeting that
CIC Agreements be entered into with Mr. Chandler, the Named Officers and certain
company executives.
Each CIC Agreement provides for a severance payment of up to two times the
executive's annual salary and target MIB bonus plus a two year continuation of
health and other benefits if (i) there is a "change in control" (as defined in
the Agreement) of the company followed within two years by (ii) the executive's
termination by the company without "cause" or termination by the executive for
"good reason" (each term is defined in the Agreement). In addition, in the case
of Mr. Chandler and the company's chief financial officer, Mr. Tarbet, the CIC
Agreement provides a 30 day window period following the first anniversary of the
change in control during which period they may terminate their employment with
or without "good reason" and receive the above described severance benefits.
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
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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 27,
1997, June 28, 1996 and June 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
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LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
<CAPTION>
OTHER STOCK
FISCAL ANNUAL OPTION LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) COMPENSATION GRANTS PAYOUTS(2) COMPENSATION(3)
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Richard H. Chandler .......... 1997 $ 475,000 $ 86,821 -- 25,000 $ -- $ 10,992
CHAIRMAN OF THE BOARD AND 1996 460,577 -- -- -- -- 4,243
PRESIDENT 1995 400,000 124,800 -- 20,000 64,805 10,509
Thomas H. O'Donnell .......... 1997 300,000 19,697 -- 10,000 1,961 8,901(4)
PRESIDENT, HOME HEALTHCARE 1996 265,192 14,432 -- 20,000 -- 8,458(4)
GROUP 1995 240,000 102,538 -- 5,000 65,528 8,480
Barrie Payne ................. 1997 266,154 18,311 -- 10,000 11,150 10,410
PRESIDENT, SUNRISE MEDICAL 1996 231,653 32,056 -- 20,000 -- 3,861
EUROPE 1995 209,000 102,177 -- 5,000 38,834 9,841
Ted N. Tarbet ................ 1997 220,000 31,111 -- 10,000 -- 7,407
SENIOR VICE PRESIDENT 1996 216,154 -- -- -- -- 1,368
AND CHIEF FINANCIAL OFFICER 1995 194,231 49,920 -- 10,000 23,540 8,093
Dennis J. McCarthy ........... 1997 202,071 38,145 -- 21,000 -- 8,469
PRESIDENT, CONTINUING CARE 1996 190,633 87,813 -- 5,000 7,277 9,947
GROUP 1995 182,150 -- -- 5,000 -- 7,858
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</TABLE>
(1) The amounts reflect the bonuses earned 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 paid out for the designated fiscal years. See
the Compensation Committee Report to Stockholders for a description of this
plan.
(FOOTNOTES CONTINUED ON NEXT PAGE)
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(3) Includes amounts allocated by the Company for the accounts of the Named
Officers in fiscal 1997 as follows:
<TABLE>
<CAPTION>
LIFE
PROFIT SHARING/ INSURANCE
NAME SAVINGS PLAN PREMIUMS
- --------------------------------------------------------------- --------------- -------------
<S> <C> <C>
Richard H. Chandler............................................ $ 6,400 $ 4,592
Thomas H. O'Donnell............................................ 6,400 2,501
Barrie Payne................................................... 6,400 4,010
Ted N. Tarbet.................................................. 6,400 1,007
Dennis J. McCarthy............................................. 6,400 2,069
</TABLE>
The company has no defined benefit or other actuarial plan covering the
Named Officers. Each of the Named Officers is party to a Change in Control
Agreement with the company. (See "Compensation Committee Report to
Stockholders--Change in Control Agreements") In addition, Messrs. O'Donnell
and Payne 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).
(4) At the request of the company, Mr. O'Donnell moved his residence twice
during fiscal 1996: (i) from Fresno, California to the company's corporate
headquarters at Carlsbad, California in April 1996 and (ii) to the newly
formed Home Healthcare Group headquarters near Boulder, Colorado in June
1997. For each of these moves the company paid for the relocation and
reimbursed Mr. O'Donnell for losses suffered thereby. The total shown above
excludes such costs and losses totaling $21,319 for fiscal 1996 and $382,293
for fiscal 1997, including losses on the sale of the residences, costs of
buying and selling the homes, moving and travel costs, and temporary living
expenses, together with a tax gross-up covering such items. In addition, the
company provided Mr. O'Donnell with three short term, bridge loans to
facilitate such moves in the amounts of $437,000, $356,000 and $50,000,
respectively. Each such loan was evidenced by a promissory note secured by a
deed of trust, and each such loan has since been repaid in full.
9
<PAGE>
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 1997 fiscal year.
OPTION/SAR GRANTS IN 1997 FISCAL YEAR
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATE OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
- ---------------------------------------------------------------------------------------------------------
PERCENT
OF TOTAL
OPTIONS/
SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES OR BASE
GRANTED IN PRICE EXPIRATION
NAME (#)(1) FISCAL YEAR PER SHARE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Richard H. Chandler........ 25,000 6.2% $ 17.46 8/20/2006 $ 199,787 $ 576,681
Thomas H. O'Donnell........ 10,000 2.5 15.88 8/20/2006 95,765 246,522
Barrie Payne............... 10,000 2.5 15.88 8/20/2006 95,765 246,522
Ted N. Tarbet.............. 10,000 2.5 15.88 8/20/2006 95,765 246,522
Dennis J. McCarthy......... 7,000 1.7 15.88 8/20/2006 67,035 172,566
Dennis J. McCarthy......... 14,000 3.5 14.94 6/25/2007 130,085 331,015
----------- -----------
Totals......................................................................... $ 684,202 $ 1,819,828
Increase in total stock market capitalization of the company
(under same assumptions)(3).................................................. $179 million $451 million
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) All grants were in the form of incentive stock options and non-qualified
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 27, 1997, 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 27, 1997 ($14.688 per share) by the
same compound annual rates set forth in the table over a 10-year period
ending June 27, 2007. These amounts are not an estimate of future stock
price growth.
10
<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 1997 and unexercised
options held as of the end of fiscal 1997.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1997 AND JUNE 27, 1997 OPTION/SAR
VALUES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SHARES VALUE OF UNEXERCISED
ACQUIRED NUMBER OF IN-THE-MONEY
ON VALUE UNEXERCISED OPTIONS/SARS OPTIONS/SARS
NAME EXERCISE REALIZED(1) AT JUNE 27, 1997 AT JUNE 27, 1997(2)
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Richard H. Chandler......... 0 $ -- 66,250 41,250 $ 27,353 $ 0
Thomas H. O'Donnell......... 0 -- 72,250 28,750 165,138 2,820
Barrie Payne................ 0 -- 53,800 28,750 144,731 2,820
Ted N. Tarbet............... 0 -- 47,500 17,500 194,795 0
Dennis J. McCarthy.......... 0 -- 57,500 28,500 195,255 705
- ----------------------------------------------------------------------------------------------------------------
</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 27, 1997 ($14.688 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 1996 and 1997. See the Compensation Committee's Report to
Stockholders for a description of this plan.
LONG-TERM INCENTIVE PLAN TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PERFORMANCE OR
OTHER PERIOD
UNTIL ESTIMATED FUTURE PAYOUTS UNDER
MATURATION OR NON-STOCK PRICE-BASED PLANS
PAYOUT FROM 1996 AND 1997 ACCRUALS
NAME (FISCAL YEAR) THRESHOLD TARGET MAXIMUM(1)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Richard H. Chandler............................. 1998 -- -- --
1999 -- -- --
Thomas H. O'Donnell............................. 1998 -- -- --
1999 -- -- --
Barrie Payne.................................... 1998 -- -- --
1999 -- -- --
Ted N. Tarbet................................... 1998 -- -- --
1999 -- -- --
Dennis J. McCarthy.............................. 1998 -- -- $ 18,487
1999 -- -- --
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents accruals for fiscal 1996 and 1997 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
1999 may increase by additional accruals in fiscal 1998 if certain fiscal
1998 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.
11
<PAGE>
STOCK PRICE PERFORMANCE GRAPH(1)
The following graph shows a five-year comparison of cumulative total returns
for the company, the S&P 500 Index ("Broad Market") and the S&P Medical Products
and Supplies Index ("Industry Index"). The graph assumes that the value of the
investment in the company's Common Stock and each index was $100 at June 30,
1992, and that all dividends were reinvested.
FIVE-YEAR CUMULATIVE TOTAL RETURN COMPARISON(2)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
YEARS SUNRISE MEDICAL INC. INDUSTRY INDEX BROAD MARKET
<S> <C> <C> <C>
1992 $100.00 $100.00 $100.00
1993 168.70 82.02 113.65
1994 152.17 79.07 115.25
1995 216.52 121.31 145.30
1996 133.91 159.37 183.08
1997 105.22 211.11 246.61
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
----------------------------------------------------------------
1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sunrise Medical Inc............................. $ 100.00 $ 168.70 $ 152.17 $ 216.52 $ 133.91 $ 105.22
Industry Index.................................. 100.00 82.02 79.07 121.31 159.37 211.11
Broad Market.................................... 100.00 113.65 115.25 145.30 183.08 246.61
</TABLE>
- ------------------------
(1) This Stock Price Performance Graph 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 graph by reference, and shall not otherwise
be deemed filed under such Acts.
(2) The graph covers the period from June 30, 1992 to June 30, 1997.
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 19, 1997, 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(3)............................................. 1,975,258 10.2%
ICM Asset Management .............................................. 1,818,000(4) 9.4%
601 W. Main Avenue, Suite #600
Spokane, WA 99201
LGT Asset Management Inc. ......................................... 1,781,700(4) 9.2%
50 California St., 27th Fl.
San Francisco, CA 94111-4624
Wisconsin Investment Board ........................................ 1,246,200(4) 6.5%
121 E. Wilson St.
Madison, WI 53702
Entrust Capital Inc. .............................................. 1,193,931(4) 6.2%
650 Madison Avenue, 25th Floor
New York, NY 10022
Lazard Freres & Co. LLC ........................................... 996,200(4) 5.2%
Thirty Rockefeller Plaza
New York, NY 10020
Lee A. Ault III.................................................... 27,250 *
Lloyd E. Cotsen.................................................... 17,000 *
Babette Heimbuch................................................... 4,650 *
Murray H. Hutchison................................................ 28,250 *
William L. Pierpoint............................................... 28,470 *
Joseph Stemler..................................................... 48,368 *
John R. Woodhull................................................... 23,250 *
Thomas H. O'Donnell................................................ 80,770 *
Barrie Payne....................................................... 71,995 *
Ted N. Tarbet...................................................... 65,980 *
Dennis J. McCarthy................................................. 61,750 *
ALL DIRECTORS & EXECUTIVE OFFICERS
AS A GROUP (14 PERSONS).......................................... 2,437,794(5) 12.4%(6)
</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 31,
1997 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 19, 1997. On the record date, September 19,
1997, there were a total of 19,304,624 shares of the company's Common Stock
issued and outstanding.
(FOOTNOTES CONTINUED ON NEXT PAGE)
13
<PAGE>
(3) Includes Mr. Chandler's options to purchase 83,750 shares of Common Stock.
Also includes 55,350 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. The total number of shares used to determine
the percent of class is 19,388,374.
(4) Based upon holdings reported by the named institutions in filings with the
Securities and Exchange Commission on Forms 13G and/or 13F, together with
telephonic confirmation of holdings (where possible) as of September 19,
1997.
(5) Includes options to purchase 406,050 shares of Common Stock held by all
directors and executive officers as a group. Also includes 6,477 units of
Common Stock held for the benefit of executive officers under the company's
Profit Sharing/Savings Plan as of August 31, 1997.
(6) Includes the 6,477 units of Common Stock and the 406,050 options referred to
in Note 5 above. The number of outstanding shares of Common Stock for this
purpose is 19,717,151.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the company's directors, executive
officers and any persons who are beneficial owners of more than 10 percent of
the Common Stock ("Reporting Persons") to report their initial ownership of
Common Stock and any subsequent changes in that ownership to the Securities and
Exchange Commission (the "SEC"). The 1934 Act specifies deadlines for filing of
these reports with the SEC and also requires the disclosure in this proxy of any
failure to meet the filing deadlines. During fiscal 1997, based solely upon a
review of Forms 4 and 5 and written compliance statements from Reporting Persons
that no Form 5 was required, the company belives that all reports were filed on
time with the SEC.
PROXY VOTE TABULATION PROCEDURES
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 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. An
abstention has the same effect as a vote "against" any matter requiring the
affirmative vote of a majority of those present and entitled to vote for
passage. 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.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP has been selected to serve as the company's
independent auditors for the 1998 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.
14
<PAGE>
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 1998 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 12, 1998 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.
By order of the board of directors,
[LOGO]
Steven A. Jaye
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
Dated October 10, 1997
15
<PAGE>
PROXY
SUNRISE MEDICAL INC.
The undersigned holder of Common Stock acknowledges receipt of a copy of
the Annual Report and the Proxy Statement and, reviewing any proxy previously
given, hereby appoints Mr. Richard H. Chandler and Mr. Steven A. Jaye as
proxies, each with full power of substitution, and hereby authorized them to
represent and to vote, cumulatively or otherwise as designated on the reverse
side, all of the shares of Common stock of Sunrise Medical Inc. held of
record by the undersigned on September 19, 1997, at the Annual Meeting of
Stockholders to be held on November 13, 1997, at 2:00 P.M. PST at the Del Mar
Hilton Hotel and at 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
<PAGE>
THE SUNRISE MEDICAL BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2:
Please mark your votes as indicated in this example /X/
Item 1--ELECTION OF DIRECTORS
NOMINEES:
WITHHELD
FOR FOR ALL
Richard H. Chandler Murray H. Hutchison
Lee A. Ault III William L. Pierpoint
Lloyd E. Cotsen Joseph Stemier
Babette Heinbach John R. Woodhull
WITHHELD FOR ONE OR MORE:
(Write that nominee's name in the space provided below).
________________________________________________________
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
/ / / / / /
WILL ATTEND MEETING / /
Signature_____________________________ Signature __________________ 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
