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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:
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(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):
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(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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<PAGE>
[LOGO]
2382 FARADAY AVENUE, SUITE 200
CARLSBAD, CALIFORNIA 92008
------------------------
NOTICE OF ANNUAL MEETING
TO BE HELD ON NOVEMBER 20, 1998
---------------------
DEAR STOCKHOLDER:
The Annual Meeting of Stockholders of Sunrise Medical Inc. will be held at
the Del Mar Doubletree, 11915 El Camino Real, San Diego, California, on Friday,
November 20, 1998, starting at 2:00 p.m. We look forward to the opportunity of
personally greeting 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 22, 1998 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 760/930-1570), so that
identification can be prepared for you. Thank you for your interest and
consideration.
Sincerely,
[SIGNATURE]
Steven A. Jaye
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
October 9, 1998
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 20, 1998
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 Doubletree, 11915 El Camino
Real, San Diego, California, on Friday, November 20, 1998, 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 shown 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 22, 1998 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 22,172,483 shares of
Common Stock. This Proxy Statement and the accompanying proxy card are being
sent to such stockholders on or about October 9, 1998. 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
Seven 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 vote the shares represented by the
proxies received by them for the seven nominees shown below for a term of one
year and until their successors are duly elected and qualified.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NAMED NOMINEE
<TABLE>
<S> <C>
RICHARD H. CHANDLER
[PHOTO] Age 55, Director since 1983
Mr. 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 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
[PHOTO] Age 62, Director since 1988
Mr. Ault was chief executive officer from 1968 through January 1992 of
Telecredit, Inc. In 1990 Telecredit, Inc. merged with Equifax, Inc., a
New York Stock Exchange ("NYSE") listed information services company.
He serves on the board of directors of Equifax, Inc., Bankers Trust
Corporation, a NYSE listed bank holding company; Bankers Trust Company,
a subsidiary of Bankers Trust Corporation; Office Depot, a NYSE listed
office supplies retailer; and Pacific Crest Outward Bound School. 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.
MICHAEL N. HAMMES
[PHOTO] Age 56, Director since 1998
Mr. Hammes is currently the chairman of the board and chief executive
officer of Guide Corporation, a privately held company which has
contracted to purchase the automotive lighting business of General
Motors. The acquisition is expected to close prior to or shortly after
the Sunrise annual meeting of stockholders. From October 1993 to
February 1997, Mr. Hammes was chairman of the board and chief executive
officer of The Coleman Company, Inc., a global manufacturer and
distributor of camping and outdoor recreational products and
hardware/home products. From 1990 to 1993, he was vice chairman of the
Black & Decker Corporation and president of its Power Tool and Home
Products Group. From 1986 to 1990, Mr. Hammes was president of
international operations for Chrysler Corporation and a vice president
of the Company. Mr. Hammes also served in a number of positions at the
Ford Motor Company, with which he was affiliated for over 20 years. Mr.
Hammes is also a board member of Navistar Corporation, Johns Manville
Corporation and a member of the Board of Visitors of Georgetown
University's School of Business.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
MURRAY H. HUTCHISON
[PHOTO] Age 58, Director since 1983
Mr. Hutchison was chairman of the Board and chief executive officer of
International Technology Corporation, a NYSE-listed environmental
management company, from 1976 to 1994. Mr. Hutchison is currently a
private investor and serves on the board of directors of the Olsen
Company, Senior Resource Group and Epic Solutions, all privately held
companies, and Cadiz Land Company and Foodmaker, Inc., both publicly
traded companies.
WILLIAM L. PIERPOINT
[PHOTO] Age 60, Director since 1985
Mr. Pierpoint was president and chief executive officer of Summit
Health Ltd., a publicly owned, integrated health care 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
[PHOTO] Age 67, Director since 1989
Mr. Stemler joined the Maret Corporation, a privately held company, as
its chief executive officer and chairman of its 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 manufacturer of disposable healthcare
gloves.
JOHN R. WOODHULL
[PHOTO] Age 64, Director since 1986
Mr. Woodhull is chairman of the board of directors of Logicon, Inc.,
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 held the positions
of president and chief executive officer from 1969 to 1998. 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., a private company, FirstFed Financial Corp., a NYSE listed
company, First Federal Bank of California, a subsidiary of FirstFed
Financial Corp., and the YMCA of Metropolitan Los Angeles, a
not-for-profit California corporation.
</TABLE>
3
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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 seven times during the fiscal year ended July 3,
1998. The audit committee met three times, and the compensation committee met
six times in fiscal 1998. The nominating committee acted once by unanimous
written consent. The executive committee did not meet in fiscal 1998. All
directors attended at least three-fourths of the aggregate of the total number
of meetings of the board, the total number of meetings of the committees of the
board on which such directors served and related meetings.
COMMITTEES
AUDIT COMMITTEE. The audit committee of the board of directors is composed
solely of outside directors. The audit committee meets periodically with the
company's independent auditors, the 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. Hammes, Pierpoint
and Stemler, with Mr. Hammes serving as chair.
COMPENSATION COMMITTEE. 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 (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 1999 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 11, 1999. Members of the compensation
committee are Messrs. Ault, Hutchison and Woodhull, with Mr. Ault serving as
chair.
EXECUTIVE COMMITTEE. The executive committee, consisting of Messrs.
Chandler, Ault and Hammes, 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 an annual retainer of $16,000 (paid in monthly
installments) and $1,200 for each board meeting attended ($600 if a board
meeting is telephonic). In addition, committee members are paid $1,000 per
meeting if attended in person or $500 per meeting if a committee meeting is
telephonic. Committee chairs receive an additional $2,000 annual retainer paid
in semi-annual installments. Upon election to the board and every year
thereafter if still a director, each outside director is granted an option to
purchase 2,000 shares of Common Stock under the company's Amended and Restated
1993 Stock Option Plan. These options vest 100% on the first anniversary of the
grant. 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 other highly compensated officers, and determines
their respective compensation levels in terms of salary, bonuses and related
benefits. 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 operating and financial performance through
individual and group bonus incentives that pay for improved quantitative
performance versus annual targets;
- The encouragement of consistent, long-term enhancement of stockholder
value by providing multi-year performance incentives through a contingent
long-term 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 seven plans currently in effect for different subgroups, one
applies to senior executives; the other six are aimed more broadly at different
groups, including middle managers, engineers, technical specialists, 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 described below. 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 of each position. The Committee relies from
time to time on outside industry surveys to assess salary competitiveness, as
well as review hiring and turnover patterns within the company. The companies
included in such surveys are typically companies having revenues and businesses
similar to those of Sunrise and/or which draw from the same geographic area. The
Composition of such companies is generally a peer group of U.S. medical
equipment manufacturers similar (but not identical) in composition to the S&P
Medical Products 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 companies having businesses and revenues comparable to those of Sunrise.
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. Annual increases for salaried Associates are all
awarded on the same day, the first Monday in September, 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 the business unit's 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. As in prior years, the fiscal 1998 maximum payout that could be earned
under the MIB Plan ranged from 10% to 80% of a manager's salary, depending upon
his or her position.
During fiscal 1998, the company amended the MIB Plan to include a
compensation deferral feature similar to that formerly contained in the
company's Special Bonus Plan (the "SB Plan"). The SB Plan terminated at the end
of fiscal 1997 with the final installments due to be paid out following fiscal
1999. Under this amended MIB Plan, 80% of an MIB bonus earned in a given fiscal
year is paid out at the end of that year, and 20% is deferred and paid out, if
earned, in two equal installments over the following two years. The deferred
amount is paid out (i) if the manager is still employed as of the end of the
fiscal year in question; and (ii) if the division achieves at least a 5%
earnings increase over the first year level, and in the third year, at least a
5% increase over the second year level (if the second year is a down year,
earnings must at least meet minimum specified earnings targets in the third
year). The overall affect of this change to the MIB Plan is to encourage and
reward sustained, steady profit growth over a rolling three-year period.
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 that have been granted to Associates 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, is generally equal to 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 the outside industry surveys referenced
above. About 7% of the company's Associates qualify for stock options each year.
401(K) PROFIT SHARING CONTRIBUTIONS
The company contributes to a 401(k) Profit Sharing/Savings Plan (the "401(k)
Plan") in which all domestic Associates (except those under certain collective
bargaining agreements) may participate after satisfying the service requirements
of the Plan. Annual awards for Associates under the profit sharing portion of
the plan typically varies from 4% to 6% of compensation (subject to the
statutory limitations on compensation referenced in the following paragraph),
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
6
<PAGE>
of division Associates. The savings portion of the 401(k) Plan provides that
Associates may defer compensation (subject to statutory limitations) and
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 generally participate in defined
contribution plans which mirror the United States plan, to the extent
appropriate in view of local laws and practices.
In Fiscal 1998, the Board approved the Committee's recommendations to amend
the 401(k) Plan. The Committee retained an independent consulting firm to review
the 401(k) Plan and recommend changes. The consulting firm suggested upgrading
the company's current domestic retirement program for Associates, noting that
the Sunrise 401(k) Plan was not competitive when compared to its peer group of
U.S. medical equipment manufacturers. Specifically, the consulting firm noted
that, due to Internal Revenue Code ("IRC") statutory limitations, the 401(k)
Plan company contributions for higher paid Associates were restricted to a
relatively small percentage of their total compensation, and resulted in
inadequate funding for their retirement. On this basis, the Committee
recommended and the Board approved the incorporation of a new feature into the
plan which provides for additional company contributions of between 8% and 11%
of compensation above $65,400 and below $160,000 (the current IRC statutory
maximum under the 401(k) Plan). Additionally, the Committee and the Board
approved the consulting firm's further recommendation to establish in fiscal
1998 a non-qualified Supplemental Executive Retirement Plan ("SERP") described
below for higher level executives.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ("SERP")
The SERP provides for company discretionary retirement contributions to a
non-qualified plan for the benefit of Associates earning a base salary of
$140,000 and above. The SERP contributions are intended to replace funds that
are not contributed to the 401(k) Plan due to the IRC statutory limitation
referenced above. Discretionary contributions may range depending on corporate
or divisional profit performance, up to 11% of compensation over $160,000,
earned in a fiscal year. In addition, these executives may also voluntarily
defer up to 25% of their MIB bonus each year into the SERP.
The SERP is funded through a "rabbi" trust with American Express Trust Co.
as the trustee and represents a contractual obligation of the company to make
payments (subject to certain vesting restrictions) to the covered Executives
upon retirement, termination, disability or death. In the unlikely case that
Sunrise becomes insolvent, the assets of the Trust will be held for the benefit
of the company's general creditors.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In determining the fiscal 1998 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. The Board, at its
August 1997 meeting accepted the Committee's recommendation to increase Mr.
Chandler's fiscal 1998 base salary to $492,500 (an increase of 3.7%). During
fiscal 1998 the Board awarded Mr. Chandler two non-qualified stock option grants
to purchase 25,000 shares (at a price of $14.563 per share) and 35,000 shares
(at a price of $14.125 per share). In addition, in August 1998, the company
contributed $10,184 to his 401(k) account, along with a $400 company matching
contribution. The company also contributed $31,814 to his SERP account. Mr.
Chandler did not receive an MIB Bonus or SB Plan accrual or pay out for fiscal
1998.
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 H. 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 July, 3,
1998, June 27, 1997 and June 28, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
<CAPTION>
STOCK
OTHER ANNUAL OPTION LTIP ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS (1) COMPENSATION(2) GRANTS PAYOUTS(3) COMPENSATION(4)
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Richard H. Chandler(5) ...... 1998 $ 492,500 $ -- -- 60,000 $ -- $ 46,967
CHAIRMAN OF THE BOARD, 1997 475,000 86,821 -- 25,000 -- 10,992
PRESIDENT AND CHIEF 1996 460,577 -- -- -- -- 4,243
EXECUTIVE OFFICER
Thomas H. O'Donnell(5) ...... 1998 310,000 -- -- 25,000 -- 28,230(6)
SENIOR VICE PRESIDENT, 1997 300,000 19,697 -- 10,000 1,961 8,901(6)
OPERATIONS AND GROUP 1996 265,192 14,432 -- 20,000 -- 8,458(6)
PRESIDENT, HOME HEALTHCARE
Ben Anderson-Ray(5) ......... 1998 280,000 -- -- 7,000 -- 13,964
SENIOR VICE PRESIDENT, 1997 250,000 1,359 -- 14,000 -- 400(7)
OPERATIONS AND GROUP 1996 N/A N/A N/A N/A N/A N/A
PRESIDENT, CONTINUING CARE
Barrie Payne(5) ............. 1998 280,000 -- -- 25,000 -- 15,083(8)
SENIOR VICE PRESIDENT, 1997 266,154 18,311 -- 10,000 11,150 10,410
OPERATIONS AND GROUP 1996 231,653 32,056 -- 20,000 -- 3,861
PRESIDENT, NORTHERN EUROPE
Ted N. Tarbet(5) ............ 1998 233,000 -- -- 25,000 -- 19,587
SENIOR VICE PRESIDENT AND 1997 220,000 31,111 -- 10,000 -- 7,407
CHIEF FINANCIAL OFFICER 1996 216,154 -- -- -- -- 1,368
- -----------------------------------------------------------------------------------------------------------------------
</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) Excludes perquisites and other personal benefits, securities or property, to
the extent the aggregate amount of such compensation does not exceed the
lesser of either $50,000 or 10% of the total of annual salary and bonus
reported for the named executive officer.
(3) The amounts reflect contingent bonuses accrued in prior years under the
Special Bonus Plan which were paid out for the designated fiscal years.
(FOOTNOTES CONTINUED ON NEXT PAGE)
8
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(4) Includes amounts shown below allocated by the company for the accounts of
the Named Officers in fiscal 1998. The company has no defined benefit or
other actuarial plan covering the Named Officers.
<TABLE>
<CAPTION>
PROFIT SUPPLEMENTAL LIFE
SHARING/ EXECUTIVE INSURANCE
NAME SAVINGS PLAN RETIREMENT PLAN PREMIUMS
- --------------------------------------------- -------------- --------------- -------------
<S> <C> <C> <C>
Richard H. Chandler.......................... $ 10,584 $ 31,814 $ 4,569
Thomas H. O'Donnell.......................... 10,584 14,693 2,953
Ben Anderson-Ray............................. 10,584 2,417 963
Barrie Payne................................. 10,584 0 4,499
Ted N. Tarbet................................ 10,584 8,128 875
</TABLE>
Mr. Payne also has an arrangement in the U.K. to receive a company
contribution equal to 10% of his compensation to a private pension account
similar to the U.S. SERP referenced above.
(5) Each of the Named Officers is party to a Change in Control Agreement ("CIC")
with the company. 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 as 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.
Messrs. O'Donnell, Anderson-Ray, Payne & Tarbet also have severance
agreements entitling them to receive a severance payment upon termination of
employment equal to one year's base salary (plus, in Mr. Tarbet's case,
target bonus for such year), unless such termination is for good cause (as
defined in the agreements).
(6) At the request of the company, Mr. O'Donnell moved his residence: (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, $382,293 for fiscal 1997 and $144,581 for
fiscal 1998, 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.
(7) At the company's request, Mr. Anderson-Ray moved his residence to Boulder,
Colorado during FY 1997. The relocation expense totaled $9,273. Mr.
Anderson-Ray was provided with relocation related compensation of $50,000 to
further facilitate this relocation. The total shown above for Mr. Anderson-
Ray excludes such amounts.
(8) In order to assist Mr. Payne with unusual expenses related to the overseas
portion of his duties with the company, Mr. Payne was granted a loan in the
amount of $250,000 at a 6% annual interest rate. The principal must be
repaid in full on the fifth anniversary of the Secured Promissory Note dated
May 8, 1998. Interest is paid quarterly, in arrears. Notwithstanding the
foregoing, all principal and interest shall be due and payable ninety (90)
days after the expiration of, or immediately upon the termination of, Mr.
Payne's employment agreement with the company.
9
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth information concerning options granted under
the Amended and Restated 1993 Stock Option Plan or the Amended and Restated
Sentient/Sunrise Stock Option Plan to the Named Officers during the 1998 fiscal
year.
OPTION/SAR GRANTS IN 1998 FISCAL YEAR
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATE OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
<CAPTION>
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 5.1% $ 14.563 8/19/2007 $ 223,875 $ 572,136
Richard H. Chandler........ 35,000 7.2 14.125 4/28/2008 335,881 827,669
Thomas H. O'Donnell........ 10,000 2.0 14.563 8/19/2007 89,550 228,855
Thomas H. O'Donnell........ 15,000 3.1 14.125 4/28/2008 143,949 354,715
Ben Anderson-Ray........... 7,000 1.4 14.563 8/19/2007 62,685 160,198
Barrie Payne............... 10,000 2.0 14.563 8/19/2007 89,550 228,855
Barrie Payne............... 15,000 3.1 14.125 4/28/2008 143,949 354,715
Ted N. Tarbet.............. 10,000 2.0 14.563 8/19/2007 89,550 228,855
Ted N. Tarbet.............. 15,000 3.1 14.125 4/28/2008 143,949 354,715
----------- -----------
Totals......................................................................... 1,322,938 3,310,713
Increase in total stock market capitalization of the company
(under same assumptions)(3)................................................... $207 million $522 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 July 2, 1998, the aggregate potential realizable
increase in value that would result if the company's stock price were to
increase from the market price on July 2, 1998 ($14.813 per share) by the
same compound annual rates set forth in the table over a 10-year period
ending July 2, 2008. 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 1998 and unexercised
options held as of the end of fiscal 1998.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1998 AND JULY 2, 1998 OPTION/SAR
VALUES
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT JULY 2, 1998 AT JULY 2, 1998(2)
<CAPTION>
SHARES
ACQUIRED
ON VALUE
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Richard H. Chandler...... -- $ -- 83,750 83,750 $ 29,540 $ 30,330
Thomas H. O'Donnell...... -- -- 82,250 43,750 173,703 15,950
Ben Anderson-Ray......... -- -- 3,500 17,500 2,846 10,287
Barrie Payne............. -- -- 63,800 43,750 150,990 15,950
Ted N. Tarbet 3,000(3) 32,430(3) 52,000 35,000 167,176 12,820
</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 July 2, 1998 ($14.813 per share) minus the exercise price.
(3) Mr. Tarbet has retained ownership of these shares.
LONG-TERM INCENTIVE PLAN
The following table reflects the fact that the Named Officers received no
long term incentive awards in fiscal 1997 and 1998.
LONG-TERM INCENTIVE PLAN TABLE
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
OTHER PERIOD NON-STOCK PRICE-BASED PLANS
UNTIL
MATURATION OR FROM PRIOR FISCAL YEAR ACCRUALS
PAYOUT
NAME (FISCAL YEAR) THRESHOLD TARGET MAXIMUM
<S> <C> <C> <C> <C>
Richard H. Chandler............................... 1999 -- -- --
2000......... -- -- --
Thomas H. O'Donnell............................... 1999 -- -- --
2000 -- -- --
Ben Anderson-Ray.................................. 1999 -- -- --
2000 -- -- --
Barrie Payne...................................... 1999 -- -- --
2000 -- -- --
Ted N. Tarbet..................................... 1999 -- -- --
2000 -- -- --
</TABLE>
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,
1993, 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>
1993 $100.00 $100.00 $100.00
1994 90.21 96.40 101.41
1995 128.35 147.90 127.85
1996 79.38 194.31 161.09
1997 62.37 257.40 216.99
1998 61.86 344.32 282.44
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
----------------------------------------------------------------
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sunrise Medical Inc................................... $ 100.00 90.21 128.35 79.38 62.37 61.86
Industry Index........................................ 100.00 96.40 147.90 194.31 257.40 344.32
Broad Market.......................................... 100.00 101.41 127.85 161.09 216.99 282.44
</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, 1993 to June 30, 1998.
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 31, 1998, 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. On August 31, 1998
there were a total of 22,172,483 shares of the company's Common Stock issued and
outstanding.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNERS(1) OWNERSHIP(2) CLASS
- ------------------------------------------------------------------------------------------ ------------ -----------
<S> <C> <C>
ICM Asset Management...................................................................... 2,500,431(3) 11.3%
601 W. Main Avenue, Suite #917
Spokane, WA 99201
Entrust Capital Inc....................................................................... 2,256,664(3) 10.2%
650 Madison Avenue, 25th Floor
New York, NY 10022
Richard H. Chandler(4).................................................................... 1,992,758 9.0%
State of Wisconsin/Wisconsin Investment Board............................................. 1,246,200(3) 5.6%
121 E. Wilson St.
Madison, WI 53702
Lazard Freres & Co. LLC................................................................... 1,166,800(3) 5.3%
Thirty Rockefeller Plaza
New York, NY 10020
Lee A. Ault III........................................................................... 28,500 *
Michael Hammes............................................................................ -- *
Murray H. Hutchison....................................................................... 18,250 *
William L. Pierpoint...................................................................... 28,470 *
Joseph Stemler............................................................................ 49,618 *
John R. Woodhull.......................................................................... 23,250 *
Thomas H. O'Donnell....................................................................... 92,504 *
Ben Anderson-Ray.......................................................................... 5,547 *
Barrie Payne.............................................................................. 82,564 *
Ted N. Tarbet............................................................................. 73,881 *
ALL DIRECTORS & EXECUTIVE OFFICERS AS A GROUP (13 PERSONS)................................ 2,408,289(5) 10%(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,
1998 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 August 31, 1998.
(3) 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 August 31, 1998.
(FOOTNOTES CONTINUED ON NEXT PAGE)
13
<PAGE>
(4) Includes Mr. Chandler's options to purchase 101,250 shares of Common Stock.
Also includes 85,350 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 22,273,733.
(5) Includes options to purchase 385,750 shares of Common Stock held by all
directors and executive officers as a group. Also includes 7,853 units of
Common Stock held for the benefit of executive officers under the company's
Profit Sharing/Savings Plan as of August 31, 1998.
(6) Includes the 7,853 units of Common Stock and the 385,750 options referred to
in Note 5 above. The number of outstanding shares of Common Stock for this
purpose is 22,558,233.
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 1998, based solely upon a
review of Officer and Director Forms 4 and 5 and written compliance statements
from the company's directors and executive officers that no Form 5 was required,
the company believes that all reports for the company's directors and executive
officers 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 for action at the Annual Meeting.
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 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 1999 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(e) Q.5, any proposals of
stockholders intended to be presented at the company's fiscal 1999 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 11, 1999 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
14
<PAGE>
company not less than 60 days prior to the fiscal 1999 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,
[SIGNATURE]
Steven A. Jaye
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
Dated October 9, 1998
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, revoking 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 authorizes 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 22, 1998, at the Annual Meeting of Stockholders
to be held on November 20, 1998, at 2:00 P.M. PST at the Del Mar Doubletree
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. THIS PROXY WILL
ALSO BE VOTED 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 ITEM 1:
Please mark
your votes as / X /
indicated in
this example
Item 1 - ELECTION OF DIRECTORS
<TABLE>
<S> <C> <C> <S>
NOMINEES: FOR all nominees WITHHOLD
listed (except as AUTHORITY
marked to the contrary to vote for all
on the line below) nominees listed
Richard H. Chandler William L. Pierpoint
Lee A. Ault III Joseph Sternler / / / /
Michael N. Hammes John R. Woodhull
Murray H. Hutchison
</TABLE>
(INSTRUCTION: To withhold authority to vote for any nominee, put an "x" in
the "FOR" box above and write that nominee's name on the space provided below.)
- -------------------------------------------------------------------------------
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 ----
