<PAGE>
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SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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 Rule 14a-11(c) or Rule 14a-12
STERIS CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ________
(2) Aggregate number of securities to which transaction applies: ___________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): _____________
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction: _______________________
(5) Total fee paid: ________________________________________________________
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid: ________________________________________________
(2) Form, Schedule or Registration Statement No.: __________________________
(3) Filing Party: __________________________________________________________
(4) Date Filed: ____________________________________________________________
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<PAGE>
STERIS CORPORATION
5960 Heisley Road . Mentor, Ohio 44060-1834 . USA
TO OUR SHAREHOLDERS:
The 2000 Annual Meeting of Shareholders of STERIS Corporation will be held
at 9:00 a.m., Eastern Daylight-Saving Time, on Friday, July 21, 2000, at the
Radisson Hotel & Conference Center, 35000 Curtis Boulevard, Eastlake, Ohio,
USA. At the Annual Meeting, shareholders will be asked to elect three
directors for terms running through the 2002 Annual Meeting. Management will
also report on fiscal year 2000 results. We urge you to attend the meeting and
to vote FOR the nominees for director listed in the Proxy Statement.
The formal notice of the meeting and the Proxy Statement containing
information relative to the meeting follow this letter. We urge you to read
the Proxy Statement carefully.
Please sign and return the enclosed Proxy whether or not you plan to attend
the meeting to assure your shares will be voted. If you do attend the meeting,
and the Board of Directors joins me in hoping that you will, there will be an
opportunity to revoke your Proxy and to vote in person if you prefer.
Sincerely,
/s/ Bill R. Sanford
Bill R. Sanford
Chairman of the Board
and Chief Executive Officer
June 22, 2000
<PAGE>
STERIS CORPORATION
5960 Heisley Road . Mentor, Ohio 44060-1834 . USA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JULY 21, 2000
The Annual Meeting of Shareholders of STERIS Corporation will be held at
9:00 a.m., Eastern Daylight-Saving Time, on Friday, July 21, 2000, at the
Radisson Hotel & Conference Center, 35000 Curtis Boulevard, Eastlake, Ohio,
USA, for the following purposes:
1. To elect three directors to serve until the 2002 Annual Meeting; and
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on June 9, 2000, as
the record date for determining shareholders entitled to notice of the meeting
and to vote.
The Company's integrated Annual Report to Shareholders and Form 10-K for the
year ended March 31, 2000, is being mailed to shareholders with the Proxy
Statement. The Proxy Statement accompanies this Notice.
By Order of the Board of Directors
/s/ David C. Dvorak
David C. Dvorak
Secretary
June 22, 2000
Please sign and return the enclosed Proxy in the envelope provided for that
purpose, whether or not you expect to be present at the Annual Meeting. If you
attend the Annual Meeting, you may revoke your Proxy and vote your shares in
person.
<PAGE>
STERIS CORPORATION
5960 Heisley Road . Mentor, Ohio 44060-1834 . USA
PROXY STATEMENT
Annual Meeting, July 21, 2000
The Proxy
and
Solicitation
This Proxy Statement is being mailed on or about June 22, 2000,
to the shareholders of STERIS Corporation ("STERIS" or the
"Company") of record as of the close of business on June 9, 2000,
in connection with the solicitation by the Board of Directors of the enclosed
form of Proxy for the Annual Meeting of Shareholders to be held at 9:00 a.m.,
Eastern Daylight-Saving Time, on Friday, July 21, 2000, at the Radisson Hotel
& Conference Center, 35000 Curtis Boulevard, Eastlake, Ohio, USA. Pursuant to
the Ohio General Corporation Law, a shareholder may revoke a writing
appointing a Proxy by giving notice to the Company in writing or in open
meeting, or by submitting a subsequent Proxy. The cost of soliciting the
Proxies will be borne by the Company. In addition to solicitations by mail,
the Company may solicit proxies in person, by telephone, telecopy, or e-mail.
STERIS has engaged a professional proxy solicitation firm, Georgeson
Shareholder Communications Inc., to aid in the solicitation of Proxies, for
whose services the Company will pay a fee of not more than $10,000.
Voting
Securities
As of the record date set by the Board of Directors of June 9,
2000, the Company had 67,503,981 Common Shares outstanding and
entitled to vote at the Annual Meeting, each of which is entitled
to one vote. Under the Ohio General Corporation Law, the shares may be voted
cumulatively in the election of directors if (a) notice in writing is given by
any shareholder to the President, a Vice President, or the Secretary of the
Company not less than forty-eight hours before the time fixed for holding the
meeting that the shareholder desires the voting in the election to be
cumulative and (b) an announcement of the giving of the notice is made upon
the convening of the meeting by the Chairman or the Secretary or by or on
behalf of the shareholder giving the notice. If voting in the election of
directors is cumulative, each shareholder will have the right to cumulate the
shareholder's votes and to give one nominee a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
the shareholder's shares are entitled, or the shareholder may distribute the
shareholder's votes on the same principle among two or more nominees. In the
event of cumulative voting, the persons named in the enclosed Proxy will vote
the shares represented by valid Proxies on a cumulative basis for the election
of the nominees listed on pages 3 and 4, allocating the votes among the
nominees in accordance with their best judgment.
Common Shares represented by properly executed Proxies will be voted in
accordance with the specifications made thereon. If no specification is made,
Proxies will be voted FOR the election of the nominees named herein.
Abstentions and broker non-votes, unless a broker's authority to vote on a
particular matter is limited, are tabulated in determining the votes present
at a meeting. An abstention or a broker non-vote (assuming a broker has
unlimited authority to vote on the matter) has no effect with respect to the
election of a director nominee. An abstention or a broker non-vote has the
same effect as a vote against the approval of a proposal, as each abstention
or broker non-vote would be one less vote for the approval of a proposal.
Director nominees receiving the greatest number of votes will be elected as
directors. Other actions generally require a majority vote of those
shareholders present or represented by Proxy at the Annual Meeting of
Shareholders, provided that a quorum is present or represented at the meeting.
Purposes
of Annual
Meeting
The Annual Meeting has been called for the purposes of (1)
electing directors of the class whose term of office expires in
2002 and (2) transacting such other business as may properly come
before the meeting.
The persons named in the enclosed Proxy have been selected by the Board of
Directors and will vote shares represented by valid Proxies. They have
indicated that, unless otherwise specified in the Proxy, they intend to vote
to elect as directors of Class II the three nominees listed on pages 3 and 4.
1
<PAGE>
Election of
Directors
STERIS has a classified board system, with the Board of
Directors divided into two classes (Classes I and II), the
members of which serve staggered two-year terms. The terms of
the current Class II directors, Jerry E. Robertson, Frank E. Samuel, Jr., Bill
R. Sanford, and Loyal W. Wilson, expire at the 2000 Annual Meeting. Messrs.
Samuel and Sanford have determined not to stand for reelection at the 2000
Annual Meeting and the Board of Directors, as permitted by the Company's
Amended and Restated Regulations, has determined to reduce the size of the
Board of Directors from seven to six members. Accordingly, after the 2000
Annual Meeting, the Board of Directors will be comprised of three Class I
directors and three Class II directors.
The Board of Directors recommends a vote FOR the election of the three
nominees listed on pages 3 and 4. The Board of Directors has no reason to
believe that any of the nominees will be unable to serve as a director. In the
event, however, of the death or unavailability of any nominee or nominees, the
Proxy to that extent will be voted for such other person or persons as the
Board of Directors may recommend.
The Company has no knowledge of any other matters to be presented for vote to
the shareholders at the Annual Meeting. In the event other matters do properly
come before the meeting, the persons named in the Proxy will vote in
accordance with their judgment on such matters.
Ownership of
Voting
Securities
The following table sets forth information furnished to the
Company with respect to the beneficial ownership of the
Company's Common Shares by each executive officer named below,
director and nominee, and by all directors and executive officers as a group,
each as of May 31, 2000. Unless otherwise indicated, each of the persons
listed has sole voting and dispositive power with respect to the shares shown
as beneficially owned.
<TABLE>
<CAPTION>
Number of Shares Percent
Name Beneficially Owned of Class
---- ------------------ --------
<S> <C> <C>
Bill R. Sanford(1).................................. 2,501,228 3.6%
Raymond A. Lancaster(2)............................. 69,162 *
Kevin M. McMullen................................... 1,600 *
J. B. Richey(3)..................................... 161,102 *
Jerry E. Robertson(3)............................... 64,262 *
Frank E. Samuel, Jr.(4)............................. 91,118 *
Loyal W. Wilson(3)(5)............................... 104,142 *
Les C. Vinney....................................... 1,200 *
William A. O'Riordan (6)(7)......................... 108,368 *
David C. Dvorak (6)(8).............................. 85,589 *
Gerard J. Reis (9).................................. 75,400 *
Michael A. Keresman, III(10)........................ 513,400 *
Thomas J. Magulski(11).............................. 94,834 *
All directors and executive officers
as a group (14 persons)(12)........................ 3,900,927 5.5%
</TABLE>
----------
* Less than one percent
(1) Includes 1,892,000 Common Shares subject to options that are exercisable
within 60 days.
(2) Includes 3,400 Common Shares held by Mr. Lancaster as custodian for his
minor children and 2,000 Common Shares as to which Mr. Lancaster's wife
has sole voting power and sole dispositive power. Also includes 56,000
Common Shares subject to options that are exercisable within 60 days.
(3) Includes 60,000 Common Shares subject to options that are exercisable
within 60 days.
(4) Includes 80,000 Common Shares subject to options that are exercisable
within 60 days.
(5) Includes 2,000 Common Shares as to which Mr. Wilson's wife has sole
voting power and sole dispositive power.
(6) Common Shares owned by participants in the STERIS Corporation 401(k) Plan
and Trust are reflected as of May 31, 2000, the most recent accounting
available.
(7) Includes 107,500 Common Shares subject to options that are exercisable
within 60 days.
2
<PAGE>
(8) Includes 85,000 Common Shares subject to options that are exercisable
within 60 days.
(9) Includes 75,000 Common Shares subject to options that are exercisable
within 60 days.
(10) Includes 510,500 Common Shares subject to options that are exercisable
within 60 days. Also includes 2,760 Common Shares held by the Keresman
Family Trust, with regard to which Mr. Keresman has voting and
dispositive power as trustee.
(11) Includes 82,500 Common Shares subject to options that are exercisable
within 60 days.
(12) Includes 3,094,510 Common Shares subject to options that are exercisable
within 60 days.
The following table shows certain information with respect to all persons
known by STERIS to beneficially own more than five percent of the Company's
outstanding Common Shares.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership Class
------------------------------------ -------------------- ----------
<S> <C> <C>
State of Wisconsin Investment Board...... 7,206,900(1) 10.68%
P.O. Box 7842
Madison, WI 53707
Mellon Financial Corporation............. 3,630,542(2) 5.38%
One Mellon Center
Pittsburgh, PA 15258
</TABLE>
----------
(1) As of June 10, 2000, based upon information contained in a Schedule 13G
filed with the Securities and Exchange Commission, the State of Wisconsin
Investment Board, a government agency which manages public pension funds,
has sole voting and dispositive power with respect to all of these shares.
(2) As of January 27, 2000, based upon information contained in a Schedule 13G
filed with the Securities and Exchange Commission, Mellon Financial Corp.,
as a holding company reporting on behalf of its subsidiaries, has sole
voting power as to 2,739,956 of these shares, shared voting power as to
179,300 of these shares, sole dispositive power as to 3,259,642 of these
shares, and shared dispositive power as to 370,900 of these shares.
Section 16(a)
Beneficial Ownership
Reporting Compliance
Based on Company records and information, the Company
believes that all Securities and Exchange Commission filing
requirements applicable to directors and executive officers
under Section 16(a) of the Securities Exchange Act of 1934,
as amended, for the fiscal year ended March 31, 2000, were
complied with.
Board of Directors
The following provides as to nominees and directors whose
terms of office will continue after the Annual Meeting, the
principal occupation and employment, age, the year in which each became a
director of the Company, and directorships in companies having securities
registered pursuant to the Securities Exchange Act of 1934, as amended.
NOMINEES FOR TERMS EXPIRING AT THE ANNUAL
MEETING IN 2002 (Class II Directors)
Kevin M. McMullen (age 39) is a new nominee. Since January 2000, Mr. McMullen
has been President and Chief Operating Officer of OMNOVA Solutions Inc., a
leading provider of specialty chemicals, coatings, and decorative and
functional surfaces used in a variety of commercial and industrial
applications. Mr. McMullen became a member of OMNOVA's Board of Directors in
March 2000. Mr. McMullen also held the position of Vice President of OMNOVA
and President, Decorative & Building Products from September 1999 until
January 2000. Previously, Mr. McMullen was Vice President of GenCorp Inc., a
technology-based manufacturer with other leading positions in the aerospace
and defense and automotive industries, and President of GenCorp's Decorative &
Building Products business unit from September 1996 until GenCorp's spin-off
of OMNOVA in October 1999. Prior to joining GenCorp, Mr. McMullen held the
position of General Manager of the Commercial & Industrial Lighting business
of General Electric Corporation, a diversified services, technology, and
manufacturing company, from 1993 to 1996, and the position of General Manager
of General Electric Lighting's Business Development and Strategic Planning
activities from 1991 to 1993.
3
<PAGE>
Jerry E. Robertson (age 67) joined the Company's Board of Directors in 1994.
Dr. Robertson retired in March 1994 from 3M Company where he most recently
served (since 1986) as Executive Vice President, Life Sciences Sector and
Corporate Services, and as a member of the Board of Directors. Dr. Robertson
is also currently a member of the Boards of Directors of Coherent, Inc. and
Choice Hotels International.
Loyal W. Wilson (age 52) joined the Company's Board of Directors in 1987.
Mr. Wilson has been a Managing Director of Primus Venture Partners, Inc., a
private equity investment and management firm, since its inception in 1983.
Mr. Wilson is also currently a member of the Board of Directors of Corinthian
Colleges, Inc.
CONTINUING DIRECTORS WHOSE TERMS EXPIRE
AT THE ANNUAL MEETING IN 2001 (Class I Directors)
Raymond A. Lancaster (age 54) joined the Company's Board of Directors in
1988. Since February 1995, Mr. Lancaster has held the position of Managing
Partner of Kirtland Capital Partners II L.P., a middle market leveraged buy
out partnership. Mr. Lancaster is also currently a member of the Boards of
Directors of PVC Container Corporation, Unifrax Corporation, and Instron
Corporation.
J. B. Richey (age 63) joined the Company's Board of Directors in 1987. Since
1984, Mr. Richey has been Senior Vice President of Invacare Corporation, a
provider of home healthcare medical equipment. Mr. Richey is also currently a
member of the Boards of Directors of Invacare Corporation and Royal Appliance
Manufacturing Company.
Les C. Vinney (age 51) joined the Company's Board of Directors in March 2000
at the same time as he was appointed as the Company's President and Chief
Operating Officer, a new position. Mr. Vinney became Senior Vice President and
Chief Financial Officer of STERIS in August 1999. He became Senior Vice
President Finance and Operations, while continuing as Chief Financial Officer,
in October 1999. Immediately prior to Mr. Vinney's employment with STERIS, he
most recently served as Senior Vice President and Chief Financial Officer at
The BF Goodrich Company, a Fortune 500 manufacturer of advanced aerospace
systems, performance materials, and engineered industrial products. During his
eight year career with BF Goodrich he held a variety of senior operating and
financial management positions, including Vice President and Treasurer,
President and CEO of the former Tremco subsidiary, and Senior Vice President,
Finance and Administration of BF Goodrich Specialty Chemicals.
Board The Company's Board of Directors met nine times during the
Meetings fiscal year ended March 31, 2000. The Board of Directors has an
and Audit Committee and a Compensation and Nominating Committee.
Committees
Messrs. Lancaster, Richey, and Samuel are the current members of the Audit
Committee. The Audit Committee reviews the results and scope of the audit and
other services provided by the Company's independent auditors. The Audit
Committee met four times during the last fiscal year.
Messrs. Lancaster, Robertson, and Wilson are the current members of the
Compensation and Nominating Committee. The Compensation and Nominating
Committee makes recommendations concerning salaries and other compensation for
employees of and consultants to the Company, administers the Company's stock
option and equity compensation plans, and nominates individuals for election
to the Board of Directors. The Compensation and Nominating Committee will
consider nominees for the Board of Directors recommended by shareholders. A
shareholder desiring to suggest a candidate for consideration by the
Compensation and Nominating Committee should send a resume of the candidate's
business experience and background to Mr. Dvorak at the Company's Mentor, Ohio
offices. The Compensation and Nominating Committee met twice during the last
fiscal year.
Each director attended more than 75% of the aggregate of all meetings of the
Board of Directors and the committees on which he served during the last
fiscal year.
4
<PAGE>
Compensation
of Executive
Officers
Shown below is information concerning the annual, long-term,
and other compensation for services in all capacities to the
Company for the fiscal years ended March 31, 2000, 1999, and
1998 of those persons who were, at the end of the Company's fiscal year on
March 31, 2000, (i) the chief executive officer, (ii) the four other most
highly compensated executive officers of the Company, and (iii) the two
additional individuals for whom disclosure would have been provided pursuant
to (ii) above but for the fact that the individuals were not serving as an
executive officer as of the end of the fiscal year (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
----------------- ------------
Name and Principal Position Year Salary Bonus(1) Options(2)
--------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Bill R. Sanford........................... 2000 $520,213 $311,625 100,000
Chairman of the Board 1999 466,249 655,856 100,000
and Chief Executive Officer 1998 383,556 564,823 100,000
Les C. Vinney............................. 2000 $214,865 $200,000 100,000
President and
Chief Operating Officer
William A. O'Riordan...................... 2000 $185,805 $ 34,981 20,000
Corporate Vice President 1999 137,229 79,718 40,000
and Group President, Health Care 1998 105,198 51,860 10,000
David C. Dvorak........................... 2000 $186,167 $ 33,763 20,000
Senior Vice President, 1999 166,412 84,165 40,000
General Counsel, and Secretary 1998 146,923 97,700 20,000
Gerard J. Reis............................ 2000 $146,497 $ 29,957 30,000
Senior Vice President, 1999 120,330 63,656 40,000
Associate and Business Relations 1998 107,061 58,627 20,000
Michael A. Keresman, III(3)............... 2000 $243,927 $ 64,515 0
Former Senior Vice President 1999 219,922 140,760 50,000
and Chief Information Officer 1998 191,544 185,773 50,000
Thomas J. Magulski(4)..................... 2000 $234,507 $ 64,378 0
Former Senior Vice President 1999 48,462 56,250 50,000
and Group President, Scientific &
Industrial
</TABLE>
----------
(1) Amounts are those awarded under the Management Incentive Compensation Plan
or the Senior Executive Management Incentive Compensation Plan for the
respective fiscal year or as an inducement for the officer to enter into
the employ of the Company.
(2) The number of Common Shares underlying options for the fiscal years ended
1998 and 1999 have been adjusted to reflect a 2-for-1 stock split by means
of a 100% stock dividend on the Company's Common Shares that was effective
August 24, 1998.
(3) Effective August 23, 1999, Mr. Keresman ceased to be an executive officer
of the Company.
(4) Effective March 31, 2000, Mr. Magulski ceased to be an executive officer
of the Company.
5
<PAGE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth, for each of the Named Executive Officers, the
exercise of options to purchase the Company's Common Shares during the fiscal
year ended March 31, 2000, and the year-end value of unexercised options to
purchase the Company's Common Shares granted in the last fiscal year and in
prior years and held by the Named Executive Officers at March 31, 2000. All
options were granted to the Named Executive Officers under the Company's 1987
Amended and Restated Nonqualified Stock Option Plan, the Company's 1994 Equity
Compensation Plan, the Company's 1997 Stock Option Plan, the Company's 1998
Long-Term Incentive Stock Plan, or as an inducement to join the Company.
<TABLE>
<CAPTION>
Number of
Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year- Fiscal Year-
Shares End End(2)
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized(1) Unexercisable Unexercisable
---- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Bill R. Sanford............ 240,000 $3,754,998 1,667,000/ $7,985,796/
400,000 56,250
Les C. Vinney.............. -- -- 0/ $ 0/
100,000 5,625
William A. O'Riordan....... -- -- 95,000/ $ 364,375/
55,000 11,250
David C. Dvorak............ -- -- 57,500/ $ 0/
72,500 11,250
Gerard J. Reis............. -- -- 55,000/ $ 13,750/
75,000 16,875
Michael A. Keresman, III... -- -- 458,000/ $2,149,750/
90,000 0
Thomas J. Magulski(3)...... -- -- 82,500/ $ 215,938/
37,500 0
</TABLE>
----------
(1) Excess of market price on date of exercise over exercise price.
(2) Excess of $10.25 (market price at fiscal year-end) over exercise price.
(3) Includes 50,000 options received under the Company's 1994 Nonemployee
Directors Equity Compensation Plan for services by Mr. Magulski as a
director before he became employed by the Company.
Option Grants During Last Fiscal Year
The following table sets forth information with respect to all stock options
granted to the Named Executive Officers during the fiscal year ended March 31,
2000.
<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Annual Rates of
% of Total Stock
Number of Options Appreciation Over
Shares Granted to Exercise Ten
Underlying Employees Price Year Option Term
Options in Fiscal Per -------------------
Name Granted(1) Year Share Expiration Date 5% 10%
---- ---------- ---------- -------- ----------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Sanford............. 100,000 7.46% $ 9.6875 February 5, 2010 $615,794 $1,564,360
Mr. Vinney.............. 90,000 6.71% $13.8125 September 2, 2009 $790,203 $2,007,428
Mr. Vinney.............. 10,000 .75% $ 9.6875 February 5, 2010 $ 61,579 $ 156,436
Mr. O'Riordan........... 20,000 1.49% $ 9.6875 February 5, 2010 $123,159 $ 312,872
Mr. Dvorak.............. 20,000 1.49% $ 9.6875 February 5, 2010 $123,159 $ 312,872
Mr. Reis................ 30,000 2.24% $ 9.6875 February 5, 2010 $184,738 $ 469,308
</TABLE>
----------
(1) All of the above options were granted on January 5, 2000, as nonqualified
options under the Company's 1997 Stock Option Plan, except for the 90,000
options listed as granted to Mr. Vinney which are
6
<PAGE>
nonqualified options granted on August 2, 1999, as an inducement to his
entering into the employ of the Company. In general, the listed options
will vest in equal annual increments over a four-year period from the date
of grant.
Employment and Change of Control Agreements
STERIS is a party to agreements relating to employment with Messrs. Sanford,
Vinney, Keresman, and Magulski and to change of control agreements with all of
its Named Executive Officers.
Agreement with Mr. Sanford. Mr. Sanford and the Company are party to an
employment agreement pursuant to which Mr. Sanford resigned his position as
President of the Company on March 21, 2000 and agreed to continue to serve as
the Company's Chairman of the Board and Chief Executive Officer through the
Company's 2000 Annual Meeting of Shareholders to be held on July 21, 2000.
Pursuant to the agreement, Mr. Sanford will resign as an executive officer of
the Company and will leave the Company's Board of Directors at the time of the
2000 Annual Meeting. The agreement contemplates that, for a period of five
years thereafter, Mr. Sanford will remain in the employ of the Company as its
Executive Founder and Special Executive Advisor, performing such activities as
may be assigned to him from time to time by the Board of Directors.
Under the agreement, the Company will continue to pay Mr. Sanford base
salary at the rate of $500,000 per year through July 21, 2000, and he will be
eligible to receive a pro rata bonus of $67,500 per month under the Company's
Senior Executive Management Incentive Compensation Plan for the four month
period ending July 31, 2000.
On July 21, 2000, the Company will make a lump sum payment to Mr. Sanford in
the amount of $3,300,000. For his services as Executive Founder and Special
Executive Advisor, the Company will pay Mr. Sanford salary at the rate of
$50,000 per year unless he assumes full-time employment with another employer,
at which time his salary would be reduced to $12,000 per year.
The agreement provides that Mr. Sanford's existing stock options that were
outstanding as of March 21, 2000 will remain outstanding and continue to vest
pursuant to their terms as long as he remains employed by the Company, whether
in his current capacity or as Executive Founder and Special Executive Advisor.
The agreement provides Mr. Sanford with the right to put up to 600,000 of
the Company's Common Shares to the Company at any time between July 21, 2001
and February 28, 2002 at a purchase price of $15.00 per share in cash. In
addition, the agreement provides that if Mr. Sanford observes all of his
obligations thereunder through February 28, 2002, a loan originally made in
1997 in connection with his exercise of certain stock options, together with
all accrued interest thereon, will be forgiven by the Company. The loan, which
amounted to $2,644,328 as of March 31, 2000, is evidenced by a full recourse
promissory note dated April 15, 1998, bears interest at the rate of 5.7% per
annum, and is otherwise repayable in a lump sum on or before February 28,
2002.
Additional benefits to Mr. Sanford under the agreement include the transfer
to him of the Company's rights in a key-man universal life insurance policy on
his life and participation by him in the Company's insurance, retirement, and
other employee benefits programs through July 21, 2005 or the date on which he
accepts full-time employment with another employer, whichever is earlier.
Pursuant to the agreement, Mr. Sanford agreed not to compete with the
Company at any time before July 21, 2005, not to solicit any employee or agent
of the Company to terminate his or her employment or other relationship with
the Company, and to maintain in confidence all of the Company's confidential
information. As part of the agreement, Mr. Sanford also released the Company
and all of the Company sponsored benefit plans, programs, and arrangements
from liability for any and all claims Mr. Sanford had or may have had as of
March 21, 2000.
Agreement with Mr. Vinney. Mr. Vinney and the Company are party to an
employment agreement pursuant to which Mr. Vinney is to serve as President and
Chief Operating Officer of the Company from March 21, 2000 through a date not
later than July 21, 2000 and as President and Chief Executive Officer of the
Company from the latter date forward. Effective April 1, 2000, Mr. Vinney's
base salary was set at $400,000 per year, increasing
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to $575,000 per year effective when he assumes the title of Chief Executive
Officer. For that part of fiscal 2001 during which he acts as Chief Operating
Officer, Mr. Vinney is to be a participant in the STERIS Management Incentive
Compensation Plan with a full year target bonus of $320,000 based on overall
corporate targets established under that plan for fiscal 2001. For that part
of fiscal 2001 during which he acts as Chief Executive Officer, Mr. Vinney is
to be a participant in the Senior Executive Management Incentive Compensation
Plan with a full year target bonus of $575,000 based upon overall corporate
achievement for fiscal 2001.
The agreement provides that the Company will grant a nonqualified stock
option to Mr. Vinney with respect to not less than 250,000 Common Shares on
the next date on which the Company grants options to other executives and that
he will be eligible for further option grants in accordance with Company
practices.
If Mr. Vinney is not appointed Chief Executive Officer by July 21, 2000, the
Company is to make a lump sum payment to him equal to $1,120,000 plus the
value of all accrued but unused vacation time and the Company is to continue
in effect, through July 21, 2001, all benefits to which Mr. Vinney had been
entitled as Chief Operating Officer.
Agreement with Mr. Keresman. Mr. Keresman and the Company are party to an
agreement pursuant to which Mr. Keresman resigned as an officer of STERIS on
August 23, 1999 and agreed to remain in the part-time employ of the Company
through September 30, 2000. Pursuant to the agreement, Mr. Keresman's base
compensation and entitlement to a bonus under the Management Incentive
Compensation Plan were continued through September 30, 1999 and his base
salary under the agreement from and after that date was set at $20,000 per
month. In addition, the Company is to provide Mr. Keresman with medical
insurance coverage through September 30, 2000 at the same levels and employee
contributions as in the case of full time Company employees. While he remains
in the employ of the Company, Mr. Keresman's rights under stock options
previously granted to him will continue to vest in accordance with the terms
of the plans pursuant to which those options were granted. The agreement
confirms Mr. Keresman's obligations under various noncompetition and
nondisclosure agreements that he had previously executed in favor of the
Company and requires Mr. Keresman to maintain in confidence all of the
Company's confidential information. As part of the agreement, Mr. Keresman
also released the Company and all of the Company sponsored benefit plans,
programs, and arrangements from liability for any and all claims he had or may
have had as of August 23, 1999.
Agreement with Mr. Magulski. Mr. Magulski and the Company are party to an
agreement pursuant to which Mr. Magulski resigned as an officer of STERIS on
March 31, 2000 and agreed to remain in the part-time employ of the Company
through September 30, 2001. Pursuant to the agreement, Mr. Magulski's base
compensation from and after April 1, 2000 was set at the rate of $223,334 per
year. In addition, the Company is to provide Mr. Magulski with relocation
assistance, pursuant to the Company's relocation policy, and with medical
insurance coverage through September 30, 2001 at the same levels and employee
contributions as in the case of full time Company employees. While he remains
in the employ of the Company, Mr. Magulski's rights under stock options
previously granted to him will continue to vest in accordance with the terms
of the plans pursuant to which those options were granted. The agreement
confirms Mr. Magulski's obligations under various noncompetition and
nondisclosure agreements that he had previously executed in favor of the
Company and requires Mr. Magulski to maintain in confidence all of the
Company's confidential information. As part of the agreement, Mr. Magulski
also released the Company and all of the Company sponsored benefit plans,
programs, and arrangements from liability for any and all claims he had or may
have had as of March 31, 2000.
Change of Control Agreements. STERIS is a party to change of control
agreements with all of its Named Executive Officers, including Messrs.
Sanford, Vinney, O'Riordan, Dvorak, and Reis. Except in the cases of Messrs.
Sanford and Vinney, the agreements provide that if, at any time within two
years after the occurrence of a change of control, the officer's employment is
terminated by STERIS (except for cause, disability, or death) or the officer
terminates employment because the officer's base salary or bonus participation
is reduced or relocation is made a condition of the officer's employment,
STERIS will pay to the officer a lump sum severance benefit equal to three
years compensation (base salary and average annual incentive compensation).
Each such change of control agreement also provides a three-month window
period, commencing on the first anniversary of the
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change of control, during which the officer may voluntarily resign and receive
a lump sum severance benefit equal to two years compensation (base salary and
average annual incentive compensation) if, at any time before the officer's
resignation, the officer determines in good faith that (a) the officer's
position, responsibilities, duties, or status with STERIS are materially
changed from those in effect before the change of control, (b) the officer's
reporting relationships with superior executive officers have been materially
changed from those in effect before the change of control, or (c) the officer's
career prospects have been in any way diminished as a result of the change of
control.
Under their change of control agreements, each of Mr. Sanford and Mr. Vinney
will be able to terminate his employment and be entitled to a lump sum payment
equal to three years compensation (base salary and average annual incentive
compensation) if, at any time within two years after a change of control, he
determines in good faith that he is unable to carry out the authorities,
powers, functions, responsibilities, or duties that he formerly had in his
positions and offices at STERIS before the change of control, in the same
manner as he was able to do before the change of control. Mr. Sanford or Mr.
Vinney, as the case may be, would also be entitled to these same benefits if
his employment were terminated by STERIS within two years of a change of
control for any reason other than cause, death, or disability. Pursuant to the
employment agreement between Mr. Sanford and the Company described above in
this section, Mr. Sanford's change of control agreement will expire on July 21,
2000 if no change of control occurs on or before that date.
An officer who is entitled to a lump sum severance benefit (whether equal to
three years or two years of compensation) under a change of control agreement
will also be paid (a) accrued base salary and vacation pay through the date of
termination, (b) payments under the Management Incentive Compensation Plan for
the last completed fiscal year, if not already paid, and for the pro rata
portion of the current fiscal year, and (c) the cost of continuing health
benefits through the third anniversary (or the second anniversary, depending
upon whether the lump sum payment is equal to three or two years of
compensation) of the termination date or, if earlier, the date the officer
secures other employment. In addition, each change of control agreement
provides for a tax gross-up if any payment to an officer exceeds the limit
specified in Section 280G of the Internal Revenue Code so that the officer will
receive the same after-tax payment as would have been the case if Section 280G
did not apply. For purposes of the change of control agreements, "cause"
includes conviction of a felony, dishonesty in the course of employment that is
inimical to the best interests of STERIS, unreasonable neglect of the officer's
duties and responsibilities, or competing with STERIS.
Board
Compensation
Each director who is not an employee of the Company is paid a
retainer of $24,000 per year plus $1,000 for each Board meeting
attended in excess of four meetings per year and $500 for each
committee meeting attended in excess of two committee meetings per
year. At the beginning of each year of service on the Board, $14,000 of the
annual retainer is paid in Restricted Common Shares granted under the 1994
Nonemployee Directors Equity Compensation Plan and each director automatically
receives a stock option for 10,000 of the Company's Common Shares. The
Restricted Common Shares are subject to forfeiture if the director does not
serve for a full year following grant of those shares. All directors are
reimbursed for certain expenses in connection with attendance at Board and
committee meetings.
Report of
Compensation
and
Nominating
Committee
The Board of Directors of the Company has delegated to the
Compensation and Nominating Committee responsibility for
determining executive compensation. The Committee is comprised of
three independent nonemployee directors who have no interlocking
relationships with the Company as defined by the Securities and Exchange
Commission.
The Company has adopted, and the Compensation and Nominating Committee has
approved, a compensation policy for executives under which, in addition to base
salaries, a significant portion of current compensation during each fiscal year
is linked directly to the Company's performance in that year and a significant
portion of total compensation is provided in the form of stock options, thereby
linking total compensation to the long-term performance of the Company's Common
Shares.
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In setting the level of base salaries and annual incentive compensation
opportunities for executives, the Compensation and Nominating Committee takes
into account the recommendations of an independent compensation consulting
firm that are based upon compensation practices in comparable companies. The
Compensation and Nominating Committee believes that the compensation policy
developed with the assistance of the consulting firm will enable the Company
to attract and retain qualified individuals as executives and to motivate
those individuals to perform to their highest abilities and work toward the
achievement of annual performance goals that will increase shareholder value.
The Company's Management Incentive Compensation Plan for fiscal 2000
provided for payment of bonuses to participants if the Company achieved
certain net revenue, operating income, and net income objectives set by the
Board of Directors. For fiscal 2000, the plan provided for target potential
bonuses ranging from 20% to 75% of a participant's base salary. In general, no
incentive compensation was payable unless the plan objectives were at least
80% achieved. Above this threshold, actual payouts were made as a percentage
of target bonuses in direct proportion to achievement of plan objectives up to
a maximum of 120% of target. If threshold levels were achieved during a
quarter and year-to-date, partial payouts were made at the end of each quarter
with the remainder being withheld pending achievement of a threshold level of
net income by the Company for the entire fiscal year. Based upon the extent to
which the Company achieved the net revenue and operating income objectives set
by the Board of Directors for fiscal 2000, bonuses were paid on average at
approximately 28% of target levels under the Management Incentive Compensation
Plan to all Named Executive Officers eligible under the plan for the entire
fiscal year.
For fiscal 2000, the Compensation and Nominating Committee set Mr. Sanford's
base salary at $500,000 per annum, having determined that this level of base
salary continued to be appropriate in view of the primary role played by Mr.
Sanford in the management of the Company. For fiscal 2000, based upon the
extent to which the Company achieved the net revenue, operating income, and
net income objectives set by the Board of Directors for that year for purposes
of the Senior Executive Management Incentive Compensation Plan, Mr. Sanford
was paid a bonus of $311,625.
The Compensation and Nominating Committee has developed a practice of
considering the grant of options to key employees each year and has followed
this practice in the case of Mr. Sanford. On January 5, 2000, in accordance
with that practice, the Compensation and Nominating Committee granted to Mr.
Sanford a nonqualified stock option to purchase 100,000 Common Shares at the
then current market price of $9.6875 per share. The Compensation and
Nominating Committee believes that both this most recent grant and the general
practice of granting annual options to Mr. Sanford are appropriate in
recognition of Mr. Sanford's contributions to the management of the Company.
Section 162(m) of the Internal Revenue Code prevents a publicly-traded
corporation from taking a tax deduction for certain compensation in excess of
$1 million per year that it or any subsidiary pays to specified executives.
Those specified executives are the Chief Executive Officer and the four other
most highly paid executive officers of the Company serving as executive
officers of the Company at the end of the fiscal year. Compensation that is
contingent on the attainment of performance goals is excluded from the
deduction limit and is therefore deductible without regard to the $1 million
limit. The Company's 1998 Long-Term Incentive Stock Plan and its Senior
Executive Management Incentive Compensation Plan are designed so that
compensation paid under those plans can qualify as performance-based
compensation and therefore be excluded from the calculation of the $1 million
limit. The general position of the Company with respect to Section 162(m) is
that the Company will seek to qualify compensation paid to its executive
officers in such a way as to satisfy the requirements of Section 162(m) where
it appears to the Compensation and Nominating Committee to be in the best
interests of the Company to do so. However, from time to time there may be
circumstances in which the Compensation and Nominating Committee concludes
that the best interests of the Company will be served by a compensation
arrangement that does not satisfy those requirements and, in those
circumstances, the Company may proceed without complying with the requirements
of Section 162(m).
As noted above, when making its determinations as to the levels of salary,
annual incentive compensation opportunity, and stock option grants to the
various executive officers, the Compensation and Nominating
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Committee considers compensation data from other companies gathered and
analyzed by an independent compensation consulting firm. Taking into account
that data and the need to provide competitive levels of compensation to retain
and to motivate those executives to continue providing services to the
Company, it is the judgment of the Compensation and Nominating Committee that
the compensation program described above and the levels of compensation paid
to executive officers of the Company during fiscal 2000 are appropriate.
Compensation and Nominating
Committee
Board of Directors
Raymond A. Lancaster
Jerry E. Robertson
Loyal W. Wilson
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STOCK PERFORMANCE GRAPH
The following graph shows the cumulative performance for STERIS
Corporation's Common Shares over the last five years compared with the
performance of the Standard & Poor's 500 Index, the Standard & Poor's Midcap
400 Index, the Standard & Poor's Health Care Sector Index, and the Dow Jones
Medical Supplies Index. The graph assumes $100 invested as of March 31, 1995
in the Company's Common Shares and in each of the named indices. The
performance shown is not necessarily indicative of future performance.
[STOCK PERFORMANCE GRAPH]
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG STERIS CORPORATION, THE STANDARD & POOR'S 500 INDEX,
THE STANDARD & POOR'S MIDCAP 400 INDEX, THE STANDARD & POOR'S HEALTH
CARE SECTOR INDEX, AND THE DOW JONES MEDICAL SUPPLIES INDEX
[GRAPH]
Cumulative Total Return
---------------------------------------------
3/95 3/96 3/97 3/98 3/99 3/00
STERIS CORPORATION 100.00 150.00 121.88 270.00 266.25 102.50
S & P 500 100.00 132.11 158.30 234.27 277.52 327.32
S & P MIDCAP 400 100.00 128.49 142.13 211.83 213.00 294.00
S & P HEALTH CARE SECTOR 100.00 147.42 179.60 287.90 370.85 327.29
DOW JONES MEDICAL SUPPLIES 100.00 124.34 168.63 207.77 248.78 189.88
* $100 INVESTED ON 3/31 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MARCH 31.
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<PAGE>
2001
Shareholder
Proposals
The deadline for shareholders to submit proposals to be
considered for inclusion in the Proxy Statement for the next
Annual Meeting of Shareholders is expected to be February 23,
2001. In the event, however, that the date of the 2001 Annual
Meeting is changed by more than 30 calendar days from the date currently
contemplated, a proposal must be received by the Company a reasonable time
before the solicitation in connection with the meeting is made.
Additionally, a shareholder may submit a proposal for consideration at the
next Annual Meeting of Shareholders, but not for inclusion in the Proxy
Statement, if that proposal is submitted not less than 120 calendar days in
advance of the anniversary of the previous year's annual meeting, which
deadline, given a July 21, 2000 Annual Meeting, will be March 23, 2001. For a
proposal to be properly requested by a shareholder to be brought before the
Annual Meeting of Shareholders, the shareholder must comply with all of the
requirements of STERIS's Amended and Restated Regulations, not just the
timeliness requirement described above.
Independent
Auditor
Ernst & Young LLP has been appointed as the Company's independent
auditor for the fiscal year ending March 31, 2001, pursuant to
the recommendations of the Audit Committee of the Board of
Directors. A representative of Ernst & Young is expected to be present at the
meeting with an opportunity to make a statement if he desires to do so and to
answer appropriate questions with respect to that firm's audit of the
Company's financial statements and records for the fiscal year ended March 31,
2000.
Annual
Report
The integrated Annual Report and Form 10-K of the Company for the
fiscal year ended March 31, 2000, which includes financial
statements for the Company for the fiscal year then ended, is
being mailed to each shareholder of record with this Proxy Statement.
By Order of the Board of Directors
/s/ David C. Dvorak
David C. Dvorak
Secretary
June 22, 2000
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