<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Alaris Medical, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
<PAGE>
ALARIS MEDICAL, INC.
10221 WATERIDGE CIRCLE
SAN DIEGO, CALIFORNIA 92121-1579
(619) 458-7000
May 19, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders, which will be held at the Peninsula Hotel, 700 Fifth Avenue at
55th Street, New York, New York at 9:00 a.m. on June 23, 1999.
The notice of the meeting and the proxy statement on the following
pages cover the formal business of the meeting. The meeting will consider the
election of Directors and the ratification of the appointment of independent
auditors for 1999. I will report on current operations and discuss our plans for
growth. I will also leave plenty of time for your questions and comments.
Whether or not you plan to attend the 1999 Annual Meeting of
Stockholders, please complete, sign, date and return the accompanying proxy card
in the enclosed envelope in order to make certain that your shares will be
represented and voted.
Thank you for your support and continued interest in ALARIS Medical,
Inc.
Very truly yours,
William J. Mercer
CHIEF EXECUTIVE OFFICER
<PAGE>
ALARIS MEDICAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 23, 1999
May 19, 1999
To Our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of ALARIS Medical, Inc. (the "Company") will be held at the Peninsula
Hotel, 700 Fifth Avenue at 55th Street, New York, New York at 9:00 a.m. on June
23, 1999 for the following purposes:
1. to elect five Directors;
2. to consider and act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as independent accountants for the year
ending December 31, 1999; and
3. to transact such other business as may properly come before the Annual
Meeting and all adjournments thereof.
The Board of Directors of the Company has fixed the close of business on
April 28, 1999 as the record date for purposes of determining the stockholders
entitled to notice of, and to vote at, the Annual Meeting.
A list of stockholders entitled to vote at the Annual Meeting will be open
to the examination of any stockholder, for any purpose germane to the Annual
Meeting, at the law offices of Gordon Altman Butowsky Weitzen Shalov & Wein, 114
West 47th Street, 21st Floor, New York, New York 10036 during ordinary business
hours for ten days prior to the Annual Meeting. The Annual Meeting may be
adjourned from time to time without notice other than by announcement at the
Annual Meeting.
By Order of the Board of Directors,
John A. de Groot
SECRETARY
<PAGE>
PROXY STATEMENT
ALARIS MEDICAL, INC.
10221 WATERIDGE CIRCLE
SAN DIEGO, CALIFORNIA 92121-1579
(619) 458-7000
ANNUAL MEETING OF STOCKHOLDERS
This proxy statement and enclosed form of proxy are being furnished to
stockholders in connection with the solicitation by the board of directors of
ALARIS Medical, Inc. (the "Board of Directors" or the "Board"), of proxies to be
voted at the Annual Meeting of Stockholders to be held at 9:00 a.m. on June 23,
1999, and all adjournments thereof (the "Annual Meeting"). The purpose of the
Annual Meeting is (i) to elect five Directors of ALARIS Medical, Inc.
(hereinafter referred to as "ALARIS Medical" or the "Company"); (ii) to ratify
the appointment of PricewaterhouseCoopers LLP as independent accountants for the
year ending December 31, 1999; and (iii) to transact such other business as may
properly come before the Annual Meeting and at all adjournments thereof. Proxy
statements and forms of proxy are first being sent to stockholders on or about
May 19, 1999.
The close of business on April 28, 1999 has been set as the record date for
purposes of determining stockholders entitled to vote at the Annual Meeting. At
the close of business on April 28, 1999, there were outstanding 59,215,404
shares of the Company's common stock, par value $.01 per share ("Common Stock"),
which is the only class of outstanding voting securities of the Company. The
holders of record of a majority of the shares of Common Stock entitled to vote
at the Annual Meeting, present in person or represented by proxy at the Annual
Meeting, shall constitute a quorum for the transaction of business at the Annual
Meeting, but, in the absence of a quorum, the holders of record, present in
person or represented by proxy at such meeting, may vote to adjourn the Annual
Meeting from time to time until a quorum is obtained. Each share of Common Stock
entitles its holder of record to one vote, except with respect to the election
of Directors, as described below.
The election of Directors shall be by plurality vote, with each stockholder
having the right to vote his shares cumulatively. See "Election of Directors --
Cumulative Voting Rights" described below. Other than with respect to the
election of Directors, the affirmative vote of the holders of a majority of the
shares of Common Stock, present in person or represented by proxy at the Annual
Meeting, is necessary for approval of all matters to be presented at the Annual
Meeting.
The aggregate number of votes cast by all stockholders present in person or
by proxy at the Annual Meeting will be used to determine whether a motion will
carry. Thus, an abstention from voting on a matter by a stockholder, present in
person or by proxy at the Annual Meeting, has no effect on the item on which the
stockholder abstained from voting. In addition, although broker "non-votes" will
be counted for purposes of attaining a quorum, they will have no effect on the
vote.
Proxies may be revoked by the person executing the proxy at any time before
the authority thereby granted is exercised, upon written notice to such effect
received by the Secretary of the Company. Attendance at the Annual Meeting will
not in and of itself constitute revocation of a proxy, although proxies may be
revoked at the Annual Meeting by written notice delivered to the Secretary of
the Company, in which case the shares of Common Stock represented thereby may be
voted in person. Proxies may also be revoked by the submission of subsequently
dated proxies. Shares represented by a valid unrevoked proxy will be voted at
the Annual Meeting or any adjournment thereof as specified
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1
<PAGE>
therein by the person giving the proxy; if no specification is made the
shares of Common Stock represented by such proxy will be voted (1) SO as to
elect the largest possible number of the Board of Directors' nominees as
Directors, and (2) FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as independent accountants of the accounts of the
Company for 1999.
1. ELECTION OF DIRECTORS
CUMULATIVE VOTING RIGHTS
The election of Directors will be by a plurality vote. There are currently
five members on the Board of Directors.
The Company's certificate of incorporation and by-laws provide that, in the
election of Directors, every holder of Common Stock has the right to vote his
shares cumulatively. Under cumulative voting, the number of shares of Common
Stock a stockholder is entitled to vote multiplied by the number of Directors to
be elected represents the number of votes he, she or it may cast at such
election. A stockholder may cast all such votes for one nominee or distribute
them among any two or more nominees. As a result, each stockholder, in voting
for Directors at the meeting, will be entitled to five votes for each share of
Common Stock held.
Five Directors are to be elected to serve until the next annual meeting and
until their successors are elected and have qualified. UNLESS OTHERWISE
DIRECTED, IT IS THE INTENTION OF THE PERSONS DESIGNATED AS PROXIES TO CUMULATE
VOTES FOR ONE OR MORE OF THE NOMINEES LISTED BELOW IN A MANNER SO AS TO ELECT
THE LARGEST POSSIBLE NUMBER OF SUCH NOMINEES TO THE BOARD OF DIRECTORS. IF ANY
OF SUCH NOMINEES SHOULD BECOME UNAVAILABLE FOR ANY REASON, IT IS INTENDED THAT
PROXIES WILL BE VOTED FOR THE ELECTION OF SUCH OTHER PERSON(S) AS SHALL BE
DESIGNATED BY THE BOARD OF DIRECTORS.
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<PAGE>
NOMINEES
Information regarding the nominees for election to the Board of Directors
is set forth below. The information presented with respect to each nominee has
been furnished by that nominee. All current Directors have been elected to serve
until the next annual meeting and until their successors are elected and
qualified.
<TABLE>
<CAPTION>
NAME POSITION WITH COMPANY AGE DIRECTOR SINCE
- ------------------------------------ --------------------- --- --------------
<S> <C> <C> <C>
Jeffry M. Picower............... Director, Chairman of the Board 57 March 1993
William J. Mercer............... Director, Chief Executive Officer 51 November 1996
Norman M. Dean............... Director 79 March 1989
Henry Green..................... Director 56 February 1991
Richard B. Kelsky............... Director 44 June 1989
</TABLE>
JEFFRY M. PICOWER - Mr. Picower was a Director, Vice President and the
Assistant Treasurer of the Company from September 1988 to March 1989 and Vice
Chairman from December 1988 to June 1989. Mr. Picower was re-elected as a
Director and Co-Chairman of the Board of the Company in March 1993 and became
Chairman of the Board in May 1993. Mr. Picower served as Chief Executive Officer
of the Company from September 1993 to November 1996. Mr. Picower has served as
Chairman of the Board of ALARIS Medical Systems, Inc., the Company's
wholly-owned operating subsidiary ("AMSI"), since November 26, 1996. He has,
since 1984, been Chairman of the Board and Chief Executive Officer of Monroe
Systems for Business, Inc. ("Monroe"), a worldwide office equipment,
distribution and service organization of which Mr. Picower is the sole
shareholder. Mr. Picower has been a Director of Physician Computer Network, Inc.
("PCN") since January 1994 and Chairman of the Board of PCN since June 1994.
PCN, a corporation whose principal shareholder is Mr. Picower, operates a
computer network linking its office-based physician members to health care
organizations.
In early March 1998, PCN announced the discovery of instances of improper
income and expense recognition in the first three quarters of its fiscal year
ended December 31, 1997, as well as delay in the completion of its financial
statements for that year. In addition, in May 1998, PCN announced that its
auditors had informed it that they were reviewing certain matters with respect
to PCN's financial statements for the year ended December 31, 1996 and that they
had determined to withdraw their previously issued report on those financial
statements. In connection with the foregoing, numerous class action lawsuits
have been filed against PCN, as well as certain of its officers and Directors,
including Mr. Green and, in certain instances, Mr. Picower. The lawsuits allege,
among other things, that PCN issued false and misleading financial statements.
WILLIAM J. MERCER - Mr. Mercer became a Director, the President and the
Chief Executive Officer of the Company and AMSI on November 26, 1996. Mr. Mercer
resigned as President of the Company and AMSI in April 1999 in connection with
the election of David L. Schlotterbeck as President and Chief Operating Officer
of the Company and AMSI. Mr. Mercer served as the Chief Financial Officer of the
Company and AMSI from March 1997 until August 1997 and from September 1998 until
March 1999. Prior to November 26, 1996, Mr. Mercer served as President, Chief
Executive Officer and a Director of IVAC Medical Systems, Inc. and President and
a Director of IVAC Holdings, Inc. since May 1995, and as Chief Executive Officer
of IVAC Holdings, Inc. since January 1996. Prior to joining IVAC Medical
Systems, Inc. and IVAC Holdings, Inc., Mr. Mercer held various positions,
primarily in medical imaging, at Mallinckrodt, Inc. for 17 years, most recently
as Senior Vice President.
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3
<PAGE>
NORMAN M. DEAN - Mr. Dean has been a Director of ALARIS Medical since 1989.
Mr. Dean has been a Director and President of Foothills Financial Corporation, a
venture capital company, since January 1985 and Chairman of the Board of Miller
Diversified Corp., a commercial cattle feeder, since May 1990.
HENRY GREEN - Mr. Green was President and Chief Operating Officer of ALARIS
Medical from September 1990 to March 1993 and has been a Director of ALARIS
Medical since 1991. Mr. Green was employed by PCN in March 1993, and elected as
President of PCN in May 1993, Chief Executive Officer of PCN in June 1994 and a
Director of PCN in July 1993. Mr. Green served as President and Chief Executive
Officer of PCN until his retirement in 1997.
RICHARD B. KELSKY - Mr. Kelsky has served as Director of ALARIS Medical
since June 1989. Mr. Kelsky is a Director of Monroe and served as Vice President
and General Counsel of Monroe from 1984 to 1996. Mr. Kelsky has served as Vice
Chairman of Monroe since 1996. Mr. Kelsky has served as a Director of PCN since
January 1992.
COMMITTEES OF THE BOARD
The Board of Directors has an Audit Committee, a Compensation Committee and
Stock Option Committee.
The Audit Committee consists of Messrs. Dean (Chairman) and Kelsky. The
function of the Audit Committee is to recommend the selection of independent
accountants, review the scope of their examination, consider individual audit
matters, monitor adequacy of internal controls, review annual financial
statements, conduct other activities relating thereto as the Audit Committee
deems appropriate and report to the Board of Directors. The Audit Committee met
once during 1998.
The Compensation Committee consists of Messrs. Dean (Chairman) and Kelsky.
The function of the Compensation Committee is to review and approve the
compensation of the principal officers and employees of the Company and its
subsidiaries, as well as material compensation plans of the Company and its
subsidiaries. The Compensation Committee met twelve (12) times during 1998.
The Stock Option Committee consists of Messrs. Dean (Chairman) and Kelsky.
The function of the Stock Option Committee is to administer the Company's 1996
Stock Option Plan (the "1996 Option Plan") and Third Amended and Restated 1988
Stock Option Plan. The Stock Option Committee met six (6) times during 1998.
The Board of Directors does not have a standing nominating committee or one
performing similar functions.
The Board of Directors met seven (7) times in 1998. Each of the members of
the Board of Directors attended all of the meetings of the Board of Directors
and meetings of committees of the Board on which such Director serves.
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4
<PAGE>
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not employees of the Company are
paid $25,000 per annum and in addition receive $1,000 per Board of Directors
and/or Committee meeting attended. In addition, such Directors are entitled to
receive options to purchase shares of Common Stock pursuant to the Directors
Plan (as defined below). Travel and accommodation expenses of Directors incurred
in connection with meetings are reimbursed by ALARIS Medical. All of the
Directors are covered by ALARIS Medical's Director's liability insurance policy.
Under the Third Amended and Restated 1990 Non-Qualified Stock Option Plan
for Non-Employee Directors of the Company (the "Directors Plan"): (i)
non-qualified stock options ("NQSOs") to purchase 10,000 shares of Common Stock
will be granted automatically to any non-employee Director who has not declined
to participate in the Directors Plan ("Eligible Director") who first becomes an
Eligible Director after May 28, 1998 on the next succeeding business day
following his or her becoming an Eligible Director; (ii) NQSOs to purchase
10,000 shares of Common Stock are granted automatically to each Eligible
Director on the anniversary date of his or her preceding NQSO grant under the
Directors Plan and every year thereafter during the term of the Directors Plan,
provided that such Director remains an Eligible Director on the date of each
such additional NQSO grant; (iii) NQSOs granted vest and become exercisable in
one-third increments for each year of an Eligible Director's service on the
Board of Directors of the Company from the date of grant of the NQSO; and (iv)
NQSOs granted under the Directors Plan are subject to termination under certain
circumstances in the event the Eligible Director ceases to be an Eligible
Director or becomes an employee of the Company.
On May 28, 1998, ALARIS Medical granted a NQSO to purchase 16,000 shares of
Common Stock to Mr. Picower. The NQSO is fully vested and presently exercisable.
On June 11, 1998, Mr. Picower was granted options to purchase 10,000 shares of
Common Stock pursuant to the Directors Plan. The options vest over three years
in one-third increments.
On September 9, 1998 Mr. Dean and Mr. Kelsky were each granted options to
purchase 10,000 shares of Common Stock pursuant to the Directors Plan. The
options vest over three years in one-third increments.
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5
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes certain information regarding compensation
paid or accrued by ALARIS Medical, its subsidiaries or IVAC Medical Systems,
Inc. to or on behalf of ALARIS Medical's Chief Executive Officer, each of the
four most highly compensated executive officers of AMSI, other than the Chief
Executive Officer, whose total annual salary and bonus for the years ended
December 31, 1998, 1997 and 1996 exceeded $100,000 (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------- ------------------------------
OTHER ALL
ANNUAL SECURITIES OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) OPTIONS ($)
- --------------------------- -------- ----------- ---------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
WILLIAM J. MERCER 1998 434,154 388,800 - - 15,761
Chief Executive Officer (4) 1997 400,008 360,000 - - 6,366
1996 319,334 312,965 - 600,000 2,998,298
JOHN A. DE GROOT 1998 207,308 172,200 - - 5,000
Vice President, Secretary and 1997 200,004 87,395 - - 3,559
General Counsel 1996 131,254 125,232 - 180,000 384,108
RICHARD M. MIRANDO 1998 210,385 92,880 - - 5,000
Vice President of Operations 1997 197,316 71,047 - - 4,750
1996 181,319 92,401 13,216 180,000 625,939
HENK VAN ROSSEM 1998 217,925 114,317 13,556 - 22,953
Vice President and General 1997 200,823 75,594 17,923 180,000 44,078
Manager, International 1996 - - - - -
ANTHONY B. SEMEDO 1998 180,383 156,722 - - 5,000
Vice President of Corporate 1997 160,008 70,318 - - 4,750
Development 1996 146,808 100,804 - 180,000 671,210
</TABLE>
- --------------------------
(1) 1996 "Salary" amounts for the Named Executives consists of salaries paid by
IVAC Medical Systems, Inc. through November 1996 and salaries paid by AMSI
for December 1996. 1997 and 1998 salaries were paid by AMSI or its
subsidiaries.
(2) 1996 "Bonus" amounts for the Named Executives represents amounts earned in
their respective positions with IVAC Medical Systems, Inc. prior to
November 26, 1996 but paid by AMSI.
(3) Amounts represent automobile allowances paid by the Company.
(4) Mr. Mercer also served as President from November 1996 to April 1999 and as
Chief Financial Officer from March 1997 until August 1997 and from
September 1998 to March 1999.
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6
<PAGE>
<TABLE>
<CAPTION>
STOCK
COMPANY OPTION TOTAL
RETIREMENT RELOCATION CANCELLATION OTHER
NAME YEAR CONTRIBUTIONS(1) PAYMENTS(2) PAYMENT(3) OTHER COMPENSATION
- ---- ---- ---------------- ------------ ---------- ----- -------------
<S> <C> <C> <C> <C> <C> <C>
WILLIAM J. MERCER 1998 5,000 - - 10,761(5) 15,761
1997 4,750 - - 1,616(4) 6,366
1996 4,120 271,980 2,722,198 - 2,998,298
JOHN A. DE GROOT 1998 5,000 - - - 5,000
1997 3,559 - - - 3,559
1996 3,000 - 381,108 - 384,108
RICHARD M. MIRANDO 1998 5,000 - - - 5,000
1997 4,750 - - - 4,750
1996 5,440 23,202 597,297 - 625,939
HENK VAN ROSSEM 1998 22,953 - - - 22,953
1997 17,568 26,510 - - 44,078
1996 - - - - -
ANTHONY B. SEMEDO 1998 5,000 - - - 5,000
1997 4,750 - - - 4,750
1996 4,404 8,568 658,238 - 671,210
</TABLE>
- --------------------------
(1) Represents contributions made by the Company (and by IVAC Medical Systems,
Inc. prior to November 26, 1996) to match pre-tax elective deferral
contributions made by the Named Executives to retirement plans.
(2) Represents relocation and temporary living expenses paid by IVAC Medical
Systems, Inc. and the Company.
(3) Represents stock option cancellation payments paid by the Company in
connection with the acquisition of IVAC Holdings, Inc. and its subsidiaries
for unexercised stock options previously granted under the IVAC Holdings,
Inc. 1995 stock option plan.
(4) Represents life insurance premium paid by the Company.
(5) Represents the fair value of noncash awards grossed-up to cover applicable
state and federal income taxes.
OPTION GRANTS IN 1998
There were no options granted to Named Executive Officers in 1998.
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7
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND OPTION VALUES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS AT 12/31/98
ACQUIRED VALUE OPTIONS AT 12/31/98 ($)(1)
ON REALIZED ------------------------------- -----------------------------
EXERCISE $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
WILLIAM J. MERCER - - 300,000 300,000 862,500 862,500
JOHN A. DE GROOT - - 108,000 72,000 310,500 207,000
RICHARD M. MIRANDO - - 108,000 72,000 310,500 207,000
HENK VAN ROSSEM - - 99,001 80,999 266,115 217,725
ANTHONY B. SEMEDO - - 108,000 72,000 310,500 207,000
</TABLE>
- --------------------------
(1) Calculated based on the excess of the closing price of ALARIS Medical's
Common Stock on December 31, 1998 ($5.875) as reported in the NASDAQ National
Market Issues published in THE WALL STREET JOURNAL over the option exercise
price.
EMPLOYMENT AGREEMENTS
In August 1996, Mr. Mercer entered into an employment agreement whereby he
became employed full time by the Company upon consummation of the Merger. The
agreement is for a term of five years, subject to automatic renewal for
successive one-year periods and to earlier termination as provided therein. The
agreement provides for, among other things, a base salary of $400,000, certain
annual and additional bonuses in an aggregate amount up to 100% of Mr. Mercer's
base annual salary in each such year, options to purchase an aggregate of
600,000 shares of Common Stock, and, in the event Mr. Mercer's employment is
terminated by the Company without cause or disability (as defined therein), or
by Mr. Mercer for good reason (as defined therein), or in the event of an
involuntary termination related to a change in control of the Company, severance
payments in an amount equal to Mr. Mercer's base salary annually until the end
of the employment term. The agreement also contains certain confidentiality,
non-solicitation and non-competition provisions.
In January 1998, Mr. Mercer's employment agreement was amended whereby the
base salary was increased to $432,000 effective January 1, 1998. In April, 1999
a new base salary of $452,000 was approved for Mr. Mercer effective as of
January 1, 1999.
SEVERANCE PLAN
Effective through December 31, 1999, the Company has in place a severance
plan which provides employee severance pay and benefits in the event of an
involuntary termination without cause. The amount of severance and benefits is
based upon position and length of service with the Company and ranges from a
minimum of seven weeks' compensation up to one year's base salary for senior
executives. In the event of an involuntary termination related to a change in
control of the Company, certain senior executives would receive severance of up
to two years' base salary and bonus under separate change of control agreements.
- -------------------------------------------------------------------------------
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed of non-employee Directors who review
recommendations as to senior executive officer compensation which, upon the
approval of the Compensation Committee, are submitted to the Board of Directors.
The members of the Compensation Committee also administer the Third Amended and
Restated 1988 Stock Option Plan of the Company under which options have been
granted on a discretionary basis to senior executive officers. A stock option
committee of non-employee Directors was appointed by the Board to administer the
1996 Stock Option Plan.
The Compensation Committee's approvals of recommendations regarding the
compensation of senior executive officers of the Company are made on an
individual basis and are based on a variety of factors which may include, but
are not limited to, the executive officer's employment contract (if any),
evaluations of the executive officer's performance, the level of responsibility
associated with the office, recruitment requirements, as well as the performance
of the Company. Recommendations made to the Compensation Committee are not
determined by reference to formulae, but rather, are based on market survey data
of similar executive positions derived from a variety of sources as well as the
individual's performance during the prior year. The compensation of the
Company's senior executive officers is structured with a heavy emphasis on
variable pay based upon Company performance and individual performance. The
Compensation Committee believes that such a structure motivates, rewards and
helps retain senior executive officers consistent with the needs of the Company
and contributes to shareholder value. The Company may pay its senior executive
officers compensation consisting of base salary, incentives and/or stock option
grants.
CHIEF EXECUTIVE OFFICER SALARY
During fiscal 1998, Mr. Mercer earned a base salary of $432,000. Mr. Mercer
was eligible for a bonus in an aggregate amount up to 100% of Mr. Mercer's base
annual salary. For fiscal 1998, the bonus was based on a combination of Mr.
Mercer's individual performance and the performance of the Company. The
Compensation Committee reviewed such performance for fiscal 1998 and awarded Mr.
Mercer a $388,800 bonus, which was approved by the Board of Directors.
This report is provided in accordance with federal securities law
requirements and is not intended to create any contractually binding employment
rights for the benefit of any employee of the Company or its subsidiaries.
COMPENSATION COMMITTEE
NORMAN M. DEAN
RICHARD B. KELSKY
STOCK OPTION COMMITTEE
NORMAN M. DEAN
RICHARD B. KELSKY
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9
<PAGE>
PERFORMANCE GRAPH
The graph set forth below represents the cumulative total return from
January 1, 1994 to December 31, 1998 on the Common Stock of the Company, the
American Stock Exchange ("AMEX") Market Value Index, and a Peer Group Index. The
Peer Group Index is a representative grouping of companies from SIC Code 3841 --
Surgical & Medical Instruments & Apparatus -- which had reportable stock
performance from January 1, 1994 to December 31, 1998. The graph has been
prepared by an outside consulting firm to the Company. The graph assumes that
the value of the investment in the Company's Common Stock and each index was
$100 on January 1, 1994 and that all dividends were reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
FROM JANUARY 1, 1994 TO DECEMBER 31, 1998
AMONG ALARIS MEDICAL, INC.,
AMEX MARKET VALUE INDEX AND PEER GROUP INDEX
[GRAPH]
<TABLE>
<CAPTION>
- ------------------------------ ------------- ------------ -------------- ------------ ------------ -------------
1/1/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ------------------------------ ------------- ------------ -------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
ALARIS Medical, Inc. $100.00 $139.13 $208.70 $260.87 $339.13 $408.70
- ------------------------------ ------------- ------------ -------------- ------------ ------------ -------------
Peer Group Index 100.00 115.07 196.32 213.81 248.01 338.62
- ------------------------------ ------------- ------------ -------------- ------------ ------------ -------------
AMEX Market Value Index 100.00 88.33 113.86 120.15 144.57 142.61
- ------------------------------ ------------- ------------ -------------- ------------ ------------ -------------
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, at April 12, 1999, information regarding
the beneficial ownership of Common Stock by (i) all persons known by ALARIS
Medical who own beneficially more than 5% of the outstanding Common Stock; (ii)
each Director of ALARIS Medical; (iii) each of the Named Executive Officers; and
(iv) all Directors and the Named Executive Officers as a group. Unless otherwise
stated, ALARIS Medical believes that the beneficial owners of the shares listed
below have sole investment and voting power with respect to such shares. In
addition, unless otherwise indicated, each such person's business address is
10221 Wateridge Circle, San Diego, California 92121.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
OWNED OF TOTAL (1)
-------------- -----------
<S> <C> <C>
Jeffry M. Picower............................................... 46,664,209 (2) 77.6%
South Ocean Blvd.
Palm Beach, FL 33480
William J. Mercer............................................... 546,200 (3) *
Norman M. Dean.................................................. 31,000 (4) *
Henry Green..................................................... 17,000 (5) *
Richard B. Kelsky............................................... 102,100 (6) *
William C. Bopp................................................. 85,000 (7) *
Anthony B. Semedo............................................... 117,600 (8) *
Richard M. Mirando.............................................. 127,000 (9) *
John A. de Groot................................................ 122,000 (10) *
Henk van Rossem................................................. 108,001 (11) *
Jake St. Philip................................................. 119,500 (12) *
James E. May.................................................... 17,500 (13) *
All Directors and Named Executive Officers as a group........... 48,057,110 (14) 79.9%
(12 individuals)
</TABLE>
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* Less than 1%
(1) Calculated in accordance with Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934, as amended. At April 12, 1999, ALARIS Medical had
59,241,131 shares of Common Stock outstanding.
(2) Includes (i) 20,079,477 shares of Common Stock owned by Decisions
Incorporated ("Decisions"); (ii) 2,489,463 shares of Common Stock owned by
JA Special Partnership Limited ("JA Special"); (iii) 24,074,269 shares of
Common Stock owned by JD Partnership, L.P. ("JD Partnership") and; (iv)
currently exercisable option on 21,000 shares of Common Stock granted
under the Directors Plan. Does not include an option to purchase 20,000
shares of Common Stock granted under the Directors Plan that vests over
time. Mr. Picower is the sole stockholder and sole Director of Decisions,
which is the sole general partner of JD Partnership, and the sole general
partner of JA Special. As a result, Mr. Picower shares or has the sole
power to vote or direct the vote of and to dispose or direct the
disposition of such shares of Common Stock and may be deemed to be the
beneficial owner of such shares.
(3) Includes (i) 206,200 shares of Common Stock owned by the William J. Mercer
Trust, of which Mr. Mercer is the trustee and a beneficiary; (ii) 32,500
shares of Common Stock owned by the William J. Mercer IRA Rollover of
which Mr. Mercer has a pecuniary interest; (iii) 7,500 shares of Common
Stock held by the Nikki Mercer IRA Rollover, that Mr. Mercer disclaims any
beneficial interest in and; (iv) currently exercisable option on 300,000
shares of Common Stock granted under the 1996 Option Plan. In addition,
pursuant to an employment agreement with the Company, Mr. Mercer has been
granted under the 1996 Option Plan an additional option on 300,000 shares
of Common Stock that vests over time. See "Employment Agreements."
(4) Includes 16,000 shares of Common Stock owned by Norman Dean, currently
exercisable option on 8,000 shares of Common Stock under the Directors
Plan, and currently exercisable option on 7,000 shares of Common Stock
granted in consideration for service on a special committee of the Board
of Directors. Does not include (i) option on an additional 14,000 shares
of Common Stock granted under the Directors Plan that vests over time and
(ii) option on 3,000 shares of
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11
<PAGE>
Common Stock granted in consideration for service on a special committee
of the Board of Directors of ALARIS Medical that vests over time.
(5) Consists of 5,000 shares of Common Stock owned by Mr. Green and currently
exercisable option on 12,000 shares.
(6) Includes (i) 94,100 shares of Common Stock owned by Mr. Kelsky and (ii)
currently exercisable option on 8,000 shares of Common Stock granted under
the Directors Plan. Does not include option on an additional 14,000 shares
of Common Stock granted under the Directors Plan that vests over time.
(7) Includes 85,000 shares of Common Stock owned by Mr. Bopp. Does not include
option of 180,000 shares of Common Stock granted under the 1996 Option
Plan that vests over time.
(8) Includes (i) 600 shares of Common Stock owned by Mr. Semedo and (ii)
currently exercisable option on 117,000 shares of Common Stock granted
under the 1996 Option Plan. Does not include option of 63,000 shares of
Common Stock granted under the 1996 Option Plan that vests over time.
(9) Includes (i) 10,000 shares of Common Stock owned by Richard M. Mirando,
and (ii) a currently exercisable option on 117,000 shares of Common Stock
granted under the 1996 Option Plan. Does not include option of 63,000
shares of Common Stock granted under the 1996 Option Plan that vests over
time.
(10) Includes (i) 5,000 shares of Common Stock owned by John A. de Groot, and
(ii) a currently exercisable option on 117,000 shares of Common Stock
granted under the 1996 Option Plan. Does not include option of 63,000
shares of Common Stock granted under the 1996 Option Plan that vests over
time.
(11) Includes currently exercisable option on 108,001 shares of Common Stock
granted under the 1996 Option Plan. Does not include option on an
additional 71,999 shares of Common Stock granted under the 1996 Option
Plan that vests over time.
(12) Includes currently exercisable option on 119,500 shares of Common Stock
granted under the 1996 Option Plan. Does not include option on an
additional 60,500 shares of Common Stock granted under the 1996 Option
Plan that vests over time.
(13) Includes: (i) 5,000 shares of Common Stock owned by James E. May, and (ii)
a currently exercisable option on 12,500 shares of Common Stock granted
under the 1996 Option Plan. Does not include option on 87,500 shares of
Common Stock granted under the 1996 Option Plan that vests over time.
(14) Includes currently exercisable options on 898,001 shares of Common Stock
granted under the 1996 Option Plan and 49,000 shares of Common Stock
granted under the Directors Plan.
POSSIBLE CHANGES IN CONTROL
All of AMSI's outstanding equity securities have been pledged by ALARIS
Medical to secure the obligations of the Company and AMSI under their bank
credit facility. The bank credit facility contains certain events of default
after expiration of applicable grace periods, including failure to make payments
under the bank credit facility; breach of representations and warranties; breach
of covenants; default under other agreements or conditions relating to
indebtedness; certain events of insolvency or bankruptcy with respect to the
Company or certain subsidiaries; certain ERISA violations; invalidity or
disaffirmance of any guarantee or pledge agreement; certain judgments and
certain events relating to changes in control of AMSI and ALARIS Medical. In the
event of a default under the bank credit facility, the lenders thereunder have
certain rights as secured creditors under the terms of the bank credit facility
to vote and to sell or otherwise dispose of such pledged shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
ALARIS Medical's executive officers, Directors and persons who beneficially own
more than 10% of a registered class of ALARIS Medical's equity securities to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Such individuals are required by regulations promulgated by
the Securities and Exchange Commission to furnish ALARIS Medical with copies of
all Section 16(a) reports that they file. Based solely on review of the copies
of such reports furnished to ALARIS Medical, or written representations that no
reports were required, ALARIS Medical believes that during 1998 and 1999, all of
its executive officers, Directors and greater-than-10% beneficial owners
complied with the Section 16(a) filing requirements applicable to them with the
exception of the following late filings: (i)
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12
<PAGE>
Mr. Picower filed one Form 4 approximately 10 months late disclosing two
transactions involving stock options granted; (ii) Mr. Greenberg, a former
member of the board of Directors, filed one Form 4 approximately 7 months
late disclosing 4 transactions involving the purchase of shares of Common
Stock; (iii) Mr. May, who became subject to Section 16(a) requirements in
February 1999, filed one Form 3 approximately 1 month late; (iv) Mr. St.
Philip filed one Form 4 approximately 8 months late disclosing one
transaction involving the grant of stock options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP was engaged to audit the Company's accounts in
1998. The Board of Directors, upon the recommendation of the Audit Committee,
which is composed of two Directors who are not now officers or otherwise
employees of the Company, selected PricewaterhouseCoopers LLP to audit the
Company's accounts for the year ending December 31, 1999.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting and to be available to respond to appropriate questions. The
representative also will have an opportunity to make a statement if he or she so
desires.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF PRICEWATERHOUSECOOPERS LLP.
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13
<PAGE>
ANNUAL REPORT TO STOCKHOLDERS AND
STOCKHOLDER PROPOSALS FOR 2000
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1998 has been mailed concurrently with this proxy statement
to all stockholders entitled to notice of and to vote at the Annual Meeting. The
Annual Report to Stockholders is not incorporated into this proxy statement and
is not considered proxy soliciting material.
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's annual meetings, consistent with regulations adopted by
the Securities and Exchange Commission (the "Commission"). Proposals submitted
for inclusion in the Company's Proxy Statement and form of proxy for the 2000
Annual Meeting of Stockholders are subject to the requirements of Rule 14a-8 of
the proxy rules adopted by the Commission, and must be received by the Company
not later than February 4, 2000. If a stockholder intends to present a proposal
for consideration at the 2000 Annual Meeting outside the processes of Rule
14a-8, the Company must receive notice of such proposal on or before April 20,
2000, or such notice will be considered untimely under Rule 14a-4(c)(1) of the
Commission's proxy rules, and the Company's proxies will have discretionary
voting authority with respect to such proposal, if presented at the meeting,
without including information regarding such proposal in its proxy materials.
Proposals should be directed to the attention of the Legal Department of the
Company at the Company's principal executive offices.
Under the Company's By-Laws, if a stockholder wishes to nominate a Director
or bring other business before the Company's annual meeting, (i) the
stockholder's written notice must be received by the Secretary of the Company
not less than sixty nor more than ninety days prior to the first anniversary of
the preceding year's annual meeting (subject to adjustment if the subsequent
year's meeting date is substantially moved) and (ii) the notice must contain the
specific information required in the Company's By-Laws. A copy of the Company's
By-Laws may be obtained by writing to the Legal Department of the Company at the
Company's principal executive offices. Please note that these requirements
relate only to matters a stockholder wishes to bring before the annual meeting.
They do not apply to proposals that a stockholder wishes to have included in the
Company's proxy statement.
FORM 10-K FOR FISCAL YEAR 1998
A COPY OF THE COMPANY'S REPORT FOR THE YEAR ENDED DECEMBER 31, 1998 ON FORM
10-K, EXCLUSIVE OF EXHIBITS, IS AVAILABLE WITHOUT CHARGE TO STOCKHOLDERS ON
REQUEST AND MAY BE OBTAINED BY WRITING TO:
CORPORATE COMMUNICATIONS
ALARIS MEDICAL, INC.
10221 WATERIDGE CIRCLE
SAN DIEGO, CALIFORNIA 92121-1579
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14
<PAGE>
NASDAQ NATIONAL MARKET LISTING
During the first quarter of 1999, the Nasdaq Stock Market, Inc. ("NASDAQ")
notified the Company that it would delist the Common Stock from the NASDAQ
National Market System on June 22, 1999 for failure to maintain a closing per
share bid price of at least $5.00 in accordance with NASDAQ Marketplace Rule
4450 (b)(4) (the "Pricing Requirement"). Notwithstanding the foregoing, if on or
before June 18, 1999, the closing per share bid price of the Common Stock equals
at least $5.00 for a minimum of ten consecutive trading days, the Company will
be deemed to have satisfied the Pricing Requirement. If the Company is unable to
achieve compliance with the Pricing Requirement, the Company may, prior to June
18, 1999, request a hearing for the purpose of seeking a waiver of the Pricing
Requirement from NASDAQ. If the Company timely requests a hearing, the Common
Stock will continue to trade on the NASDAQ National Market System until a
decision on the Company's request for such waiver is rendered by NASDAQ.
Although the Company expects that, if it is unable to achieve compliance with
the Pricing Requirement by June 18, 1999, it will request a hearing, there can
be no assurance that it will be granted a waiver with respect to such
requirement. In the event that the Company cannot achieve compliance with the
Pricing Requirement and is not granted a waiver with respect to the Pricing
Requirement, the Company will seek to have the Common Stock approved for trading
on either the NASDAQ Small Capitalization Market or the American Stock Exchange.
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15
<PAGE>
OTHER MATTERS
The enclosed proxy is being solicited by the Board of Directors. The cost
of the solicitation will be borne by the Company. In addition to use of the
mails, proxies may be solicited by telephone, telegraph or personal interview by
employees of the Company and its subsidiaries without additional compensation.
The Company will reimburse brokerage firms, banks, trustees, nominees and
other persons authorized by the Company for their out-of-pocket expenses in
forwarding proxy material to the beneficial owners of the Company's stock.
Management does not know of any other matters that will be presented at the
meeting other than matters incident to the conduct thereof. However, if any
matters properly come before the meeting or any adjournments, the holders of the
proxies named in the accompanying form of proxy have discretionary authority to
vote on such matters.
By Order of the Board of Directors,
John A. de Groot
SECRETARY
San Diego, California
May 19, 1999
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16
<PAGE>
ALARIS MEDICAL, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 23, 1999
The undersigned stockholder of ALARIS MEDICAL, INC. (the "Company") hereby
appoints JOHN A. de GROOT, RICHARD B. KELSKY AND HENRY GREEN, or any of them,
with full power of substitution and revocation, proxies of the undersigned to
vote all shares of Common Stock of the Company which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders
of the Company (the "Annual Meeting") to be held on Wednesday, June 23, 1999
at 9:00 a.m. at the Peninsula Hotel, 700 Fifth Avenue at 55th Street, New
York, New York and at any adjournment thereof, with respect to:
1. The election of Directors;
2. The ratification of the appointment of PricewaterhouseCoopers, LLP as
independent accountants for the fiscal year ending December 31, 1999; and
3. The transaction of such other business as may properly come before the
Annual Meeting.
The proxy will be voted in accordance with the instructions given on the
other side, and in the discretion of the proxies upon such other matters as
may properly come before the Annual Meeting. IF NO INSTRUCTIONS ARE GIVEN,
THIS PROXY WILL BE VOTED (1) SO AS TO ELECT THE LARGEST POSSIBLE NUMBER OF
THE BOARD OF DIRECTORS' NOMINEES, AND (2) FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS, LLP AS INDEPENDENT ACCOUNTANTS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
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TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
(CONTINUED FROM REVERSE SIDE)
Please mark your votes as indicated in this example /X/
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE FOR ITEM 1.
Item 1 - Election of Directors, Nominees: Norman M. Dean, Henry Green,
Richard B. Kelsky, William J. Mercer, and Jeffry M. Picower.
The Board of Directors Recommends Stockholders Vote FOR Item 1. / /
WITHHOLD Authority to vote for all nominees listed above / /
For the nominees listed above, (except as written to the contrary below) and,
unless otherwise indicated, with discretion of the proxies to cumulate votes,
in their sole and absolute discretion, for one or more of such nominees in
such manner so as to elect the largest number of such nominees.
(To withhold authority to vote for any nominee write that nominee's name in
the space provided below)
- ----------------------------------------------------------------------------
To vote cumulatively, write "Cumulative For" and the number of shares and the
name(s) of the nominee(s) in the space provided below.
- ----------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE FOR ITEM 2.
Item 2 - The ratification of the appointment of PricewaterhouseCoopers, LLP
as independent accountants for the fiscal year ending December 31,
1999; and
FOR AGAINST ABSTAIN
/ / / / / /
Dated: , 1999
-----------------------------------------
- ------------------------------------------------------
Signature
- ------------------------------------------------------
Signature if held jointly
Please mark, date and sign exactly as your name(s) appear(s) above and return
in the enclosed envelope. If acting as attorney, executor, administrator,
trustee, guardian, etc., please give full title. If the signer is a
corporation, please sign the full corporate name by fully authorized officer.
If shares are held jointly, each shareholder named should sign.
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TRIANGLE FOLD AND DETACH HERE TRIANGLE
