SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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|X| Definitive Proxy Statement
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|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
BEI MEDICAL SYSTEMS COMPANY, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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<PAGE>
BEI MEDICAL SYSTEMS COMPANY, INC.
100 Hollister Road
Teterboro, New Jersey 07608
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 21, 2000
To the Stockholders of BEI Medical Systems Company, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of BEI
Medical Systems Company, Inc., a Delaware corporation (the "Company"), will be
held on Tuesday, March 21, 2000 at 2:00 p.m. local time, at the Company's
principal executive office located at 100 Hollister Road, Teterboro, New Jersey,
for the following purposes:
1. To elect two directors to hold office until the Annual Meeting of
Stockholders in 2003.
2. To ratify the selection of Ernst & Young LLP as independent public
accountants of the Company for its fiscal year ending September 30,
2000.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on January 25,
2000, as the record date for the determination of stockholders entitled to
notice of and to vote at this Annual Meeting of Stockholders and at any
adjournment or postponement thereof.
By Order of the Board of Directors
Thomas W. Fry
Corporate Secretary
Teterboro, New Jersey
January 27, 2000
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT ATTENDANCE AT THE MEETING WILL NOT BY ITSELF REVOKE A PROXY.
FURTHERMORE, IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
BEI MEDICAL SYSTEMS COMPANY, INC.
100 Hollister Road
Teterboro, New Jersey 07608
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
March 21, 2000
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of BEI Medical Systems Company, Inc., a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held on March
21, 2000, at 2:00 p.m. local time (the "Annual Meeting"), or at any adjournment
or postponement thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting. The Annual Meeting will be held at the
Company's principal executive office located at 100 Hollister Road, Teterboro,
New Jersey. The Company intends to mail this proxy statement and accompanying
proxy card on or about February 10, 2000, to all stockholders entitled to vote
at the Annual Meeting.
The Distribution: Effective September 27, 1997, the Company, formerly
known as BEI Electronics, Inc. ("Electronics"), distributed the outstanding
stock of its wholly-owned subsidiary, BEI Technologies, Inc. ("BEI Technologies"
or "Technologies"), to its stockholders in a spin-off of its sensors business
(the "Distribution"). As a result, the Company's sole remaining direct
subsidiary was a medical device business, BEI Medical Systems Company, Inc.
("BMED"). In November 1997, the Company merged BMED into the Company and changed
the Company's name to BEI Medical Systems Company, Inc. (the "Merger"). For
further information about the Distribution, see BEI Technologies' Form 10
General Form for Registration of Securities as amended (File No. 0-22799), the
Company's Form 10-K Annual Report for the fiscal year ended September 27, 1997
(the "1997 10-K") and Note 1 of "Notes to Consolidated Financial Statements"
included in the 1997 10-K.
The Asset Sale: On December 8, 1999, BEI completed the sale of a
substantial portion of the assets of the Company to CooperSurgical Acquisition
Corp., a Delaware corporation ("CSAC"), for approximately $10.5 million in cash
subject to post-closing adjustments, plus assumption of certain liabilities,
pursuant to an Asset Purchase Agreement, dated as of October 1, 1999, between
the Company and CSAC, as amended (the "Asset Purchase Agreement") (the "Asset
Sale"). The assets sold constitute a business of developing, manufacturing,
marketing and servicing a broad array of advanced systems and devices for
diagnostic and therapeutic procedures in the medical fields of gynecology and
gastroenterology. Following the Asset Sale, the Company is focusing exclusively
on developing a new therapeutic system, the Hydro ThermAblator(R) (the "HTA"(R))
for treatment of excessive uterine bleeding. For further information about the
Asset Sale, see the Company's Proxy Statement for Special Meeting of
Stockholders, (File No. 0000929624-99-001921), the Company's Form 10-K Annual
Report for the fiscal year ended October 2, 1999 (the "1999 10-K") and Note 1 of
"Notes to Consolidated Financial Statements" included in the 1999 10-K.
1
<PAGE>
Solicitation
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this proxy statement,
the proxy and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of business on January
25, 2000, will be entitled to notice of and to vote at the Annual Meeting. At
the close of business on January 25, 2000, the Company had outstanding and
entitled to vote 7,685,521 shares of Common Stock. Each holder of record of
Common Stock on such date will be entitled to one vote for each share held on
all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 100
Hollister Road, Teterboro, New Jersey 07608, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Please note, however, that attendance at the
meeting will not by itself revoke a proxy. Furthermore, if the shares are held
of record by a broker, bank or other nominee and the stockholder wishes to vote
at the meeting, the stockholder must obtain from the record holder a proxy
issued in the stockholder's name.
Stockholder Proposals
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2001 Annual
Meeting of Stockholders pursuant to Rule 14a-8, of the Securities and Exchange
Commission is October 13, 2000. The deadline for submitting a stockholder
proposal or a nomination for director that is not to be included in such proxy
statement and proxy is December 21, 2000. Stockholders are also advised to
review the Company's By-laws, which contain additional requirements with respect
to advance notice of stockholder proposals and director nominations.
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<PAGE>
Proposal 1
Election of Directors
The Company's Restated Certificate of Incorporation and By-Laws provide
that the Board shall be divided into three classes, each class consisting, as
nearly as possible, of one-third of the total number of directors, with each
class having a three-year term. Vacancies on the Board may be filled by the
affirmative vote of the holders of a majority of the voting power of the then
outstanding shares of Common Stock or by the affirmative vote of a majority of
the remaining directors. A director elected by the Board to fill a vacancy
(including a vacancy created by an increase in the authorized number of
directors on the Board) shall serve for the remainder of the full term of the
class of directors in which the vacancy occurred and until such director's
successor is elected and has qualified or until his earlier death, resignation
or removal.
The Board of Directors is presently composed of five members. Two
directors are in the class whose term of office expires in 2000. The nominees
for election to this class are Mr. Richard W. Turner, who is currently a
director and president and chief executive officer of the Company, and Gary D.
Wrench, a current director of the Company. If elected at the Annual Meeting, a
nominee would serve until the 2003 Annual Meeting of Stockholders and until his
successor is elected and has qualified, or until such director's earlier death,
resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the two nominees named below. In the event that the nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. The persons nominated for election have agreed to serve if elected, and
the Board has no reason to believe that the nominees will be unable to serve.
Set forth below is biographical information for the nominees and each
person whose term of office as a director will continue after the Annual
Meeting.
Nominees for Election for a Three-Year Term Expiring at the 2003 Annual Meeting
Richard W. Turner
Mr. Turner, age 53, founded in 1991 what is now the Company as a
subsidiary of Electronics. Mr. Turner served as President of that subsidiary
from 1991 until it merged into the Company in November 1997, and then as
President of the Company until April 1998. He rejoined the Company as President
and Chief Executive Officer in January 1999. He has served as a director of the
Company since September 1997. Previously President of the Healthcare Group for
the Cooper Companies, Mr. Turner has held executive leadership positions in the
medical industry for over 20 years, including President and Director of
Cooper-LaserSonics, Inc., President of CooperVision Inc., President and Chief
Executive Officer/Director for Pancretec, Inc. and President of Kay
Laboratories. Mr. Turner holds a B.S. from Old Dominion University and an M.B.A.
from Pepperdine University.
3
<PAGE>
Gary D. Wrench
Mr. Wrench, age 66, has been a director of the Company since 1986. He
served as Senior Vice President and Chief Financial Officer of Electronics from
July 1993 to September 1997. From April 1985 to July 1993, he served as Vice
President of Electronics and President and Chief Executive Officer of Motion
Systems Company, Inc., then a wholly owned subsidiary of Electronics that is now
a part of Technologies. Previous experience includes 20 years with Hughes
Aircraft Company including an assignment as President of Spectrolab, Inc., a
Hughes subsidiary. He currently serves as a director of Technologies. Mr. Wrench
holds a B.A. from Pomona College and an M.B.A. from the University of
California, Los Angeles.
The Board Of Directors Recommends A Vote
In Favor Of The Nominees
Director Continuing in Office Until the 2001 Annual Meeting
Lawrence A. Wan
Dr. Wan, age 61, has been a director of the Company since November 1997.
He served as Vice President and Chief Technical Officer of Electronics from July
1990 to September 1997, and is currently Vice President, Corporate Technology.
From 1984 until 1990, he served as Vice President, Engineering, of Systron
Donner Corporation, and also held various other technical and general management
positions with that company between 1979 and 1984. From 1968 through 1979, he
served as Chief Executive Officer of Sycom, Inc., a commercial electronics
company which he founded. From 1964 to 1968, he worked for Hughes Aircraft
Company where he headed the Radar Systems Section of the Hughes Ground Systems
Group. In 1962, Dr. Wan and two other professors established an Engineering
School at the University of California, Santa Barbara, where he also taught
Engineering. Dr. Wan holds B.S., M.S. and Ph.D. degrees in Engineering and
Applied Sciences from Yale University.
Directors Continuing in Office Until the 2002 Annual Meeting
Charles Crocker
Mr. Crocker, age 60, a founder of the Company, has served as Chairman of the
Board of Directors of the Company since October 1974. Mr. Crocker served as
President and Chief Executive Officer of the Company from October 1995 until the
Distribution. Mr. Crocker is President and Chief Executive Officer of
Technologies. He served as President of Crocker Capital Corporation (a Small
Business Investment Company), from 1970 to 1985, and as General Partner of
Crocker Associates, a venture capital investment partnership, from 1970 to 1990.
He currently serves as a director of Technologies, Fiduciary Trust Company
International, Pope & Talbot, Inc. and KeraVision. Mr. Crocker holds a B.S. from
Stanford University and an M.B.A. from the University of California, Berkeley.
4
<PAGE>
Dr. Ralph M. Richart
Dr. Richart, age 66, has been a director of the Company since November
1997 and was a director of BEI Medical Systems Company, Inc. from 1996 until
that company's merger into Electronics in November 1997. Dr. Richart is
Professor of Pathology in Obstetrics and Gynecology at the Columbia University
College of Physicians and Surgeons and Associate Director of Gynecological
Pathology and Cytology at the Sloane Hospital for Women in New York City. He
served as a Career Research Development Awardee at the Medical College of
Virginia before moving to Columbia-Presbyterian Medical Center in 1963. His
professional interests have centered around obstetrical and gynecological
pathology and cytology with particular emphasis on the study of cervical
neoplasia and, more recently, the relationship of the human papillomavirus to
lower genital tract neoplasia. He is the past President of the International
Gynecologic Cancer Society. He received his medical training at the University
of Rochester School of Medicine and Dentistry, and completed his pathology
residency in the Harvard Hospitals system.
Board Committees and Meetings
During the fiscal year ended October 2, 1999, the Board held nine
meetings. The Board has an Audit Committee and a Compensation Committee, but
does not have a Nominating Committee or any committee performing a similar
function.
The Audit Committee meets with the Company's independent accountants at
least annually to review the scope and results of the annual audit; recommends
to the Board the independent accountants to be retained; and receives and
considers the accountants' comments as to internal controls, accounting staff
and management performance and procedures in connection with audit and financial
controls. The Audit Committee currently consists of two non-employee directors:
Mr. Wrench, Chairman of the Committee, and Dr. Richart.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation for the Company's executive officers, awards stock
options and restricted stock to eligible executives, employees and consultants
under the Company's stock option plan and restricted stock plan, administers the
Company's stock option plan and restricted stock plan, and otherwise determines
compensation levels and performs such other functions regarding compensation as
the Board may delegate. The Compensation Committee met once during fiscal year
1999. The Compensation Committee consists of two non-employee directors: Mr.
Wrench, Chairman of the Committee, and Dr. Wan.
During the fiscal year ended October 2, 1999, each director except Mr.
Turner attended 75% or more of the aggregate of the meetings of the Board and
committees on which he served which were held during the period for which he was
a director or committee member, respectively.
5
<PAGE>
Proposal 2
Ratification of Selection of Independent Public Accountants
The Board of Directors has selected Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending September 30, 2000.
Ernst & Young LLP (including its predecessor, Ernst & Whinney) has audited the
Company's financial statements since 1975. A representative of Ernst & Young LLP
is expected to be present at the Annual Meeting, will have an opportunity to
make a statement if he or she so desires and will be available to respond to
appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent public accountants is not required by the Company's
By-Laws or otherwise. However, the Board is submitting the selection of Ernst &
Young LLP to the stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the selection, the Audit Committee
and the Board will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Board at its discretion may direct the appointment of
a different independent accounting firm at any time during the year if it
determines that such a change would be in the best interest of the Company and
its stockholders.
The affirmative vote of the holders of a majority of the shares
represented and entitled to vote at the meeting will be required to ratify the
selection of Ernst & Young LLP as the Company's independent public accountants
for the fiscal year ending September 30, 2000. Abstentions will be counted
toward the tabulation of votes cast on proposals presented to the stockholders
and will have the same effect as negative votes. Broker non-votes are counted
towards a quorum, but are not counted for any more in determining whether this
matter has been approved.
The Board Of Directors Recommends A Vote
In Favor Of Proposal 2
6
<PAGE>
Security Ownership Of
Certain Beneficial Owners And Management
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of January 10, 2000 by: (i) each director; (ii)
each executive officer; (iii) all executive officers and directors of the
Company as a group; and (iv) all those known by the Company to be beneficial
owners of more than five percent of its Common Stock.
Beneficial Ownership(l)
Number of Percent of
Beneficial Owner Shares Total (2)
Mr. Charles Crocker(3) 1,557,904 20.3%
One Post Street
Suite 2500
San Francisco, CA
Hollybank Investment, LP (4) 1,000,200 13.0%
One Financial Center, Suite 1600
Boston, MA
Dimensional Fund Advisors, Inc.(5) 476,000 6.2%
1299 Ocean Avenue
Penthouse
Santa Monica, CA
SoGen International Fund, Inc.(6) 400,000 5.2%
1221 Avenue of the Americas
8th Floor
New York, NY 10020
Mr. Samuel Dickstein(7) 60,457 *
Mr. Thomas W. Fry(7) 62,270 *
Dr. Ralph M. Richart(7) 105,161 1.4%
Mr. Richard W. Turner(7) 375,012 4.7%
Dr. Lawrence A. Wan(7) 26,283 *
Mr. Gary D. Wrench(7)(8) 103,389 1.3%
All executive officers and directors
as a group (7 persons)(9) 2,290,476 28.0%
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders of the Company and upon any Schedules 13D or 13G
filed with the Securities and Exchange Commission (the "Commission").
Unless otherwise indicated in the footnotes to this table and subject to
community property laws where applicable, the Company believes that each
of the stockholders named in this table has sole voting and investment
power with respect to the shares indicated as beneficially owned.
7
<PAGE>
(2) Applicable percentages are based on 7,685,707 shares outstanding on
January 10, 2000, adjusted as required by rules promulgated by the
Commission.
(3) Includes 400,000 shares held by Mr. Crocker as trustee for his adult
children, as to which Mr. Crocker disclaims beneficial ownership. Also
includes 54,936 shares held in a trust of which Mr. Crocker is beneficiary
and sole trustee. Mr. Crocker, acting alone, has the power to vote and
dispose of the shares in each of these trusts.
(4) Represents shares held by Hollybank Investments, LP ("Hollybank") which
has the sole power to vote and dispose of the shares held by it and
includes 161,200 shares held by Dorsey R. Gardner, general partner of
Hollybank, who has the sole power to vote and dispose of his shares. Mr.
Gardner, as general partner of Hollybank, may be deemed to beneficially
own shares held by Hollybank. Except to the extent of his interest as a
limited partner in Hollybank, Mr. Gardner disclaims such beneficial
ownership.
(5) Dimensional Fund Advisors Inc. ("Dimensional'), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the "Portfolios").
In its role as investment advisor and investment manager, Dimensional
possesses both voting and investment power over 476,000 shares of the
Company's stock as of September 30, 1999. The Portfolios own all
securities reported in this statement, and Dimensional disclaims
beneficial ownership of such securities.
(6) SoGen International Fund, Inc. shares with Societe Generale Asset
Management Corp. the power to vote and dispose of all shares held by it.
(7) Includes shares which certain officers and directors have the right to
acquire within 60 days after the date of this table pursuant to
outstanding options as follows: Mr. Dickstein, 44,667 shares; Mr. Fry,
20,899 shares; Mr. Turner, 375,012 shares; Dr. Wan, 10,000 shares; Mr.
Wrench 41,371 shares; and all executive officers and directors as a group,
491,949 shares. Also includes shares which certain officers and directors
have the right to vote pursuant to unvested portions of restricted stock
awards as follows: shares; Dr. Wan, 3,570 shares; Mr. Wrench, 6,300
shares; and all executive officers and directors as a group, 9,870 shares.
(8) Includes 45,276 shares held in a revocable trust of which Mr. Wrench and
his wife, Jacqueline Wrench, are beneficiaries and sole trustees. Mr. and
Mrs. Wrench, acting alone, each has the power to vote and dispose of such
shares. Also includes 16,743 shares which Mr. Wrench, acting alone, has
power to vote and dispose of.
(9) Includes the shares described in the Notes above, as applicable.
8
<PAGE>
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who own more than ten percent of the Company's Common Stock, to file
with the Commission initial reports of ownership and reports of changes in
ownership of Common Stock of the Company. Officers, directors and greater than
ten percent stockholders are required by the Commission's regulations to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended October 2, 1999, the
Company's officers, directors and greater than ten percent beneficial owners
complied with all applicable Section 16(a) filing requirements.
9
<PAGE>
Executive Compensation
Compensation of Directors
During the fiscal year ended October 2, 1999, Dr. Wan and Mr. Wrench, as
non-employee directors, each received a monthly fee of $1,000 and a fee of $500
for each Board meeting attended and for each committee meeting attended as a
committee member and a fee of $250 for each telephonic Board or committee
meeting in which such director participated. In the fiscal year ended October 2,
1999, the total compensation paid to non-employee directors, excluding Mr.
Crocker, for services as directors was $30,000. The members of the Board are
also eligible for reimbursement for their expenses incurred in connection with
attendance at Board meetings in accordance with Company policy.
In December 1999, Mr. Wrench was awarded a $10,000 bonus payment related
to his contributions toward the completion of the Asset Sale
In fiscal year 1998, a nonstatutory stock option to purchase 20,000 shares
of the Company's Common Stock was issued to Dr. Wan in connection with his
agreement to serve as a director of the Company. On December 14, 1998, the stock
option was repriced and reissued at an exercise price of $1.625. The closing
price of the Company's Common Stock on the Nasdaq National Market System on
December 14, 1998, was $1.625.
In March 1998, the Company entered into a consulting agreement with Dr.
Richart under which he would assist with medical research and clinical
information. In consideration for these services, the Company granted Dr.
Richart 50,000 shares of the Company's Common Stock pursuant to the terms of the
Company's 1992 Restricted Stock Plan, as amended. Of the shares granted, 19,996
vested immediately upon issuance with the balance vesting ratably from October
1998 through March 2000. Unvested shares will be forfeited by Dr. Richart should
he cease to render services to the Company for any reason other than due to
retirement, disability or death. The fair market value of the shares at
September 24, 1998, the date of the award, was $96,875, based upon the closing
price of the stock as reported by the Nasdaq National Market System on that
date. The agreement also provides for commissions to be paid to Dr. Richart on
sales of the HTA in the Far East and Latin America territories at the rate of
$1,000 per unit and for a 2% commission to be paid on certain disposable units
sold. In fiscal year 1999, the Company paid Dr. Richart $2,057 for commission on
shipments made in fiscal year 1998 and $9,233 is payable for shipments made in
fiscal year 1999. In addition, Dr. Richart provides consulting services to the
Company pursuant to an agreement under which he is paid a fee of $1,000 per day
of service. In the fiscal year ended October 2, 1999, Dr. Richart provided no
services and the Company was not obligated to pay any fees under this agreement.
Mr. Crocker serves as Chairman of the Board of Directors of the Company at
an annual compensation of $50,000 per year plus reimbursement for expenses
incurred in connection with attendance at Board meetings in accordance with
Company policy.
10
<PAGE>
Compensation of Executive Officers
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation(1) Compensation Awards
Securities All other
Restricted Underlying Compen-
Name and Salary Bonus Stock Awards Options (4) sation(7)
Principal Position Year ($) ($) ($) (#) $
<S> <C> <C> <C> <C> <C> <C>
Mr. Herbert H. Spoon
Former President and 1999 138,542 -- -- -- 3,599
Chief Executive Officer(5) 1998 87,217 -- 232,500(3) 95,000 21,051
Mr. Richard W. Turner 1999 238,094 (2) 90,000 -- 95,000 5,044
President and 1998 181,387 (2) -- -- 409,403 4,244
Chief Executive Officer(6) 1997 218,490 (2) -- -- -- 5,754
Mr. Thomas W. Fry
Vice President, 1999 160,813 50,000 -- 41,750 4,816
Finance and Administration, 1998 140,836 15,000 -- 17,024 4,314
Treasurer and Secretary 1997 138,333 13,500 -- -- 3,741
Mr. Samuel Dickstein
Vice President,
New Business Development 1999 138,038 40,000 -- 27,625 4,461
and Technology 1998 120,003 7,500 -- 43,479 4,486
</TABLE>
(1) As permitted by rules promulgated by the Commission, no amounts are shown
for "Other Annual Compensation" because no Named Executive Officer
received perrequisites in an amount exceeding the lesser of 10% of salary
plus bonus or $50,000.
(2) Includes amounts earned but deferred at the election of Mr. Turner
pursuant to the Company's Retirement Savings Plan of $58,094, $21,146 and
$28,698 in fiscal years 1999, 1998 and 1997, respectively.
(3) Represents the dollar value of shares awarded, calculated by multiplying
the market value based on the closing sales price on the date of grant by
the number of shares awarded. The restrictions on awards of restricted
stock lapse with respect to 25% of the total number of shares per year on
the first, second, third and fourth anniversaries of the date of grant. In
fiscal 1999, Mr. Spoon's employment terminated and he forfeited 75%, or
90,000, of the shares that had been awarded to him. At October 2, 1999,
the aggregate holdings and value of restricted stock of Mr. Spoon (based
on the number of shares held at fiscal year-end multiplied by the closing
sales price of the Company's Common Stock as reported on the Nasdaq
National Market System on October 2, 1999) was 30,000 shares valued at
$43,175.
(4) Fiscal year 1999 options include repriced options issued in replacement of
options issued in fiscal year 1998 to purchase 15,000, 8,750, and 7,625
shares for Mr. Turner, Mr. Fry, and Mr. Dickstein, respectively. Fiscal
year 1998 includes options to purchase shares of the Company's Common
Stock granted to Named Executive Officers in exchange for options to
purchase the Common Stock of the Company's
11
<PAGE>
former subsidiary, BMED, in connection with the merger of that subsidiary
into the Company in the amount of 394,433, 8,274 and 35,854 shares for Mr.
Turner, Mr. Fry, and Mr. Dickstein, respectively.
(5) Mr. Spoon was the Company's President and Chief Executive Officer from
April 1998 to January 1999. He continued as an employee of the Company
through October 1999 when his employment with the Company terminated.
(6) Mr. Turner was the Company's President and Chief Executive Officer from
September 1997 through March 1998. He remained an employee of the Company
and in January 1999 returned to the position of President and Chief
Executive Officer.
(7) Includes $2,425, $4,186, $3,335 and $3,081, paid in fiscal year 1999 to
Messrs. Spoon, Turner, Fry and Dickstein, respectively; $438, $3,246,
$3,231 and $3,050 paid in fiscal year 1998 to Messrs. Spoon, Turner, Fry
and Dickstein, respectively; and $3,721 and $2,482 paid in fiscal year
1997 to Messrs. Turner and Fry, respectively; as a normal contribution
pursuant to the Company's Retirement Savings Plan. Includes $20,000 paid
to Mr. Spoon as a relocation bonus in fiscal year 1998. The remaining sum
for each of the persons listed is attributable to premiums paid by the
Company for group term life insurance.
Stock Option Grants and Exercises
The Company grants options to its executive officers and key employees
under the Company's Amended 1987 Stock Option Plan (the "Amended Plan"). The
Company may grant both incentive and non-statutory stock options to employees as
well as grant stock options to non-employee consultants to the Company. The
Amended Plan provides for the grant of options to purchase up to 2,100,000
shares of common stock, and expires on January 15, 2007. As of January 10, 2000,
options to purchase a total of 1,106,255 shares had been granted and were
outstanding under the Amended Plan and options to purchase 381,499 shares
remained available for grant.
12
<PAGE>
The following tables show for the fiscal year ended October 2, 1999,
certain information regarding options granted to, exercised by, and held at
year-end by, the Named Executive Officers.
Option Grants in Fiscal Year 1999
<TABLE>
<CAPTION>
% of Total
Number of Options/ Market Potential Realizable Value at
Securities Granted to Exercise Price at Assumed Annual Rates of Stock Price
Underlying Employees or Base Date of Appreciation for Option Term (3)
Options Granted in Fiscal Price Grant Expiration
Name (#) (1) Year (2) ($/Sh) ($/Sh) Date 0% 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mr. Turner 15,000 3.9% 1.6250(4) 1.6250 11/19/07 -- 15,329 38,847
80,000 20.9% 1.4375 1.4375 3/24/09 -- 85,454 225,491
Mr. Fry 8,750 2.3% 1.6250(4) 1.6250 11/19/07 -- 8,942 22,661
33,000 8.6% 1.6250 1.6250 12/16/08 -- 33,724 85,464
Mr. Dickstein 7,625 2.0% 1.6250(4) 1.6250 11/19/07 -- 19,181 48,609
20,000 5.2% 1.6250 1.6250 12/16/08 -- 7,792 19,747
</TABLE>
(1) Options generally vest monthly over a four-year period. The options will
fully vest upon a change of control, as defined in the Amended Plan. The
Board of Directors may reprice the options under the terms of the Amended
Plan.
(2) Based upon options to purchase 382,447 shares issued to employees in
fiscal year 1999. Does not include options to purchase 215,308 shares
issued to non-employee directors and consultants in fiscal year 1999.
(3) The potential realizable value is based on the term of the option at its
time of grant. It is calculated by assuming that the stock price on the
date of grant appreciated at the indicated rate, compounded annually for
the entire term of the option and that the option is exercised solely on
the last day of its term for the appreciated price. These amounts
represent certain assumed rates of appreciation, less the exercise or base
price, in accordance with the rules of the Commission, and do not reflect
the Company's estimate or projection of future stock price performance.
Actual gains, if any, are dependent on the actual future performance of
the Company's Common Stock and no gain to the optionee is possible unless
the stock price increases over the option term, which will benefit all
stockholders.
(4) On December 14, 1998, options representing the right to purchase 102,847
shares of the Company's Common Stock at exercise prices ranging from
$3.7437 to $4.00, which had originally been granted on November 4, 1997,
and November 20, 1997, were repriced to $1.625 per share, an amount equal
to the fair market value of the Company's stock at that time. Of the
options subject to the repricing, options granting the right to purchase
31,375 shares of the Company's Common Stock were held by Named Executive
Officers. Optionees who chose to surrender their old options for the
repriced options agreed to relinquish the right to exercise the repriced
options for a period of six months.
13
<PAGE>
Aggregated Options Exercised in Last Fiscal Year and FY-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at FY-End (#) at FY-End ($)
Shares Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable (1) Unexercisable (2)
<S> <C> <C> <C> <C>
Mr. Spoon -- -- 23,750 / 0 /
0 0
Mr. Turner -- -- 371,262 / 382,524 /
118,141 19,886
Mr. Fry -- -- 10,462 / 9,313 /
39,562 0
Mr. Dickstein -- -- 37,760 / 40,357 /
25,719 0
</TABLE>
(1) Includes both in-the-money and out-of-the money options.
(2) The fair market value of the underlying shares on the last day of the
fiscal year, October 2, 1999, less the exercise or base price.
"Out-of-the-money" options are ignored.
Employment Agreements
The employment agreement between Mr. Turner and the Company dated October
7, 1999, provides that Mr. Turner is entitled to full salary and all other
benefits for a minimum period equal to the time he is subject to any restriction
contained in the Noncompetition Agreement (the "NCA") between Mr. Turner and
CSAC, (a period ending December 8, 2002). In the event Mr. Turner leaves the
employ of BEI before termination of the restrictions under the NCA, he will be
entitled to receive from BEI at a minimum the same salary and benefits for the
remaining term of the restrictions under the NCA. However, if Mr. Turner leaves
the employ of BEI before the end of the restrictions under the NCA and finds
other employment, BEI's obligations to pay salary and bonus will be reduced by
the salary and bonus Mr. Turner receives from such other employment. The Company
has also agreed: (i) not to terminate Mr. Turner's employment without cause
under the NCA, and (ii) to accelerate vesting of all of Mr. Turner's options to
purchase Common Stock of the Company upon termination of his employment.
14
<PAGE>
The employment agreement between the Company and Mr. Fry, Vice President,
Finance and Administration, Secretary and Treasurer of the Company, provides
that if Mr. Fry is terminated by the Company or terminates his employment with
the Company for good reason, as defined in the employment agreement, he will
receive from the Company his thencurrent full-time compensation for 12 months
after such termination.
Compensation Committee Interlocks and Insider Participation
As noted above, during fiscal year 1999, the Compensation Committee
consisted of Dr. Wan and Mr. Wrench. In connection with and effective upon the
Distribution, Dr. Wan resigned as Vice President, Corporate Technology, of the
Company and Mr. Wrench resigned as the Senior Vice President and Chief Financial
Officer of the Company. Each continues to serve the Company as a member of the
Board of Directors.
15
<PAGE>
Report of the Compensation Committee of the Board of Directors
On Executive Compensation(1)
The Compensation Committee (the "Committee") is composed of two
non-employee directors. The current members of the Committee are Mr. Wrench and
Dr. Wan. The Committee is responsible for, among other things, recommending the
compensation of executive officers, including any stock-based awards to such
individuals under the Amended Plan and the 1992 Restricted Stock Plan
(collectively, the "Plans").
Executive Compensation Principles
The Committee seeks to compensate executive officers in a manner designed
to achieve the primary goal of the Company's stockholders: increased stockholder
value. In furtherance of this goal, the Committee determines a compensation
package that takes into account both competitive and performance factors. Annual
compensation of Company executives is comprised of salary and bonus, an approach
consistent with the compensation programs of similar companies. A portion of the
compensation of each executive officer is contingent upon the Company's
performance. Cash bonuses may vary significantly for an individual from year to
year, and may vary among the executive officers. Another component of
compensation of the executive officers is incentive stock options , which vest
over a multi-year period. Restricted stock grants, subject to multi-year
vesting, having less frequently been a part of the compensation of some of the
executive officers.
Base Salary
The Committee reassessed salaries for last three fiscal quarters of fiscal
year 1999 in March 1999 for all executive officers. In adjusting the base
salaries of the executive officers, the Compensation Committee examined both
competitive market rates and qualitative factors relating to corporate and
individual performance. In connection with its examination of competitive
factors, the Committee reviewed an independent survey of base salaries paid by
other medical device development stage companies of comparable size. In many
instances, assessment of qualitative factors necessarily involves a subjective
assessment by the Committee. In determining salary adjustments for executive
officers other than Mr. Turner for fiscal year 1999, the Committee relied
primarily on the evaluations and recommendations of Mr. Crocker and Mr. Turner
of each officer's responsibilities for fiscal year 1999 and performance during
fiscal year 1998.
At its meeting in March 1999, the Committee approved base compensation
increases effective January 1, 1999, for the Named Executive Officers other than
Mr. Spoon and Mr. Turner as follows: Mr. Fry and Mr. Dickstein by 5.0% and 3.0%,
respectively, each effective retroactive to January 1999.
Management Incentive Bonus
In fiscal year 1999, the Company had a Management Incentive Bonus Plan
under which members of management were eligible to receive cash bonuses based on
the achievement of specific operating results established at the beginning of
the fiscal year. In December 1999 the Company's Board awarded bonus payments to
Mr. Fry of $15,000 and to Mr. Dickstein of $7,500 their contributions to
achievement of operating results in for fiscal year 1999. In addition, in
December 1999 Mr. Fry and Mr. Dickstein received bonus payments related to their
contributions toward the completion of the Asset Sale of $35,000 and $32,500
respectively.
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<PAGE>
Chief Executive Officer Compensation
In general, the factors utilized in determining Mr. Turner's compensation
were similar to those applied to other executive officers in the manner
described in the preceding paragraphs; however, a significant percentage of Mr.
Turner's potential earnings is subject to consistent, positive, long-term
performance of the Company.
In January 1999, Mr. Turner agreed to return to the position of President
and Chief Executive Officer of the Company, from which he had resigned in March
1998, although he had continued to be employed by the Company in the interim.
The Committee increased his base compensation rate to $180,000 effective for the
period from January 15, 1999 through April 15, 1999 and to $250,000 effective
April 15, 1999.
In December 1999, the Board of Directors awarded Mr. Turner a bonus of
$10,000 for fiscal 1999. In addition Mr. Turner received a bonus of $80,000 for
his contribution to completion of the Asset Sale.
Option Repricing Information
The following table shows certain information concerning the repricing of
options received by the Named Executive Officers during the last ten years.
17
<PAGE>
Ten year Option Repricing
<TABLE>
<CAPTION>
Number of Length of
Securities Market Price Exercise Original
Underlying of Stock at Price at New Option
Date of Options Time of Time of Exercise Term Remaining
Name and Option Repriced Repricing Repricing Price at Date of
Principal Position Repricing # $ ($) ($) Repricing
<S> <C> <C> <C> <C> <C> <C>
Mr. Richard W. Turner
President and
Chief Executive Officer 12/14/98 15,000 $1.625 $4.00 $1.625 8.9 years
Mr. Thomas W. Fry
Vice President,
Finance and Administration,
Treasurer and Secretary 12/14/98 8,750 1.625 4.00 1.625 8.9 years
Mr. Samuel Dickstein
Vice President,
New Business Development
and Technology 12/14/98 7,625 1.625 4.00 1.625 8.9 years
</TABLE>
In December 1998, The Board of Directors determined that it would be in
the best interests of the Company to restore the incentive for optionees who
were currently employees, directors or consultants of the Company in order to
encourage them to remain as service providers of the Company and to exert their
maximum efforts on behalf of the Company by repricing the options so that the
per share exercise price of the repriced options reflected the current fair
market value of the Company's common stock.
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<PAGE>
Long-Term Incentives
The Company has equity incentive plans in place to enable the alignment of
the interests of stockholders and management by creating incentives related to
the possession by management of a substantial economic interest in the long-term
appreciation of the Company's stock. In determining the size of a stock option
or restricted stock award to be granted to an executive officer, the Committee
takes into account the officer's position, level of responsibility within the
Company, existing equity holdings, the potential reward to the officer if the
stock appreciates in the public market, the incentives to retain the officer's
services to the Company, the competitiveness of the officer's overall
compensation arrangements and the performance of the officer. Based on a review
of this mix of factors, in December 1998, the Committee awarded incentive stock
options to Mr. Turner (15,000 shares), Mr. Fry (33,000 shares) and Mr. Dickstein
(20,000 shares) and in March 1999, awarded incentive stock options to Mr. Turner
(80,000 shares). All such options are subject to vesting.
Gary D. Wrench Lawrence A. Wan
- ----------
(1) This Section is not "soliciting material", is not deemed "filed" with the
Commission and is not to be incorporated by reference in any filing of the
Company under the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, whether made before or after the date hereof
and irrespective of any general incorporation language in any such filing.
19
<PAGE>
Performance Measurement Comparison (1)
The following graph shows the value of an investment of $100 on September
30, 1994, in cash of (i) the Company's Common Stock, (ii) the Center for
Research in Securities Prices ("CRSP") Total Return Index for the Nasdaq Stock
Market (U.S. Companies) and (iii) the CRSP Total Return Industry Index for
Nasdaq Non-Financial Companies. All values assume reinvestment of the full
amount of all dividends and are calculated as of the last trading day of the
applicable fiscal year of the Company(2):
[GRAPHIC OMITTED]
- ----------
(1) This Section is not "soliciting material", is not deemed "filed" with the
Commission and is not to be incorporated by reference in any filing of the
Company under the Securities Act or the Exchange Act, whether made before
or after the date hereof and irrespective of any general incorporation
language in any such filing.
(2) Fiscal year ending on the Saturday nearest September 30.
20
<PAGE>
Certain Transactions
The Company's By-Laws provide that the Company will indemnify its
directors and executive officers and may indemnify its other officers, employees
and other agents to the extent not prohibited by Delaware law. Under the
Company's By-Laws, indemnified parties are entitled to indemnification for
negligence, gross negligence and otherwise to the fullest extent permitted by
law. The By-Laws also require the Company to advance litigation expenses in the
case of stockholder derivative actions or other actions, against an undertaking
by the indemnified party to repay such advances if it is ultimately determined
that the indemnified party is not entitled to indemnification.
21
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
Thomas W. Fry
Corporate Secretary
January 27, 2000
A copy of the Company's Annual Report to the Securities and Exchange Commission
on Form 10-K for the fiscal year ended October 2, 1999, is available without
charge upon written request to: Investor Relations, BEI Medical Systems Company,
Inc., 100 Hollister Road, Teterboro, NJ 07608.
22
