<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SPACELABS 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> 2
LOGO
Dear Stockholder: March 26, 1998
You are cordially invited to attend the 1998 Annual General Meeting of
Stockholders of Spacelabs Medical, Inc. at 10:00 a.m. on Thursday, May 7, 1998,
at the Bellevue Club, 11200 SE 6th Street, Bellevue, Washington.
The accompanying Notice of 1998 Annual General Meeting of Stockholders and
the Proxy Statement describe the matters to be presented at the meeting.
Whether or not you plan to attend the meeting, we hope you will have your
stock represented by completing, signing, dating and returning your proxy card
in the enclosed postage-paid envelope as soon as possible. Your stock will be
voted in accordance with the instructions you have given in your proxy.
Sincerely,
/s/ CARL A. LOMBARDI
Carl A. Lombardi
Chairman of the Board
and Chief Executive Officer
IMPORTANT
A Proxy Statement and proxy card are enclosed. All stockholders are urged to
complete and mail the proxy card promptly. The enclosed envelope for return of
the proxy card requires no postage. Any stockholder attending the meeting may
personally vote on all matters that are considered, in which event the signed
proxy will be revoked.
IT IS IMPORTANT THAT YOUR STOCK BE VOTED.
<PAGE> 3
NOTICE OF ANNUAL GENERAL MEETING OF STOCKHOLDERS
MAY 7, 1998
------------------------
To the Stockholder:
The 1998 Annual General Meeting of Stockholders of Spacelabs Medical, Inc.
will be held at the Bellevue Club, 11200 SE 6th Street, Bellevue, Washington on
Thursday, May 7, 1998, at 10:00 a.m. for the following purposes:
(1) To elect seven directors to hold office until the next Annual
General Meeting of Stockholders and until their respective successors are
elected and qualified;
(2) To ratify the appointment of KPMG Peat Marwick LLP as auditors for
Spacelabs Medical, Inc. for 1998; and
(3) To transact such other business as may properly come before the
meeting and any adjournment and postponement thereof.
Nominees for directors are named in the enclosed Proxy Statement.
March 9, 1998 has been set as the record date for the meeting. Only
stockholders of record at the close of business on that date will be entitled to
notice of and to vote at the meeting.
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON, BUT EVEN IF
YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PAID ENVELOPE PROVIDED TO ENSURE YOUR REPRESENTATION. STOCKHOLDERS
ATTENDING THE MEETING MAY VOTE IN PERSON EVEN IF THEY HAVE PREVIOUSLY SENT IN A
PROXY.
By Order of the Board of Directors
/s/ EUGENE V. DeFELICE
Eugene V. DeFelice
Secretary
Redmond, Washington
March 26, 1998
THE 1997 ANNUAL REPORT OF SPACELABS MEDICAL, INC.
ACCOMPANIES THIS PROXY STATEMENT.
<PAGE> 4
1998 PROXY STATEMENT
GENERAL
The enclosed proxy is solicited by the Board of Directors of Spacelabs
Medical, Inc. ("Spacelabs Medical" or the "Company") for use at the 1998 Annual
General Meeting of Stockholders to be held at 10:00 a.m. on Thursday, May 7,
1998, at the Bellevue Club, 11200 SE 6th Street, Bellevue, Washington 98004, and
at any adjournment or postponement thereof (the "Meeting"). Only holders of
record of Spacelabs Medical's Common Stock, par value $0.01 per share (the
"Common Stock"), at the close of business on March 9, 1998 will be entitled to
notice of and to vote at the Meeting. On that date, Spacelabs Medical had
9,450,219 shares of Common Stock outstanding. Each share of Common Stock
outstanding on the record date is entitled to one vote.
The address of Spacelabs Medical's principal executive offices is 15220 NE
40th Street, Redmond, Washington 98052.
This Proxy Statement and the accompanying proxy are being mailed to the
stockholders of Spacelabs Medical on or about March 26, 1998.
VOTING
Shares of Common Stock for which proxies are properly executed and returned
will be voted at the Meeting in accordance with the directions noted thereon or,
in the absence of directions to the contrary, will be voted (i) "FOR" the
election of the seven nominees for the Board of Directors named on the following
pages, provided that if any one or more of such nominees should become
unavailable for election for any reason, such shares will be voted for the
election of such substitute nominee or nominees as the Board of Directors may
propose, and (ii) "FOR" the ratification of the appointment of KPMG Peat Marwick
LLP as auditors for Spacelabs Medical for 1998. Under Delaware law, Spacelabs
Medical's Certificate of Incorporation and Spacelabs Medical's By-Laws, the
presence at the Meeting, in person or by duly authorized proxy, of the holders
of one-third of the outstanding shares of Common Stock entitled to vote
constitutes a quorum for the transaction of business. The seven nominees for the
Board of Directors who receive the greatest number of votes cast for the
election of directors by the shares present in person or represented by proxy at
the Meeting and entitled to vote shall be elected directors. The affirmative
vote of a majority of shares entitled to vote and present in person or by proxy
at the Meeting is required for approval of any other matters submitted to a vote
of the shareholders. In the election of directors, an abstention or broker
non-vote will have no effect on the outcome. In the case of any other matter,
abstention from voting will have the practical effect of voting against such
matter. Broker non-votes will be included in determining the presence of a
quorum at the Meeting but will have no effect on the outcome of any matters,
other than to reduce the number of "FOR" votes necessary to approve such
matters.
REVOCATION
Any stockholder giving a proxy may revoke it at any time before it is voted
by delivering to the Secretary of Spacelabs Medical a written notice of
revocation or a duly executed proxy bearing a later date, or by attending the
Meeting and electing to vote in person.
PROPOSAL 1: ELECTION OF DIRECTORS
In accordance with Spacelabs Medical's By-Laws, the Board of Directors has
fixed the number of directors constituting the Board at seven. It is proposed
that seven directors be elected, each to hold office for a term of one year and
until his successor shall have been elected and qualified. It is intended that
votes will be cast pursuant to the accompanying proxy for the election of the
nominees named below, each of whom is currently a director of Spacelabs Medical.
If any nominee should become unavailable for any reason, it is intended that
votes will be cast for a substitute nominee designated by the Board of
Directors. The Board of Directors has no reason to believe that the nominees
named will be unable to serve if elected. The seven
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nominees who receive the greatest number of votes cast by stockholders present
in person or by proxy and certified to vote at the Meeting, a quorum being
present, shall be elected directors.
NOMINEES FOR THE BOARD OF DIRECTORS
GILBERT W. ANDERSON. Mr. Anderson (age 69) has served as a director of
Spacelabs Medical since July 28, 1995. Mr. Anderson is the former President,
Chief Executive Officer and director of Physio-Control Corporation, a
manufacturer of medical equipment. Mr. Anderson joined Physio-Control in 1976,
was appointed its President and Chief Executive Officer and a director in 1985,
and retired in 1991. Mr. Anderson is a member of the Board of Directors of
Esterline Technologies Corporation. He serves on the Advisory Board of the
University of Washington Schools of Business and Business Administration and is
a member of the Seattle Public Library Foundation. He is also past Chairman of
the United Way of King County.
Principal Occupation: Retired President, Chief Executive Officer
and Director of Physio-Control Corporation
THOMAS J. DUDLEY, D.B.A. Dr. Dudley (age 66) has served as a director,
Chairman of the Audit Committee and member of the Executive Committee and the
Compensation Committee of Spacelabs Medical since June 26, 1992. Dr. Dudley has
been a Professor of Quantitative Methods, The George L. Graziadio School of
Business and Management, Pepperdine University, since 1968. Dr. Dudley has also
owned and operated Thomas J. Dudley & Associates, a company that provides
management consulting services for strategic planning and implementation to
small and medium-sized companies, since 1968. Dr. Dudley holds a doctorate in
business administration from the University of Southern California. He also has
a master's degree in business administration and a bachelor's degree in liberal
arts and sciences from the University of Michigan. Dr. Dudley is a member of
INFORMS, the World's Futures Society, and the Accreditation Committee of the
Association of Independent Colleges and Schools. He is also an advisor to the
American-China Association for Science and Technology Exchange. He is a member
of the Boards of Directors of the Los Angeles branch of Recording for the Blind
and Dyslexic, a nonprofit organization, and Ashurst Technology, Ltd. Dr. Dudley
is a recipient of the Harriett and Charles Luckman Distinguished Teaching Fellow
Award.
Principal Occupation: Professor of Quantitative Methods,
The George L. Graziadio School of Business and Management, Pepperdine University
HARVEY FEIGENBAUM, M.D. Dr. Feigenbaum (age 64) has served as a director
and member of the Audit Committee of Spacelabs Medical since June 26, 1992. Dr.
Feigenbaum has been a Distinguished Professor of Medicine at the Indiana
University Medical Center since 1980 and joined its faculty in 1962. He was
elected Phi Beta Kappa and received a bachelor of arts degree summa cum laude
from Indiana University in 1955, an M.D. degree from the Indiana School of
Medicine in 1958 and his cardiovascular subspecialty, American Board of Internal
Medicine, in 1969. Dr. Feigenbaum is a member of the Board of Directors of ATL
Ultrasound, Inc. Dr. Feigenbaum is a fellow of the American College of
Physicians, the American College of Cardiology and the Council on Clinical
Cardiology of the American Heart Association, as well as a member of the
Editorial Boards of the American Heart Journal, the American Journal of
Cardiology and CIRCULATION. He is editor of the Journal of the American Society
of Echocardiography.
Principal Occupation: Distinguished Professor of Medicine,
Indiana University Medical Center
CARL A. LOMBARDI. Mr. Lombardi (age 54) has served as a director, Chairman
of the Board and Chief Executive Officer of Spacelabs Medical since June 26,
1992. Mr. Lombardi joined Spacelabs Medical in 1967 in the research and
development group. He served in various executive positions with Spacelabs
Medical before being appointed President in 1981. Mr. Lombardi was named Group
Vice President of Squibb Medical
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<PAGE> 6
Systems in 1982 with responsibility for the patient monitoring group of
companies. Mr. Lombardi holds a master of business administration degree from
Pepperdine University. He also has a master of science degree in systems
engineering from West Coast University and a bachelor of science degree in
electrical engineering from Pacific State University. He also serves on the
Regional Council of the Scribner Kidney Research Center and the Board of
Trustees of the Northwest Kidney Center.
Principal Occupation: Chairman of the Board, Chief Executive Officer
and President of Spacelabs Medical, Inc.
ANDREW R. NARA, M.D., PH.D. Dr. Nara (age 51) has served as a member of the
Board since 1998. Dr. Nara has been an Associate Professor of Medicine at Case
Western Reserve University School of Medicine since 1990 and joined its faculty
in 1979. He received a bachelor of science degree in 1969 from the University of
Toledo, and a combined M.D., Ph.D. degree in biomedical engineering in 1976 from
Case Western Reserve University. He has been certified by the American Board of
Internal Medicine since 1981 and received a Subspecialty in Adult Cardiovascular
Disease in 1983. Dr. Nara is a Fellow of the American College of Cardiology,
American Heart Association and American College of Chest Physicians.
Principal Occupation: Associate Professor of Medicine
Case Western Reserve University School of Medicine
PHILLIP M. NUDELMAN, PH.D. Dr. Nudelman (age 62) has served as a director
and member of the Compensation Committee of Spacelabs Medical since June 26,
1992. Dr. Nudelman has served as Chief Executive Officer and President of Group
Health Cooperative of Puget Sound ("Group Health") since February 1991 and, as
of August 1997, serves as Chairman and President of Kaiser/Group Health, Inc.
Dr. Nudelman joined Group Health in 1973 as Director of Professional Services
and has held positions of increasing responsibility since then. Dr. Nudelman
received his bachelor of science degree in microbiology, zoology and pharmacy
from the University of Washington and holds master of business administration
and doctor of philosophy degrees in health systems management from Pacific
Western University. Dr. Nudelman is a member of the Board and Chair-elect of the
American Association of Health Plans. He serves on the Boards of Directors of
the United Way, Pacific Science Center, Woodland Park Zoo, the Association for
Washington Business, ATL Ultrasound, Inc., Cell Therapeutics, Inc. and Intensiva
Inc.
Principal Occupation: Chairman and President
of Kaiser/Group Health, Inc.
PETER H. VAN OPPEN. Mr. van Oppen (age 45) has served as Chairman of the
Board and Chief Executive Officer of Advanced Digital Information Corporation
("ADIC") since its acquisition by Interpoint in 1994, and as President from 1994
to 1997. He has served as a Director of ADIC since 1986. He served as Chairman
of the Board of Interpoint from 1995 until its acquisition by Crane Co. in
October 1996. He also served as President and Chief Executive Officer of
Interpoint from 1989 until its acquisition by Crane Co. in October 1996, as
President and Chief Operating Officer of Interpoint from 1987 to 1989, and as
Executive Vice President for Finance and Operations of Interpoint from 1985 to
1987. Prior to 1985, Mr. van Oppen worked as a Consulting Manager at Price
Waterhouse LLP and at Bain & Company in Boston and London. He has additional
experience in medical electronics and venture capital. Mr. van Oppen also serves
as a Director of Seattle Film Works, Inc. and Key Technology, Inc. He holds a
bachelor of arts degree from Whitman College and a master of business
administration degree from Harvard Business School, where he was a Baker
Scholar.
Principal Occupation: Chairman of the Board and
Chief Executive Officer of Advanced Digital Information Corporation
The Board of Directors met four times in 1997. All directors, except for
Dr. Nara and Mr. van Oppen who joined the Board in 1998, attended at least 75%
of the meetings of the Board of Directors and its Committees on which they
serve.
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COMMITTEES OF THE BOARD OF DIRECTORS
Spacelabs Medical has established standing committees of its Board of
Directors, including an Audit, a Compensation and an Executive Committee. Each
of these Committees is responsible to the full Board of Directors, and its
activities are therefore subject to Board approval. The functions performed by
these Committees are summarized below:
Audit Committee. The Audit Committee reviews the accounting principles,
internal accounting controls, audit plan and financial results of Spacelabs
Medical to safeguard Spacelabs Medical's assets and to provide for the
reliability of its financial records. The members of this Committee are Dr.
Dudley (Chairman), Dr. Feigenbaum and Mr. Anderson. The Audit Committee met four
times in 1997.
Compensation Committee. The Compensation Committee establishes salaries,
incentives and other forms of compensation for directors, officers and other
executives of Spacelabs Medical. This Committee also administers Spacelabs
Medical's various incentive compensation and benefit plans and recommends the
establishment of policies relating to such plans. The members of this Committee
are Dr. Nudelman (Chairman) and Drs. Dudley and Nara. The Compensation Committee
met four times in 1997.
Executive Committee. The Executive Committee has authority, subject to
limitations prescribed by the Board of Directors, to exercise, during the
intervals between meetings of the Board of Directors, the powers of the full
Board and is also available, on a standby basis, for use in an emergency or when
scheduling makes it impractical to bring the full Board together for a meeting.
The members of this Committee are Mr. Lombardi (Chairman) and Dr. Dudley. The
Executive Committee did not meet in 1997.
DIRECTOR COMPENSATION
Directors who are employees of Spacelabs Medical do not receive any fees
for their services as directors. Directors who are not employees of Spacelabs
Medical are paid an annual retainer of $15,000 for serving on the Board of
Directors and receive an additional $500 for attending each meeting of the Board
of Directors plus $500 for attending each meeting of a committee of the Board of
which they are a member. A nonemployee director serving as a committee chairman
receives an additional $1,000 per annum.
Under the Spacelabs Medical, Inc. Stock Option and Deferral Plan for
Nonemployee Directors (the "Director Plan"), each director who is neither an
officer nor an employee of Spacelabs Medical is eligible to receive an annual
automatic grant of an option to purchase 2,000 shares of Common Stock on the
fifth business day following the date of each Annual General Meeting of
Stockholders. Each new nonemployee director is also eligible to receive an
initial automatic grant of an option to purchase up to 1,500 shares of Common
Stock upon the director's initial election or appointment to the Board. The
options have an exercise price equal to the fair market value of the Common
Stock on the date of grant and expire on the earlier of 10 years from the date
of grant and one year after a director's termination of service as a director or
three years after a director's mandatory retirement. Each option vests during
the director's continued service as a director until the date of the first
Annual General Meeting of Stockholders after the date of grant. The Director
Plan also permits nonemployee directors to defer payment of all or a part of
their cash retainers and/or Board Committee chairmanship fees into "Stock
Units."
The Company also has a Cash Deferred Compensation Plan for Nonemployee
Directors. Participating directors may elect to defer all or a portion of their
cash compensation for service as directors into an interest-bearing cash
account.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common Stock
as of February 6, 1998, by (i) each stockholder known by the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, (ii) each
director, (iii) the named executive officers and (iv) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP OUTSTANDING
- ---------------------- -------------------- -----------
<S> <C> <C>
Trimark Financial Corporation............................. 964,900 10.21%
One First Canadian Place
Suite 5600, P.O. Box 487
Toronto, ON M5X 1E5
Mellon Bank Corporation................................... 720,137(2) 7.62%
One Mellon Bank Center
500 Grant Street
Pittsburgh, PA 15258-0001
Dimensional Fund Advisors................................. 673,200(3) 7.12%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Sanford C. Bernstein & Co., Inc. ......................... 627,800(4) 6.64%
767 Fifth Avenue
New York, NY 10153
Gilbert W. Anderson....................................... 4,500(5) *
Thomas J. Dudley.......................................... 8,000(6) *
Harvey Feigenbaum......................................... 8,463(7) *
Carl A. Lombardi.......................................... 482,663(8)(9) 4.89%
Andrew R. Nara............................................ 7,250(10) *
Phillip M. Nudelman....................................... 8,100(11) *
Peter H. van Oppen........................................ -0- *
Dennis Larsen............................................. 59,654(9)(12) *
James A. Richman.......................................... 44,647(9)(13) *
T. Randy Miskimon......................................... 60,787(9)(14) *
George P. Messina......................................... -0- *
Emil H. Soika............................................. 5,313(15) *
All directors and executive officers as a group (15
persons)................................................ 760,588(16) 7.52%
</TABLE>
- ---------------
* Represents holdings of less than 1%.
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes shares over which the
indicated beneficial owner exercises voting and/or investment power. Shares
of Common Stock subject to options currently exercisable or exercisable
within 60 days are deemed outstanding for computing the percentage
ownership of the person holding the options but are not deemed outstanding
for computing the percentage ownership of any other person. Except as
indicated, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
(2) Sole power to vote 601,737 shares and to dispose of 650,437 shares. Shared
power to dispose of 69,700 shares with Boston Group Holdings, Inc. and the
Boston Company, Inc., subsidiaries of Mellon Bank Corporation.
(3) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 673,200 shares, all of
which are held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company (the "Fund"), or in series of the
DFA Investment Trust Company, a Delaware business trust (the "Trust"), or
the DFA Group Trust
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and DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, all of which Dimensional serves as investment
manager. Dimensional disclaims beneficial ownership of all such shares.
Dimensional has sole power to vote 470,800 shares and shared power to vote
38,500 shares owned by the Fund and 163,900 shares owned by the Trust.
(4) Shared power to vote 7,000 shares with Sanford C. Bernstein & Co., Inc.
clients who have appointed an independent voting agent with instructions to
vote shares in the same manner as Sanford C. Bernstein & Co., Inc. Sole
power to vote 538,000 shares and to dispose of 627,800 shares.
(5) Includes options to purchase 3,500 shares exercisable within 60 days of
February 6, 1998.
(6) Represents options to purchase 8,000 shares exercisable within 60 days of
February 6, 1998.
(7) Includes 163 shares that are owned by Dr. Feigenbaum's wife and options to
purchase 8,000 shares exercisable within 60 days of February 6, 1998.
(8) Includes options to purchase 414,000 shares exercisable within 60 days of
February 6, 1998.
(9) Includes 2,363, 1,154, 1,366 and 787 shares held by the 401(k) trustee, as
of December 31, 1997, for Messrs. Lombardi, Larsen, Richman and Miskimon,
respectively.
(10) Represents options to purchase 7,250 shares exercisable within 60 days of
February 6, 1998.
(11) Includes options to purchase 8,000 shares exercisable within 60 days of
February 6, 1998.
(12) Includes options to purchase 54,500 shares exercisable within 60 days of
February 6, 1998.
(13) Includes options to purchase 37,500 shares exercisable within 60 days of
February 6, 1998.
(14) Includes options to purchase 55,500 shares exercisable within 60 days of
February 6, 1998.
(15) Includes options to purchase 2,813 shares exercisable within 60 days of
February 6, 1998.
(16) Includes options to purchase 657,563 shares exercisable within 60 days of
February 6, 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on the Company's review of Forms 3, 4 and 5 and any amendment thereto
furnished to it pursuant to Section 16 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), all such forms were filed on a timely basis.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Nara is affiliated with University Hospitals of Cleveland where the
Company sponsors a research and development center that supports the Company's
development of new concepts and improvements of its patient monitoring products.
The Company has had a series of annual agreements with University Hospitals of
Cleveland and in 1997 the aggregate payments to the University Hospitals of
Cleveland were approximately $200,000 for such development work. Dr. Nara is
involved in the related research projects.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee, which consists of three nonemployee directors,
implements and endorses the goals of the Company's executive compensation
program, which reflect three guiding principles: (i) to provide compensation and
benefits that allow the Company to maintain competitive compensation to attract
and retain executives with the skills critical to the Company's long-term
success, (ii) to reward performance in attaining business objectives and
maximizing stockholder value and (iii) to encourage Company stock ownership
through officer ownership guidelines that are monitored by the Committee on an
ongoing basis.
An outside compensation consulting firm advises the Committee on all
elements of executive officer compensation. The Committee examines survey data
for positions with similar responsibilities in other medical equipment companies
of similar size. The surveyed companies overlap significantly with companies
included in the peer group index shown in the stock price performance graph.
Total compensation for
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executive officers is targeted by the Committee at the median for comparable
companies, as is the mix of pay elements, which include base salaries, annual
incentives and long-term incentives in the form of stock options.
Base Salaries. Individual base salaries reflect historical practice,
internal position relationships, individual performance and relative external
market pay. No specific weight is assigned to these factors. Spacelabs Medical's
Chief Executive Officer is responsible for setting salaries up to $150,000;
salaries over $150,000 are established by the Committee, with strong
consideration given to the recommendation of the Chief Executive Officer. The
base salary for Mr. Messina, the Chief Executive Officer of Burdick, was
established before the acquisition of Burdick by Spacelabs Medical in 1997 and
remains unchanged. His salary is above the median for comparable companies.
Annual Incentives. The Management Incentive Compensation Plan (the "MIC
Plan") is a plan approved by stockholders under which annual cash or stock-based
awards may be made to executive officers and other key employees. The total
amount of the MIC Plan award pool is established based on the Company's net
income performance, emphasizing the quality of earnings based on the return on
capital employed. The amount of any individual award depends on performance by
the individual against assigned goals. These goals are both quantitative and
subjective, and vary among executive officers reflecting their areas of
responsibility, with no specific weight assigned to any particular goal.
In 1997, the Company did not attain the profitability threshold established
for incentive awards under the MIC Plan. The Chief Executive Officer recommended
awards to certain executive officers at less than target levels to recognize
individual contributions toward strategic objectives of adding to the Company's
market position and product line through acquisitions. A portion of MIC Plan
awards was paid in restricted stock for employment retention and stock
ownership.
Long-Term Incentives. The Spacelabs Medical, Inc. 1992 Option, Stock
Appreciation Right, Restricted Stock, Stock Grant and Performance Unit Plan (the
"1992 Plan") is the Company's primary long-term incentive plan. Annual grants of
stock options are made to executive officers and other key employees under the
plan.
The options granted to executive officers in 1997 include both regular
annual grants and special one-time grants. Regular annual option grants are
increased from prior years as part of the Company's continuing movement toward
median competitive grant levels. Special option grants were made to Messrs.
Lombardi, Larsen, Richman, Bromfield, Miskimon and DeFelice to provide strong
incentives for building stockholder value in connection with continued
acquisition and corporate-development activities. Messrs. Bromfield and Stringer
also received a special grant in connection with their hire. In addition, Mr.
Messina received a one-time grant of stock appreciation rights at the time of
the Burdick acquisition, entitling him to the appreciation on a specified number
of Spacelabs Medical's shares at the end of three years if he is still employed
by the Company at that time. The objective of the grant was to give Mr. Messina
a strong ownership incentive in Spacelabs Medical and to retain his services
during the critical period of integrating the Burdick operations.
The total value of the regular annual grants is below the level of
Spacelabs Medical's median competitive target for annual grant values; with the
addition of the special one-time awards it exceeds such target. However, the
Company does not intend to repeat the special grants, while it does intend to
continue to move the regular grants to a median competitive level.
Compensation of the Chief Executive Officer. Mr. Lombardi's base salary was
maintained at $400,000 during 1997, while the Committee continued to place
greater emphasis on pay for performance, which is reflected in the annual
incentive and stock option portions of his compensation package. Mr. Lombardi
received an award under the MIC Plan for 1997 of 4,000 shares of restricted
stock for employment retention and stock ownership, with the same rationale as
for other executive officers in 1997. The award was given in recognition of Mr.
Lombardi's strategic leadership and successes in corporate development
endeavors. No award was given for the profitability component of Mr. Lombardi's
compensation package. Mr. Lombardi also received a regular annual stock option
grant of 85,000 shares, plus a special grant of 100,000 shares in connection
with continued acquisition and corporate-development activities.
7
<PAGE> 11
Policy with Respect to Section 162(m) Limitations. Section 162(m) of the
Internal Revenue Code of 1986, as amended, generally disallows a tax deduction
to public companies for compensation in excess of $1 million paid to each of a
company's four most highly compensated executive officers and its chief
executive officer. Qualifying performance-based compensation is not subject to
the deduction limit if certain requirements are met. The Compensation Committee
has decided not to qualify the MIC Plan, since to do so would limit the
Committee's flexibility in the administration of the plan. The Compensation
Committee believes that there will not be any nondeductible compensation for the
five executive officers in question in 1998.
Respectfully submitted,
Phillip M. Nudelman (Chairman)
Thomas J. Dudley
Compensation Committee Members
EXECUTIVE COMPENSATION
The following table provides information for the past three fiscal years
concerning the annual and long-term compensation received by those persons who
were, in 1997, the Company's Chief Executive Officer and the five other most
highly compensated executive officers of the Company (the "named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------- ---------------------- -------
NAME AND OTHER ANNUAL RESTRICTED STOCK LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) STOCK(2) OPTIONS PAYOUTS COMPENSATION(3)
------------------ ---- -------- -------- ---------------- ----------- -------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carl A. Lombardi 1997 $400,000 -- -- $ 87,000 185,000 -- $13,190
Chief Executive
Officer, 1996 $400,000 -- -- $ 87,960 75,000 -- $13,362
Chairman of the Board 1995 $385,000 $200,000 -- $ 27,240 65,000 -- $12,990
and President
Dennis Larsen 1997 $149,000 -- $34,257 -- 27,000 -- $ 4,580
Vice President and 1996 $150,000 -- $18,200 $ 43,980 8,000 -- $ 5,250
General Manager, 1995 $150,000 $ 20,000 -- $ 27,240 10,000 -- $ 4,660
Supplies Products
James A. Richman 1997 $144,000 $ 20,000 -- $ 21,750 34,000 -- $ 9,576
Vice President and 1996 $135,000 -- -- $ 54,975 10,000 -- $12,149
Corporate Controller, 1995 $125,000 $ 20,000 -- $ 51,980 8,000 -- $11,638
Acting Chief
Financial Officer
T. Randy Miskimon 1997 $150,000 $ 50,000 $11,636 $ 21,750 52,000 -- $ 4,055
Vice President, 1996 $150,000 $ 15,000 $14,148 $ 43,980 10,000 -- $ 7,172
International 1995 $138,000 $ 20,000 $46,377 $ 27,240 10,000 -- $ 4,620
George P. Messina 1997 $304,200(4) -- -- -- 94,094(5) -- $ 2,995
Senior Vice President
Emil H. Soika(6) 1997 $200,000 -- -- -- 10,000 -- $ 2,250
Vice President, 1996 $200,000 -- -- -- 10,000 -- $ 2,250
Ambulatory 1995 $ 14,600 -- -- $131,550 15,000 -- $ 164
Healthcare
</TABLE>
- ---------------
(1) Represents sales commissions earned in each of the years shown.
(2) Recipients of restricted stock are recorded as shareholders of the Company
and, subject to the provisions of the 1992 Option, Stock Appreciation
Right, Restricted Stock, Stock Grant and Performance Unit Plan as Amended
and Restated on May 10, 1995, have all the rights of a stockholder with
respect to such shares and receive all dividends or other distributions
made or paid with respect to such shares. Restricted stock is valued at the
closing price quoted on the Nasdaq National Market (the "Nasdaq/NM") on the
8
<PAGE> 12
date of grant. At December 26, 1997, Messrs. Lombardi, Larsen, Richman,
Miskimon, Messina and Soika held 6,000, 3,000, 3,900, 3,000, 0 and 2,500
shares of restricted stock, respectively, with a value at that date of
$112,500, $56,250, $73,125, $56,250, $0 and $46,875, respectively. The
Company's restricted stock vests at the rate of 25% per year, beginning on
the first anniversary of the date of grant.
(3) Includes Spacelabs Medical's contribution to Spacelabs Medical's ISSO 401(k)
Plan during 1997 for Messrs. Lombardi, Larsen, Richman, Miskimon, Messina
and Soika of $4,500, $3,167, $4,400, $3,185, $0 and $0, respectively; group
term life insurance premiums paid by Spacelabs Medical for the same
individuals of $1,440, $1,413, $1,440, $870, $655 and $2,250, respectively;
and the Company's matching contribution on salary deferrals pursuant to the
provisions of the Spacelabs Medical, Inc. Deferred Compensation Plan for
Key Employees for the same individuals of $7,250, $0, $3,736, $0, $2,340
and $0, respectively.
(4) On August 21, 1997, Mr. Messina entered into an employment agreement with
the Company pursuant to which he will be paid a base salary of $304,200 per
year for a term of three years, subject to certain provisions relating to
termination. Mr. Messina's 1997 salary totaled $304,200 of which $106,500
was paid by Spacelabs Medical and $197,700 was paid by Burdick.
(5) Includes 64,094 stock appreciation rights granted on August 21, 1997 under
the provisions of the 1992 Option, Stock Appreciation Right, Restricted
Stock, Stock Grant and Performance Unit Plan. Under the terms of the Plan,
the Stock Appreciation Rights vest and become exercisable on August 21,
2000, and permit the holder to receive cash (on a per share basis) in an
amount equal to the difference between the fair market value of a share of
Common Stock on the date of exercise and the fair market value of such
share on the date the stock appreciation right was granted. If employment
is voluntarily terminated or terminated for cause before the vesting date,
the stock appreciation rights are not exercisable.
(6) Effective July 1997, Emil H. Soika no longer served as an Executive Officer
of the Company and was no longer an employee of the Company as of December
31, 1997. All of Mr. Soika's restricted shares and 7,187 of his 1997 option
grants were forfeited upon termination of his employment.
9
<PAGE> 13
1997 OPTION/SAR GRANTS AND EXERCISES
The following table provides information on option and stock appreciation
right grants in fiscal year 1997 to the named executive officers.
OPTION/SAR GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE VALUE AT ASSUMED
TOTAL OPTIONS ANNUAL RATES OF STOCK PRICE
GRANTED TO EXERCISE OR APPRECIATION FOR OPTION/SAR TERM(4)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION ---------------------------------------
NAME GRANTED(1) IN FISCAL YEAR PER SHARE(3) DATE 0% 5% 10%
---- ---------- -------------- ------------ ---------- ----- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Carl A. Lombardi....... 85,000 $21.88 2/27/07 $ 0 $ 1,169,175 $ 2,963,525
100,000 $23.19 7/25/07 $ 0 $ 1,458,250 $ 3,695,250
------- --- ----------- -----------
Total 185,000 19.3% $ 0 $ 2,627,425 $ 6,658,775
Dennis Larsen.......... 12,000 $21.88 2/27/07 $ 0 $ 165,060 $ 418,380
15,000 $23.19 7/25/07 $ 0 $ 218,738 $ 554,288
------- --- ----------- -----------
Total 27,000 2.8% $ 0 $ 383,798 $ 972,668
T. Randy Miskimon...... 12,000 $21.88 2/27/07 $ 0 $ 165,060 $ 418,380
40,000 $23.19 7/25/07 $ 0 $ 583,300 $ 1,478,100
------- --- ----------- -----------
Total 52,000 5.4% $ 0 $ 748,360 $ 1,896,480
George Messina......... 30,000 3.1% $22.38 8/21/07 $ 0 $ 422,100 $ 1,070,100
64,094(2) N/A $22.38 9/20/00 $ 0 $ 226,252 $ 474,937
--- ----------- -----------
Total $ 0 $ 648,352 $ 1,545,037
James A. Richman....... 14,000 $21.88 2/27/07 $ 0 $ 192,570 $ 488,110
20,000 $23.19 7/25/07 $ 0 $ 291,650 $ 739,050
------- --- ----------- -----------
Total 34,000 3.5% $ 0 $ 484,220 $ 1,227,160
Emil H. Soika(5)....... 10,000 1.0% $21.88 2/27/07 $ 0 $ 137,550 $ 348,650
</TABLE>
- ---------------
(1) Options become exercisable in four equal annual installments beginning on
the first anniversary date of the grant. The Compensation Committee
administers the 1992 Plan and has the authority to accelerate exercisability
before the originally designated exercise date(s). In addition, a Change of
Control, as defined under "Compensation -- Agreement with Chief Executive
Officer; Change of Control Arrangements," will make each outstanding option
automatically exercisable in full for the total remaining number of shares
covered. The exercise price may be paid by delivering already-owned shares,
and tax withholding obligations relating to exercise may be paid by
offsetting the underlying shares, subject to certain conditions.
(2) Mr. Messina received 64,094 stock appreciation rights. Subject to certain
conditions, stock appreciation rights vest and become exercisable on the
third anniversary of the grant date and permit the holder to receive cash
(on a per share basis) in an amount equal to the difference between the fair
market value of a share of Common Stock on the date of exercise and the fair
market value of such share on the date the stock appreciation right was
granted. If employment is voluntarily terminated or terminated for cause
before the vesting date, the stock appreciation rights are not exercisable.
(3) The exercise or base price per share represents the average of the high and
low sales prices quoted on the Nasdaq/NM for the stock on the date of grant.
(4) The actual value, if any, that a named executive officer or any other
individual may realize will depend on the excess of the market price of the
stock over the exercise price on the date the option is exercised. With
respect to stock options, the realizable values presented above are based
upon assumed compounded growth rates of 5% and 10% over a 10-year period.
For example, at an assumed 5% compounded growth rate over a 10-year period,
a share of stock originally valued at $21.875 on the grant date would grow
to $35.63 per share, yielding a potential realizable value of $13.76 per
share; at an assumed 10% compounded growth rate, the same share of stock
would appreciate in value to $56.74 per share, yielding
10
<PAGE> 14
a potential realizable value of $34.87 per share. With respect to stock
appreciation rights, the realizable values presented above are based upon
assumed compounded growth rates of 5% and 10% over the three-year life of
the stock appreciation right. These amounts are not intended to forecast
possible future appreciation, if any, in the market price for the Common
Stock; therefore, there can be no assurance that the actual value realized
by a named executive officer will approximate the potential realizable
values set forth in the table.
(5) Upon his departure from the Company on December 31, 1997, Mr. Soika
forfeited 7,187 of the 10,000 options granted during the fiscal year.
No options were exercised in 1997. The following table provides information
on the value of the named executive officers' unexercised options at December
26, 1997.
AGGREGATED OPTION EXERCISES IN 1997 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl A. Lombardi..... -- -- 342,750 288,750 $342,095 $0
Dennis Larsen........ -- -- 44,500 40,500 $ 2,500 $0
George Messina....... -- -- 0 94,094 $ 0 $0
T. Randy Miskimon.... -- -- 45,000 67,000 $ 2,500 $0
James A. Richman..... -- -- 27,500 47,500 $ 1,250 $0
Emil H. Soika........ -- -- 10,000 25,000 $ 0 $0
</TABLE>
- ---------------
(1) Stock options and stock appreciation rights are valued based upon the
closing price of a share of Common Stock as reported on the Nasdaq/NM on
December 26, 1997 ($18.75).
11
<PAGE> 15
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total return on the
Common Stock during the period beginning on December 24, 1992 and ending on
December 26, 1997 with the cumulative total return on the Total Return Index for
the Nasdaq Stock Market (US Companies) (the "Nasdaq Index") and the Media
General Medical Instruments and Supplies Index (the "Media General Index"). The
comparison assumes $100 was invested on December 24, 1992 in Common Stock and in
each of the foregoing indices and assumes reinvestment of dividends. The stock
price performance shown on the graph is not necessarily indicative of future
price performance.
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN FOR
SPACELABS MEDICAL, INC., THE NASDAQ INDEX AND THE
MEDIA GENERAL INDEX
<TABLE>
<CAPTION>
MEDIA
MEASUREMENT PERIOD SPACELABS GENERAL
(FISCAL YEAR COVERED) MEDICAL, INC. NASDAQ INDEX INDEX
<S> <C> <C> <C>
12/24/92 $ 100 $ 100 $ 100
12/31/93 $ 86 $ 115 $ 85
12/30/94 $ 82 $ 112 $ 93
12/29/95 $ 102 $ 159 $ 150
12/27/96 $ 74 $ 195 $ 158
12/26/97 $ 66 $ 240 $ 187
</TABLE>
RETIREMENT PLAN
Spacelabs Medical's Retirement Plan, a defined benefit plan, covers the
majority of employees on the active, regular payroll of Spacelabs Medical and
its US subsidiaries. Employees of the Company's Burdick operations do not
participate in the Retirement Plan. The Retirement Plan provides that, upon
retirement, a participant will receive a monthly benefit equal to 1% of the
participant's highest consecutive 60-month average earnings (as defined in the
plan, including base salary and, subject to certain limits, bonuses and
commissions), multiplied by the participant's years of credited service with
Spacelabs Medical and its subsidiaries (including employment with Spacelabs
Medical's former parent, Westmark), reduced as described below. A participant is
vested upon completing five years of service.
12
<PAGE> 16
The following table sets forth the estimated annual benefits payable upon
retirement to Retirement Plan participants.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $ 18,750 $ 25,000 $ 31,250 $ 37,500 $ 43,750
150,000 22,500 30,000 37,500 45,000 52,500
175,000 26,250 35,000 43,750 52,500 61,250
200,000 30,000 40,000 50,000 60,000 70,000
225,000 33,750 45,000 56,250 67,500 78,750
250,000 37,500 50,000 62,500 75,000 87,500
300,000 45,000 60,000 75,000 90,000 105,000
400,000 60,000 80,000 100,000 120,000 140,000
450,000 67,500 90,000 112,500 135,000 157,500
500,000 75,000 100,000 125,000 150,000 175,000
600,000 90,000 120,000 150,000 180,000 210,000
700,000 105,000 140,000 175,000 210,000 245,000
</TABLE>
The compensation covered by the Retirement Plan corresponds to the salary
and bonus, not in excess of 50% of base salary, disclosed for the following
named executive officers. The credited years of service for Messrs. Lombardi,
Larsen, Richman, Miskimon and Soika as of December 26, 1997 are 30.69, 13.08,
13.52, 15.46 and 2.08 years, respectively.
Certain federal legislation generally limits the amount of annual pension
that may be paid from a federal income tax qualified plan to varying amounts
($130,000 for 1998) and the amount of annual earnings that may be taken into
account for purposes of calculating benefits under a federal income tax
qualified plan ($160,000 for 1998). The actual amounts paid under the Retirement
Plan will be limited to comply with such legislation.
Spacelabs Medical also has established a Supplemental Benefit Plan, which
is not qualified for federal income tax purposes and which covers any employee
whose benefit under the Retirement Plan is limited by the federal legislation
described above. Mr. Messina is among the participants of this Plan and receives
credit toward retirement for years of service from October 5, 1987 until his
termination from the Company. The benefit under the Supplemental Benefit Plan
consists of the amount by which the benefit to which the participant is
otherwise entitled under the Retirement Plan is reduced to comply with the
limits on annual earnings or the amount of annual pension that may be paid.
AGREEMENT WITH CHIEF EXECUTIVE OFFICER; CHANGE OF CONTROL ARRANGEMENTS
Spacelabs Medical has entered into a change of control agreement with Mr.
Lombardi that provides for continued employment terms equivalent to those
immediately before a Change of Control (as defined below) for the three years
following a Change of Control. An immediate payment of a lump sum equal to three
years' salary and bonus is triggered if, following a Change of Control,
employment is terminated by the employee for "good cause," by the employer
"without cause" or by the employee during the 30-day window period one year
after the Change of Control. A Change of Control, with or without termination of
employment, also triggers an acceleration of vesting of restricted stock and
stock options and the payment of the "spread" between the exercise price of
options and the fair market value of the underlying Common Stock.
In very general terms, a Change of Control would be a substantial change in
Spacelabs Medical's Board of Directors or in the ownership of the Company
without either the acquiescence of the then-current Board or continuing majority
ownership by stockholders of Spacelabs Medical. More particularly, a Change of
Control as defined in the agreement is: (i) a change in the Board of Directors
such that a majority of the seats on the Board are occupied by individuals who
are neither nominated by a majority of the Incumbent Directors (as
13
<PAGE> 17
defined below) of Spacelabs Medical then in office nor appointed by directors so
nominated, (ii) the acquisition by any person (other than Spacelabs Medical or a
Spacelabs Medical employee benefit plan) of, in the case of transactions not
approved by a majority of the directors of Spacelabs Medical who were either
nominated by a majority of the directors of Spacelabs Medical then in office or
appointed by directors so nominated ("Incumbent Directors"), 20% or more of the
combined general voting power of the Common Stock and any other voting
securities of Spacelabs Medical and, in the case of other transactions, 33% or
more of such combined voting power, or (iii) the approval by the stockholders of
Spacelabs Medical of a complete liquidation or dissolution of Spacelabs Medical
or a merger, consolidation or sale of substantially all the assets of Spacelabs
Medical (collectively, a "Business Combination"), other than a Business
Combination in which all or substantially all the stockholders of Spacelabs
Medical receive 60% or more of the stock of the corporation resulting from the
Business Combination in substantially the same proportions as their ownership
before the Business Combination, no holder has more than 20% of the combined
voting power of the capital stock of the resulting corporation and at least a
majority of the board of directors of the resulting corporation are Incumbent
Directors.
Under the 1992 Plan and the Spacelabs Medical 1992 Adjustment Plan, upon a
Change of Control each outstanding option and stock appreciation right ("SAR")
will automatically become exercisable in full for the total remaining number of
shares covered thereby. In addition, during the 90-day period following a Change
of Control an optionee may choose to receive cash equal to the difference
between the exercise price of the option and the fair market value of a share of
Common Stock determined as described below for a limited SAR, in lieu of
exercising the option and paying the option price. Also, all restrictions on
shares of restricted stock will lapse upon a Change of Control and all amounts
otherwise deferred by Spacelabs Medical and any employee in connection with
performance units will be distributed.
A limited SAR may be exercised only during the 90 days immediately
following a Change of Control. For the purpose of determining the amount payable
upon exercise of a limited SAR, the fair market value of a share of Common Stock
will be equal to the higher of (a) the highest fair market value of the Common
Stock during the 90-day period ending on the date the limited SAR is exercised,
determined as in the case of an option, and (b) whichever of the following
applies:
(i) the highest price per share paid in any tender or exchange offer
that is in effect at any time during the 90 days preceding the exercise of
the limited SAR;
(ii) the fixed or formula price for the acquisition of shares of
Common Stock in a merger or similar agreement approved by the Spacelabs
Medical stockholders or Board of Directors, if such price is determinable
on the date of exercise; or
(iii) the highest price per share paid to any Spacelabs Medical
stockholder in a transaction or group of transactions giving rise to the
exercisability of the limited SAR.
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS
Unless instructed to the contrary, it is intended that votes be cast
pursuant to the accompanying proxy for the ratification of the appointment of
KPMG Peat Marwick LLP as auditors for Spacelabs Medical for 1998. KPMG Peat
Marwick LLP has audited the accounts of Spacelabs Medical for 1997.
Representatives of KPMG Peat Marwick LLP are expected to attend the Meeting and
will have an opportunity to make a statement and/or respond to appropriate
questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS AUDITORS FOR SPACELABS MEDICAL FOR 1998.
In the event that the ratification of the appointment of auditors is not
made by a majority of the shares entitled to vote thereon, the selection of
other auditors will be considered by the Board of Directors.
14
<PAGE> 18
EXPENSES OF SOLICITATION
The accompanying proxy is solicited by and on behalf of the Board of
Directors, and the entire cost of such solicitation will be borne by Spacelabs
Medical. Corporate Investors Communications, Inc. will distribute proxy
materials to beneficial owners and may solicit proxies by personal interview,
mail, telephone and telegram, and will request brokerage houses and other
custodians, nominees and fiduciaries to forward soliciting material to the
beneficial owners of the Common Stock held on the record date by such persons.
The Company will pay Corporate Investors Communications, Inc. a fee of $4,500 to
cover its services and will reimburse Corporate Investors Communications, Inc.
for payments made to brokers and other nominees for their expenses in forwarding
solicitation materials. Solicitation may be by personal interview, telephone and
telegram by directors, officers and other employees of Spacelabs Medical without
special compensation.
OTHER MATTERS
Spacelabs Medical knows of no other matters that are likely to be brought
before the Meeting. If, however, other matters that are not now known or
determined come before the Meeting, the persons named in the enclosed proxy or
their substitutes will vote such proxy in accordance with their judgment.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders to be considered for inclusion in the Proxy
Statement and proxy for the Company's 1999 Annual General Meeting of
Stockholders must be received by the Secretary of Spacelabs Medical by November
26, 1998.
ANNUAL REPORT AND ANNUAL REPORT ON FORM 10-K
A copy of the Spacelabs Medical 1997 Annual Report and of the Annual Report
on Form 10-K for the year ended December 26, 1997, as filed with the Securities
and Exchange Commission, is being mailed with this Proxy Statement to each
stockholder of record. Stockholders not receiving a copy of such Annual Reports
may obtain one without charge by writing or calling Mr. Clark Thompson, Senior
Director Investor Relations, Spacelabs Medical, P.O. Box 97013, Redmond,
Washington, 98073-9713, (425) 867-7345.
By Order of the Board of Directors
/s/ EUGENE V. DeFELICE
Eugene V. DeFelice
Secretary
Redmond, Washington
March 26, 1998
15
<PAGE> 19
PROXY
SPACELABS MEDICAL, INC.
INSTRUCTIONS FOR ANNUAL GENERAL MEETING OF STOCKHOLDERS, MAY 7, 1998
Shares of Spacelabs Medical, Inc. Common Stock in which you have an interest
as a participant in the ATL Ultrasound, Inc. Incentive Savings and Stock
Ownership Plan are held by Wells Fargo Bank, N.A., as Trustee of the Plan, and
will be voted by the Trustee at the Annual Meeting of Stockholders on May 7,
1998, pursuant to instructions received from Plan participants. You may
participate in the voting, in proportion to your interest in such shares, by
using this form to instruct the Trustee how to vote the shares allocated to your
account.
IN ORDER FOR YOUR INSTRUCTIONS TO BE VOTED BY THE TRUSTEE, THIS FORM MUST BE
RECEIVED BY FIRST CHICAGO TRUST COMPANY OF NEW YORK NO LATER THAN CLOSE OF
THE BUSINESS DAY ON MAY 1, 1998.
If you do not indicate otherwise, these instructions will authorize the
Trustee to vote for the election of Directors and for the ratification of
auditors for 1998, as described in the Spacelabs Medical, Inc. Proxy Statement
dated March 26, 1998. These instructions will also authorize the Trustee to vote
at its discretion on such other matters as may come before the meeting.
- --------------------------------------------------------------------------------
Wells Fargo Bank, N.A.
Trust Division, P.O. Box 21927
Seattle, WA 98111
INSTRUCTIONS TO TRUSTEE
THESE INSTRUCTIONS ARE BEING GIVEN IN CONJUNCTION WITH THE
BOARD OF DIRECTORS' SOLICITATION OF PROXIES FROM THE TRUSTEE
You are hereby authorized and instructed to vote at the Annual General Meeting
of Stockholders of Spacelabs Medical, Inc. on May 7, 1998, and at any
adjournments thereof, either in person or by proxy, all of the shares of Common
Stock of Spacelabs Medical, Inc., allocated to my account under the ATL
Ultrasound, Inc. Incentive Savings and Stock Ownership Plan.
THESE INSTRUCTIONS ARE CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
<PAGE> 20
[X] PLEASE MARK YOUR 6110
VOTES AS IN THIS
EXAMPLE.
THE INTEREST IN SHARES SUBJECT TO THESE INSTRUCTIONS WILL BE VOTED AS DIRECTED
BY THE PLAN PARTICIPANT. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED
INSTRUCTIONS ARE RETURNED, SUCH INTEREST WILL BE VOTED "FOR" AUTHORITY ON ITEMS
1 AND 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AUTHORITY ON ITEMS 1 AND 2.
1. ELECTION OF DIRECTORS FOR [ ] WITHHELD [ ]
Authority to vote "FOR" the following nominees:
Gilbert W.Anderson,
Thomas J. Dudley, D.B.A.,
Harvey Feigenbaum, M.D.,
Carl A. Lombardi,
Andrew R. Nara, M.D., Ph.D.,
Phillip M. Nudelman, Ph.D.,
Peter H. van Oppen
For all except vote withheld from the following nominee(s):
-----------------------------------------------------------------------------
2. RATIFICATION OF AUDITORS FOR [ ] AGAINST [ ] ABSTAIN [ ]
Authority to vote "FOR" ratification of KPMG Peat Marwick LLP, as auditors
for the year ending December 25,1998.
- --------------------------------------------------- ------------------------
PARTICIPANT DATE
Please date and sign exactly as your name appears above, and return in the
enclosed envelope to First Chicago Trust Company of New York, who will tabulate
and report your instruction to the Plan's Trustee for voting.
<PAGE> 21
PROXY
SPACELABS MEDICAL, INC.
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON MAY 7, 1998
The undersigned hereby constitutes and appoints Carl A. Lombardi and Eugene V.
DeFelice, and each of them, his true and lawful agents and proxies with full
power of substitution in each, to represent the undersigned at the Annual
Meeting of Stockholders of SPACELABS MEDICAL, INC. to be held on May 7, 1998 at
10:00 a.m., local time, at the Bellevue Club, Bellevue, Washington, and at any
adjournments thereof, on all matters coming before such meeting.
You are encouraged to specify your choices by marking the appropriate boxes. SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The Proxy(ies) cannot vote your
shares unless you sign and return this card.
(Change of Address/Comments)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEE REVERSE
SIDE
<PAGE> 22
[X] PLEASE MARK YOUR 5020
VOTES AS IN THIS
EXAMPLE.
THE PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF DIRECTORS AND FOR
PROPOSAL 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS FOR [ ] WITHHELD [ ]
Nominees for Director:
Gilbert W. Anderson,
Thomas J. Dudley, D.B.A.,
Harvey Feigenbaum, M.D.,
Carl A. Lombardi,
Andrew R. Nara, M.D., Ph.D.,
Phillip M. Nudelman, Ph.D.,
Peter H. van Oppen
For all except vote withheld from the following nominee(s):
- --------------------------------------------------------------------------------
2. RATIFICATION OF AUDITORS FOR [ ] AGAINST [ ] ABSTAIN [ ]
Approval of KPMG Peat Marwick LLP, independent certified public accountants
to audit the accounts and records of Spacelabs Medical, Inc. for the fiscal
year ending December 25,1998.
3. In their discretion, upon such other matters as may properly come before the
meeting.
CHANGE OF ADDRESS/COMMENTS ON REVERSE SIDE
Please sign name(s) exactly as printed hereon. Joint owners should each sign. If
signing as attorney, administrator, executor, guardian or trustee, give full
title as such.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) DATE
<PAGE> 23
PROXY
SPACELABS MEDICAL, INC.
INSTRUCTIONS FOR ANNUAL GENERAL MEETING OF STOCKHOLDERS, MAY 7, 1998
Shares of Spacelabs Medical, Inc. Common Stock in which you have an interest
as a participant in the Spacelabs Medical, Inc. Incentive Savings and Stock
Ownership Plan are held by U.S. Bank of Washington, N.A., as Trustee of the
Plan, and will be voted by the Trustee at the Annual Meeting of Stockholders on
May 7, 1998, pursuant to instructions received from Plan participants. You may
participate in the voting, in proportion to your interest in such shares, by
using this form to instruct the Trustee how to vote the shares allocated to your
account.
IN ORDER FOR YOUR INSTRUCTIONS TO BE VOTED BY THE TRUSTEE, THIS FORM MUST BE
RECEIVED BY FIRST CHICAGO TRUST COMPANY OF NEW YORK NO LATER THAN CLOSE OF
THE BUSINESS DAY ON MAY 1, 1998.
If you do not indicate otherwise, these instructions will authorize the
Trustee to vote for the election of Directors and for the ratification of
auditors for 1998, as described in the Spacelabs Medical, Inc. Proxy Statement
dated March 26, 1998. These instructions will also authorize the Trustee to vote
at its discretion on such other matters as may come before the meeting.
- --------------------------------------------------------------------------------
U.S. Bank of Washington, N.A.
P.O. Box 720
Seattle, WA 98111
INSTRUCTIONS TO TRUSTEE
THESE INSTRUCTIONS ARE BEING GIVEN IN CONJUNCTION WITH THE
BOARD OF DIRECTORS' SOLICITATION OF PROXIES FROM THE TRUSTEE
You are hereby authorized and instructed to vote at the Annual General Meeting
of Stockholders of Spacelabs Medical, Inc. on May 7, 1998, and at any
adjournments thereof, either in person or by proxy, all of the shares of Common
Stock of Spacelabs Medical, Inc., allocated to my account under the Spacelabs
Medical, Inc. Incentive Savings and Stock Ownership Plan.
THESE INSTRUCTIONS ARE CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
<PAGE> 24
[X] PLEASE MARK YOUR 6018
VOTES AS IN THIS
EXAMPLE.
THE INTEREST IN SHARES SUBJECT TO THESE INSTRUCTIONS WILL BE VOTED AS DIRECTED
BY THE PLAN PARTICIPANT. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED
INSTRUCTIONS ARE RETURNED, SUCH INTEREST WILL BE VOTED "FOR" AUTHORITY ON ITEMS
1 AND 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AUTHORITY ON ITEMS 1 AND 2.
1. ELECTION OF DIRECTORS FOR [ ] WITHHELD [ ]
Authority to vote "FOR" the following nominees:
Gilbert W.Anderson,
Thomas J. Dudley, D.B.A.,
Harvey Feigenbaum, M.D.,
Carl A. Lombardi,
Andrew R. Nara, M.D., Ph.D.,
Phillip M. Nudelman, Ph.D.,
Peter H. van Oppen
For all except vote withheld from the following nominee(s):
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2. RATIFICATION OF AUDITORS FOR [ ] AGAINST [ ] ABSTAIN [ ]
Authority to vote "FOR" ratification of KPMG Peat Marwick LLP, as auditors
for the year ending December 25, 1998.
- --------------------------------------------------- ------------------------
PARTICIPANT DATE
Please date and sign exactly as your name appears above, and return in the
enclosed envelope to First Chicago Trust Company of New York, who will tabulate
and report your instruction to the Plan's Trustee for voting.
