1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only
(as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
STERIS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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:
-------------------------------------------------------------------------
2
STERIS CORPORATION
5960 Heisley Road * Mentor, Ohio 44060-1834 * USA
TO OUR SHAREHOLDERS:
The 1998 Annual Meeting of Shareholders of STERIS Corporation will be held
at 9:00 a.m., Eastern Daylight-Saving Time, on Thursday, July 23, 1998, at the
Company's headquarters, 5960 Heisley Road, Mentor, Ohio, USA. At the Annual
Meeting, shareholders will be asked to elect four directors for terms running
through the 2000 Annual Meeting, to approve an amendment to the Articles of
Incorporation increasing the authorized number of Common Shares, to approve a
senior executive management incentive compensation plan, and to approve a new
long-term incentive stock plan. Management will also report on fiscal year 1998
results. We urge you to attend the meeting and to vote FOR the nominees for
Director listed in the Proxy Statement, FOR the amendment to the Articles of
Incorporation increasing the authorized number of Common Shares, FOR the STERIS
Corporation Senior Executive Management Incentive Compensation Plan, and FOR the
STERIS Corporation 1998 Long-Term Incentive Stock Plan.
The formal notice of the meeting and the Proxy Statement containing
information relative to the meeting follow this letter. We urge you to read the
Proxy Statement carefully.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING TO ASSURE YOUR SHARES WILL BE VOTED. If you do attend the meeting,
and the Board of Directors joins me in hoping that you will, there will be an
opportunity to revoke your Proxy and to vote in person if you prefer.
Sincerely,
/s/ Bill R. Sanford
BILL R. SANFORD
Chairman of the Board, President,
and Chief Executive Officer
June 19, 1998
3
STERIS CORPORATION
5960 Heisley Road * Mentor, Ohio 44060-1834 * USA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JULY 23, 1998
The Annual Meeting of Shareholders of STERIS Corporation will be held at
9:00 a.m., Eastern Daylight-Saving Time, on Thursday, July 23, 1998, at the
Company's headquarters, 5960 Heisley Road, Mentor, Ohio, USA, for the following
purposes:
1. To elect four directors to serve until the 2000 Annual Meeting;
2. To approve an amendment to the Articles of Incorporation to increase
the authorized number of Common Shares;
3. To approve the STERIS Corporation Senior Executive Management
Incentive Compensation Plan;
4. To approve the STERIS Corporation 1998 Long-Term Incentive Stock
Plan;
5. To receive the reports of officers; and
6. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on June 12, 1998, as
the record date for determining shareholders entitled to notice of the meeting
and to vote.
The Company's integrated Annual Report to Shareholders and Form 10-K for
the year ended March 31, 1998, is being mailed to shareholders with the Proxy
Statement. The Proxy Statement accompanies this Notice.
By Order of the Board of Directors
/s/ David C. Dvorak
DAVID C. DVORAK
Secretary
June 19, 1998
PLEASE SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED FOR THAT
PURPOSE, WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.
4
STERIS CORPORATION
5960 Heisley Road * Mentor, Ohio 44060-1834 * USA
PROXY STATEMENT
ANNUAL MEETING, JULY 23, 1998
THE PROXY AND This Proxy Statement is being mailed on or about June 19,
SOLICITATION 1998, to the shareholders of STERIS Corporation ("STERIS" or
the "Company") of record as of the close of business on June
12, 1998 (the "Record Date"), in connection with the
solicitation by the Board of Directors of the enclosed form of Proxy for the
Annual Meeting of Shareholders to be held at 9:00 a.m., Eastern Daylight-Saving
Time, on Thursday, July 23, 1998, at the Company's headquarters, 5960 Heisley
Road, Mentor, Ohio, USA. Pursuant to the Ohio General Corporation Law, a
shareholder may revoke a writing appointing a Proxy either by giving notice to
the Company in writing or in open meeting. The cost of soliciting the Proxies
will be borne by the Company. STERIS has engaged a professional proxy
solicitation firm, Georgeson & Company, Inc., to aid in the solicitation of
Proxies, for whose services the Company will pay a fee of not more than $10,000.
VOTING The Company has XXX Common Shares outstanding and entitled to
SECURITIES vote at the Annual Meeting, each of which is entitled to one
vote. The Board of Directors fixed the close of business on
June 12, 1998, as the record date for determining the
shareholders entitled to notice of the meeting and to vote. Under the Ohio
General Corporation Law, the shares may be voted cumulatively in the election of
directors if (a) notice in writing is given by any shareholder to the President,
a Vice President, or the Secretary of the Company not less than forty-eight
hours before the time fixed for holding the meeting that the shareholder desires
the voting in the election to be cumulative and (b) an announcement of the
giving of the notice is made upon the convening of the meeting by the Chairman
or the Secretary or by or on behalf of the shareholder giving the notice. If
voting in the election of directors is cumulative, each shareholder will have
the right to cumulate the shareholder's votes and to give one nominee a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which the shareholder's shares are entitled, or the shareholder may
distribute the shareholder's votes on the same principle among two or more
nominees. In the event of cumulative voting, the persons named in the enclosed
Proxy will vote the shares represented by valid Proxies on a cumulative basis
for the election of the nominees listed on page 11, allocating the votes among
the nominees in accordance with their best judgment.
Common Shares represented by properly executed Proxies will be voted in
accordance with specifications made thereon. If no specification is made,
Proxies will be voted FOR the election of the nominees named herein, FOR
approval of the amendment to the Articles of Incorporation to increase the
authorized number of Common Shares, FOR approval of the STERIS Corporation
Senior Executive Management Incentive Compensation Plan, and FOR approval of the
STERIS Corporation 1998 Long-Term Incentive Stock Plan. Abstentions and broker
non-votes, unless a broker's authority to vote on a particular matter is
limited, are tabulated in determining the votes present at a meeting.
Consequently, an abstention or a broker non-vote (assuming a broker has
unlimited authority to vote on the matter) has the same effect as a vote against
a director nominee or against the approval of a proposal, as each abstention or
broker non-vote would be one less vote for a director nominee or for the
approval of a proposal.
Directors are elected and other actions are generally taken by a
majority vote of those shareholders present or represented by Proxy at the
Annual Meeting of Shareholders, provided that a quorum is present or represented
at the meeting. Approval of the amendment to the Articles of Incorporation
requires the affirmative vote of a majority of the outstanding Common Shares.
1
5
PURPOSES OF The Annual Meeting has been called for the purposes of (1)
ANNUAL MEETING electing directors of the class whose term of office expires
in 2000, (2) approving an amendment to the Articles of
Incorporation increasing the authorized number of Common
Shares, (3) approving the STERIS Corporation Senior
Executive Management Incentive Compensation Plan, (4) approving the STERIS
Corporation 1998 Long-Term Incentive Stock Plan, (5) receiving the reports of
officers, and (6) transacting such other business as may properly come before
the meeting.
The three persons named in the enclosed Proxy have been selected by the
Board of Directors and will vote shares represented by valid Proxies. They have
indicated that, unless otherwise specified in the Proxy, they intend to vote to
elect as directors of Class II the four nominees listed on page 11, to approve
an amendment to the Articles of Incorporation increasing the authorized number
of Common Shares, to approve the STERIS Corporation Senior Executive Management
Incentive Compensation Plan which is summarized on pages 3 and 4, and to approve
the STERIS Corporation 1998 Long-Term Incentive Stock Plan which is summarized
on pages 5 through 9.
ELECTION OF STERIS has a classified board system, with the Board of
DIRECTORS Directors divided into two classes (Classes I and II), the
members of which serve staggered two-year terms. The
terms of the current Class II Directors expire at the 1998
Annual Meeting. The nominees for election at the 1998 Annual
Meeting for each of the four seats in Class II are all incumbent members of
the Board of Directors who were last elected by the shareholders at the 1996
Annual Meeting.
The Board of Directors recommends a vote FOR the election of the four
nominees listed on page 11.
The Board of Directors has no reason to believe that any of the nominees
will be unable to serve as a director. In the event, however, of the death or
unavailability of any nominee or nominees, the Proxy to that extent will be
voted for such other person or persons as the Board of Directors may recommend.
APPROVAL OF STERIS's Amended Articles of Incorporation (the "Articles")
AMENDMENT TO presently authorize the issuance of 100 million Common
ARTICLES OF Shares. The Board of Directors recommends an increase in the
INCORPORATION number of authorized Common Shares from 100 million to 300
TO INCREASE million Common Shares. The proposal will not affect the
AUTHORIZED number of authorized Serial Preferred Shares, which will
NUMBER OF remain at 3 million.
COMMON SHARES
As of March 31, 1998, there were 34,010,768 Common Shares
issued and outstanding and 3,629,003 Common Shares were
reserved for issuance in connection with employee stock
option plans and the nonemployee director stock option and
restricted stock plan. In addition, under the STERIS
Shareholders Rights Agreement, STERIS is required to reserve
and keep available sufficient Common Shares to permit the exercise of all
outstanding rights, which requires a reservation of 37,639,771 Common Shares
as of March 31, 1998. Accordingly, as of March 31, 1998, 75,279,542 Common
Shares were either issued or reserved for existing plans and the Shareholders
Rights Agreement, leaving fewer than 25 million Common Shares available.
The Board of Directors believes that it is advisable to have additional
Common Shares authorized for issuance in order to facilitate stock splits, stock
dividends, future financings, and other distributions and to enable STERIS to
take advantage of favorable market conditions or attractive business
opportunities. Having such additional authorized shares available will give
STERIS greater flexibility by permitting such shares to be issued without the
delay and expense incident to holding a special meeting of shareholders.
The subsequent issuance by STERIS of Common Shares, including the
additional shares that would be authorized if this proposed amendment to the
Articles is adopted, may dilute the present equity ownership position of current
holders of Common Shares. STERIS has no current plans, understandings, or
agreements for issuing the additional shares that are to be authorized by the
proposed amendment. Holders of Common Shares do not have pre-emptive rights with
respect to the issuance of additional shares by STERIS.
2
6
The proposal to increase the authorized number of Common Shares could be
viewed as having an anti-takeover effect. Authorized but unissued and unreserved
Common Shares could be issued by the Board of Directors to make a change in
control of STERIS more difficult by diluting the stock ownership of those
seeking to obtain control of STERIS.
In order to effect an increase in the number of authorized Common Shares,
it is proposed that Article Fourth of the Articles be amended to read as
follows:
FOURTH. The authorized number of shares of the Corporation is 303
million of which 300 million shall be Common Shares, without par value
(the "Common Shares"), and 3 million shall be Serial Preferred Shares,
without par value (the "Serial Preferred Shares").
Vote Required. Pursuant to Article Seventh of the Articles, the
affirmative vote of a majority of the outstanding Common Shares is required to
adopt this proposal to amend the Articles to increase the authorized number of
Common Shares.
The Board of Directors recommends a vote FOR approval of the amendment to
the Articles of Incorporation to increase the authorized number of Common Shares
to 300 million.
APPROVAL OF The Board of Directors has adopted, subject to shareholder
SENIOR EXECUTIVE approval, the STERIS Corporation Senior Executive Management
MANAGEMENT Incentive Compensation Plan (the "Senior Incentive Plan") to
INCENTIVE provide incentive compensation to certain executive officers
COMPENSATION of the Company in such a manner that the incentive
PLAN compensation can be fully deductible by the Company for
federal income tax purposes. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue
Code"), prevents a publicly-traded corporation from taking a tax deduction for
certain compensation in excess of $1 million per year that it or any subsidiary
pays to specified executives. Those specified executives are the Chief Executive
Officer and the four other executive officers for whom proxy disclosure is
required ("Covered Employees"). Compensation that is contingent on the
attainment of performance goals is excluded from the deduction limit and is
therefore deductible without regard to the $1 million limit. To qualify for this
performance-based exemption, the material terms pursuant to which the
compensation is to be paid (including a description of the employees eligible to
receive compensation under the plan, a description of the business criteria on
which the plan's performance goals are based, and the maximum amount that may be
paid to any Covered Employee under the plan) must be approved by the
shareholders of the corporation.
The Compensation Committee of the Board of Directors (the "Committee")
selects participants in the Senior Incentive Plan, selects the performance
criteria and performance goals for each performance period, determines the
amount of the award opportunity for each participant, and administers and
interprets the Senior Incentive Plan. Payment by STERIS of awards pursuant to
the Senior Incentive Plan is contingent on shareholder approval; if shareholder
approval is not obtained, no awards will be paid under the Senior Incentive
Plan.
The employees who are eligible to receive compensation under the Senior
Incentive Plan are those executive officers of STERIS whose annual incentive
compensation for any taxable year of STERIS commencing on or after April 1, 1998
the Committee anticipates would not be deductible by the Company in whole or in
part unless the incentive compensation qualifies as "performance-based" under
Section 162(m). An eligible employee may (but need not) be selected to
participate in the Senior Incentive Plan for all or any part of any fiscal year
as the Committee may specify. Other employees of STERIS are eligible to earn
annual incentive compensation under the Company's Management Incentive
Compensation Plan (the "MICP"). An employee selected to participate in the
Senior Incentive Plan for any period is ineligible to be a participant for that
period in the MICP. For fiscal 1999, Mr. Sanford is the only person eligible to
be selected to participate in the Senior Incentive Plan. Other employees may be
eligible to participate in the Senior Incentive Plan in the future, depending on
the levels and character of compensation payable to other executive officers in
the future.
The method for computing the amount of compensation that each participant
will be paid under the Senior Incentive Plan will be selected by the Committee
and stated in terms of an objective formula or standard that
3
7
precludes discretion to increase the amount that will be due upon attainment of
the goals. The Committee will retain discretion under the Senior Incentive Plan
to reduce an award at any time before it is paid.
Under the Senior Incentive Plan, the performance goals for any performance
period may be based on any of the following business criteria, either alone or
in any combination, and on either a consolidated or business unit level, as the
Committee may in each case determine: return on net assets, return on capital
employed, economic value added, level of sales, net revenue, earnings per share,
income before income taxes and the cumulative effect of accounting changes,
operating income, net income, earnings before interest and taxes, return on
equity, total shareholder return, market valuation, cash flow, completion of
acquisitions, product and market development, and customer satisfaction
criteria. The foregoing terms shall have any reasonable definitions that the
Committee may specify, which may include or exclude any or all of the following
items, as the Committee may specify: extraordinary, unusual, or nonrecurring
items; effects of accounting changes; effects of currency fluctuations; effects
of financing activities; expenses for restructuring or productivity initiatives;
nonoperating items; acquisition expenses; and effects of divestitures. Any of
the foregoing criteria may apply to a participant's award opportunity for any
period in its entirety or to any designated portion of the award opportunity, as
the Committee may specify.
The performance goals that have been established by the Committee for
fiscal 1999 are based on net revenue, operating income, and net income. The
Committee has determined that these three items will be calculated in accordance
with generally accepted accounting principles, consistently applied, excluding
the effects of acquisitions, disposals, significant reorganizations, and debt or
equity financings. Under the Senior Incentive Plan, the Committee may use the
same criteria or any one or more of the other criteria described above for
awards in future years.
The maximum amount of compensation that may be paid under the Senior
Incentive Plan to any participant for any fiscal year is $3,000,000. For fiscal
1999, the maximum amount of incentive compensation that it is anticipated may be
paid to Mr. Sanford is equal to the lesser of 200% of his base salary or
$1,000,000. During fiscal 1998, Mr. Sanford earned incentive compensation of
$564,823 under the Company's 1998 Management Incentive Compensation Plan. For
fiscal 1998, that plan used performance criteria similar to those selected by
the Committee for the Senior Incentive Plan for fiscal 1999.
All payments pursuant to the Senior Incentive Plan are to be made in cash,
unless the Committee determines otherwise, and only after the Committee
certifies that the performance goals for the period have been satisfied.
The Senior Incentive Plan is in effect for the fiscal year commencing April
1, 1998 and will continue in effect for subsequent years unless and until
terminated by the Board. The Board may amend, modify, or terminate the Senior
Incentive Plan at any time, provided that no such amendment, modification, or
termination may adversely affect the incentive opportunity of any participant
with respect to the portion of the year elapsed before the date of the
amendment, modification, or termination, without the participant's written
consent.
For fiscal 1999, Mr. Sanford is the only participant in the Senior
Incentive Plan. While the actual amounts payable under the Senior Incentive Plan
for fiscal 1999 are not determinable, the Committee has set the maximum
incentive compensation award opportunity for fiscal 1999 for Mr. Sanford at
$1,000,000. The maximum award under the Senior Incentive Plan will be earned
only if specified performance criteria fixed by the Committee are attained, the
Committee does not exercise its discretion to reduce the maximum award
opportunity, and the participant remains in the Company's employment for the
entire year.
In general, awards will be paid under the Senior Incentive Plan for any
period only to the extent the awards are earned by attainment of the objective
performance goals applicable to those periods and the participant is
continuously employed by STERIS throughout the period. The only exceptions to
the continued employment requirement are (a) if employment terminates before the
end of a fiscal year on account of (i) death, (ii) disability, or (iii)
retirement or resignation with the consent of the Committee, or (b) there occurs
a Change of Control (as defined in the Company's 1998 Long-Term Incentive Stock
Plan). In any of these special cases, the Company is to pay to the participant
(or to the participant's personal representative) a pro rata award for the
fiscal year in which the termination or Change of Control occurs equal to the
participant's target award for the entire fiscal year (as determined by the
Committee) multiplied by a fraction, the numerator of which is the number of
full or partial
4
8
calendar months between the beginning of the fiscal year and the date of
termination or Change of Control and the denominator of which is twelve (net of
any payments previously made with respect to that award opportunity).
Approval of the Senior Incentive Plan requires the affirmative vote of the
holders of a majority of the Common Shares represented in person or by proxy and
entitled to vote at the Annual Meeting.
The Board of Directors recommends a vote FOR approval of the Senior
Executive Management Incentive Compensation Plan.
APPROVAL OF STERIS's Board of Directors has adopted and recommended that
1998 LONG-TERM the shareholders approve the STERIS Corporation 1998
INCENTIVE STOCK Long-Term Incentive Stock Plan (the "Plan") pursuant to which
PLAN employees of STERIS and its subsidiaries may be granted
options, stock appreciation rights, restricted shares, and
performance shares. The Board is of the opinion that the ability to attract and
retain outstanding executives and other key employees is critical to the
continuing success of STERIS. The Board believes that the ability to grant
stock options, stock appreciation rights, restricted shares, and performance
shares under a flexible plan such as the Plan is important to the achievement of
this objective and that the proposed Plan will allow STERIS to continue to
provide key employees a significant identity of interest with STERIS and its
shareholders.
The Company has historically provided compensation to its key employees
that is heavily weighted to short-term and long-term incentive compensation with
the short-term incentive compensation consisting of quarterly and annual bonuses
that are contingent upon achievement of financial goals set each year by the
Board of Directors and with the long-term incentive compensation consisting of
stock option grants with exercise prices equal to the fair market value of the
Company's stock at the date of grant so that gain to the employee is contingent
upon an increase in the value of the Company's Common Shares. The Board of
Directors intends that incentive compensation, both short-term and long-term,
remain a significant part of each key employee's total compensation as the
Company becomes larger and, as a result, competes increasingly with other large
corporations for talented employees. The Board believes that this policy is in
the best interest of STERIS and its shareholders and that adoption and approval
of the 1998 Long-Term Incentive Stock Plan is consistent with this policy.
The Company has compared the rate at which it grants options to employees
to the rates at which other high growth companies that are of similar revenue
size (between $500 million and $1 billion) grant options to their employees. The
2.8% per annum rate at which the Company has granted options to employees is
below the median of the rates at which options are granted by other high growth
companies in this comparison group, while the Company's five-year compound
annual growth rate is in the top quartile of this group.
The following summary is a brief description of the Plan. This summary is
qualified in its entirety by reference to the Plan, a copy of which is attached
as Exhibit A.
Types of Awards. The Plan provides for the grant of options, which may be
"incentive stock options," within the meaning of Section 422 of the Internal
Revenue Code, or nonqualified options, stock appreciation rights, restricted
shares, and performance shares.
Administration. The Plan will be administered by the Compensation
Committee of the Board of Directors, which determines the participants to whom
awards will be granted, the type and amount of awards to be granted, and the
terms and conditions of awards under the Plan, including any applicable
performance goals. The Committee interprets the Plan and is authorized to make
all determinations and decisions thereunder. The Committee is intended to be at
all times comprised solely of "outside directors" within the meaning of Section
162(m) of the Internal Revenue Code and the treasury regulations thereunder and
constituted in a manner that satisfies the "non-employee" director standard in
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended.
Participants. Awards may be granted to key employees of STERIS or a
subsidiary selected by the Committee, including officers named in the Summary
Compensation Table. As of May 31, 1998, STERIS and its subsidiaries employed
approximately 4,500 individuals.
5
9
Number of Shares Authorized and Certain Further Limits. A total of
1,650,000 Common Shares are reserved for issuance of awards under the Plan. This
number is 4.84% of the number of Common Shares issued and outstanding as of May
31, 1998. No more than 300,000 Common Shares may be issued under the Plan as
restricted shares; no more than 1,650,000 Common Shares may be issued under the
Plan pursuant to awards of incentive stock options; and no more than 500,000
Common Shares may be subject to awards granted under the Plan to any one
employee during any calendar year.
The Plan does not amend or affect STERIS's existing stock option and equity
compensation plans or its existing directors equity compensation plan. Awards
will continue to be made under those plans up to the limits prescribed therein.
The number of Common Shares remaining available for grants of additional awards
under the Plan at any particular time will be reduced, upon the granting of any
award, by the full number of Common Shares subject to that award (except in the
case of those awards where the exercise of one award will reduce the number of
Common Shares subject to another award, in which case the number of Common
Shares remaining available will be reduced by the maximum number of Common
Shares with respect to which the holder of the awards may receive value under
those awards). If any award, for any reason, expires or is terminated, in whole
or in part, without the receipt by an employee of Common Shares (or the
equivalent thereof in cash or other property), the Common Shares subject to that
part of the award that has so expired or terminated will again be available for
the future grant of awards under the Plan.
Option Terms. Options granted under the Plan will be subject to the
following terms and conditions:
Exercise Price of Options. The exercise price under an option, whether an
incentive stock option or a nonqualified option, will not be less than the fair
market value of the Common Shares, as determined by the Committee, on the date
of grant. The closing sales price of STERIS Common Shares as reported on the
NASDAQ National Market System on May 29, 1998, was $62.50 per share.
The exercise price may be paid in such form as the Committee determines may
be accepted, including, without limitation, cash, securities, other property,
any combination thereof, or delivery of irrevocable instructions to a broker to
promptly deliver to STERIS the amount of sale or loan proceeds from the Common
Shares subject to the option to pay the exercise price. The Committee, in its
sole discretion, may grant the right to transfer Common Shares acquired upon the
exercise of a part of an option in payment of the exercise price payable upon
immediate exercise of a further part of the option.
Exercise and Term of Options. An option is exercisable in one or more
installments at the time or times provided in the option agreement. Options
granted under the Plan will expire at the time set forth in the grant, which
cannot be later than ten years after grant in the case of an incentive stock
option and ten years and one month after grant in the case of a nonqualified
option.
Transferability of Options. An option may be exercised only while the
optionee is an employee and is not transferable except as set forth in this
paragraph. An option may be exercised during the three months following
termination of employment for any reason other than disability, death, or
termination with cause. If an optionee's employment is terminated due to
disability, an option may be exercised within a period of one year following
such termination of employment. Upon the death of the holder of an incentive
stock option or nonqualified option during employment or during the period
following termination of employment when such option may be exercised, the
optionee's executor or administrator or a permitted transferee of the option may
exercise the option within a period of one year after the optionee's death.
Stock Appreciation Rights. Stock appreciation rights ("SARs") may be
granted under the Plan to provide holders of options granted under the Plan with
an alternative method of realizing the benefits of those options.
Amounts Payable upon Exercise of SARs. Upon exercise of a SAR and
surrender of the related option, STERIS will pay to the holder of the SAR an
amount equal to 100%, or such lesser percentage as the Committee may determine,
of the excess of (a) the fair market value of the Common Shares subject to the
related option on the date the SAR is exercised over (b) the exercise price for
those Common Shares (the "spread"). This amount is payable by STERIS at the time
of exercise in cash, in Common Shares, or in any combination of cash and Common
Shares as determined by the Committee.
6
10
Time of Exercise of SARs. SARs may be exercised only at a time and to the
same extent as the related option is exercisable. Upon exercise of a SAR, the
holder of the SAR must surrender, unexercised, the related option or any
applicable portion thereof.
Restricted Shares. The Committee may grant to employees awards consisting
of the right to purchase Common Shares as restricted shares for such acquisition
price, if any, as may be determined by the Committee. Any restricted shares
granted under the Plan will be subject to (a) the restrictions that the grantee
not sell, transfer, otherwise dispose of, or pledge or otherwise encumber the
restricted shares during a restriction period specified by the Committee (the
length of which is to be determined by the Committee in its sole discretion at
the time the award is made), (b) the restrictions that (unless otherwise
provided in the award instrument with respect to the restricted shares) the
grantee offer the restricted shares to STERIS at the acquisition price paid by
the grantee if the grantee's employment terminates before the end of the
applicable restriction period, and (c) such other restrictions and conditions as
the Committee may impose. Upon payment of the acquisition price for restricted
shares, an employee will have full voting and dividend rights with respect to
those restricted shares, subject only to the restrictions noted above.
Performance Shares. The Committee may grant to employees awards consisting
of performance shares with respect to which the employees' receipt of value will
be contingent upon attainment of one or more performance goals by STERIS or any
subsidiary or subunit of STERIS or of any subsidiary over one or more periods
selected by the Committee. The Committee may grant awards of performance shares
that are intended to qualify as "performance-based" within the meaning of
Section 162(m) and the Committee may also grant awards of performance shares
that are not intended to so qualify. With respect to performance awards intended
to qualify as performance based under Section 162(m), the Committee will
establish in writing the performance goals for each award period and those
performance goals will be based on any of the following performance criteria,
either alone or in any combination, and applying to the Company, to a
subsidiary, or to any one or more subunits of the Company or of any subsidiary,
as the Committee may in each case determine: return on net assets, return on
capital employed, economic value added, level of sales, net revenue, earnings
per share, income before income taxes and cumulative effect of accounting
changes, operating income, net income, earnings before interest and taxes,
return on equity, total shareholder return, market valuation, cash flow,
completion of acquisitions, product and marketing development, and customer
satisfaction criteria. The foregoing terms shall have any reasonable definitions
that the Committee may specify, which may include or exclude any or all of the
following items, as the Committee may specify: extraordinary, unusual, or
nonrecurring items; effects of accounting changes; effects of currency
fluctuations; effects of financing activities; expenses for restructuring or
productivity initiatives; nonoperating items; acquisition expenses; and effects
of divestitures. Unless otherwise provided in the award instrument, an employee
must be employed throughout a performance period to be entitled to any payment
with respect to performance shares that may be earned during that period. The
Committee may establish one or more formulas to determine whether all, some
portion but less than all, or none of the performance shares granted with
respect to any performance period will be treated as earned during that
performance period.
Payment for Performance Shares. STERIS may pay an employee for performance
shares earned during any performance period in cash, Common Shares, restricted
shares, or any combination of cash, Common Shares, and restricted shares as the
Committee may determine.
Effect of Change of Control. In general, unless otherwise specified in the
award instrument, awards outstanding on the date of a change of control will be
accelerated so that all outstanding options and SARs will become immediately
exercisable in full, the restriction period for all outstanding restricted
shares will immediately terminate, and any restrictions, conditions, or
contingencies on any performance shares will be modified in such manner as the
Committee may specify to give the employees entitled to those performance shares
the benefit of those performance shares through the date of the change of
control.
Assignability. No option, SAR, or performance share may be transferred
other than by will or by the laws of descent and distribution. During an
employee's lifetime, only the employee (or in the case of incapacity of an
employee, the employee's attorney-in-fact or legal guardian) may exercise any
award requiring or permitting exercise.
7
11
Term of the Plan. The Plan will become effective on the date on which it
is approved by the shareholders of STERIS. If it is not so approved, the Plan
and any awards granted thereunder will become null and void. If the Plan is
approved by the shareholders, it will remain in effect until all of the shares
authorized to be issued or transferred under the Plan have been exhausted or
until the Plan is sooner terminated by action of the Board of Directors.
Amendments. The Board of Directors, or a duly authorized committee
thereof, may alter or amend the Plan from time to time prior to its termination
in any manner the Board of Directors, or such duly authorized committee, may
deem to be in the best interests of the Company and its shareholders, except
that no amendment that would increase either the overall aggregate limit of
Common Shares that may be issued under the Plan or the respective limits on the
number of Common Shares that may be issued under the Plan as restricted shares,
as incentive stock options, or to any one employee in any calendar year may be
made without shareholder approval.
The Board of Directors, or a duly authorized committee thereof, may amend
the terms and conditions applicable to outstanding awards in any case where
expressly permitted by the terms of the Plan or the relevant award instrument,
or, in any other case, with the consent of the employee to whom the award was
granted, except that no amendment of an option, or an option and its related
SAR, may reduce the exercise price of such option. Except as expressly provided
in the Plan or in the award instrument evidencing the award, the Board of
Directors, or a duly authorized committee thereof, may not, without the consent
of the holder of an award granted under the Plan, amend the terms and conditions
applicable to that award in a manner adverse to the interests of the employee.
Federal Income Tax Consequences of Awards. The following is a brief
general discussion of the anticipated income tax treatment of the grant and
exercise of awards to employees and to STERIS under current provisions of the
Internal Revenue Code.
Incentive Stock Options. The grant of an incentive stock option will have
no immediate tax consequences to STERIS or the optionee. If the optionee has
remained an employee of STERIS or a subsidiary from the date of grant until at
least the day three months before the date of exercise (one year before the date
of exercise in the case of an employee who is disabled), the optionee will
recognize no taxable income and STERIS will not be entitled to any tax deduction
at the time of exercise of an incentive stock option. However, the amount by
which the fair market value of the acquired shares at the time of exercise
exceeds the exercise price will be an adjustment to alternative minimum taxable
income for purposes of the alternative minimum tax. If an optionee exercises an
incentive stock option more than three months after terminating employment (one
year in the case of an employee who is disabled), the exercise of the option
will be treated in the same manner as the exercise of a nonqualified option.
If an optionee holds the shares received upon exercise of an incentive
stock option for at least two years after the date of grant and for at least one
year from the date of exercise, gain or loss on a subsequent sale of the shares
will be a long-term capital gain or loss. If an optionee holds the shares for at
least 18 months from the date of exercise, more favorable capital gains rates
will apply. If an optionee disposes of shares acquired upon exercise of an
incentive stock option before the one-year and two-year holding periods are
satisfied, the optionee generally will recognize compensation income equal to
the lesser of (a) the excess of the fair market value of the stock on the
exercise date over the exercise price or (b) the excess of the amount realized
on disposition over the exercise price. The amount received in excess of the
fair market value on the exercise date will be taxable as a short-term capital
gain, and any loss will be treated as short-term capital loss. Upon any such
premature disposition by an employee, STERIS will be entitled to a deduction in
the amount of compensation income realized by the employee. For purposes of
calculating the alternative minimum tax for the year of the disposition of a
share acquired upon exercise of an incentive stock option, any adjustment to
alternative minimum taxable income reported upon exercise of the incentive stock
option will be included in the basis of the share.
Nonqualified Options. The grant of a nonqualified option will have no
immediate tax consequences to STERIS or the optionee. An optionee will recognize
compensation income at the time of exercise of a nonqualified option in an
amount equal to the difference between the exercise price and the fair market
value on the exercise date of the acquired shares. STERIS will be entitled to a
deduction in the same taxable year and in
8
12
the same amount as an optionee recognizes compensation income as a result of the
exercise of a nonqualified option.
SARs. Grants of SARs will have no immediate tax consequences to STERIS or
the employee receiving the grant. The amount received by an employee upon the
exercise of a SAR will constitute compensation income to the employee at the
time of exercise. STERIS will be entitled to a deduction for compensation paid
in that amount at that time.
Restricted Shares. Unless an employee makes an election under Section
83(b) of the Internal Revenue Code, an employee will recognize no income and
STERIS will be entitled to no deduction at the time restricted shares are
awarded to an employee. As and when the restrictions on restricted shares lapse
or are otherwise removed, the employee will recognize compensation income equal
to the excess of the fair market value of the restricted shares on the date the
restrictions lapse or are otherwise removed over the amount paid by the employee
for the restricted shares and STERIS will be entitled to a corresponding
deduction for compensation paid. Dividends paid on restricted shares during the
restriction period will constitute compensation income to the employee receiving
the dividend and will give rise to a deduction for STERIS. Upon disposition of
Common Shares after the restrictions lapse or are otherwise removed, any gain or
loss realized by an employee will be treated as short-term or long-term capital
gain or loss depending upon the period of time between the disposition and the
earlier lapse or removal of the restrictions on those Common Shares. If an
employee files an election under Section 83(b) with the Internal Revenue Service
within 30 days after the grant of restricted shares, the employee will recognize
compensation income on the date of the grant, equal to the excess of the fair
market value of the Common Shares on that date over the price paid for those
Common Shares and STERIS will be entitled to a corresponding deduction.
Performance Shares. The grant of performance shares will not have any
immediate tax consequences to an employee receiving the performance shares or to
STERIS. In general, at the time STERIS pays any amount to an employee with
respect to performance shares, the employee will recognize compensation income
equal to the amount of that payment and STERIS will be entitled to a
corresponding deduction.
Vote Required. Approval of the Plan will require the favorable vote of
holders of a majority of the STERIS Common Shares present in person or by proxy
at the meeting and entitled to vote on this proposal.
The Board of Directors recommends a vote FOR approval of the 1998 Long-Term
Incentive Stock Plan.
The Company has no knowledge of any other matters to be presented for vote
to the shareholders at the Annual Meeting. In the event other matters do
properly come before the meeting, the persons named in the Proxy will vote in
accordance with their judgment on such matters.
9
13
OWNERSHIP OF The following table sets forth information furnished to the
VOTING SECURITIES Company with respect to the beneficial ownership of the
Company's Common Shares by each executive officer named
below, director and nominee, and by all directors and
executive officers as a group, each as of May 31, 1998.
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED OF CLASS
---- ------------------- ---------
Bill R. Sanford(1)........................................ 1,017,500 2.9%
Raymond A. Lancaster(2)(3)................................ 23,222 *
Loyal W. Wilson(3)(4)..................................... 41,462 *
J. B. Richey(3)........................................... 69,942 *
Jerry E. Robertson(3)..................................... 21,522 *
Thomas J. Magulski (3)(5)................................. 34,950 *
Frank E. Samuel, Jr.(3)(5)................................ 34,950 *
Michael A. Keresman, III(6)............................... 214,150 *
J. Lloyd Breedlove(7)(8).................................. 212,686 *
Paul A. Zamecnik(9)....................................... 42,650 *
Pamela S. Sedmak(8)(10)................................... 7,732 *
All directors and executive officers as a group (12
persons)(11)............................................ 1,735,895 4.9%
- ---------------
* Less than one percent.
(1) Includes 831,000 Common Shares subject to options that are exercisable
within 60 days.
(2) Includes 1,700 Common Shares held by Mr. Lancaster as custodian for his
minor children and 1,000 Common Shares as to which Mr. Lancaster's wife has
sole voting power and sole dispositive power.
(3) Includes 20,000 Common Shares (18,000 Common Shares for Mr. Lancaster)
subject to options that are exercisable within 60 days, which options were
granted pursuant to the STERIS Corporation 1994 Nonemployee Directors
Equity Compensation Plan (the "Directors Plan").
(4) Includes 1,000 Common Shares as to which Mr. Wilson's wife has sole voting
power and sole dispositive power.
(5) Includes an additional 10,000 Common Shares subject to options that are
exercisable within 60 days.
(6) Includes 212,750 Common Shares subject to options that are exercisable
within 60 days. Also includes 1,380 Common Shares held by the Keresman
Family Trust, with regard to which Mr. Keresman has voting and dispositive
control as trustee.
(7) Includes 211,250 Common Shares subject to options that are exercisable
within 60 days.
(8) Common Shares owned by participants in the STERIS Corporation 401(k) Plan
and Trust are reflected as of May 31, 1998, the most recent accounting
available.
(9) Includes 42,650 Common Shares subject to options that are exercisable
within 60 days.
(10) Includes 7,500 Common Shares subject to options that are exercisable within
60 days.
(11) Includes 1,458,150 Common Shares subject to options that are exercisable
within 60 days.
The following table presents information derived from Schedule 13-Gs filed
with the Securities and Exchange Commission by persons beneficially owning more
than five percent of the Company's Common Shares outstanding as of May 31, 1998.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------- -------------------- ----------
The Kaufmann Fund, Inc. 3,000,000--Sole 8.80%
140 E.45th Street Voting & Dispositive
43rd Floor Power
New York, NY 10017
10
14
SECTION 16(a) Based on Company records and information, the
BENEFICIAL OWNERSHIP Company believes that all Securities and Exchange
REPORTING COMPLIANCE Commission filing requirements applicable to directors
and executive officers under Section 16(a) of the
Securities Exchange Act of 1934, as amended, for the fiscal year ended March
31, 1998, were complied with.
BOARD OF DIRECTORS The following provides as to nominees and
directors whose terms of office will continue after the
Annual Meeting, the principal occupation and employment, age, the year in which
each became a director of the Company, and directorships in companies having
securities registered pursuant to the Securities Exchange Act of 1934, as
amended.
NOMINEES FOR TERMS EXPIRING AT THE ANNUAL
MEETING IN 2000 (CLASS II DIRECTORS)
JERRY E. ROBERTSON (age 65) joined the Company's Board of Directors in
1994. Dr. Robertson retired in March 1994 from 3M Company where he most recently
served (since 1986) as Executive Vice President, Life Sciences Sector and
Corporate Services and as a member of the Board of Directors. Dr. Robertson is
also currently a member of the Boards of Directors of Manor Care, Inc.,
Haemonetics Corporation, Coherent, Inc., Cardinal Health, Inc., Medwave, Inc.,
Allianz Life Insurance Company of North America, and Choice Hotels
International.
FRANK E. SAMUEL, JR. (age 58) joined the Company's Board of Directors in
1992. Since February 1995, Mr. Samuel has been the President of Edison
BioTechnology Center, a business formation organization for the State of Ohio in
the biotechnology, biomedical devices, and medical software fields. From January
1990 to February 1995, Mr. Samuel was an independent healthcare industry
consultant. From February 1984 through December 1989, Mr. Samuel was President
of the Health Industry Manufacturers Association, a national trade association
representing medical technology manufacturers. Mr. Samuel is also currently a
member of the Boards of Directors of Protocol Systems, Inc. and Life
Technologies, Inc.
BILL R. SANFORD (age 54) has served as Chairman of the Board of Directors,
President, and Chief Executive Officer of the Company since April 1, 1987.
LOYAL W. WILSON (age 50) joined the Company's Board of Directors in 1987.
Mr. Wilson has been a Managing Director of Primus Venture Partners, Inc. since
its inception in 1983.
CONTINUING DIRECTORS WHOSE TERMS EXPIRE
AT THE ANNUAL MEETING IN 1999 (CLASS I DIRECTORS)
RAYMOND A. LANCASTER (age 52) joined the Company's Board of Directors in
1988. Since February 1995, Mr. Lancaster has held the position of Managing
Partner of Kirtland Capital Partners II L.P., a middle market leveraged buy out
partnership. From 1990 to 1994, Mr. Lancaster was Managing Director of Key
Equity Capital Corporation, a wholly-owned subsidiary of KeyCorp.
THOMAS J. MAGULSKI (age 54) joined the Company's Board of Directors in
1989. Mr. Magulski currently serves as the President of Dover Holdings, an
investment holding company. Mr. Magulski served as President, Chief Operating
Officer, and a member of the Board of Directors of VERSA Technologies, Inc. from
December 1993 to February 1998. Mr. Magulski was President of Dover Partners, a
consulting firm, from March 1992 to December 1993.
J.B. RICHEY (age 61) joined the Company's Board of Directors in 1987. Since
1984, Mr. Richey has been Senior Vice President of Invacare Corporation, a
provider of home healthcare medical equipment. Mr. Richey is also acting
Chairman of the Board of Directors and Chief Executive Officer of Neuro Control
Corporation and a member of the Boards of Directors of Invacare Corporation,
Royal Appliance Manufacturing Company, and Unique Mobility, Inc.
11
15
BOARD MEETINGS During the fiscal year ended March 31, 1998,
AND COMMITTEES there were five meetings of the Company's Board of
Directors. The Company's Board of Directors has a
Compensation Committee and an Audit Committee. The Company's entire Board of
Directors nominates directors for election to the Board. The Compensation
Committee makes recommendations concerning salaries and other compensation for
employees of and consultants to the Company and administers the Company's stock
option and equity compensation plans. The Audit Committee reviews the results
and scope of the audit and other services provided by the Company's independent
auditors. Messrs. Lancaster, Robertson, and Wilson are the current members of
the Compensation Committee, and Messrs. Magulski, Richey, and Samuel are the
current members of the Audit Committee. During the fiscal year ended March 31,
1998, there were two meetings of the Compensation Committee and one meeting of
the Audit Committee. Each director attended at least 75% of the aggregate
number of meetings held by the Board of Directors and all committees on which
the director served.
COMPENSATION OF Shown below is information concerning the
EXECUTIVE OFFICERS annual, long-term, and other compensation for services
in all capacities to the Company for the fiscal years
ended March 31, 1998, 1997, and 1996 of those persons who were, at March 31,
1998, (i) the chief executive officer and (ii) the four other most highly
compensated executive officers of the Company (the "Named Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
-------------------- ------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(2)
--------------------------- ---- -------- -------- ------------
Bill R. Sanford............................... 1998 $383,556 $564,823 50,000
Chairman of the Board, President, 1997 321,101 417,400 350,000
and Chief Executive Officer 1996 236,923 264,000 40,000
J. Lloyd Breedlove............................ 1998 $191,868 $173,881 25,000
Senior Vice President 1997 165,034 150,251 50,000
1996 136,923 101,294 16,000
Michael A. Keresman, III...................... 1998 $191,544 $185,773 25,000
Senior Vice President and 1997 160,241 147,508 55,000
Chief Financial Officer 1996 118,846 96,000 20,000
Paul A. Zamecnik.............................. 1998 $154,045 $104,408 10,000
Vice President 1997 111,300 73,154 12,500
1996 86,346 55,809 10,000
Pamela S. Sedmak(3)........................... 1998 $147,874 $101,671 10,000
Vice President 1997 48,670 27,611 20,000
- ---------------
(1) Amounts are those awarded under the Management Incentive Compensation Plan
for the respective fiscal year.
(2) The number of Common Shares underlying options for the fiscal year ended
1996 have been adjusted to reflect a 2-for-1 stock split by means of a 100%
stock dividend on the Company's Common Shares that was effective August 24,
1995.
(3) Ms. Sedmak joined the Company as Vice President in October 1996. The table
reflects all compensation earned by Ms. Sedmak as an executive officer
during the fiscal year ended 1998 and 1997. Prior to becoming an executive
officer, Ms. Sedmak had been with General Electric Company for twelve years,
most recently as a General Manager of Marketing with GE Medical Systems.
12
16
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, for each of the Named Officers, the
exercise of options to purchase the Company's Common Shares during the fiscal
year ended March 31, 1998, and the year-end value of unexercised options to
purchase the Company's Common Shares granted in the last fiscal year and in
prior years and held by the Named Officers at March 31, 1998. All options were
granted to the Named Officers under either the Company's 1987 Amended and
Restated Non-qualified Stock Option Plan or the Company's 1994 Equity
Compensation Plan.
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END(2)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- --------------- ----------------------
Bill R. Sanford.................... -- -- 701,000/ $33,049,138/
352,500 9,589,531
J. Lloyd Breedlove................. 40,000 $1,640,156 181,000/ $ 8,520,438/
78,000 2,056,188
Michael A. Keresman, III........... 10,000 $ 351,667 192,250/ $ 8,945,327/
83,750 2,228,359
Paul A. Zamecnik................... 3,600 $ 181,350 32,025/ $ 1,345,120/
26,875 709,961
Pamela S. Sedmak................... -- -- 5,000/ $ 96,563/
25,000 460,938
- ---------------
(1) Excess of market price on date of exercise over exercise price.
(2) Excess of $54.00 (market price at fiscal year-end) over exercise price.
OPTION GRANTS DURING LAST FISCAL YEAR
The following table sets forth information with respect to the stock
options granted to the Named Officers pursuant to the Company's 1987 Amended and
Restated Non-qualified Stock Option Plan during the fiscal year ended March 31,
1998.
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS RATES OF STOCK
GRANTED TO APPRECIATION OVER TEN
EMPLOYEES EXERCISE YEAR OPTION TERM
OPTIONS IN FISCAL PRICE PER EXPIRATION -----------------------
NAME GRANTED(1) YEAR SHARE DATE 5% 10%
---- ---------- ---------- --------- ------------- ---------- ----------
Mr. Sanford............... 50,000 8.83% $36.8750 July 30, 2007 $1,162,336 $2,947,212
Mr. Breedlove............. 25,000 4.42% $36.8750 July 30, 2007 $ 581,168 $1,473,606
Mr. Keresman.............. 25,000 4.42% $36.8750 July 30, 2007 $ 581,168 $1,473,606
Mr. Zamecnik.............. 10,000 1.77% $36.8750 July 30, 2007 $ 232,467 $ 589,442
Ms. Sedmak................ 10,000 1.77% $36.8750 July 30, 2007 $ 232,467 $ 589,442
- ---------------
(1) All of these options were granted as nonqualified options on July 23, 1997
under the STERIS Corporation 1987 Amended and Restated Non-qualified Stock
Option Plan. In general, options granted under the 1987 Amended and Restated
Non-qualified Stock Option Plan have and will vest in equal annual
increments over a four-year period from the date of grant.
13
17
Effective February 28, 1997, the Company made a loan to Mr. Sanford in
connection with his exercise of options for 186,500 STERIS Common Shares that
had been granted to Mr. Sanford in 1987 at the inception of his employment with
STERIS and that, if not exercised, would have expired on April 2, 1997. The
Compensation Committee authorized the loan in view of its determination that it
was in STERIS's best interests to promote the ownership of Common Shares by
management, in this instance by enabling Mr. Sanford to exercise the options and
hold all of the shares received upon that exercise without the need to
immediately sell the shares or a major portion thereof to satisfy the
substantial tax liability incurred in connection with the exercise. Effective
April 15, 1998, in connection with the payment of the final installment of Mr.
Sanford's 1997 taxes relating to the exercise of these options, and as
previously contemplated, the amount of the loan was increased to $2,371,813.76.
The loan is evidenced by a full recourse promissory note, bears interest at the
rate of 5.70% per annum, and is repayable in a lump sum on or before February
28, 2002. In addition, if and when Mr. Sanford sells any of the 186,500 STERIS
Common Shares acquired upon the exercise of the options, he is required to
retire a proportionate part of the principal and interest remaining due on the
promissory note.
BOARD Each director who is not an employee of the
COMPENSATION Company is paid a retainer of $24,000 per year plus
$1,000 for each Board meeting attended in excess of
four meetings per year and $500 for each committee meeting attended in excess
of two committee meetings per year. Under the Directors Plan, $14,000 of the
annual retainer is paid in Restricted Common Shares and each director
automatically receives a stock option for 5,000 of the Company's Common Shares
at the beginning of each year of service on the Board. The Restricted Common
Shares are subject to forfeiture if the director does not serve for a full year
following grant of those shares. All directors are reimbursed for certain
expenses in connection with attendance at Board and committee meetings.
REPORT OF The Board of Directors of the Company has
COMPENSATION delegated to the Compensation Committee responsibility
COMMITTEE for determining executive compensation. The Committee
is comprised of three independent nonemployee directors
who have no interlocking relationships with the Company as defined by the
Securities and Exchange Commission.
The Company has adopted, and the Compensation Committee has approved, a
compensation policy for executives under which a significant portion of current
compensation during each fiscal year is linked directly to the Company's
performance in that year and a significant portion of total compensation is
provided in the form of stock options, thereby linking total compensation to the
long-term performance of the Company's Common Shares.
The Compensation Committee has determined that this compensation policy
will better enable the Company to attract and retain qualified individuals as
executives and to motivate those individuals to perform to their highest
abilities and work toward the achievement of annual performance goals that will
increase shareholder value.
The Company's Management Incentive Compensation Plan provides for payment
of bonuses to participants if the Company achieves certain net revenue,
operating income, and net income objectives set by the Board of Directors. For
fiscal 1998, the plan provided for target potential bonuses ranging from 20% to
150% of a participant's base salary. No incentive compensation is payable until
the plan objectives are at least 80% achieved. Above this threshold, actual
payouts are made as a percentage of target bonuses in direct proportion to
achievement of plan objectives up to a maximum of 120% of target. Based upon the
extent to which the Company achieved the net revenue and operating income
objectives set by the Board of Directors for fiscal 1998, bonuses were paid at
approximately 100% of target levels under the Management Incentive Compensation
Plan to all executive officers.
Effective July 28, 1997, in conjunction with a general adjustment of base
salaries of all executive officers, the Compensation Committee set Mr. Sanford's
base salary at $400,000 per annum. The Compensation Committee determined that
this level of base salary was appropriate in view of the primary role played by
Mr. Sanford in the management of the Company, the growth and increased size of
the Company, and the financial performance of the Company. For fiscal 1998,
based upon the extent to which the Company achieved the net
14
18
revenue, operating income, and net income objectives set by the Board of
Directors for that year for purposes of the Management Incentive Compensation
Plan, Mr. Sanford was paid a bonus of $564,823.
The Compensation Committee has developed a practice of considering the
grant of options to key employees each year and has followed this practice in
the case of Mr. Sanford. On July 23, 1997, in accordance with that practice and
in recognition of Mr. Sanford's continuing efforts and success in leading the
Company, the Compensation Committee granted to Mr. Sanford a nonqualified stock
option to purchase 50,000 Common Shares at the then current market price of
$36.875 per share. The Compensation Committee believes that both this most
recent grant and the general practice of granting annual options to Mr. Sanford
are appropriate in recognition of the continuing performance of the Company
under his direction and as an additional incentive for continuing efforts by Mr.
Sanford to enhance the value of the Company's Common Shares.
Section 162(m) of the Code prevents a publicly-traded corporation from
taking a tax deduction for certain compensation in excess of $1 million per year
that it or any subsidiary pays to specified executives. Those specified
executives are the Chief Executive Officer and the four other executive officers
for whom proxy disclosure is required ("Covered Employees"). Compensation that
is contingent on the attainment of performance goals is excluded from the
deduction limit and is therefore deductible without regard to the $1 million
limit. The Company's 1998 Long-Term Incentive Stock Plan and its Senior
Executive Management Incentive Compensation Plan, both of which are being
submitted to shareholders for approval at the Annual Meeting and are discussed
in more detail elsewhere in this proxy statement (see pages 2 through 11), are
designed so that compensation paid under those plans can qualify as
performance-based compensation and therefore be excluded from the calculation of
the $1 million limit. The general position of the Company with respect to
Section 162(m) is that the Company will seek to qualify compensation paid to its
executive officers in such a way as to satisfy the requirements of Section
162(m) where it appears to the Compensation Committee to be in the best
interests of the Company to do so. However, from time to time there may be
circumstances in which the Compensation Committee concludes that the best
interests of the Company will be served by a compensation arrangement that does
not satisfy those requirements and, in those circumstances, the Company may
proceed without complying with the requirements of Section 162(m).
In making its determinations as to the levels of salary, annual incentive
compensation opportunity, and stock option grants to the various executive
officers, the Compensation Committee considers compensation data from other
companies gathered and analyzed by an independent compensation consultant.
Taking into account that data, as well as the performance of the Company and its
executive officers, and the need to provide competitive levels of compensation
to retain and to motivate those executives to continue providing services to the
Company, it is the judgment of the Compensation Committee that the compensation
program described above and the levels of compensation paid to executive
officers of the Company during fiscal 1998 are appropriate.
Compensation Committee
Board of Directors
Raymond A. Lancaster
Jerry E. Robertson
Loyal W. Wilson
15
19
STOCK PERFORMANCE GRAPH
The following graph shows the cumulative performance for STERIS
Corporation's Common Shares over the last five years compared with the
performance of the Standard & Poor's 500 Index, the Standard & Poor's Health
Care Sector Index, the NASDAQ Stock Market (US) Index, and the NASDAQ Health
Services Index. The Company has added the Standard & Poor's 500 Index and the
Standard & Poor's Health Care Sector Index because it believes they provide a
better comparison to the Company's performance.
The graph assumes $100 invested as of March 31, 1993 in each of the
following: the Company's Common Shares, the Standard & Poor's 500 Index, the
Standard & Poor's Health Care Sector Index, the NASDAQ Stock Market (US) Index,
and the NASDAQ Health Services Index. The performance shown is not necessarily
indicative of future performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG STERIS CORPORATION, THE STANDARD & POOR'S 500 INDEX,
THE NASDAQ STOCK MARKET (U.S.) INDEX,
THE STANDARD & POOR'S HEALTH CARE SECTOR INDEX
AND THE NASDAQ HEALTH SERVICES INDEX
STANDARD &
POOR'S NASDAQ NASDAQ
MEASUREMENT PERIOD STERIS STANDARD & HEALTH CARE STOCK HEALTH
(FISCAL YEAR COVERED) CORPORATION POOR'S 500 SECTOR MARKET (U.S.) SERVICES
3/93 100.00 100.00 100.00 100.00 100.00
3/94 145.00 101.00 95.00 108.00 131.00
3/95 246.00 117.00 133.00 120.00 151.00
3/96 369.00 155.00 197.00 163.00 183.00
3/97 300.00 186.00 240.00 181.00 164.00
3/98 665.00 275.00 384.00 275.00 196.00
* $100 INVESTED ON 3/31/93 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING MARCH 31.
16
20
1999 The deadline for shareholders to submit proposals to be
SHAREHOLDER considered for inclusion in the Proxy Statement for the next
PROPOSALS Annual Meeting of Shareholders is expected to be February 19,
1999. In the event, however, that the date of the 1999 Annual
Meeting is changed by more than 30 calendar days from the date currently
contemplated, a proposal must be received by the Company a reasonable time
before the solicitation in connection with the meeting is made.
INDEPENDENT Ernst & Young LLP has been appointed as the Company's
AUDITOR independent auditor for the fiscal year ending March 31, 1999,
pursuant to the recommendations of the Audit Committee of the
Board of Directors. Representatives of Ernst & Young are expected to be present
at the meeting with an opportunity to make a statement if they desire to do so
and to answer appropriate questions with respect to that firm's audit of the
Company's financial statements and records for the fiscal year ended March 31,
1998.
ANNUAL REPORT The integrated Annual Report and Form 10-K of the Company for
the fiscal year ended March 31, 1998, which includes financial
statements for the Company for the fiscal year then ended, is being mailed to
each shareholder of record with this Proxy Statement.
By Order of the Board of Directors
/s/ David C. Dvorak
DAVID C. DVORAK
Secretary
June 19, 1998
17
21
EXHIBIT A
STERIS CORPORATION
1998 LONG-TERM INCENTIVE STOCK PLAN
1. Purpose. The STERIS Corporation 1998 Long-Term Incentive Stock Plan is
intended to promote the interests of STERIS Corporation and its shareholders by
enabling the Company and its Subsidiaries to attract and retain key Employees
and by stimulating the interest of those Employees in the development and
financial success of the Company. To achieve these purposes, the Company may
grant Awards of Options, Stock Appreciation Rights, Restricted Shares, and
Performance Shares to key Employees selected by the Compensation Committee, all
in accordance with the terms and conditions set forth in the Plan. Capitalized
terms used in the Plan have the meanings ascribed to them in Section 25, the
last section hereof.
2. Shares Subject to the Plan. The number of Common Shares that may be
issued pursuant to the Plan shall be subject to the overall aggregate limit set
forth in Section 2.1 and the specific further limits set forth in Section 2.2,
in each case subject to adjustment under Section 12. Common Shares issued
pursuant to the Plan may be authorized and unissued Common Shares, treasury
Common Shares, or Common Shares acquired on the open market specifically for
distribution under the Plan, as the Board of Directors may from time to time
determine. If any Award for any reason expires or is terminated, in whole or in
part, without the receipt by an Employee of Common Shares (or the equivalent
thereof in cash or other property) or if Common Shares issued as Restricted
Shares are reacquired by the Company as a result of rights reserved in the Award
Instrument pursuant to which the Restricted Shares were granted, the Common
Shares subject to that part of the Award that has so expired or terminated or
the Restricted Shares that have been reacquired by the Company, as the case may
be, shall again be available for the future grant of Awards under the Plan.
2.1 Overall Aggregate Limit. The aggregate number of Common Shares that may
be issued pursuant to Awards granted under the Plan shall be 1,650,000 Common
Shares.
2.2 Specific Further Limits. In addition to the overall aggregate limit set
forth in Section 2.1, the following specific limits shall apply to Awards made
pursuant to the Plan:
(a) Restricted Share Limit. The aggregate number of Common Shares that may
be issued as Restricted Shares pursuant to Awards made under the Plan shall
be 300,000 Common Shares.
(b) Incentive Stock Option Limit. The maximum number of Common Shares that
may be issued under the Plan pursuant to Awards of Incentive Stock Options
made under the Plan shall be 1,650,000 Common Shares.
(c) Per Employee Limit. The maximum number of Common Shares that may be
subject to Awards granted under the Plan to any Employee during any
calendar year shall be 500,000 Common Shares.
3. Eligibility. Awards may be granted to officers and to other key
Employees selected by the Committee in its sole discretion. The granting of any
Award to an Employee shall not entitle that Employee to, nor disqualify that
Employee from, participation in any other grant of an Award.
4. Administration. The Plan shall be administered by the Committee. No
Award may be made under the Plan to any member or alternate member of the
Committee. The Committee shall have authority, subject to the terms of the Plan,
(a) to determine the Employees who are eligible to participate in the Plan, the
type, size, and terms of Awards to be granted to any Employee, the restrictions,
conditions, and contingencies to be applicable in the case of specific Awards,
the time or times at which Awards shall be exercisable or at which restrictions,
conditions, and contingencies shall lapse, and the terms and provisions of the
instruments by which Awards shall be evidenced, (b) to establish and administer
Performance Goals and any other restrictions, conditions, and contingencies on
Awards in addition to those prescribed by the Plan and to certify whether
particular Performance Goals have been met, (c) to interpret the Plan, and (d)
to make all determinations necessary for the administration of the Plan. The
construction and interpretation by the Committee of any provision of the Plan or
any Award Instrument delivered pursuant to the Plan and any determination by the
Committee pursuant to any provision of the Plan or any Award Instrument shall be
final and conclusive. No member or alternate member of
A-1
22
the Committee shall be liable for any such action or determination made in good
faith. The Committee may act only by a majority of its members. Any
determination of the Committee may be made, without a meeting, by a writing or
writings signed by all of the members of the Committee. In addition, the
Committee may authorize any one or more of their number or any officer of the
Company to execute and deliver documents on behalf of the Committee and the
Committee may delegate to one or more Employees, agents, or officers of the
Company, or to one or more third party consultants, accountants, lawyers, or
other advisors, such ministerial duties related to the operation of the Plan as
it may deem appropriate.
5. Stock Options.
5.1 Type and Date of Grant of Options.
(a) The Award Instrument pursuant to which any Incentive Stock Option is
granted shall specify that the Option granted thereby shall be treated as
an Incentive Stock Option. The Award Instrument pursuant to which any
Nonqualified Option is granted shall specify that the Option granted
thereby shall not be treated as an Incentive Stock Option.
(b) The day on which the Committee authorizes the grant of an Incentive
Stock Option shall be the date on which that Option is granted. No
Incentive Stock Option may be granted on any date after the tenth
anniversary of the date of adoption of the Plan.
(c) The day on which the Committee authorizes the grant of a Nonqualified
Option shall be considered the date on which that Option is granted, unless
the Committee specifies a later date.
5.2 Exercise Price. The Exercise Price under any Option shall be not less
than the Fair Market Value of the Common Shares subject to the Option on the
date the Option is granted.
5.3 Option Expiration Date. The Option Expiration Date under any Incentive
Stock Option shall not be later than ten years from the date on which the Option
is granted. The Option Expiration Date under any Nonqualified Option shall not
be later than ten years and one month from the date on which the Option is
granted.
5.4 Exercise of Options.
(a) Except as otherwise provided in Section 9, an Option may be exercised
only while the Employee to whom the Option was granted is in the employ of
the Company or of a Subsidiary. Once any portion of an Option becomes
exercisable, whether by lapse of time or upon satisfaction of any other
restriction, condition, or contingency that may have been established by
the Committee and contained in the Award Instrument, that portion shall
remain exercisable until expiration or termination of the Option. An
Employee to whom an Option is granted may exercise the Option from time to
time, in whole or in part, up to the total number of Common Shares with
respect to which the Option is then exercisable, except that no fraction of
a Common Share may be purchased upon the exercise of any Option.
(b) An Employee electing to exercise an Option shall deliver to the Company
(i) the Exercise Price payable in accordance with Section 5.5 and (ii)
written notice of the election that states the number of whole Common
Shares with respect to which the Employee is exercising the Option.
5.5 Payment For Common Shares. Upon exercise of an Option by an Employee,
the Exercise Price shall be payable by the Employee in cash or in such other
form of consideration as the Committee determines may be accepted, including,
without limitation, securities or other property, or any combination of cash,
securities, or other property, or by delivery by the Employee (with the written
notice of election to exercise) of irrevocable instructions to a broker
registered under the 1934 Act to promptly deliver to the Company the amount of
sale or loan proceeds to pay the Exercise Price. The Committee, in its sole
discretion, may grant to an Employee the right to transfer Common Shares
acquired upon the exercise of a part of an Option in payment of the Exercise
Price payable upon immediate exercise of a further part of the Option.
6. Stock Appreciation Rights ("SARs").
6.1 Grant of SARs. A SAR may be granted only in connection with an Option.
A SAR granted in connection with an Incentive Stock Option may be granted only
when the Incentive Stock Option is granted. A
A-2
23
SAR granted in connection with a Nonqualified Option may be granted either when
the related Nonqualified Option is granted or at any time thereafter, including,
in the case of any Nonqualified Option resulting from the conversion of an
Incentive Stock Option to a Nonqualified Option, simultaneously with or after
the conversion.
6.2 Exercise of SARs.
(a) An Employee electing to exercise a SAR shall deliver written notice to
the Company of the election identifying the SAR and the related Option with
respect to which the SAR was granted to the Employee, and specifying the
number of whole Common Shares with respect to which the Employee is
exercising the SAR. Upon exercise of the SAR, the related Option shall be
deemed to be surrendered to the extent that the SAR is exercised.
(b) SARs may be exercised only (i) on a date when the Fair Market Value of
a Common Share exceeds the Exercise Price stated in the Option related to
that SAR, (ii) at a time and to the same extent as the related Option is
exercisable, (iii) by surrender to the Company, unexercised, of the related
Option or any applicable portion thereof, and (iv) in compliance with any
restrictions that may be set forth in the Award Instrument pursuant to
which the SAR was granted.
6.3 Payment for SARs. The amount payable upon exercise of a SAR may be paid
by the Company in cash, or, if the Committee shall determine in its sole
discretion, in whole Common Shares (taken at their Fair Market Value at the time
of exercise of the SAR) or in a combination of cash and whole Common Shares;
provided, however, that in no event shall the total number of Common Shares that
may be paid to an Employee pursuant to the exercise of a SAR exceed the total
number of Common Shares subject to the related Option.
6.4 Termination, Amendment, or Suspension of SARs. A SAR shall terminate
and may no longer be exercised upon the first to occur of (a) exercise or
termination of the related Option or (b) any termination date specified by the
Committee at the time of grant of the SAR. In addition, the Committee may, in
its sole discretion at any time before the occurrence of a Change of Control,
amend, suspend, or terminate any SAR theretofore granted under the Plan without
the holder's consent; provided that, in the case of amendment, no provision of
the SAR, as amended, shall be in conflict with any provision of the Plan. The
amendment, suspension, or termination of any SAR by the Committee as described
in the immediately preceding sentence shall not affect the holder's rights in
any related Option.
7. Restricted Shares.
7.1 Additional Conditions on Restricted Shares. In addition to the
restrictions on disposition of Restricted Shares during the Restriction Period
and the requirement to offer Restricted Shares to the Company if the Employee's
employment terminates during the Restriction Period, the Committee may provide
in the Award Instrument with respect to any Award of Restricted Shares other
restrictions, conditions, and contingencies, which other restrictions,
conditions, and contingencies, if any, may relate to, in addition to such other
matters as the Committee may deem appropriate, the Employee's personal
performance, corporate performance, or the performance of any subunit of the
Company or any Subsidiary, in each case measured in such manner as may be
specified by the Committee. The Committee may impose different restrictions,
conditions, and contingencies on separate Awards of Restricted Shares granted to
different Employees, whether at the same or different times, and on separate
Awards of Restricted Shares granted to the same Employee, whether at the same or
different times. The Committee may specify a single Restriction Period for all
of the Restricted Shares subject to any particular Award Instrument or may
specify multiple Restriction Periods so that the restrictions with respect to
the Restricted Shares subject to the Award will expire in stages according to a
schedule specified by the Committee and set forth in the Award Instrument.
7.2 Payment for Restricted Shares. Each Employee to whom an Award of
Restricted Shares is made shall pay the Acquisition Price with respect to those
Restricted Shares to the Company no later than 30 days after the delivery to the
Employee of the Award Instrument with respect to those Restricted Shares. If any
Employee fails to pay the Acquisition Price with respect to any Award of
Restricted Shares within that 30-day period, the Employee's rights under that
Award shall be forfeited.
A-3
24
7.3 Rights as a Shareholder. Upon payment by an Employee in full of the
Acquisition Price for Restricted Shares under an Award, the Employee shall have
all of the rights of a shareholder with respect to the Restricted Shares,
including voting and dividend rights, subject only to such restrictions and
requirements referred to in Section 7.1 as may be incorporated in the Award
Instrument with respect to those Restricted Shares.
7.4 Lapse of Restrictions following Unaccepted Offer of Resale. If (a) an
Employee or an Employee's Representative becomes required, under the terms of
the Plan or any provision of an Award Instrument, to offer for resale to the
Company at the Acquisition Price Restricted Shares held by the Employee at the
Employment Termination Date and the Employee makes the required offer to the
Company in writing, and (b) the Company fails to repurchase those Restricted
Shares at the Acquisition Price within 60 days of the date on which the Company
receives that written offer, all restrictions on those Restricted Shares shall
lapse and neither the Employee nor the Employee's Representative shall
thereafter be required to offer to resell those Restricted Shares to the
Company.
8. Performance Shares. The Committee may grant Awards of Performance Shares
that are intended to qualify as "performance-based" within the meaning of Code
Section 162(m)(4)(C) ("Section 162(m) Performance Awards") and the Committee may
also grant Awards of Performance Shares that are not intended to so qualify.
8.1 Discretion of Committee with Respect to Performance Shares. Except as
may be otherwise provided below in this Section 8 with respect to Section 162(m)
Performance Awards, the Committee shall have full discretion to select the
Employees to whom Awards of Performance Shares are made, the number of
Performance Shares to be granted to any Employee so selected, the kind and level
of the Performance Goals and whether those Performance Goals are to apply to the
Company, a Subsidiary, or any one or more subunits of the Company or of any
Subsidiary, the dates on which each Performance Period shall begin and end, and
to determine the form and provisions of the Award Instrument to be used in
connection with any Award of Performance Shares.
8.2 Conditions Applicable to Section 162(m) Performance Awards. The
provisions of this Section 8.2 shall apply to all Section 162(m) Performance
Awards. The Committee shall (i) designate the Section 162(m) Performance Awards
as being intended to qualify as "performance-based" within the meaning of Code
Section 162(m)(4)(C), (ii) select the Employees to whom Section 162(m)
Performance Awards are to be granted, and (iii) establish in writing the
applicable Performance Goals and all related terms no later that 90 days after
the commencement of the relevant Performance Period, or such earlier or later
date as may be the applicable deadline for payments with respect to the Section
162(m) Performance Shares to qualify as "performance-based" within the meaning
of Code Section 162(m)(4)(C). The Committee shall establish in writing the
Performance Goals for each Award Period which shall be based on any of the
following performance criteria, either alone or in any combination, and applying
to the Company, to a Subsidiary, or to any one or more subunits of the Company
or of any Subsidiary, and which shall include or exclude discontinued operations
and acquisition expenses (e.g., pooling of interests), as the Committee may in
each case determine: return on net assets, return on capital employed, economic
value added, level of sales, net revenue, earnings per share, income before
income taxes and cumulative effect of accounting changes, operating income, net
income, earnings before interest and taxes, return on equity, total shareholder
return, market valuation, cash flow, completion of acquisitions, product and
market development, and customer satisfaction criteria. The foregoing criteria
shall have any reasonable definitions that the Committee may specify at the time
the Performance Goal is established, which may include or exclude any or all of
the following items, as the Committee may specify: extraordinary, unusual, or
nonrecurring items; effects of accounting changes; effects of currency
fluctuations; effects of financing activities; expenses for restructuring or
productivity initiatives; nonoperating items; acquisition expenses; and effects
of divestitures. Any such performance criterion or combination of such criteria
may apply to an Employee's award opportunity in its entirety or to any
designated portion or portions of the opportunity, as the Committee may specify.
8.3 No Discretion to Increase Payments Under Section 162(m) Performance
Awards. The Committee shall not have any discretion to increase the amount to be
paid to an Employee pursuant to any Section 162(m) Performance Award upon
attainment of the applicable Performance Goal. However, the Committee may
reserve to itself the right to exercise negative discretion with respect to any
Section 162(m) Performance Award (i.e., to
A-4
25
reduce or eliminate the amount payable pursuant to the Section 162(m)
Performance Award) within the meaning of Treasury Regulation Section
1.162-27(e)(2)(iii)(A).
8.4 Performance Shares Earned Upon Attainment of Performance Goals. The
Committee may establish one or more formulas to be applied against the
Performance Goals to determine whether all, some portion but less than all, or
none of the Performance Shares granted with respect to a Performance Period are
earned pursuant to any Award of Performance Shares. An Employee will be entitled
to receive payments with respect to any Performance Shares only to the extent
that those Performance Shares are earned under one or more such formulas and no
payments shall be made under any Section 162(m) Performance Award unless and
until the Committee has certified the extent to which the Performance Goals have
been attained.
8.5 Unless otherwise provided in the relevant Award Instrument or as
permitted by the last sentence of this Section 8.5, an Employee must be employed
by the Company or a Subsidiary on the last day of a Performance Period to be
entitled to payment for any Performance Shares. The Committee may, in its sole
discretion, provide for a partial or full payment of a Performance Award
following termination of an Employee's employment before the end of a
Performance Period, which payment shall be made at the same time as the payment
would have been made if the Employee's employment had continued through the end
of the Performance Period, except that the Committee shall not exercise this
discretion in any manner that would cause any Section 162(m) Performance Award
to fail to qualify as "performance-based" within the meaning of Code Section
162(m)(4)(C).
8.6 Payment for Performance Shares. The Company shall pay each Employee who
is entitled to payment for Performance Shares earned with respect to any
Performance Period an amount for those Performance Shares (a) in cash (based
upon the per share Fair Market Value of Common Shares on the last day of the
Performance Period), (b) in Common Shares (one Common Share for each Performance
Share earned), (c) in Restricted Shares (one Common Share of Restricted Shares
for each Performance Share earned), or (d) any combination of the foregoing, in
such proportions as the Committee may determine. Restricted Shares issued by the
Company in payment of Performance Shares shall be subject to the provisions of
Section 7 to the extent provided by the Committee.
8.7 Dividends. The Committee may, in its sole discretion, at the time
Performance Shares are granted, provide that dividends, if any, declared on
Common Shares from the beginning of the Performance Period through the date of
payment of the Award of Performance Shares that would have been paid with
respect to Performance Shares had they been Common Shares owned by a grantee,
shall be (a) paid to the grantee in cash, or (b) accumulated for the benefit of
the grantee and converted into an increased number of Performance Shares to be
paid to the grantee pursuant to the Award.
8.8 Delayed Payment. If the Committee, in its sole discretion, determines
that any amount payable as a Performance Award will not be deductible by the
Company by reason of Code Section 162(m) if paid when otherwise scheduled, but
will be deductible if paid by the Company at a later date, the Committee may
cause the Company to delay the payment of that amount until the amount so paid
will be deductible under Code Section 162(m). The delayed payment of a
Performance Award payable in Common Shares or Restricted Shares shall be equal
to the number of Performance Shares earned but unpaid. The delayed payment of a
Performance Award payable in cash shall be equal to the Fair Market Value of the
earned but unpaid Performance Shares as of the appropriate date selected by the
Committee.
9. Termination of Employment. After an Employee's Employment Termination
Date, the rules set forth in this Section 9 shall apply. All factual
determinations with respect to the termination of an Employee's employment that
may be relevant under this Section 9 shall be made by the Committee in its sole
discretion.
9.1 Termination Other Than Upon Death or Disability or for Cause. Upon any
termination of an Employee's employment for any reason other than the Employee's
disability or death or the Employee's termination for Cause:
(a) Unless otherwise provided in the relevant Award Instrument, the
Employee shall have the right during the period ending three months after
the Employment Termination Date, but not later than the Option Expiration
Date, to exercise any Options and related SARs that were outstanding on the
Employment Termination Date,
A-5
26
if and to the same extent as those Options and SARs were exercisable by the
Employee on the Employment Termination Date,
(b) Unless otherwise provided in the relevant Award Instrument, the
Employee shall offer for resale at the Acquisition Price to the Company
each Common Share of Restricted Shares held by the Employee at the
Employment Termination Date with respect to which, as of that date, any
restrictions, conditions, or contingencies have not lapsed, and
(c) Unless otherwise provided in the relevant Award Instrument, the
Employee shall forfeit each Performance Share with respect to which, as of
that date, any restrictions, conditions, or contingencies have not lapsed.
9.2 Termination Due To Disability. Upon any termination of an Employee's
employment due to disability:
(a) Unless otherwise provided in the relevant Award Instrument, the
Employee, or the Employee's Representative, shall have the right (i) to
exercise, from time to time during the period ending one year after the
Employment Termination Date, but not later than the Option Expiration Date,
any Nonqualified Options and related SARs that were outstanding on the
Employment Termination Date, if and to the same extent those Options and
SARs were exercisable by the Employee on the Employment Termination Date,
and (ii) to exercise, from time to time during the period ending one year
after the Employment Termination Date, but not later than the Option
Expiration Date, any Incentive Stock Options and related SARs that were
outstanding on the Employment Termination Date, if and to the same extent
as those Options and SARs were exercisable by the Employee on the
Employment Termination Date (even though exercise of the Incentive Stock
Option more than three months after the Employment Termination Date may
cause the Option to fail to qualify for Incentive Stock Option treatment
under the Code),
(b) Unless otherwise provided in the relevant Award Instrument, the
Employee, or the Employee's Representative, shall offer for resale at the
Acquisition Price to the Company each Common Share of Restricted Shares
held by the Employee at the Employment Termination Date with respect to
which, as of that date, any restrictions, conditions, or contingencies have
not lapsed, and
(c) Unless otherwise provided in the relevant Award Instrument, the
Employee shall forfeit each Performance Share with respect to which, as of
that date, any restrictions, conditions, or contingencies have not lapsed.
9.3 Death of an Employee. Upon the death of an Employee while employed by
the Company or any Subsidiary or within any of the periods referred to in either
of Section 9.1 or Section 9.2 during which any particular Option or SAR remains
potentially exercisable:
(a) Unless otherwise provided in the relevant Award Instrument (in which
the Committee may specify a different period of extension of the Option
Expiration Date in the event of the death of the Employee), if the Option
Expiration Date of any Nonqualified Option that had not expired before the
Employee's death would otherwise expire before the first anniversary of the
Employee's death, that Option Expiration Date shall automatically be
extended to the first anniversary of the Employee's death,
(b) Unless otherwise provided in the relevant Award Instrument, any Options
and related SARs that are outstanding on the date of the Employee's death
shall become immediately exercisable in full and the Employee's
Representative shall have the right to exercise, from time to time during
the period ending one year after the date of the Employee's death, but not
later than the Option Expiration Date, any such Options and related SARs in
accordance with Section 5.4 (as to any Options) or Section 6.2 (as to any
SARs),
(c) Unless otherwise provided in the relevant Award Instrument, the
Restriction Period with respect to all outstanding Awards of Restricted
Shares that had been outstanding on the date of the Employee's death shall
immediately terminate, and
(d) Unless otherwise provided in the relevant Award Instrument, the
restrictions, conditions, or contingencies on any Performance Shares held
by the Employee at the date of death shall be modified in such manner as
A-6
27
the Committee may specify to give the Employee's Representative the benefit
of those Performance Shares through that date.
9.4 Termination for Cause. Upon any termination of an Employee's employment
for Cause:
(a) All of the Employee's rights with respect to unexercised Options and
SARs shall expire immediately before the Employment Termination Date,
(b) The Employee shall offer for resale at the Acquisition Price to the
Company all Restricted Shares held by the Employee at the Employment
Termination Date with respect to which, as of that date, any restrictions,
conditions, or contingencies have not lapsed, and
(c) The Employee shall forfeit all Performance Shares with respect to
which, as of the Employment Termination Date, any restrictions, conditions,
or contingencies have not lapsed.
10. Acceleration Upon Change of Control. Unless otherwise specified in the
relevant Award Instrument, upon the occurrence of a Change of Control of the
Company, each Award theretofore granted to any Employee that then remains
outstanding shall be modified as follows: (a) any outstanding Option shall
become immediately exercisable in full, (b) SARs related to any such Options
shall also become immediately exercisable in full, (c) the Restriction Period
with respect to all outstanding Awards of Restricted Shares shall immediately
terminate, and (d) the restrictions, conditions, or contingencies on any
Performance Shares shall be modified in such manner as the Committee may specify
to give the Employee the benefit of those Performance Shares through the date of
Change of Control.
11. Assignability. Except as may be otherwise provided by the Committee and
reflected in the Award Instrument, no Option, SAR, Restricted Share, or
Performance Share may be transferred other than by will or by the laws of
descent and distribution. During an Employee's lifetime, only the Employee (or
in the case of incapacity of an Employee, the Employee's attorney-in-fact or
legal guardian) may exercise any Award requiring or permitting exercise.
12. Adjustment Upon Changes in Common Shares. In the event of any stock
dividend, stock split, or share combination of the Common Shares or any
reclassification, recapitalization, merger, consolidation, other form of
business combination, liquidation, or dissolution involving the Company or any
spin-off or other distribution to shareholders of the Company (other than normal
cash dividends), (a) the Committee shall make appropriate adjustments to the
overall aggregate limit set forth in Section 2.1 and to the specific further
limits set forth in Section 2.2, and (b) the Committee shall adjust the number
and kind of shares subject to, the price per share under, and the terms and
conditions of each then outstanding Award to the extent necessary and in such
manner that the benefits of Employees under all then outstanding Awards shall be
maintained substantially as before the occurrence of such event. Any adjustment
so made by the Committee shall be conclusive and binding for all purposes of the
Plan as of such date as the Committee may determine.
13. Purchase For Investment. Each person acquiring Common Shares pursuant
to any Award may be required by the Company to furnish a representation that he
or she is acquiring the Common Shares so acquired as an investment and not with
a view to distribution thereof if the Company, in its sole discretion,
determines that such representation is required to ensure that a resale or other
disposition of the Common Shares would not involve a violation of the Securities
Act of 1933, as amended, or of applicable blue sky laws. Any investment
representation so furnished shall no longer be applicable at any time such
representation is no longer necessary for such purposes.
14. Withholding of Taxes. The Company will withhold from any payments of
cash made pursuant to the Plan such amount as is necessary to satisfy all
applicable federal, state, and local withholding tax obligations. The Committee
may, in its sole discretion and subject to such rules as the Committee may adopt
from time to time, permit or require an Employee to satisfy, in whole or in
part, any withholding tax obligation that may arise in connection with the grant
of an Award, the lapse of any restrictions with respect to an Award, the
acquisition of Common Shares pursuant to any Award, or the disposition of any
Common Shares received pursuant to any Award by such means as the Committee may
determine including, without limitation, by having the Company hold back some
portion of the Common Shares that would otherwise be delivered pursuant to the
Award or by delivering to the Company an amount equal to the withholding tax
obligation arising with respect to such grant, lapse, acquisition, or
disposition in (a) cash, (b) Common Shares, or (c) such combination of cash and
Common
A-7
28
Shares as the Committee may determine. The Fair Market Value of the Common
Shares to be so held back by the Company or delivered by the Employee shall be
determined as of the date on which the obligation to withhold first arose. The
Company may apply the provisions of this Section 14 based upon generally
applicable withholding rates and without regard to any statutory minimum rate
applicable to special payments.
15. Awards in Substitution for Awards Granted by Other Companies. Awards,
whether Incentive Stock Options, Nonqualified Options, SARs, Restricted Shares,
or Performance Shares, may be granted under the Plan in substitution for awards
held by employees of a company who become Employees of the Company or a
Subsidiary as a result of the merger or consolidation of the employer company
with the Company or a Subsidiary, or the acquisition by the Company or a
Subsidiary of the assets of the employer company, or the acquisition by the
Company or a Subsidiary of stock of the employer company as a result of which it
becomes a Subsidiary. The terms, provisions, and benefits of the substitute
Awards so granted may vary from the terms, provisions, and benefits set forth in
or authorized by the Plan to such extent as the Committee at the time of the
grant may deem appropriate to conform, in whole or in part, to the terms,
provisions, and benefits of the awards in substitution for which they are
granted.
16. Legal Requirements. No Awards shall be granted and the Company shall
have no obligation to make any payment under the Plan, whether in Common Shares,
cash, or any combination thereof, except in compliance with all applicable
federal and state laws and regulations, including, without limitation, the Code
and federal and state securities laws.
17. Duration and Termination of the Plan. The Plan shall become effective
and shall be deemed to have been adopted on the date on which it is approved by
the shareholders of the Company and shall remain in effect thereafter until
terminated by action of the Board of Directors. No termination of the Plan shall
adversely affect the rights of any Employee with respect to any Award granted
before the effective date of the termination.
18. Amendments. The Board of Directors, or a duly authorized committee
thereof, may alter or amend the Plan from time to time prior to its termination
in any manner the Board of Directors, or such duly authorized committee, may
deem to be in the best interests of the Company and its shareholders, except
that no amendment that would increase the overall aggregate limit set forth in
Section 2.1 or any of the specific further limits set forth in Section 2.2, in
each case as adjusted by Section 12, may be made without shareholder approval.
The Board of Directors, or a duly authorized committee thereof, shall have the
authority to amend the terms and conditions applicable to outstanding Awards (a)
in any case where expressly permitted by the terms of the Plan or of the
relevant Award Instrument or (b) in any other case with the consent of the
Employee to whom the Award was granted, except that no amendment of an Option,
or an Option and its related SAR, may reduce the exercise price of such Option.
Except as expressly provided in the Plan or in the Award Instrument evidencing
the Award, the Committee may not, without the consent of the holder of an Award
granted under the Plan, amend the terms and conditions applicable to that Award
in a manner adverse to the interests of the Employee.
19. Plan Noncontractual. Nothing herein contained shall be construed as a
commitment to or agreement with any person employed by the Company or a
Subsidiary to continue such person's employment with the Company or the
Subsidiary, and nothing herein contained shall be construed as a commitment or
agreement on the part of the Company or any Subsidiary to continue the
employment or the annual rate of compensation of any such person for any period.
All Employees shall remain subject to discharge to the same extent as if the
Plan had never been put into effect.
20. Interest of Employees. Any obligation of the Company under the Plan to
make any payment at any future date merely constitutes the unsecured promise of
the Company to make such payment from its general assets in accordance with the
Plan, and no Employee shall have any interest in, or lien or prior claim upon,
any property of the Company or any Subsidiary by reason of that obligation.
21. Claims of Other Persons. The provisions of the Plan shall in no event
be construed as giving any person, firm, or corporation any legal or equitable
right against the Company or any Subsidiary, their officers, Employees, agents,
or directors, except any such rights as are specifically provided for in the
Plan or are hereafter created in accordance with the terms and provisions of the
Plan.
22. Absence of Liability. No member of the Board of Directors of the
Company or a Subsidiary, of the Committee, of any other committee of the Board
of Directors, or any officer or Employee of the Company or a
A-8
29
Subsidiary shall be liable for any act or action under the Plan, whether of
commission or omission, taken by any other member, or by any officer, agent, or
Employee, or, except in circumstances involving his bad faith or willful
misconduct, for anything done or omitted to be done by himself.
23. Severability. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.
24. Governing Law. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
25. Definitions.
25.1 1934 Act. The term "1934 Act" shall mean the Securities Exchange Act
of 1934, as amended.
25.2 Acquisition Price. The term "Acquisition Price" with respect to any
Restricted Shares shall mean such amount, if any, as may be specified by the
Committee in the Award Instrument with respect to those Restricted Shares as the
consideration to be paid by the Employee for those Restricted Shares.
25.3 Award. The term "Award" shall mean an award granted under the Plan of
an Option, of Stock Appreciation Rights, of Restricted Shares, or of Performance
Shares.
25.4 Award Instrument. The term "Award Instrument" shall mean a written
instrument evidencing an Award in such form and with such provisions as the
Committee may prescribe, including, without limitation, an agreement to be
executed by the Employee and the Company, a certificate issued by the Company,
or a letter executed by the Committee or its designee. Each Award Instrument
shall provide that acceptance of the Award Instrument by an Employee constitutes
agreement to the terms of the Award evidenced thereby.
25.5 Cause. The Company shall be deemed to have "Cause" for the termination
of an Employee's employment if the Employee has committed any act or series of
acts determined by the Committee (in a determination made either before or after
the Employment Termination Date) to warrant discharge from employment,
including, without limitation, any act of theft or dishonesty in connection with
the Employee's employment with the Company, any unauthorized disclosure of
confidential information belonging to the Company, or other similar action.
25.6 Change of Control. A "Change of Control" shall be deemed to have
occurred if at any time or from time to time after the date of adoption of the
Plan:
(a) there is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form, or report), each as adopted under the 1934 Act,
disclosing the acquisition of 25% or more of the voting stock of the
Company in a transaction or series of transactions by any person (as the
term "person" is used in Section 13(d) and Section 14(d)(2) of the 1934
Act),
(b) during any period of 730 consecutive days or less, individuals who at
the beginning of such period constitute the directors of the Company cease
for any reason to constitute at least a majority thereof unless the
election of each new director of the Company was approved or recommended by
the vote of at least two-thirds of the directors of the Company then still
in office who were directors of the Company at the beginning of that
period,
(c) the Company merges with or into or consolidates with another
corporation following approval of the shareholders of the Company of such
merger or consolidation and, after giving effect to such merger or
consolidation, less than 50% of the then outstanding voting securities of
the surviving or resulting corporation represent or were issued in exchange
for voting securities of the Company outstanding immediately prior to such
merger or consolidation,
(d) there is a sale, lease, exchange, or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the
assets of the Company following approval of the shareholders of the Company
of such transaction or series of transactions, or
(e) the shareholders of the Company shall approve any plan or proposal for
the liquidation or dissolution of the Company.
25.7 Code. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended.
A-9
30
25.8 Committee. The term "Committee" shall mean a committee appointed by
the Board of Directors of the Company to administer the Plan. The Committee
shall be composed of not less than two directors of the Company. The Board of
Directors may also appoint one or more directors as alternate members of the
Committee. No officer or Employee of the Company or of any Subsidiary shall be a
member or alternate member of the Committee. The Committee shall at all times be
comprised solely of "outside directors" within the meaning of Code Section
162(m) and in such a manner as to satisfy the "non-employee" director standard
contained in Rule 16b-3.
25.9 Common Shares. The term "Common Shares" shall mean common shares of
the Company without par value.
25.10 Company. The term "Company" shall mean STERIS Corporation and its
successors, including the surviving or resulting corporation of any merger of
STERIS Corporation with or into, or any consolidation of STERIS Corporation
with, any other corporation or corporations.
25.11 Disability. An Employee shall be deemed to have suffered a
"Disability" if and only if (a) the Employee has established to the satisfaction
of the Committee that the Employee is unable to perform the Employee's normal
duties and responsibilities with the Company by reason of a medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted or can be expected to last for a continuous period of
not less than 12 months, all within the meaning of Section 22(e)(3) of the Code,
and (b) the Employee has satisfied any other requirement that may be imposed by
the Committee.
25.12 Employee. The term "Employee" shall mean any individual employed by
the Company or by any Subsidiary (including any individual employed by the
Company or any Subsidiary who is also a member of the Board of Directors of the
Company or of any Subsidiary).
25.13 Employee's Representative. The term "Employee's Representative" shall
mean, (a) in the case of a deceased Employee, the Employee's executor or
administrator or the person or persons to whom the Employee's rights under any
Award are transferred by will or the laws of descent and distribution, and (b)
in the case of a disabled or incapacitated Employee, the Employee's
attorney-in-fact or legal guardian.
25.14 Employment Termination Date. The term "Employment Termination Date"
with respect to an Employee shall mean the first date on which, as of the end of
the day, the Employee is no longer employed by the Company or any Subsidiary.
25.15 Exercise Price. The term "Exercise Price" with respect to an Option
shall mean the price specified in the Option at which the Common Shares subject
to the Option may be purchased by the holder of the Option.
25.16 Fair Market Value. Except as otherwise determined by the Committee,
the term "Fair Market Value" with respect to Common Shares shall mean the
closing sales price of the Common Shares as reported on the national securities
exchange on which the Common Shares are traded, or, if applicable, as reported
on the National Association of Securities Dealers Automated Quotation System
("NASDAQ") National Market, on the date for which the determination of fair
market value is made or, if there are no sales of Common Shares on that date,
then on the next preceding date on which there were any sales of Common Shares.
If the Common Shares are not or cease to be traded on a national securities
exchange or on the NASDAQ National Market, the "Fair Market Value" of Common
Shares shall be determined in the manner prescribed by the Committee.
25.17 Incentive Stock Option. The term "Incentive Stock Option" shall mean
an Option intended by the Committee to qualify as an "incentive stock option"
within the meaning of Section 422 of the Code.
25.18 Nonqualified Option. The term "Nonqualified Option" shall mean an
Option intended by the Committee not to qualify as an "incentive stock option"
under Section 422 of the Code.
25.19 Option. The term "Option" shall mean an Award entitling the holder
thereof to purchase a specified number of Common Shares at a specified price
during a specified period of time.
25.20 Option Expiration Date. The term "Option Expiration Date" with
respect to any Option shall mean the date selected by the Committee after which,
except as provided in Section 9.3 in the case of the death of the Employee to
whom the option was granted, the Option may not be exercised.
A-10
31
25.21 Performance Goal. The term "Performance Goal" shall mean a
performance goal specified by the Committee in connection with the potential
grant of Performance Shares and may include, without limitation, goals based
upon cumulative earnings per Common Share, return on investment, return on
shareholders' equity, or achievement of any other goals, whether or not readily
expressed in financial terms, that are related to the performance by the
Company, by any Subsidiary, or by any Employee or group of Employees in
connection with services performed by that Employee or those Employees for the
Company, a Subsidiary, or any one or more subunits of the Company or of any
Subsidiary.
25.22 Performance Period. The term "Performance Period" shall mean such one
or more periods of time, which may be of varying and overlapping durations, as
the Committee may select, over which the attainment of one or more Performance
Goals will be relevant in connection with one or more Awards of Performance
Shares.
25.23 Performance Shares. The term "Performance Shares" shall mean an Award
denominated in Common Shares and contingent upon attainment of one or more
Performance Goals by the Company or a Subsidiary or any subunit of the Company
or of any Subsidiary over a Performance Period.
25.24 Plan. The term "Plan" shall mean this STERIS Corporation 1998
Long-Term Incentive Stock Plan as from time to time hereafter amended in
accordance with Section 18.
25.25 Restricted Shares. The term "Restricted Shares" shall mean Common
Shares of the Company delivered to an Employee pursuant to an Award subject in
every case to:
(a) the restriction that the Employee not sell, transfer, otherwise dispose
of, or pledge or otherwise hypothecate the Restricted Shares during the
applicable Restriction Period, and
(b) the requirement that, subject to the provisions of Section 9, if the
Employee's employment terminates so that the Employee is no longer employed
by the Company or any Subsidiary before the end of the applicable
Restriction Period, the Employee will offer to sell to the Company at the
Acquisition Price each Common Share of Restricted Shares held by the
Employee at the Employment Termination Date with respect to which, as of
that date, any restrictions, conditions, or contingencies have not lapsed.
In addition to the restriction and requirement set forth in (a) and (b), above,
each Common Share of Restricted Shares shall be subject to such other
restrictions, conditions, and contingencies, if any, as the Committee may
provide in the Award Instrument with respect to those Restricted Shares.
25.26 Restriction Period. The term "Restriction Period" with respect to an
Award of Restricted Shares shall mean the period selected by the Committee and
specified in the Award Instrument with respect to those Restricted Shares during
which the Employee may not sell, transfer, otherwise dispose of, or pledge or
otherwise hypothecate the Restricted Shares. The length of the Restriction
Period shall be determined by the Committee in its sole discretion.
25.27 Rule 16b-3. The term "Rule 16b-3" shall mean Rule 16b-3 or any
successor provision under the 1934 Act.
25.28 Stock Appreciation Right. The term "Stock Appreciation Right" or
"SAR" shall mean an Award granted to an Employee with respect to all or any part
of any Option that entitles the holder thereof to receive from the Company, upon
exercise of the SAR and surrender of the related Option, or any portion of the
SAR and the related Option, an amount equal to 100%, or such lesser percentage
as the Committee may determine at the time of the grant of the Award, of the
excess, if any, measured at the time of the exercise of the SAR, of (a) the Fair
Market Value of the Common Shares subject to the Option with respect to which
the SAR is exercised over (b) the Exercise Price of those Common Shares under
the Option.
25.29 Subsidiary. The term "Subsidiary" shall mean any corporation,
partnership, joint venture, or other business entity in which the Company owns,
directly or indirectly, 50% or more of the total combined voting power of all
classes of stock (in the case of a corporation) or other ownership interests (in
the case of any entity other than a corporation).
A-11
32
PROXY PROXY
STERIS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 23, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
At the Annual Meeting of Shareholders of the Company to be held on July 23,
1998, and at any adjournment thereof, Bill R. Sanford, Raymond A. Lancaster, and
Loyal W. Wilson, and each of them, with full power of substitution in each (the
"Proxies"), are hereby authorized to represent me and to vote my shares on the
following:
Electing directors of a class to serve for a two-year term of office expiring at
the Company's 2000 Annual Meeting of Shareholders ("Class II" Directors). The
nominees of the Board of Directors for Class II are: Jerry E. Robertson, Frank
E. Samuel, Jr., Bill R. Sanford, and Loyal W. Wilson.
Approving an Amendment to the Articles of Incorporation to Increase the
Authorized Number of Common Shares.
Approving the STERIS Corporation Senior Executive Management Incentive
Compensation Plan.
Approving the STERIS Corporation 1998 Long-Term Incentive Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS TO ELECT AS CLASS II DIRECTORS THE NOMINEES
LISTED ABOVE, TO APPROVE AN AMENDMENT TO THE ARTICLES OF INCORPORATION, TO
APPROVE THE STERIS CORPORATION SENIOR EXECUTIVE MANAGEMENT INCENTIVE
COMPENSATION PLAN, AND TO APPROVE THE STERIS CORPORATION 1998 LONG-TERM
INCENTIVE STOCK PLAN.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO ELECT AS CLASS II
DIRECTORS THE NOMINEES LISTED ABOVE, TO APPROVE AN AMENDMENT TO THE ARTICLES OF
INCORPORATION, TO APPROVE THE STERIS CORPORATION SENIOR EXECUTIVE MANAGEMENT
INCENTIVE COMPENSATION PLAN, AND TO APPROVE THE STERIS CORPORATION 1998
LONG-TERM INCENTIVE STOCK PLAN. SEE REVERSE SIDE.
(change of address)
------------------------------
------------------------------
------------------------------
------------------------------
(If you have written in the
above space, please mark the
corresponding box on the
reverse side.)
................................................................................
[ARROW] FOLD AND DETACH HERE [ARROW]
PLEASE VOTE, SIGN, DATE, AND RETURN THIS PROXY FORM PROMPTLY USING THE ENCLOSED
ENVELOPE.
33
STERIS CORPORATION
[ PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ] ]
FOR WITHHELD FOR ALL
ALL ALL EXCEPT: FOR AGAINST ABSTAIN
1. Election of Directors [ ] [ ] [ ] 2. Approval of an Amendment to the [ ] [ ] [ ]
Director Nominees: Articles of Incorporation to Increase
-------------------------------- the Authorized Number of Common Shares.
Jerry E. Robertson, Frank E. Samuel, Jr., FOR AGAINST ABSTAIN
Bill R. Sanford, and Loyal W. Wilson. 3. Approval of the STERIS Corporation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE Senior Executive Management Incentive [ ] [ ] [ ]
FOR ALL THE ABOVE NOMINEES. Compensation Plan.
FOR AGAINST ABSTAIN
-------------------------------------------- 4. Approval of the STERIS Corporation
Nominee Exception 1998 Long-Term Incentive Stock Plan. [ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ITEMS 2, 3, AND 4.
In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before the
meeting or at any adjournment thereof and
matters incident to the conduct of the
meeting.
Change of Address [ ] Date: _______________, 1998
Attend Meeting [ ]
------------------------------
Signature(s)
------------------------------
Signature(s)
NOTE: Please sign exactly as name appears hereon.
Joint owners should each sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full title
as such.
...................................................................................................................................
* FOLD AND DETACH HERE *
PLEASE VOTE, SIGN, DATE, AND RETURN THIS PROXY FORM PROMPTLY USING THE ENCLOSED ENVELOPE.
34
DIRECTION FORM
STERIS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 23, 1998
INSTRUCTIONS FOR VOTING SHARES HELD BY KEY TRUST COMPANY OF OHIO, N.A.,
TRUSTEE UNDER THE STERIS CORPORATION 401(k) PLAN AND TRUST (THE "PLAN")
Pursuant to the Plan, I hereby direct Key Trust Company of Ohio, N.A., as
Trustee, to vote in person or by proxy all Common Shares of the Company credited
to my stock fund account under the Plan at the Annual Meeting of Shareholders of
the Company to be held on July 23, 1998, and at any adjournment thereof, as
specified, on all matters coming before said meeting.
Electing directors of a class to serve for a two-year term of office expiring at
the Company's 2000 Annual Meeting of Shareholders ("Class II" Directors). The
nominees of the Board of Directors for Class II are: Jerry E. Robertson, Frank
E. Samuel, Jr., Bill R. Sanford, and Loyal W. Wilson.
Approving an Amendment to the Articles of Incorporation to Increase the
Authorized Number of Common Shares.
Approving the STERIS Corporation Senior Executive Management Incentive
Compensation Plan.
Approving the STERIS Corporation 1998 Long-Term Incentive Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS TO ELECT AS CLASS II DIRECTORS THE NOMINEES
LISTED ABOVE, TO APPROVE AN AMENDMENT TO THE ARTICLES OF INCORPORATION, TO
APPROVE THE STERIS CORPORATION SENIOR EXECUTIVE MANAGEMENT INCENTIVE
COMPENSATION PLAN, AND TO APPROVE THE STERIS CORPORATION 1998 LONG-TERM
INCENTIVE STOCK PLAN.
IF THE TRUSTEE DOES NOT RECEIVE YOUR INSTRUCTIONS FOR VOTING, IT WILL VOTE THE
SHARES CREDITED TO YOUR STOCK FUND ACCOUNT IN THE SAME PROPORTION AS IT VOTES
THOSE SHARES WITH RESPECT TO WHICH IT DOES RECEIVE VOTING INSTRUCTIONS REGARDING
THE ELECTION OF THE NOMINEES FOR DIRECTOR LISTED ABOVE, APPROVAL OF AN AMENDMENT
TO THE ARTICLES OF INCORPORATION, APPROVAL OF THE STERIS CORPORATION SENIOR
EXECUTIVE MANAGEMENT INCENTIVE COMPENSATION PLAN, APPROVAL OF THE STERIS
CORPORATION 1998 LONG-TERM INCENTIVE STOCK PLAN, AND ALL OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING. SEE REVERSE SIDE.
DIRECTION FORMS MUST ARRIVE AT THE OFFICES OF HARRIS TRUST AND SAVINGS BANK, THE
TABULATING AGENT, NO LATER THAN 5:00 P.M. EASTERN DAYLIGHT-SAVING TIME ON JULY
17, 1998, FOR TABULATION.
(change of address)
------------------------------
------------------------------
------------------------------
------------------------------
(If you have written in the
above space, please mark the
corresponding box on the
reverse side.)
................................................................................
[ARROW] FOLD AND DETACH HERE [ARROW]
PLEASE VOTE, SIGN, DATE, AND RETURN THIS DIRECTION FORM PROMPTLY USING THE
ENCLOSED ENVELOPE.
35
STERIS CORPORATION
[ PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ] ]
FOR WITHHELD FOR ALL
ALL ALL EXCEPT: FOR AGAINST ABSTAIN
1. Election of Directors [ ] [ ] [ ] 2. Approval of an Amendment to the [ ] [ ] [ ]
Director Nominees: Articles of Incorporation to Increase
-------------------------------- the Authorized Number of Common Shares.
Jerry E. Robertson, Frank E. Samuel, Jr., FOR AGAINST ABSTAIN
Bill R. Sanford, and Loyal W. Wilson. 3. Approval of the STERIS Corporation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE Senior Executive Management Incentive [ ] [ ] [ ]
FOR ALL THE ABOVE NOMINEES. Compensation Plan.
FOR AGAINST ABSTAIN
------------------------------------------------ 4. Approval of the STERIS Corporation
Nominee Exception 1998 Long-Term Incentive Stock Plan. [ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ITEMS 2, 3, AND 4.
In its discretion, the Trustee is
authorized to vote upon such other
business as may properly come before the
meeting or at any adjournment thereof and
matters incident to the conduct of the
meeting.
Change of Address [ ] Date: ____________, 1998
Attend Meeting [ ]
----------------------------
Signature(s)
----------------------------
Signature(s)
NOTE: Please sign exactly as name appears hereon.
Joint owners should each sign. When signing
as attorney, executor, administrator, trustee
or guardian, please give full title as such.
...................................................................................................................................
* FOLD AND DETACH HERE *
PLEASE VOTE, SIGN, DATE, AND RETURN THIS DIRECTION FORM PROMPTLY USING THE ENCLOSED ENVELOPE.
