NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December 13, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Possis
Medical, Inc., a Minnesota corporation, will be held on Wednesday, December 13,
2000, at 4:00 p.m. at the Minneapolis Marriott City Center, 30 South Seventh
Street, Minneapolis, Minnesota 55402, for the following purposes:
1. To elect seven (7) directors.
2. To ratify the selection of Deloitte & Touche LLP as independent
certified public accountants for the Corporation.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
All shareholders of record on the transfer books of the Corporation as of
the close of business on Friday, October 27, 2000, will be entitled to vote at
the meeting.
Your attention is respectfully directed to the enclosed Proxy. Whether or
not you intend to be present at the meeting, please complete, sign and return
the Proxy in the enclosed envelope.
By Order of the Board of Directors
IRVING R. COLACCI
Secretary
Dated: November 10, 2000
Possis Medical Inc.
9055 Evergreen Boulevard NW - Minneapolis, MN 55433-8003 USA
Phone: (763) 780-4555 Toll Free 1-800-810-7677 Fax: (763) 780-2227
PROXY STATEMENT
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished to the Shareholders of Possis Medical,
Inc. (the "Corporation" or the "Company"), in connection with the solicitation
of proxies to be used in voting at the Annual Meeting of Shareholders to be held
on December 13, 2000, and any adjournments thereof. The enclosed Proxy is
solicited by the Board of Directors of the Corporation.
A person giving the enclosed Proxy has the power to revoke it at any time
before the convening of the Annual Meeting. Revocation must be in writing,
signed in exactly the same manner as the Proxy, and dated. Revocations of Proxy
will be honored if received at the offices of the Corporation, addressed to the
attention of Irving R. Colacci, Secretary, on or before December 12, 2000. In
addition, on the day of the Meeting, prior to the convening thereof, revocations
may be delivered to the Company representatives who will be seated at the door
of the meeting hall.
Proxies not revoked will be voted in accordance with the choice specified
by Shareholders by means of the ballot provided on the Proxy for that purpose.
Proxies which are signed but which lack any such specification will, subject to
the following, be voted in favor of the proposals set forth in the Notice of
Meeting and in favor of the slate of Directors proposed by the Board of
Directors and listed herein. If a Shareholder abstains from voting as to any
matter, then the shares held by such Shareholder shall be deemed present at the
Meeting for purposes of determining a quorum and for purposes of calculating the
vote with respect to such matter, but shall not be deemed to have been voted in
favor of such matter. Abstentions, therefore, as to any proposal will have the
same effect as votes against such proposal. If a broker returns a "non-vote"
proxy, indicating a lack of voting instruction by the beneficial holder of the
shares and a lack of discretionary authority on the part of the broker to vote
on a particular matter, then the shares covered by such non-vote shall not be
deemed to be represented at the Meeting for purposes of calculating the vote for
approval of such matter, but will be deemed to be present for purposes of
determining the presence of a quorum.
The Corporation will bear the cost of the solicitation of Proxies,
including the charges and expenses of brokerage firms and others for forwarding
solicitation material to, and obtaining Proxies from, beneficial owners of the
Corporation's Common Shares. In addition to the use of the mails, Proxies may be
solicited by personal interview, telephone, letter or facsimile. Proxies may be
solicited by officers or other employees of the Corporation, who will receive no
special compensation for their services. The Corporation's management intends to
send this Proxy Statement and the enclosed Proxy to Shareholders commencing on
approximately November 10, 2000.
VOTING RIGHTS
At October 27, 2000, 16,696,156 shares of Common Stock, the only voting
securities of the Corporation, were outstanding. Each share of Common Stock is
entitled to one vote. Shareholders are not entitled to cumulate their votes in
the election of Directors. Only holders of Common Stock of record at the close
of business on October 27, 2000, will be entitled to notice of and to vote at
this Annual Meeting of Shareholders.
COMMON STOCK OWNERSHIP
The following table sets forth the beneficial holdings as of October 12,
2000, of each Director and Named Executive Officer (as defined under the heading
"Executive Compensation") and all Directors and Executive Officers as a group.
The Corporation is aware of no person who beneficially owns more than five
percent of the Corporation's Common Shares.
Name of Beneficial Owner or Voting and Total %
Identity of Group Investment Power of Class
- -------------------------------------------------------------------------------------------------
Donald C. Wegmiller, Chairman 70,406 (1) *
Dean Belbas, Director 59,026 (2) *
Seymour J. Mansfield, Director 171,087 (3) *
Whitney A. McFarlin, Director 3,696 (4) *
William C. Mattison, Jr., Director 300,887 (5) 1.7
Rodney A. Young, Director 1,470 (6) *
Robert G. Dutcher, Director, 232,916 (7) 1.3
President & Chief Executive Officer
Irving R. Colacci, Vice President, 97,818 (8) *
Legal Affairs & Human Resources,
General Counsel and Secretary
James G. Gustafson, Vice President of 86,755 (9) *
Regulatory/Clinical Affairs
T. V. Rao, Vice President/General Manager 43,133 (11) *
Robert J. Scott, Vice President 138,991(12) *
Manufacturing Operations
Directors and Executive Officers
as a Group (13 persons) 1,249,022(10) 7.0
<FN>
(1) Includes 47,577 shares issuable upon exercise of currently exercisable
options.
(2) Includes 34,413 shares issuable upon exercise of currently exercisable
options.
(3) Includes 39,276 shares issuable upon exercise of currently exercisable
options and 15,000 shares owned by children.
(4) Includes 2,696 shares issuable upon exercise of currently exercisable
options.
(5) Includes 100,000 shares owned directly, 200,000 shares held indirectly
in Trust and by an IRA, and 887 shares issuable upon the exercise of currently
exercisable options.
(6) Includes 1,010 shares issuable upon exercise of currently exercisable
options.
(7) Includes 169,000 shares issuable upon exercise of currently exercisable
options.
(8) Includes 79,725 shares issuable upon exercise of currently exercisable
options.
(9) Includes 79,550 shares issuable upon exercise of currently exercisable
options.
(10) Includes 35,000 shares issuable upon exercise of currently exercisable
options.
(11) Includes 105,425 shares issuable upon exercise of currently
exercisable options.
(12) Includes 608,672 shares issuable upon exercise of currently
exercisable options.
* Denotes ownership of less than 1% of shares outstanding
</FN>
ELECTION OF DIRECTORS
(Proposal Number One)
At the Annual Meeting, seven Directors will be elected to serve until the
next Annual Meeting of Shareholders and until their respective successors are
elected and qualified.
Unless instructed not to vote for the election of Directors or not to vote
for any specific nominee, the Proxy will vote FOR the election as Directors of
the seven nominees named below. If any nominee becomes unavailable for any
reason or if a vacancy should occur before the election, which events are not
anticipated, the Proxy may vote for such other person as he, in his discretion,
may determine.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS THAT THE NOMINEES
LISTED BELOW BE ELECTED.
Information Concerning Nominees. The following information concerning the
principal occupations of the nominees has been furnished by the nominees. Each
of the nominees has held their principal occupation for more than the past five
years, unless otherwise indicated.
Director Committee
Director Nominees Principal Occupation Age Since Positions
- ------------------------------------------------------------------------------------------------------------------
Donald C. Wegmiller President and CEO, HealthCare 62 1987 Executive
Chairman Compensation Strategies (formerly and Compensation
Management Compensation Group/ Committees
Health Care), Minneapolis, Minnesota,
since April 1993. Director, ALLETE
(formerly Minnesota Power), and
LecTec Corporation.
- ------------------------------------------------------------------------------------------------------------------
Dean Belbas Retired. Former Senior Vice President, 68 1984 Executive, Audit
Director of Investor Relations, General and Compensation
Mills, Inc., Minneapolis, Minnesota. Committees
- ------------------------------------------------------------------------------------------------------------------
Seymour J. Mansfield Officer and Shareholder, Mansfield, 55 1987 Executive
Tanick & Cohen, P.A., Attorneys, and Compensation
Minneapolis, Minnesota. Committees
- ------------------------------------------------------------------------------------------------------------------
Whitney A. McFarlin Retired. Former Chairman of the Board 60 1998 Planning and Audit
of Directors, President and CEO Committees
of Angeion Corporation
- ------------------------------------------------------------------------------------------------------------------
William C. Mattison, Jr. Principal of Gerard, Klauer 53 1999 Planning and Audit
Mattison & Co., Inc., since its Committees
founding in 1989; served as
President or Vice Chairman of
Gerard Klauer from 1989 to 1998.
- ------------------------------------------------------------------------------------------------------------------
Rodney A. Young Chairman, CEO and President 45 1999 Compensation
of LecTec Corporation since 1996. and Planning
Formerly Vice President/General Committees
Manager Specialized Distribution
Division of Baxter International, Inc.
- ------------------------------------------------------------------------------------------------------------------
Robert G. Dutcher President and Chief Executive 55 1993 Executive
Officer of the Corporation. Committee
- ------------------------------------------------------------------------------------------------------------------
.
Meetings. During fiscal year 2000, the Board of Directors had five regular
meetings. Actions were also taken by written consent. All director nominees
attended at least 75% of all meetings of the Board and the Committees of which
they are members.
Committees. The Corporation has established four committees to address the
Corporation's business: the Executive Committee met four times during fiscal
year 2000, one of which was a joint meeting with the Compensation Committee. The
Executive Committee is responsible for exercising the authority of the Board
during the intervals between meetings of the Board and for formulating and
recommending general policies for Board consideration. The Audit Committee met
twice during fiscal year 2000 and is responsible for reviewing the scope and the
results of the annual independent audit of the books and records of the
Corporation and to review compliance with all corporate financial policies as
approved by the Board. Beginning calendar year 2000, the Committee has begun
meeting on a quarterly basis to review the Corporation's financial statements.
The Compensation Committee met five times during fiscal 2000, one of which was a
joint meeting with the Executive Committee, and is responsible for defining and
administering the Corporation's executive compensation program. The Strategic
Planning Committee was established in December 1999 to work with management in
the development of its annual Strategic Plan and to advise the Board on
strategic issues. This Committee met once in person and once by telephone during
fiscal year 2000.
Director Fees. Effective January 1, 2000, the Board of Directors approved
increases in the annual retainers for outside Directors. Current retainer fees
are: Chairman - $8,000; Outside Directors - $4,000; Committee Chairs - $3,000;
Executive Committee Members - $6,000. Each outside Director also receives $500
for each Board meeting attended, $200 for each teleconference Board meeting
attended, and $250 for each Committee Meeting attended. The Chairmen of the
Compensation, Audit and Strategic Planning Committees each also receive $500 per
meeting. Total fees of $74,025 were earned by outside Directors during fiscal
2000.
Pursuant to the Corporation's 1992 Stock Compensation Plan, each outside
Director may elect to receive Director fees in the form of discounted stock
options. Each Director must make an election on or before June 1 of each year
with regard to fees that would otherwise be payable for that calendar year. The
exercise price of the options is 50% of the fair market value on the date of
grant, which is January 2 of the year following the year for which the fees are
earned. Each option becomes exercisable in full six months following the date of
grant, is exercisable for 10 years following the date of grant, and is subject
to the general restrictions on exercise and transferability applicable to stock
options issued to employees. The number of shares subject to each option is
calculated by dividing the fees owed to the particular Director by the dollar
amount of the discount. All eligible outside Directors elected to receive
discounted stock options in lieu of cash payment of director fees for calendar
year 2000.
On January 4, 2000, all eligible outside Directors received discounted
stock options in lieu of cash payments of fees for calendar year 1999. These
options were granted pursuant to elections made in May 1999. A total of 14,496
options at an exercise price of $4.06 were granted to current Directors.
The Corporation's 1992 Stock Compensation Plan provides for the annual
grant of options to purchase 3,000 Common Shares to outside Directors. The
exercise price of these options must be at least 100% of the fair market value
at date of grant. The date of grant is the first business day of each calendar
year. The options vest ratably over a four-year period and expire ten years
after the date of grant. During fiscal 2000, 18,000 options were granted to
outside Directors under this Plan at an exercise price of $8.12.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid for services rendered to
the Corporation during each of the three fiscal years ended July 31, 2000, 1999
and 1998, to the President and CEO of the Corporation and the Corporation's four
other highest paid executive officers who received salary and bonus in excess of
$100,000 during fiscal year 2000 ("Named Executive Officers"):
Name and Long-Term
Principal Position Year Annual Compensation Compensation Awards
------------------- Securities
Restricted Underlying All Other
Salary Bonus(1) Stock Award Options/(2) Compensation(3)
($) ($) ($) SARs (#) ($)
- --------------------------------------------------------------------------------------------------------------
Robert G. Dutcher 2000 179,472 64,300 -- 90,000 6,988
President and 1999 167,250 88,000 -- 90,000 6,398
Chief Executive 1998 155,577 46,000 172,500(4) 30,000 4,672
Officer
- --------------------------------------------------------------------------------------------------------------
T.V. Rao 2000 144,907 44,900 -- 50,000 4,660
Vice President, 1999 140,462 47,300 -- 45,000 --
General Manager 1998 23,192 3,000 70,500(6) 45,000(7) --
- --------------------------------------------------------------------------------------------------------------
Irving R. Colacci 2000 112,037 29,700 -- 40,000 4,463
Vice President, 1999 104,904 36,900 -- 30,000 3,747
Legal Affairs & Human 1998 98,788 20,000 86,250(5) 20,000 3,567
Resources, General
Counsel and Secretary
- --------------------------------------------------------------------------------------------------------------
James D. Gustafson 2000 110,447 29,300 -- 30,000 --
Vice President, 1999 102,482 36,700 -- 30,000 3,674
Quality Systems, 1998 95,346 20,000 86,250(5) 20,000 3,621
Regulatory/Clinical
Affairs
- --------------------------------------------------------------------------------------------------------------
Robert J. Scott 2000 106,862 28,000 -- 30,000 --
Vice President 1999 100,462 36,000 -- 30,000 3,030
Manufacturing 1998 94,106 19,000 86,250(5) 20,000 2,871
Operations
- --------------------------------------------------------------------------------------------------------------
<FN>
(1) Cash bonuses shown are awarded following end of fiscal year, based on
fiscal year performance.
(2) Stock options shown are awarded following end of fiscal year, based on
fiscal year performance. Grants awarded for 1998 vest over a four-year period.
Grants awarded for 1999 and 2000 vest in one year, subject to specified
conditions relating to the appreciation in the value of the Company's stock: for
the 1999 grants, one-third vests when the stock reaches $15 per share; one-third
vests when the stock reaches $20 per share; one-third vests when the stock
reaches $25 per share. For the 2000 grants, one-third of the total grant vests
in four equal annual installments beginning one year after the grant. The
remainder of the 2000 grants vest as follows: one-third vests when the stock
reaches $10 per share, one-third vests when the stock reaches $15 per share; and
one-third vests when the stock reaches $20 per share. After seven years, 100% of
the 1999 and 2000 grants vest notwithstanding other vesting contingencies.
(3) Includes only Company matching contributions to its 401(k) Plan.
(4) Mr. Dutcher was granted 12,000 shares of restricted stock, of which
4,000 shares vested on September 24, 1998; 4,000 shares vested on September 24,
1999; and 4,000 shares vested on September 24, 2000. The dollar value shown
represents the fair market value of the stock on the date of grant, September
24, 1997.
(5) Mssrs. Colacci, Scott and Gustafson were each granted 6,000 shares of
restricted stock of which 2,000 shares vested on September 24, 1998; 2,000
shares vested on September 24, 1999; and 2,000 shares vested on September 24,
2000. The dollar value shown represents the fair market value of the stock on
the date of grant, September 24, 1997.
(6) Mr. Rao was granted 9,000 shares of restricted stock, of which 3,000
shares vested on September 24, 1998; 3,000 shares vested on September 24,1999;
and 3,000 shares vested on September 24, 2000. The dollar value shown represents
the fair market value of the stock on the date of grant, June 22, 1998.
(7) Mr. Rao received 20,000 stock options on June 22, 1998, his hire date.
In addition, Mr. Rao received 25,000 stock options based on fiscal year
performance.
</FN>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information concerning stock option grants to
Named Executive Officers during fiscal year 2000.
Individual Grants
----------------------------------------------------------
Number of Percent of
Securities Total Potential Realizable
Underlying Options/SARs Exercise or Value at Assumed Annual
Options/SARs Granted to Base Price Rates of Stock Price
Name Granted (#) Employees in ($/Sh) Expiration Date(1) Appreciation for Option
Fiscal Year Term(2)
(%) 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------------------------
Robert G. Dutcher 90,000 15.356 8.625 September 8, 2009 488,179 1,237,143
- ---------------------------------------------------------------------------------------------------------------
Irving R. Colacci 30,000 5.119 8.625 September 8, 2009 162,726 412,381
- ---------------------------------------------------------------------------------------------------------------
James D. Gustafson 30,000 5.119 8.625 September 8, 2009 162,726 412,381
- ---------------------------------------------------------------------------------------------------------------
T. V. Rao 45,000 7.678 8.625 September 8, 2009 244,090 618,571
- ---------------------------------------------------------------------------------------------------------------
Robert J. Scott 30,000 5.119 8.625 September 8, 2009 162,726 412,381
- ---------------------------------------------------------------------------------------------------------------
<FN>
(1) All option grants shown vest seven years following the date grant, or
September 8, 2006, and said vesting is accelerated such that one-third of the
options vest when the stock price reaches $10 per share; one-third vest when the
stock price reaches $15 per share; and one-third vests when the stock price
reaches $25 per share beginning on the September 8, 1999 grant date.
(2) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange Commission
(the "SEC") and do not represent the Company's estimate or projection of the
Company's future Common Stock prices. These amounts represent certain assumed
rates of appreciation only. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Common Stock and overall stock market
conditions. The amounts reflected in this table may not necessarily be achieved.
</FN>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information concerning stock option exercises
and the value of unexercised options at July 31, 2000, for the Named Executive
Officers.
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at Fiscal Year-End at Fiscal Year-End (1)
(#) ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name Upon Exercise ($) Unexercisable Unexercisable
(#)
------------------------------------------------------------------------------------------------------
Robert G. Dutcher 19,000 86,250 150,750/126,250 22,284/11,826
Irving R. Colacci 10,000 30,000 68,450/52,850 12,456/7,884
James D. Gustafson -- -- 68,125/53,075 12,456/7,884
T. V. Rao -- -- 30,000/60,000 6,570/9,855
Robert J. Scott 5,000 15,000 94,150/52,850 13,896/7,884
------------------------------------------------------------------------------------------------------
<FN>
(1) The dollar values shown are calculated by determining the difference
between the fair market value of the common stock underlying the options at
fiscal year-end and the exercise price of the options. The closing price of the
stock on July 31, 2000 was $6.47.
</FN>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee")
consists of four independent, outside directors. The Committee is responsible
for defining and administering the Company's executive compensation program and
meets as may be necessary to review executive compensation policies, the design
of compensation programs and individual salaries and awards for executive
officers.
Introduction
The Corporation's compensation program is intended to attract and retain
the highest quality personnel possible consistent with the Corporation's
resources. The current overall compensation program reflects the continuing need
to maintain competitive levels of compensation in the face of a tight job
market, particularly for the highly skilled employees necessary for the
Corporation's continuing growth.
Compensation decisions for fiscal year 2000 were guided by the belief that
the past year was a critical year in the development of the Corporation and its
progress toward meeting growth and profitability goals. The development of
appropriate criteria to guide compensation decisions is increasingly influenced
by two factors: the fact that the Company has entered a new stage in its
development and is establishing a foundation for long-term profitability; and by
the need to continue to enhance the alignment of management's interests with
those of the shareholders. While decisions on base salary and on the types of
cash and equity-based compensation awarded continue to be guided by the general
compensation philosophy previously adopted by the Committee, the scope and
amounts of such awards reflect continued movement toward establishing
performance criteria that are more heavily weighted on financial and
commercialization goals. Until profitability is achieved, relatively less
emphasis will be placed on research and product development milestones. As the
Corporation increases its market penetration through the sale and placement of
AngioJet(R) System drive units, continues its growth in the sales of AngioJet
System disposable components, and increases gross margins, its performance will
increasingly be evaluated on its ability to achieve and increase profitability.
Corporate and individual performance measures will reflect a greater emphasis on
achieving financial goals, sales and profitability targets, financing
requirements and research, development and regulatory approvals necessary to
support sustained growth.
Awards for fiscal year 2000 reflect a lower level of overall Corporate
performance compared to the prior year due in large part to its failure to meet
ambitious sales and profitability goals.
Program Elements
Compensation of executive management and key managerial and technical
personnel is based on three types of compensation: a) base salaries; b) annual
cash incentives; and c) long term equity-based compensation.
(a) Base Salaries
Base salaries are determined and adjusted consistent with a policy of
rewarding performance and maintaining competitive salary levels necessary to
retain and attract quality personnel. During the transition to significantly
higher revenues and profitable operations, the Corporation does not have the
financial resources to match salaries offered by larger and profitable medical
companies. By augmenting base salary with performance-based annual incentives
and aggressive longer term equity-based compensation programs, the Corporation
seeks to continue to attract and retain quality technical and management
personnel. The annual increase in base salaries for existing officers, effective
August 1, 2000, was limited to a three percent cost-of-living increase.
(b) Annual Cash Incentives
The Corporation provides executives with an opportunity to earn annual cash
incentive awards pursuant to an Incentive Compensation Plan that incorporates
objective guidelines and conditions incentive awards on corporate and individual
performance. The Plan offers opportunities for awards competitive with similar
companies based on corporate and individual performance objectives reflecting
the Corporation's continuing commitment to alignment of management's interests
with those of the shareholders and its transition to achieving profitability.
Cash incentives were awarded under the Incentive Compensation Plan in
August 2000 to 42 employees (excluding the CEO) to reflect fiscal year 2000
performance. Cash awards of $423,500 reflect a decrease of approximately 12%
from awards granted for fiscal year 1999 performance, based on the Committee's
assessment of the Corporation's performance against corporate objectives for
2000. Cash awards of $163,100 were made to the Company's six executive officers
other than the CEO for fiscal year 2000 performance.
(c) Long-term Equity-based Compensation
The major component of the Corporation's long-term equity-based
compensation program consists of stock options awarded under the Corporation's
Stock Compensation Plan. Stock options are intended by the Committee to maximize
individual performance and dramatically strengthen the alignment of management
interests with that of the shareholders. Stock options have historically been
granted annually to officers and other key employees based on progress toward
achievement of long-term strategic objectives, technical and regulatory
milestones, and corporate financial performance goals. Until 1999,
exercisability was conditioned on passage of time, with no specific performance
requirements. Stock options awarded in August 1999 for fiscal year 1999
performance were divided between those granted to officers and those granted to
other key management and technical personnel. The options granted to officers
included special terms that provided that the options would vest within seven
years only if the market price of the stock rose substantially from the price of
the stock on the date of grant. This practice was continued for a portion of the
grants to officers for fiscal year 2000 performance. Of the options granted to
officers in August 2000, all at an option price of $6.125, one third was subject
to the normal four-year vesting schedule applied to grants to all management and
key employee personnel. Of the remaining two-thirds of the option grants,
one-third become exercisable only if the stock price increases to $10 per share;
an additional one-third becomes exercisable only when the stock price increases
to $15 per share; and the final one-third becomes exercisable only when the
stock price increases to $20 per share. Notwithstanding the vesting
contingencies described above, all options granted to these officers vest seven
years from date of grant. The total number of shares granted to the officer
group was intended and designed to be substantially equivalent in value to those
granted in 1999.
Stock option grants to non-officer managers and key employees were
substantially unchanged from 1999 and contain similar vesting provisions as past
years. Twenty-five percent of each grant vests annually over four years. In
total, options covering 124,800 shares to a total of 36 employees (excluding the
CEO and officers) were approved in August 2000. A total of 210,000 shares were
granted to six officers (excluding the CEO), as compared to 165,000 shares
granted to five officers in 1999.
The Corporation established a restricted stock program in June 1993 as a
vehicle to retain officers and other key personnel. No new restricted stock
grants have been made to existing participants in this program since 1997. A
total of 5,000 shares of restricted stock were, however, granted to two new
officers during fiscal year 2000. All existing grants vested on September 24,
2000. Future grants, if any, will depend on an assessment of how this type of
equity compensation supports the overall compensation program.
A new equity-based compensation program was instituted for sales personnel
and for officers, managers and other key employees for fiscal year 2001. This
Special Equity Compensation program is designed as a one-time program that has
the effect of preserving cash and provides the Corporation with a potential
opportunity to raise new capital on terms more favorable than it achieved in
private placement financing efforts in May/June 1999, and comparable to those
achieved in March 2000, by paying a portion of sales commissions and incentive
compensation in the form of stock options instead of cash. Sales personnel were
provided an opportunity to elect to receive nonqualified stock options in lieu
of up to 50% of target cash commissions earned throughout fiscal year 2001 at a
value of $2.00 per share, meaning that all options granted under the Special
Equity Compensation Program to sales personnel were awarded at the rate of one
option share for each two dollars of potential cash commission. The options
granted to sales personnel under the Special Equity Compensation Program have an
exercise price equal to $7.69 per share, the fair market value of the common
stock on the date the program was implemented for sales personnel.
Selected management and key employee personnel will receive up to 85% of
their annual incentive cash compensation in the form of nonqualified stock
options based on fiscal year 2001 performance, at the same $2.00 per share
value. The options granted to selected management and key personnel will be
awarded when the performance criteria relating to vesting (described below) are
established, and will have an exercise price equal to the fair market value on
the date the program is implemented for management and employees.
A total of 97,071 nonqualified options, in lieu of $194,143 in cash sales
commissions, were awarded to sales personnel under the Special Equity
Compensation Program. Management and key employees are expected to be awarded
307,400 nonqualified options in lieu of $615,000 in cash incentive compensation.
Vesting of all options awarded is contingent on continued employment. The
options vest after one year to the extent that target performance and sales
goals are achieved. Amounts not achieved in year one may still be earned in year
two. All options granted vest in full after three years, contingent only on
continued employment, and have a term of 10 years. The total number of options
ultimately awarded will be no more than the number stated above, but may be less
depending on contingencies attached to the awards. Assuming all options are
exercised, the Corporation will realize $2,591,000 in cash, comparable to
raising money at $8.41 per share, without normal commissions and transaction
costs associated with public and private financing efforts.
The Committee implemented the Special Equity Compensation program to align
employee interests with those of the shareholders, as well as to provide the
Corporation with cash on a favorable basis and to reduce the amount of cash
necessary to pay sales commission and incentive compensation awards.
CEO Compensation
Robert G. Dutcher, as President and CEO of the Corporation, participates in
the general compensation program of the Company, as described above, along with
all other key employees. Mr. Dutcher's base salary is set at a level determined
by the Committee to be competitive with other similarly-situated companies based
on salary surveys and other comparative data, and reflects the scope of his
responsibilities and individual performance as an officer of the Corporation.
Effective August 1, 2000, Mr. Dutcher's base salary was increased 3% as a
cost-of-living adjustment. Mr. Dutcher received a cash bonus equal to 35% of
base salary and a grant of 90,000 stock options in August 2000 to reward fiscal
year 2000 performance. Twenty percent of the options granted to Mr. Dutcher
carry a four-year vesting cycle; the remainder vest after seven years unless
vesting is accelerated by stock appreciation to $10, $15 and $20 levels. All
cash and equity awards reflect the Committee's judgment as to Mr. Dutcher's
individual performance, the overall performance of the Corporation as measured
against Corporate objectives, and the Committee's commitment to aligning the
interests of the CEO with those of shareholders. The terms and conditions of the
option awards are identical to those contained in grants to other officers. No
new grants of restricted stock were awarded to the CEO in 2000.
At this time the Committee has no formal, written plan for CEO compensation
separate and apart from the Corporation's general compensation philosophy and
the Incentive Compensation Plan. Until a plan specific to the CEO is developed,
CEO compensation will be based on corporate and individual performance measured
against established guidelines and objectives. Current guidelines and objectives
are contained in the Corporation's 2001-2005 Strategic Plan, as approved by the
Board.
Compensation Committee of the Board of Directors
Dean Belbas, Chairman
Donald C. Wegmiller
Seymour J. Mansfield
Rodney A. Young
Performance Graph
Set forth below is a graph showing the five-year cumulative returns through
July 31, 2000 of Possis Medical, Inc. Common Stock as compared with the Nasdaq
Stock Market Index (U.S. companies only) and a peer group index comprised of
seven companies in the medical device industry with operations similar in size
to Possis Medical, Inc. (the "Peer Group"). The graph assumes an investment of
$100.00 in the Company's Common Stock in each of the indexes on July 31, 1995,
and the reinvestment of all dividends.
Possis Medical, Inc. is included in the Nasdaq Stock Market Index (U.S.
companies only) and is similar in size and stage of commercialization as the
other companies in the Peer Group. The Nasdaq Stock Market Index does not have
an index specifically for medical devices. The Company believes that the
following entities comprising the Peer Group are representative of the Company's
current medical device operations: Angeion Corporation; Arrow International,
Inc.; Cardima, Inc.; Micro Therapeutics, Inc.; Novoste Corporation; PLC Systems,
Inc.; and Rochester Medical Corporation.
[OBJECT OMITTED]
1995 1996 1997 1998 1999 2000
------------------- ------ ------ ------ ------ ------ ------
Possis Medical, Inc 100.00 109.91 103.60 66.67 77.93 46.62
-----------------------------------------------------------------------
Nasdaq US Index 100.00 108.96 160.79 189.28 270.71 385.48
------------------------------------------------------------------------
Peer Group Index 100.00 67.59 77.92 67.31 61.16 88.17
------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Seymour J. Mansfield, a Director of the Corporation, is a shareholder
in a law firm that performs legal services for the Corporation from time to
time. The amount of fees paid by the Corporation during fiscal 2000 to Mr.
Mansfield's law firm does not exceed five percent of that firm's gross revenues
for its last full fiscal year. Mr. William C. Mattison, Jr., a Director of the
Corporation, is a Principal of an investment banking firm that has performed
services for the Corporation and which received fees of $925,000 during fiscal
year 2000 in connection with a private placement financing by the Corporation.
SECTION 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that Executive Officers and Directors of the Corporation and persons who own
more than 10% of a registered class of the Corporation's equity securities file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission (the "SEC"). Such persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it with
respect to fiscal 2000 and written representations from certain reporting
persons, the Corporation believes that all filing requirements applicable to its
Executive Officers and Directors have been complied with, with the exception
that the Form 3 Initial Statement of Beneficial Ownership of Securities, due for
filing within ten (10) days of the date of hiring of Martin A. Rossing, Vice
President of Technology and Product Development, was not filed within the
required time frame. This Form 3 was subsequently filed. The Corporation is
aware of no person who owns more than 10% of the Corporation's Common Shares.
APPOINTMENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
(Proposal Number Two)
Deloitte & Touche LLP, independent certified public accountants, have been
auditors of the accounts of the Corporation since July 31, 1960. They have been
appointed by the Board of Directors of the Corporation for the purpose of
auditing the Corporation's accounts in the current fiscal year. Shareholder
approval of such appointment is requested. The Board of Directors considers such
accountants to be well qualified.
Representatives of the firm of Deloitte & Touche LLP will be in attendance
at the Annual Meeting of Shareholders and will have the opportunity to make a
statement if they desire to do so. In addition, they will be available to
respond to appropriate questions.
In the event that the appointment of Deloitte & Touche LLP should not be
approved by shareholders, the Board of Directors will make another appointment
to be effective at the earliest feasible time either this fiscal year or the
next.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPOINTMENT OF
DELOITTE & TOUCHE LLP. The enclosed Proxy will be so voted unless a contrary
specification is made.
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in the Corporation's proxy
solicitation materials for its next annual meeting of shareholders, any
shareholder proposal to be considered at such meeting must be received at the
Corporation's principal executive offices, 9055 Evergreen Boulevard N.W.,
Minneapolis, Minnesota 55433-8003, no later than July 14, 2001. Pursuant to the
Corporation's Bylaws, in order for business to be properly brought before the
next annual meeting by a shareholder, the shareholder must give written notice
of such shareholder's intent to bring a matter before the annual meeting no
later than July 14, 2001. Each notice should be sent to the Secretary at the
Corporation's executive offices, and must set forth certain information with
respect to the shareholder who intends to bring such matter before the meeting
and the business desired to be conducted, as set forth in greater detail in the
Corporation's Bylaws. Any such proposal will be subject to the requirements of
the proxy rules adopted under the Securities Exchange Act of 1934.
Management may use discretionary authority to vote against any shareholder
proposal presented at the 2001 annual meeting if: 1) such proposal has been
properly omitted from the Corporation's proxy materials under federal securities
law; 2) notice of such proposal was not submitted to the Secretary of the
Corporation at the address listed above by July 14, 2001; or 3) the proponent
has not solicited proxies in compliance with federal securities laws from the
holders of at least the percentage of the Corporation's voting shares required
to carry the proposal.
MISCELLANEOUS
The Board of Directors is aware of no matter, other than as described in
the Notice, that will be presented for action at the Meeting. If, however, other
matters do properly come before the Meeting, it is the intention of the person
named in the Proxy to vote the proxied shares in accordance with his best
judgment on such matters.
OTHER MATTERS
A copy of the Corporation's Annual Report on Form 10-K may be obtained
without charge by any beneficial owner of the Corporation's Common Shares on the
record date upon written request addressed to Eapen Chacko, Vice President,
Finance and Chief Financial Officer, Possis Medical, Inc., 9055 Evergreen
Boulevard N.W., Minneapolis, Minnesota 55433-8003.
By Order of the Board of Directors
IRVING R. COLACCI,
Secretary
Dated: November 10, 2000
Possis Medical Inc.
9055 Evergreen Boulevard NW - Minneapolis, MN 55433-8003 USA
Phone: (763) 780-4555 Toll Free 1-800-810-7677 Fax: (763)780-2227