SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Possis Medical, Inc.
(Name of Registrant as Specified in Its Charter)
Irvng R. Colacci, Vice President,
Legal Affairs & Human Resources, General Counsel and Secretary
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
_____________________________________________________________________
(2) Aggregate number of securities to which transactions applies:
______________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
______________________________________________________________________
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
(4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________
[ ] 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
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POSSIS MEDICAL, INC.
2905 Northwest Boulevard
Minneapolis, Minnesota 55441-2644
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December 6, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Possis
Medical, Inc., a Minnesota corporation, will be held on Wednesday, December 6,
1995 at 4:00 p.m. at the Radisson Hotel and Conference Center Minneapolis, 3131
Campus Drive, Plymouth, Minnesota 55441 for the following purposes:
1. To elect seven (7) directors.
2. To approve an amendment to the Corporation's 1992 Stock Compensation
Plan.
3. To ratify the selection of Deloitte & Touche LLP as independent
certified public accountants for the Corporation.
4. 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
13, 1995 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: October 30, 1995
2905 Northwest Boulevard
Minneapolis, Minnesota 55441-2644
PROXY STATEMENT
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished to the Shareholders of Possis Medical,
Inc. (the "Corporation"), in connection with the solicitation of proxies to be
used in voting at the Annual Meeting of Shareholders to be held on December 6,
1995 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 5, 1995. In
addition, on the day of the Meeting, prior to the convening thereof, revocations
may be delivered to the tellers 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.
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 October 30, 1995.
VOTING RIGHTS
At October 13, 1995, 11,721,281 Common Shares, the only voting securities
of the Corporation, were outstanding. Each Common Share is entitled to one vote.
Shareholders are not entitled to cumulate their votes in the election of
Directors. Only holders of Common Shares of record at the close of business on
October 13, 1995 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 13,
1995 of each Director and Named Executive Officer 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.
Sole Shared
Name of Beneficial Voting and Voting and Total
Owner or Identity Investment Investment % of
of Group Power Power Class
Joe A. Walters, Director 55,283 (1) -- *
Dean Belbas, Director 48,753 (2) -- *
Donald C. Wegmiller, Director 39,927 (3) -- *
Seymour J. Mansfield, Director 144,212 (4) 11,000 1.3
Demetre M. Nicoloff, M.D., Director 307,610 (5) 143,000 3.8
Ann M. Possis, Director 87,750 (6) 4,500 (7) *
Robert G. Dutcher, Director, 131,746 (8) -- 1.1
President & Chief Executive Officer
Irving R. Colacci, 31,940 (9) -- *
Vice President, Legal Affairs
& Human Resources,
General Counsel and Secretary
William J. Drasler, 86,153(10) -- *
Vice President of
Research and Development
Directors and Executive Officers
as a Group (13 persons) 1,042,279(11) 158,500 11.5
_________________________
(1) Includes 27,306 shares issuable upon exercise of currently exercisable
options.
(2) Includes 39,353 shares issuable upon exercise of currently exercisable
options.
(3) Includes 39,927 shares issuable upon exercise of currently exercisable
options.
(4) Includes 35,260 shares issuable upon exercise of currently exercisable
options.
(5) Includes 9,075 shares issuable upon exercise of currently exercisable
options.
(6) Includes 750 shares issuable upon exercise of currently exercisable
options.
(7) Ms. Possis serves as co-trustee of the Possis Marital Trust and, as such,
has voting power over an additional 239,003 shares of the Corporation's
Common Shares owned by the Trust and not reflected in the above table. In
addition, the Trust holds 20,250 shares issuable upon exercise of currently
exercisable options.
(8) Includes 105,250 shares issuable upon exercise of currently exercisable
options.
(9) Includes 30,126 shares issuable upon exercise of currently exercisable
options.
(10) Includes 61,750 shares issuable upon exercise of currently exercisable
options.
(11) Includes 459,797 shares issuable upon exercise at currently exercisable
options.
* Denotes ownership of less than 1% of shares outstanding
ELECTION OF DIRECTORS
(Proposal Number 1)
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
principal occupation has been furnished by the nominees. Each of the nominees
has held the principal occupation for more than the past five years, unless
otherwise indicated.
Director Committee
Director Nominees Principal Occupation Age Since Position
Joe A. Walters Partner, O'Connor & Hannan, 75 1960 Audit Committee
Attorneys, Minneapolis,
Minnesota.
Dean Belbas Senior Vice President, 63 1984 Executive and
Director of Investor Compensation
Relations, General Mills, Committees
Inc., Minneapolis,
Minnesota, since January 1993.
Prior thereto, Vice President,
Director of Corporate
Communications, General Mills,
Inc., Minneapolis, Minnesota.
Donald C. Wegmiller President and CEO, 57 1987 Executive,
Management Compensation Audit, and
Group/Health Care, Compensation
Minneapolis, Minnesota, Committees
April 1993 to present;
President & CEO, Health
One Corporation, Minneapolis,
Minnesota, May 1987 to April
1993. Director, Minnesota
Power & Light Company, HBO
& Co., Medical Graphics
Corporation, LifeRate Systems,
Inc., InPhyNet Medical
Management Co.
Seymour J. Mansfield Shareholder, Mansfield 50 1987 Executive,
& Tanick, P.A., Attorneys, Audit, and
Minneapolis, Minnesota, Compensation
since 1989; Owner, Committees
S.J. Mansfield & Associates,
Attorneys, Minneapolis,
Minnesota, 1982-1989.
Demetre M. Nicoloff Cardiac Surgeon, Vice 62 1991 Audit and
President of Cardiac Medical
Surgical Associates, P.A., Advisory
Minneapolis, St. Cloud Committee
and St. Paul, Minnesota;
Director, Optical Sensors,
Incorporated, and Micromedics,
Inc.
Robert G. Dutcher President and Chief 50 1993 Executive
Executive Officer Committee
of the Corporation since
October 1993; Executive
Vice President from
December 1992 to October
1993; President, Possis
Holdings, Inc., since 1987.
Ann M. Possis Director of Development of 35 1993 Audit
Voyageur Outward Bound Committee
School since April 1995;
Development Associate,
Planned Parenthood of
Minnesota, 1992-1995;
various sales and marketing
positions with West
Publishing Company,
Minneapolis, Minnesota,
from 1983 to 1991.
Meetings. During fiscal year 1995, the Board of Directors had four regular
meetings and one special meeting. Actions were also taken by written consent.
All directors 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 eight times during fiscal
year 1995 and is responsible for exercising the authority of the Board in the
management of the Corporation during the intervals between meetings of the Board
and for formulating and recommending general policies for Board consideration;
the Audit Committee met once during fiscal year 1995 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; the Medical Advisory Committee did
not meet formally during fiscal year 1995 and is responsible for providing
information and recommendations to the Board on technical medical issues and
considerations that may have an impact on the Corporation's business strategies,
policies, and research and development projects; and the Compensation Committee
met two times during fiscal 1995 and is responsible for reviewing and
establishing compensation for officers of the Corporation and administering the
Corporation's Stock Compensation Plan. The Corporation has no Nominating
Committee.
Director Fees. With the exception of the Chairman of the Board, each
outside Director receives $2,000 as an annual retainer. Mr. Wegmiller receives
an $8,000 annual retainer as Chairman. Each outside Director also receives $500
for each Board meeting attended and $200 for each teleconference Board meeting
attended. Outside Directors sitting on the Executive Committee receive a $4,000
annual retainer. All committee Chairmen receive a $3,000 annual retainer. The
Chairmen of the Compensation and Audit Committees each receive $500 per meeting
and the members receive $250 per meeting. Total fees of $55,750 were earned by
outside Directors during fiscal 1995.
Pursuant to the Company's 1992 Stock Compensation Plan, each outside
Director is permitted to 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 by 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 from fair market value
in the exercise price. All outside Directors, with the exception of Dean Belbas
and Ann M. Possis, elected to receive discounted stock options in lieu of cash
payment of Director fees for calendar year 1995.
On January 2, 1995, all outside Directors, with the exception of Ms. Possis
and Mr. Belbas, received discounted stock options in lieu of cash payments of
fees for calendar year 1994. These options were granted pursuant to elections
made in May 1994. A total of 11,574 options at an exercise price of $3.875 were
granted. Ms. Possis and Mr. Belbas elected to receive cash payment of fees for
calendar year 1994.
The Company'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 1995, 18,000 options were granted to outside Directors
under this Plan at an exercise price of $7.75.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid for services rendered to
the Corporation and its subsidiaries during each of the three fiscal years ended
July 31, 1995, to each executive officer who received salary and bonus in excess
of $100,000 during fiscal year 1995 ("Named Executive Officers"):
Name and Annual Long-Term
Principal Position Year Compensation Compensation
Awards
Salary Bonus Restricted Securities All
($) ($) Stock Underlying/ Other
Award($) Options/ Compen-
SARs sation(1)
(#) ($)
Robert G. Dutcher 1995 124,154 36,000(2) -- 3,725
CEO and President 1994 112,923 23,000 -- 20,000 4,087
1993 102,308 36,000(3) 138,750(4) 22,000 3,519
Irving R. Colacci 1995 83,258 18,000(5) -- -- 2,498
Vice President, 1994 80,663 13,000 -- 10,000 2,765
Legal Affairs & 1993 75,651 5,000 -- 12,000 1,975
Human Resources,
General Counsel
and Secretary
William J. Drasler 1995 89,460 14,000(6) -- -- 2,684
Vice President, 1994 85,520 15,000 -- 15,000 3,018
Research and 1995 83,723 23,700(7) 111,000(8) 18,000 2,725
Development
(1) Includes only Company matching contributions to its 401(k) Plan.
(2) Includes $21,959 in cash and $14,041 in Common Shares of the Corporation.
(3) Includes $15,000 in cash and $21,000 in Common Shares of the Corporation.
(4) Mr. Dutcher was granted 15,000 shares of restricted stock, of which 3,000
shares vested or will vest on each of December 1, 1993 and June 3, 1994
through 1997. As of July 31, 1995, 6,000 shares with an aggregate market
value on that date of $84,500 remained restricted. Any dividends paid
to common shareholders will be paid on these shares.
(5) Includes $10,982 in cash and $7,018 in Common Shares of the Corporation.
(6) Includes $8,539 in cash and $5,461 in Common Shares of the Corporation.
(7) Includes $9,000 in cash and $14,700 in Common Shares of the Corporation.
(8) Mr. Drasler was granted 12,000 shares of restricted stock, of which 2,400
shares vested or will vest on each of December 2, 1993 and June 3, 1994
through 1997. As of July 31, 1995, 4,800 shares with an aggregate market
value on that date of $67,200 remained restricted. Any dividends paid to
common shareholders will be paid on these shares.
OPTION GRANTS IN LAST FISCAL YEAR
No options or SARs were granted to the Named Executive Officers during
fiscal year 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information concerning stock option exercises
and the value of unexercised options at July 31, 1995, for the Named Executive
Officers.
Name Shares Value Number of Value of
Acquired Realized Securities Unexercised
Upon Underlying In-The-Money
Exercise Unexercised Options
(#) ($) Options at at Fiscal
Fiscal Year-End Year-End(1)
(#) ($)
Exercisable/ Exercisable/
Unexercisable Unexercisable
Robert G. Dutcher -- -- 105,250/30,750 792,196/201,531
Irving R. Colacci -- -- 30,126/14,500 251,330/95,750
William J. Drasler -- -- 61,750/23,250 450,031/151,688
(1) The dollar values shown are calculated by determining the difference
between the fair market value of the common stock underlying the options and the
exercise price of the options at fiscal year-end.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee")
consists of three independent outside directors. The Committee is responsible
for setting salaries for officers and for granting incentive awards and
stock-based compensation to officers and other key employees.
Compensation Philosophy
Compensation decisions for fiscal 1995 continue to be guided by the general
compensation philosophy adopted by the Committee in 1993, as supplemented by an
Incentive Compensation Plan adopted in concept by the Committee in October 1994.
The Company's compensation program is intended to attract and retain the highest
quality personnel possible consistent with the Company's resources.
Compensation of management personnel continues to be based on four types of
compensation: a) base salaries; b) cash and/or stock bonuses; c) stock options;
and d) restricted stock.
(a) Base Salaries
Base salaries continue to be determined and adjusted consistent with
policies and procedures applied in past years. Base salaries for officers are
intended to be competitive with salaries offered by other emerging medical
device companies. Emerging companies continue to be used for comparison purposes
because during 1995 the Company's products remained in clinical testing in the
United States and achieved only limited initial sales outside of the United
States. In the absence of meaningful revenues and profitable operations, the
Company does not have the financial resources to match salaries offered by
larger and profitable medical companies. The Company, however, seeks whenever
possible to offer salaries at the time of hire competitive with salaries offered
by companies with which it competes for the services of key personnel. By
augmenting base salary with equity-based compensation, the Company seeks to
continue to attract and retain quality management personnel despite limited
financial resources. Annual increases in base salaries for existing officers are
generally limited to cost-of-living adjustments. Larger increases are given, as
appropriate, to reflect changes in job responsibility, authority, or to
internally balance the salary structure among the executive officer group.
Because no officer-level personnel were hired during fiscal year 1995, all base
salary compensation levels were restricted to internal balancing adjustments and
a cost-of-living increase implemented on January 1, 1995.
Because no officer-level personnel were hired in 1995, the Company did not
engage in a detailed comparison of competitive salary levels for new officers.
This information is, however, tracked on a continuous basis and is used in
compensation decisions as the need arises.
(b) Bonuses
Cash and/or stock bonuses are awarded annually and are used to reward
officers and other key employees for achievement of corporate financial and
technical milestones, as well as individual performance. Bonuses awarded during
fiscal year 1995 to reward fiscal year 1994 performance consisted of cash and
stock awards to a total of twenty-seven employees. The awards were based on a
Committee-approved total pool available for awards. The size of the pool was
determined by corporate performance and was apportioned based on management's
evaluation of performance by individual key employees. The awards granted
consisted of 61% cash and 39% Possis Common Stock. The value of the total award
per person ranged from 5% to 30% of base salary.
An Incentive Compensation Plan that provides objective guidelines for
determining total and individual awards was approved in concept by the Committee
in October 1994 to guide incentive awards for performance during fiscal year
1995. The Committee substantially approved the specifics of the Plan in August
1995 and, on September 13, 1995, approved cash bonuses for thirty-six employees.
These cash bonuses ranged in value from 3% to 40% of base salary.
(c) Stock Option
Stock options under the 1992 Stock Compensation Plan are intended as
incentive compensation and have historically been granted annually to officers
and other key employees based on the Company's financial performance and
achievement of technical and regulatory milestones. Stock options were granted
in June 1994 to reflect fiscal 1994 performance. No awards were granted during
fiscal year 1995. Stock option awards consistent with the intent of the
Incentive Compensation Plan were approved on September 13, 1995, to reward
performance during fiscal year 1995. A total of 190,900 stock options were
approved and became effective October 3, 1995, at a price equal to 100% of the
fair market value on the date of grant and subject to a four year vesting
period.
(d) Restricted Stock
The fourth component of the Company's compensation system is a restricted
stock program instituted in June 1993 primarily as a vehicle to retain key
officers. No restricted stock has been granted since the initial grant in June
1993 to the CEO and two vice presidents. No additional grants are contemplated
at this time. Future grants will be made at the discretion of the Committee
based on an ongoing assessment of the need to utilize this form of equity
compensation to retain key officers in light of the Company's financial
resources and ability to compete with compensation packages offered by other
medical companies.
CEO Compensation
Robert G. Dutcher, as CEO of the Company, participates in the general
compensation program of the Company, as described above, along with all other
key employees. At the time of his assumption of responsibilities as CEO in 1993,
Mr. Dutcher's base salary was set at a level determined by the Committee to be
appropriate for his level of experience and performance as an officer of the
Company. During 1995 his base salary was increased 6% to reflect a cost-of
living increase and to recognize favorable corporate and individual performance.
Mr. Dutcher also received a cash and stock bonus in October 1994 equal to
approximately 30% of base salary. This bonus award reflected the Committee's
judgment as to Mr. Dutcher's individual performance and the overall performance
of the Company in completing a significant public stock offering, achieving
regulatory and technical milestones, and making significant progress toward a
major strategic marketing alliance during fiscal year 1994.
At this time the Committee has no formal, written plan for CEO compensation
separate and apart from the Company'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, consistent with guidelines
applicable to all key employees. Current guidelines and objectives are contained
in the Company's 1996-1999 Strategic Plan, as approved by the Board of Directors
in July 1995.
Compensation Committee
the Board of Directors
Seymour J. Mansfield, Chairman
Donald C. Wegmiller
Dean Belbas
PERFORMANCE GRAPH
Set forth below is a graph showing the five-year cumulative return through
July 31, 1995 of Possis Medical, Inc. Common Stock as compared with Standard and
Poor's Medical Products and Supplies Index and Standard and Poor's 500 Stock
Index. This information assumes a base point at July 31, 1990 of $100.00 and the
reinvestment of all dividends.
BASE
COMPANY/INDEX NAME PERIOD RETURN RETURN RETURN RETURN RETURN
1990 1991 1992 1993 1994 1995
Possis Medical, Inc. 100 206.25 218.75 262.5 162.5 236.88
S&P 500 Index 100 112.76 127.18 138.29 145.42 183.39
S&P Medical Products 100 140.64 152.21 111.93 121.06 191.71
& Suplies Index
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ROYALTY PAYMENTS
Through fiscal year 1995, Z.C. Possis and the Z.C. Possis Estate (the
"Estate") were paid 11.25% of all payments received by the Corporation from St.
Jude Medical, Inc. ("St. Jude") pursuant to the terms of an assignment agreement
between the Corporation and St. Jude relating to certain heart valve patent
rights. Payments to Mr. Possis of 7.5% of all payments received by the
Corporation from St. Jude were authorized by the Board in 1979 to recognize that
Mr. Possis was the sole inventor of the devices subject to the patents and that
Mr. Possis had worked on development of the devices on his own personal time
over a period of approximately four years. An additional 3.75% of all payments
received by the Corporation from St. Jude was authorized by the Board in 1992 to
be paid to Mr. Possis in recognition of the contributions of Mr. Possis to the
Corporation, the absence of a pension program for Mr. Possis following
retirement, and the fact that at the time that Mr. Possis assigned his rights to
the Corporation he received no consideration individually.
For the fiscal year ended July 31, 1995, the Corporation paid a total of
$366,790 for the benefit of Mr. Possis and the Estate. The Corporation
additionally paid $76,618 for the benefit of Mr. Possis' daughter, who is a
Director of the Corporation, $69,283 each for the benefit of two of his
sisters-in-law, and $128,785 for the benefit of a trust for the children of
Demetre Nicoloff, M.D., a consultant in the development of the devices subject
to the patents and currently a Director of the Corporation. Such additional
payments or accruals for the fiscal year ended July 31, 1995, arise out of the
transfer by the foregoing persons of their rights in the heart valve patents.
LEGAL SERVICES
Mr. Seymour J. Mansfield, a Director of the Corporation, is a sharehoder 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 1995 to Mr. Mansfield's
law firm does not exceed five percent of that firm's gross revenues for its last
full fiscal year.
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that 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 1995 and written representations from certain reporting
persons, the Corporation believes that all filing requirements applicable to its
Officers and Directors have been complied with. The Corporation is aware of no
person who owns more than 10% of the Corporation's Common Shares.
AMENDMENT OF THE CORPORATION'S
1992 STOCK COMPENSATION PLAN
(Proposal No. 2)
The Corporation's Board of Directors has approved, subject to shareholder
approval, an amendment to the Possis Medical, Inc., 1992 Stock Compensation Plan
(the "Plan") to increase the number of shares added to the Plan each year from
1% to 2% of the total number of shares outstanding and to increase the maximum
number of shares of common stock that may be issued pursuant to Incentive Stock
Options ("ISOs") to 1,000,000 shares. The following description of the Plan is
qualified in its entirety by the full text thereof, copies of which may be
obtained without charge upon written request to Mr. Irving R. Colacci, the
Corporation's Secretary.
The Board of Directors adopted the Plan on August 6, 1992. The shareholders
approved the Plan on December 9, 1992. The Corporation initially reserved a
total of 600,000 shares of its Common Stock (subject to adjustment from time to
time for stock splits or dividends) for issuance upon the exercise of options or
other awards granted pursuant to the terms of the Plan. The total number of
shares reserved and available for distribution under the Plan is increased
annually on January 2 by 1% of the number of shares outstanding at July 31 of
the prior year. Of the shares available, 350,000 shares were authorized to be
issued pursuant to ISOs. The 350,000 shares available for issuance pursuant to
ISOs are reserved for issuance pursuant to currently outstanding grants.
The purpose of the Plan is to enable the Corporation to retain and reward
employees, directors, officers, advisors and consultants and to strengthen the
mutuality of interests between such individuals and the shareholders by offering
performance-based stock incentives and other equity or equity-based
compensation. Directors, officers, highly compensated employees, advisors, and
consultants of the Corporation and any subsidiary, parent or affiliate are
eligible to receive awards under the Plan as determined by the Compensation
Committee. The increase in the number of shares available under the Plan is
necessary due to the expected growth of the Corporation, an increase in the
number of employees eligible for awards under the Plan and increasing
competition for the services of current and future employees. The fair market
value of the Corporation's Common Stock on October 18, 1995 was $14-7/16 per
share. A description of the provisions of the Plan follows:
Administration. The Plan is administered by a Committee of at least two
"disinterested" members of the Board of Directors. Current administration is by
the Compensation Committee, all members of which qualify as "disinterested
persons" for purposes of SEC Rule 16b-3.
Types of Compensation. The Plan authorizes awards of the following types of
equity-based compensation: Incentive Stock Options (ISOs); Non-Qualified Stock
Options (NQSOs); Stock Appreciation Rights (SARs); Restricted Stock; Deferred
Stock; Annual Grants of Stock Options to Directors; Stock Options to Directors
in Lieu of Compensation for services rendered as Directors; and Other
Stock-Based Awards valued in whole or in part by reference to stock of the
Corporation. No ISOs may be granted on or after August 1, 2002, nor shall such
options remain valid beyond ten years following the date of grant. The following
describes each type of award in greater detail:
1. Stock Options. Incentive Stock Options ("ISOs") and Non-Qualified Stock
Options ("NQSOs") may be granted for such number of shares as the Committee will
determine and may be granted alone, in addition to, or in tandem with other
awards under the Plan.
Stock options will be exercisable at such times and subject to such terms
and conditions as the Committee will determine and over a term to be determined
by the Committee, which term will be no more than ten years after the date of
grant. The option price for any ISO will not be less than 100% of the fair
market value of the Corporation's common stock as of the date of grant. The
option price for any NQSO will not be less than 80% of the fair market value of
the Corporation's common stock as of date of grant. Payment of the option price
may be in cash, check, note (if approved by the Board), or such other instrument
or method as the Committee may accept, including Restricted or Deferred Stock
subject to an award under the Plan, exercise of a SAR granted under the plan, or
through delivery of stock acquired by successive exercises of the ISO or NQSO.
Upon termination of an employee for a reason other than death, disability,
or retirement, stock options remain exercisable for three months following such
termination or until the end of the option period, whichever is shorter. Upon
the disability of the employee, stock options are exercisable within the lesser
of the remainder of the option period or one year from the date of disability.
Upon the retirement of the employee consistent with the retirement policy of the
Corporation, stock options other than ISOs are exercisable within the lesser of
the remainder of the option period or five (5) years from the date of
retirement.
Stock options are not transferable other than by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order.
Upon the death of an employee, stock options are exercisable by the deceased
employee's representative within the lesser of the remainder of the option
period or one year from the date of the employee's death. Unless otherwise
determined by the Committee, only options which are exercisable on the date of
termination, death, disability, or retirement may be subsequently exercised.
2. Stock Appreciation Rights. Stock Appreciation Rights ("SARs") may be
granted either alone or in addition to other awards granted under the Plan and
may, but need not, relate to all or part of any stock option granted under the
Plan. SARs may be exercised in accordance with procedures established by the
Committee as set forth in the applicable award agreement, subject to specific
restrictions contained in the Plan, such as: SARs shall not be transferable
except under the laws of descent and distribution or pursuant to a qualified
domestic relations order; upon exercise of a SAR, any related option shall be
deemed to have been exercised; and the Committee, in its discretion, may
determine at the time of grant the amount to be paid upon exercise in the event
of a "change in control" of the Corporation.
3. Restricted Stock. Restricted stock may be granted alone, in addition to,
or in tandem with other awards under the Plan, and may be conditioned upon the
attainment of specific performance goals or such other factors as the Committee
may determine. The provisions attendant to a grant of restricted stock may vary
from participant to participant.
During the restriction period, the employee may not sell, transfer, pledge
or assign the restricted stock. The certificate evidencing the restricted stock
will remain in the possession of the Corporation until the restrictions have
lapsed.
Upon the termination of the employee's employment for any reason during the
restriction period, all restricted stock either vests or is subject to
forfeiture, in accordance with the terms and conditions of the initial award.
During the restriction period, the employee has the right to vote the restricted
stock and to receive any cash dividends. At the time of the award, the Committee
may require the deferral and reinvestment of any cash dividends in the form of
additional shares of restricted stock. Stock dividends are treated as additional
shares of restricted stock and are subject to the same terms and conditions as
the initial grant.
4. Deferred Stock. Deferred stock may be granted alone, in addition to, or
in tandem with other awards under the Plan, and may be conditioned upon the
attainment of specific performance goals or such other factors as the Committee
may determine. The provisions attendant to a grant of deferred stock may vary
from participant to participant.
In making an award of deferred stock the Committee determines the periods
during which the stock is subject to forfeiture and grants such stock without
payment therefor. Upon vesting, the award is settled in shares of the
Corporation's common stock.
During the deferral period as set by the Committee, the employee may not
sell, transfer, pledge or assign the deferred stock award. At the end of the
deferral period, shares of common stock equal to the number covered by the award
of deferred stock are delivered to the employee.
Upon the termination of the employee's employment for any reason during the
deferral period, all deferred stock either vests or is subject to forfeiture, in
accordance with the terms and conditions of the initial award.
During the deferral period, and as determined by the Committee at the time
of award, amounts equivalent to any dividends that would have been paid had the
shares of deferred stock covered by a given award been issued will be paid to
the employee, or deemed reinvested in additional shares of deferred stock.
Deferred stock will carry no voting rights until such time as the stock is
actually issued.
5. Annual Stock Options to Directors. Directors of the Corporation who are
not otherwise employees are granted annually, on January 2nd, options to
purchase 3,000 shares of the Corporation's common stock. The option price is not
less than 100% of the fair market value of the Corporation's common stock as of
the date of grant. Each option becomes exercisable in annual increments of 750
shares beginning on the first annual anniversary of the date of grant, is
exercisable for ten years following the date of grant and is subject to the same
terms and conditions as apply to other stock options granted under the Plan.
6. Stock Options to Directors in Lieu of Fees. On or before June 1 of each
year, each director who is not otherwise an employee of the Corporation is
permitted to elect to receive fees that would otherwise be due for services
rendered that year as a director in the form of discounted stock options. The
exercise price of each option is 50% of the fair market value of the
Corporation's common stock on the date of grant. The difference between 100% and
50% of the fair market value of the Corporation's common stock on the date of
grant times the number of options granted equals the fees that would otherwise
be due for services for the year immediately preceding the date of grant. The
date of grant is January 2. Each option becomes exercisable in full six months
following the date of grant, is exercisable for ten years following the date of
grant and is subject to the same additional terms and conditions as apply to
other stock options granted under the Plan.
7. Other Stock-Based Awards. The Committee may also grant other types of
awards that are valued, in whole or in part, by reference to or otherwise based
on the Corporation's common stock. These awards may be granted alone, in
addition to, or in tandem with stock options, SARs, restricted stock or deferred
stock granted under the Plan. Such awards will be made upon terms and conditions
as the Committee may in its discretion provide.
Number of Shares. The total number of shares of stock reserved and
available for distribution under the Plan initially was 600,000 shares of Stock,
a maximum of 350,000 of which could be issued as Incentive Stock Options. The
total number of shares of Stock reserved and available for distribution under
the Plan is increased annually on January 2 by 1% of the number of shares of the
Corporation's common stock outstanding at July 31 of the prior year. On October
3,1995, the Board granted ISOs to officers and key employees of the Corporation.
The status of all of the grants made to officers of the Corporation (totalling
120,500 shares) as ISOs are contingent on shareholder approval authorizing an
increase in the number of shares of Common Stock available for issuance pursuant
to the exercise of ISOs. When counted as ISOs, these 120,500 options exceed the
number of ISOs currently authorized by the Plan. As of the end of fiscal year
1995, 447,791 shares remained eligible for issuance under the Plan. The October
3, 1995 grant reduced this amount to 261,391 shares.
The following table lists the number of stock grants and option grants
issued to the Corporation's officers, directors, and non-officer employees as a
group since inception of the Plan.
Name and Position Stock Grants Options Granted
Robert G. Dutcher 19,553 67,000 *
Chief Executive Officer, President and Director
William J. Drasler, Vice President 14,393 47,500 *
Research and Development
Robert J. Scott, Vice President 12,322 41,900 *
Manufacturing Operations
Russel E. Carlson, Vice President 1,276 38,500 *
Finance and Chief Financial Officer
Irving R. Colacci, Vice President 1,276 38,200 *
Legal Affairs & Human Resources,
General Counsel and Secretary
James D. Gustafson, Vice President 1,064 40,500 *
Quality Assurance and
Regulatory/Clinical Affairs
Joseph J. Afryl, Vice President 567 30,900 *
Sales and Marketing
Donald C. Wegmiller -- 21,398
Chairman of the Board
Dean Belbas -- 13,361
Director
Joe A. Walters -- 13,931
Director
Seymour J. Mansfield -- 16,088
Director
Demetre M. Nicoloff -- 13,575
Director
Ann M. Possis -- 6,000
Director
Employees as a Group 6,427 144,200
(excluding above-named persons)
TOTAL 56,878 533,053
* These amounts include the following ISOs granted effective October 3,
1995 and made contingent on shareholder approval of amendment to the Plan:
Robert G. Dutcher, 25,000 shares; William J. Drasler, 14,500 shares; Robert J.
Scott, 15,900 shares; Irving R. Colacci, 16,200 shares; Joseph J. Afryl, 15,900
shares; James D. Gustafson, 16,500 shares; Russel E. Carlson, 16,500 shares.
Eligibility. Under the Plan, only employees are eligible to be granted
Incentive Stock Options ("ISOs") that are intended to qualify as ISOs pursuant
to the Internal Revenue Code. All other grants under the Plan are granted to
officers, advisors, consultants, and highly compensated employees, subject to
restrictions as stated in the Plan relating to specific types of grants.
Directors are eligible to receive grants only under the Section of the Plan
pertaining specifically and exclusively to Directors'
Options.
Amendment and Termination. The Plan may be amended, altered, discontinued,
or terminated by the Board of Directors, except that the Board may not, without
the approval of the Corporation's shareholders, increase the number of shares
reserved for purposes of the Plan, authorize an increase in the total number of
shares reserved for issuance upon exercise of Incentive Stock Options, change
the individuals or class of individuals eligible to participate in the Plan,
extend the maximum option period provided under the Plan, revise the terms of
annual option grants to directors, grant Incentive Stock Options at less than
100% of the fair market value of the stock on the date of grant, permit the
issuance of stock prior to payment in full therefor, or impair the rights of a
Participant under any award theretofore granted.
Change in Control. In the event of a "Change in Control" of the
Corporation, as defined in the Plan, any award, unless provided to the contrary
in the related Award Agreement, shall become fully exercisable and vested. The
value of all outstanding awards may, at the Committee's discretion, be cashed
out on the basis of the "Change in Control Price" as defined in the Plan.
Federal Income Tax Consequences of Stock Purchase Rights. The following is
a brief summary of the Federal income tax aspects of awards under the Plan based
on Federal income tax laws in effect on the date hereof. This summary is not
intended to be exhaustive and does not describe state or local tax consequences.
1. Incentive Stock Options. No taxable income is realized by the
participant upon the grant or exercise of an ISO. If common stock is issued to a
participant pursuant to the exercise of an ISO, and if no disqualifying
disposition of the shares is made by the participant within two years of the
date of grant or within one year after the transfer of the shares to the
participant, then: a) upon the sale of the shares, any amount realized in excess
of the option price will be taxed to the participant as a long-term capital
gain, and any loss sustained will be a long-term loss; and b) no deduction will
be allowed to the Corporation for Federal income tax purposes. The exercise of
an ISO may result in an alternative minimum tax liability for the participant
unless the participant makes a disqualifying disposition of the shares received
upon exercise.
If common stock acquired upon the exercise of an ISO is disposed of prior
to the expiration of the holding periods described above, then generally: a) the
participant will realize ordinary income in the year of disposition in an amount
equal to the excess, if any, of the fair market value of the shares at exercise
(or, if less, the amount realized on the disposition of the shares) over the
option price paid for such shares; and b) the Corporation will be entitled to
deduct any such recognized amount. Any further gain or loss realized by the
participant will be taxed as short-term or long-term capital gain or loss, as
the case may be, and will not result in any deduction by the Corporation.
Subject to certain exceptions for disability or death, if an ISO is
exercised more than three months following the termination of the participant's
employment, the option will generally be taxed as a non-qualified stock option.
2. Non-Qualified Stock Options. Except as noted below, with respect to
non-qualified stock options: a) no income is realized by the participant at the
time the option is granted; b) generally, upon exercise of the option, the
participant realizes ordinary income in an amount equal to the difference
between the option price paid for the shares and the fair market value of the
shares on the date of exercise (the Corporation will be entitled to a tax
deduction in the same amount); and c) at disposition, any appreciation (or
depreciation) after date of exercise is treated either as short-term or
long-term capital gain or loss, depending upon the length of time that the
participant has held the shares.
3. Stock Appreciation Rights. No income will be realized by a participant
in connection with the grant of an SAR. When the SAR is exercised, the
participant will generally be required to include as taxable ordinary income in
the year of exercise, an amount equal to the amount of cash and the fair market
value of any shares received. The Corporation will be entitled to a deduction at
the time and in the amount included in the participant's income by reason of the
exercise. If the participant receives common stock upon exercise of an SAR, the
post-exercise appreciation or depreciation will be treated in the same manner
discussed above under "Non-Qualified Stock Options."
4. Restricted Stock. A participant receiving restricted stock generally
will not recognize income at the time the restricted stock is granted, and will
recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock is no longer subject to forfeiture, less
the consideration paid for the stock. A participant may elect, however, under
Section 83(b) of the Internal Revenue Code, to recognize taxable ordinary income
on the date of grant equal to the excess of the fair market value of the shares
of restricted stock (determined without regard to the restrictions) over the
purchase price of the restricted stock. Thereafter, if the shares are forfeited,
the participant will be entitled to a deduction, refund, or loss for tax
purposes only in an amount equal to the purchase price of the forfeited shares
regardless of whether he made a Section 83(b) election. With respect to the sale
of shares after the forfeiture period has expired, the holding period to
determine whether the participant has long-term or short-term capital gain or
loss generally begins when the restriction period expires and the tax basis for
such shares will generally be based on the fair market value of such shares on
such date. If, however, the participant makes an election under Section 83(b),
the holding period will commence on the date of grant and the tax basis will be
equal to the fair market values of shares on such date (determined without
regard to restrictions). The Corporation generally will be entitled to a
deduction equal to the amount that is taxable as ordinary income to the
participant in the year that such income is taxable.
5. Deferred Stock. A participant receiving deferred stock generally will be
subject to tax at ordinary income rates on the fair market value of the deferred
stock on the date that the stock is distributed to the participant. The capital
gain or loss holding period for such stock will also commence on that date. The
Corporation generally will be entitled to a deduction in the amount that is
taxable as ordinary income to the participant.
6. Dividends and Dividend Equivalents. Dividends paid on restricted stock
generally will be treated as compensation that is taxable as ordinary income to
the participant, and will be deductible by the Corporation. If, however, the
participant makes a Section 83(b) election, the dividends will be taxable as
ordinary income to the participant but will not be deductible by the
Corporation. If dividend equivalents are credited with respect to deferred stock
awards, the participant will realize ordinary income when the dividend
equivalents are paid and the Corporation will be able to take a deduction at
that time.
7. Other Stock Based Awards. The Federal income tax treatment of other
stock-based awards will depend on the nature of any such award and the
restrictions applicable to such award. Such an award, may, depending on the
conditions applicable to the award, be taxable as an option, an award of
restricted stock, or an award of deferred stock.
The affirmative vote of a majority of the Common Stock outstanding on the
record date and present in person or by proxy at the Annual Meeting is required
for approval of the proposed amendment to the Plan. The Board of Directors
unanimously recommends a vote FOR PROPOSAL NO. 2 to approve amendment of the
Plan, and the enclosed Proxy will be so voted unless a contrary specification is
made.
APPOINTMENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
(Proposal Number 3)
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
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
specificationis made.
SHAREHOLDER PROPOSALS
A shareholder proposal to be presented at the Corporation's 1996 Annual
Meeting must be received at the Corporation's executive offices, 2905 Northwest
Boulevard, Minneapolis, Minnesota 55441-2644, no later than July 2, 1996, for
evaluation as to inclusion in the Corporation's Proxy Statement in connection
with such meeting.
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.
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 Russel E. Carlson, Vice President,
Finance and Chief Financial Officer, Possis Medical, Inc., 2905 Northwest
Boulevard, Minneapolis, Minnesota 55441-2644.
By Order of the Board of Directors
IRVING R. COLACCI
Secretary
Dated: October 30, 1995
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