SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ______
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[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Possis Medical, Inc.
(Name of Registrant as Specified in its Charter)
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calculated and state how it was determined):
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Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
[GRAPHIC OMITTED]
9055 Evergreen Boulevard N.W.
Minneapolis, Minnesota 55433-8003
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December 9, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Possis
Medical, Inc., a Minnesota corporation, will be held on Tuesday, December 9,
1997 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 six (6) directors.
2. To approve an amendment to the
Corporation's 1992 Stock Compensation Plan providing for an increase in the
number of authorized shares of the Corporation.
3. To approve an amendment to the Corporation's Employee Stock Purchase
Plan.
4. To ratify the selection of Deloitte & Touche LLP as independent
certified public accountants for the Corporation. 6. 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 17, 1997 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 5, 1997
[GRAPHIC OMITTED]
9055 Evergreen Boulevard N.W.
Minneapolis, Minnesota 55433-8003
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 9,
1997 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 8, 1997. 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, 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 5, 1997.
VOTING RIGHTS
At October 17, 1997, 12,135,100 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 17, 1997 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 17,
1997, 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
Dean Belbas, Director 44,520 (1) *
Donald C. Wegmiller, Director 49,092 (2) *
Seymour J. Mansfield, Director 155,761 (3) 1.3
Demetre M. Nicoloff, M.D., Director 438,150 (4) 3.6
Ann M. Possis, Director 292,502 (5) 2.4
Robert G. Dutcher, Director, 162,195 (6) 1.3
President & Chief Executive Officer
Joseph J. Afryl, Vice President of 24,217 (7) *
Sales & Marketing
Russel E. Carlson, Vice President of 47,768 (8) *
Finance and Chief Financial Officer
Irving R. Colacci, Vice President, 52,908 (9) *
Legal Affairs & Human Resources,
General Counsel and Secretary
James G. Gustafson, Vice President of 37,467(10) *
Regulatory/Clinical Affairs
Directors and Executive Officers
as a Group (11 persons) 1,382,230(11) 11.4
<FN>
(1) Includes 30,491 shares issuable upon exercise of currently exercisable
options.
(2) Includes 41,092 shares issuable upon exercise of currently exercisable
options.
(3) Includes 35,809 shares issuable upon exercise of currently exercisable
options and 13,000 shares owned by children.
(4) Includes 16,615 shares issuable upon exercise of currently exercisable
options and 143,000 shares owned by children.
(5) Includes 4,500 shares issuable upon exercise of currently exercisable
options, 4,500 shares owned by Ms. Possis' spouse and 196,502 shares owned by
the Possis Marital Trust over which Ms.Possis has voting power as co-trustee.
(6) Includes 129,750 shares issuable upon
exercise of currently exercisable options.
(7) Includes 22,400 shares issuable
upon exercise of currently exercisable options and 88 shares owned by a child.
(8) Includes 42,925 shares issuable upon exercise of currently exercisable
options.
(9) Includes 49,426 shares issuable upon exercise of currently exercisable
options.
(10) Includes 34,525 shares issuable upon exercise of currently exercisable
options.
(11) Includes 485,183 shares issuable upon exercise of currently exercisable
options.
* Denotes ownership of less than 1% of shares outstanding
</FN>
ELECTION OF DIRECTORS
(Proposal Number 1)
At the Annual Meeting, six 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 six 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 Positions
Dean Belbas Retired. Former Senior Vice President, 65 1984 Executive and
Director of Investor Relations, General Compensation
Mills, Inc., Minneapolis, Committees
Director of Corporate
Communications, General Mills, Inc.,
Minneapolis, Minnesota.
Donald C. Wegmiller President and CEO, Management 59 1987 Executive, Audit,
Compensation Group/Health Care, and Compensation
Minneapolis, Minnesota, since Committees
April 1993. Prior thereto, President
& CEO, Health One Corporation,
Minneapolis, Minnesota.
Director, Minnesota Power & Light
Company, HBO & Co.,
Medical Graphics Corporation,
LifeRate Systems, Inc.,
LecTec Corporation.
Seymour J. Mansfield Shareholder, Mansfield & Tanick, P.A., 52 1987 Executive,Audit,
Attorneys, Minneapolis, and Compensation
Minnesota. Committees
Demetre M. Nicoloff Cardiac Surgeon, 64 1991 Audit and Medical
Cardiac Surgical Associates, P.A., Advisory
Minneapolis, Minnesota. Committee
Director, Optical Sensors, Inc.,
Neovision, Inc., Micromedics, Inc.,
and Applied Biometrics, Inc.
Director Committee
Director Nominees Principal Occupation Age Since Positions
Robert G. Dutcher President and Chief Executive 52 1993 Executive
Officer of the Corporation since Committee
October 1993; Executive Vice President
from December 1992 to October 1993;
President, Possis Holdings, Inc.,
since 1987.
Ann M. Possis Board Chair of Working Opportunities 37 1993 Audit Committee
for Women, St. Paul, Minnesota;
Board Member of Planned Parenthood
of Minnesota/South Dakota;
Director of Development, Voyageur
Outward Bound School, Minneapolis,
Minnesota, 1995-1996; Development
Associate, Planned Parenthood of
Minnesota, 1992-1995.
Meetings. During fiscal year 1997, the Board of Directors had five regular
meetings and one meeting by telephone. 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 eight times during fiscal year 1997 and is responsible
for exercising the authority of the Board during the intervals between meetings
of the Board, for performing the functions of a nominating committee, and for
formulating and recommending general policies for Board consideration; the Audit
Committee met once during fiscal year 1997 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
during fiscal year 1997 and is responsible for providing information and
recommendations to the Board on technical medical issues and considerations, as
the need arises, that may have an impact on the Corporation's business
strategies, policies, and research and development projects; the Compensation
Committee met three times during fiscal 1997 and is responsible for reviewing
and establishing compensation for officers of the Corporation and administering
the Corporation's 1992 Stock Compensation Plan. 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 an additional $4,000 annual
retainer. All committee chairmen receive an additional $3,000 annual retainer.
The chairmen of the Compensation and Audit Committees each also receive $500 per
meeting; the members receive $250 per meeting. Total fees of $61,050 were earned
by outside Directors during fiscal 1997.
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 from fair market value in the exercise price. All outside
Directors, with the exception of Ann M. Possis, elected to receive discounted
stock options in lieu of cash payment of director fees for calendar year 1997.
On January 2, 1997, all outside Directors, with the exception of Ms.
Possis, received discounted stock options in lieu of cash payments of fees for
calendar year 1996. These options were granted pursuant to elections made in May
1996. A total of 5,207 options at an exercise price of $10.0625 were granted.
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 1996, 18,000 options were granted to outside Directors
under this Plan at an exercise price of $20.125.
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, 1997, 1996 and 1995, 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 $100,000 during fiscal year 1997 ("Named Executive
Officers"):
Name and Annual Long-Term
rincipal Position Year Compensation Compensation Awards
Securities
Restricted Underlying All Other
Salary Bonus(1) Stock Award Options(2) Compensation (3)
($) ($) ($) SARs (#) ($)
Robert G. Dutcher 1997 145,746 46,300 -- 24,000 3,078
President and CEO 1996 137,720 50,000 29,500 (4) 25,000 3,321
1995 124,154 50,000 -- 25,000 3,725
Joseph J. Afryl 1997 91,312 17,400 -- 12,700 3,526
Vice President, 1996 88,624 16,600 59,000 (5) 12,800 3,424
Sales and Marketing 1995 79,423 19,500 -- 15,900 420
Russel E. Carlson 1997 91,890 19,700 -- 14,300 3,440
Vice President, Finance 1996 87,397 19,400 59,000 (5) 15,100 3,204
Chief Financial Officer 1995 78,596 19,400 -- 16,500 2,358
Irving R. Colacci 1997 93,890 20,100 -- 14,300 3,511
Vice President, 1996 90,711 19,700 59,000(5) 14,800 3,327
Legal Affairs & Human 1995 83,258 20,200 -- 16,200 2,498
Resources, General
Counsel and Secretary
James D. Gustafson 1997 89,890 19,700 -- 14,600 3,369
Vice President, 1996 86,078 19,100 59,000(5) 15,100 3,161
Quality Systems, 1995 78,139 19,300 -- 16,500 2,344
Regulatory/Clinical
Affairs
<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, and vest over a four-year period.
(3) Includes only Company matching contributions to its 401(k) Plan.
(4) Mr. Dutcher was granted 2,000 shares of restricted stock, of which 1,000
shares vested on June 3, 1996 and 1,000 shares vested on June 3, 1997. No other
shares of restricted stock are held, as of the end of fiscal year 1997, by Mr.
Dutcher.
(5) Mssrs. Colacci, Afryl, Gustafson and Carlson were each granted 4,000 shares
of restricted stock, of which 2,000 shares vested on June 3, 1996 and 2,000
shares vested on June 3, 1997. No other shares of restricted stock are held, as
of the end of fiscal year 1997, by these individuals.
</FN>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information concerning stock option grants to
Named Executive Officers during fiscal year 1997.
Individual Grants
Number of Percent of
Securities Total Potential Realizable Value
Underlying Options/SARs Exercise or at Assumed Annual Rates of
Option/SARs Granted to Base Price Stock Price Appreciation
Name Granted (#) Employees in ($/Sh) Expiration Date(1) for Option Term(2)
Fiscal Year (%)
5% ($) 10% ($)
Robert G. Dutcher 25,000 5.4 18.00 October 14, 2006 283,003 717,184
Joseph J. Afryl 12,800 2.8 18.00 October 14, 2006 144,897 367,198
Russel E. Carlson 15,100 3.3 18.00 October 14, 2006 170,934 433,179
Irving R. Colacci 14,800 3.2 18.00 October 14, 2006 167,538 424,573
James D. Gustafson 15,100 3.3 18.00 October 14, 2006 170,934 433,179
(1) All option grants shown vest in four equal annual installments beginning one
year following the October 14, 1996 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.
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, 1997, 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 6,000 43,500 123,250/48,750 909,563/43,125
Joseph J. Afryl -- -- 15,225/28,475 82,266/27,422
Russel E. Carlson -- -- 35,025/29,975 185,263/21,563
Irving R. Colacci -- -- 41,676/29,450 289,940/21,563
James D. Gustafson -- -- 26,625/29,975 141,563/21,563
<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.
</FN>
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 1997 continued 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 and implementation of an expanded stock option program
for all employees in April 1997. The Corporation's compensation program is
intended to attract and retain the highest quality personnel possible consistent
with the Corporation's resources. Recent initiatives reflect the need to
increase levels of compensation in the face of a tightening job market,
particularly for engineering personnel and other highly skilled employees
necessary for the Corporation's continuing growth.
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, with a recognition that the
tightening job market and the commencement of commercialization of one of the
Corporation's products compels a more competitive approach to compensation
decisions. 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, although during 1997 the
Corporation began commercialization of its initial products, the Corporation
does not expect to achieve profitability until fiscal year 1999 and most of its
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 Corporation does not have the financial
resources to match salaries offered by larger and profitable medical companies.
By augmenting base salary with equity-based compensation, and by increasing base
salaries as necessary to retain skilled personnel, the Corporation seeks to
continue to attract and retain quality technical and 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
and authority, or to internally balance the salary structure among the executive
officer group. Because no officer-level personnel were hired during fiscal year
1997, base salary changes were limited to internal balancing adjustments and a
cost-of-living increase on January
1, 1997.
Prior to granting salary increases to officers for 1997, the Corporation
evaluated salary survey information from the medical device industry as well as
officer-level salaries in industry generally. Based on this information, it was
determined that executive management personnel, at the current stage of the
Corporation's development, should continue to be compensated at substantially
equivalent levels as between the various functional departments. Salary
increases were, therefore, designed to maintain the base salaries of all
existing officers, with the exception of the President/CEO, to within 4% of each
other. Increases ranged from 4.5% to 5.8%. As functional responsibilities
develop in response to the Corporation's growth, more divergent salary levels
are expected.
(b) Bonuses
The Incentive Compensation Plan that provides objective guidelines for
determining total and individual bonus awards was approved in concept by the
Committee in October 1994 and continues to guide incentive awards for
performance during fiscal year 1997. Cash 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 for individual performance. Cash
bonuses were awarded in September 1997 to 37 employees (excluding the CEO) to
reward fiscal year 1997 performance. The awards were based on a
Committee-approved total pool available for awards. The size of the awards
actually granted was determined by corporate performance and apportioned based
on management's evaluation of performance by individual key employees. These
awards totaled $160,800, a modest increase over the $148,200 awarded to four
fewer employees one year ago.
(c) Stock Options
Stock options under the Corporation's 1992 Stock Compensation Plan are
intended as incentive compensation and have historically been granted annually
to officers and other key employees based on the Corporation's financial
performance and achievement of technical and regulatory milestones. Stock option
awards in the amount of 143,800 shares to a total of 37 employees (excluding the
CEO) were approved September 1997 to reward performance during fiscal year 1997,
a modest increase of 4 employees and 7,700 shares over awards for fiscal year
1996.
In April 1997, the Corporation expanded its stock option program as a way
to compensate all employees more competitively with other companies in an
increasingly tight job market without utilizing cash. The Corporation
implemented a program that awards Incentive Stock Options that vest over a
four-year period to all employees (excluding officers and sales
representatives), in amounts of from 750 shares to 3,000 shares depending on
each employee's position and salary level. These grants were made to all
existing eligible employees in April 1997 and will be made to all eligible new
hires for the foreseeable future.
(d) Restricted Stock
The fourth component of the Corporation's compensation system is a
restricted stock program instituted in June 1993, primarily as a vehicle to
retain key officers. Prior to fiscal year 1996, restricted stock had been
granted to the CEO and two vice presidents. In February 1996, Restricted Stock
awards of 4,000 shares each were granted to the four existing officers not
previously granted a Restricted Stock Award. These grants operated to
substantially equalize the compensation paid to all officers, other than the
President/CEO, and to bring their total compensation packages more in line with
compensation offered by other medical device companies. Based on its assessment
of the need to utilize this form of equity compensation to retain key employees
other than officers, in light of the Corporation's financial resources and
ability to compete with compensation packages offered by other medical
companies, the Corporation expanded its Restricted Stock Program to include
additional key employees. In September 1997, the Corporation granted a total of
44,250 shares of Restricted Stock to a total of 23 officers and key management
personnel (excluding the CEO). These grants are prospective in that they are not
based on past performance, are contingent on continual employment with the
Corporation, and vest in equal installments over the next 3 years.
CEO Compensation
Robert G. Dutcher, as CEO of the Corporation, 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
Corporation. During 1997, Mr. Dutcher's base salary was increased 7.2% to
reflect a cost-of living increase and to recognize favorable corporate and
individual performance. Mr. Dutcher received a cash bonus equal to approximately
35% of base salary and a grant of 25,000 stock options in October 1996 to reward
fiscal year 1996 performance. The committee awarded a cash bonus of $46,300 and
24,000 stock options to Mr. Dutcher in September 1997 to reward corporate and
individual performance during fiscal year 1997. A grant of 12,000 shares of
Restricted Stock was awarded in September 1997 as part of the restricted stock
program implemented for officers and other key management personnel as described
in the Restricted Stock section above. These cash, stock option and stock awards
reflect the Committee's judgment as to Mr. Dutcher's individual performance and
the overall performance of the Corporation in commencing commercialization and
achieving regulatory and technical milestones.
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, consistent with guidelines
applicable to all key employees. Current guidelines and objectives are contained
in the Corporation's 1998-2001 Strategic Plan, as approved by the Board.
Compensation Committee
of 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, 1997 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, 1992 of $100.00 and the
reinvestment of all dividends.
Annual Return Percentage
Years Ending
Company \ Index Name July93 July94 July95 July96 July97
POSSIS MEDICAL INC. 20.00 -38.10 113.46 9.91 -5.74
S & P 500 COMP-LTD 8.73 5.16 26.11 16.57 52.14
HLTH CARE 9MED PDS & SUPP) - 500 -26.46 8.15 58.37 15.28 55.17
Indexed Returns
Base
Period Return Return Return Return Return
Company \ Index Name July92 July93 July94 July95 July96 July97
POSSIS MEDICAL INC. 100.00 120.00 74.29 158.57 174.29 164.29
S & P 500 COMP-LTD 100.00 108.73 114.34 144.19 168.08 255.72
HLTH CARE (MED PDS & SUPP) - 500 100.00 73.54 79.53 125.96 145.20 225.30
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 1997 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(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 1997 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. 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
2% to 3% 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 2,000,000 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 Plan limited the
number of ISOs that could be granted under the Plan to 350,000 shares. In
addition, 1% of the total number of shares outstanding were to be added to the
Plan annually. On December 6, 1995, the Corporation's shareholders approved an
amendment to the Plan that increased the maximum number of shares of common
stock that may be issued as ISOs to 1,000,000 shares and the number of shares
added to the Plan each year from 1% to 2% of the total number of shares
outstanding. The total number of shares reserved and available for distribution
under the Plan is thereby increased annually on January 2 by 2% of the number of
shares outstanding at July 31 of the prior year. Of the 1,000,000 shares
available for issuance pursuant to ISOs, as of the end of fiscal year 1997,
856,750 were reserved for issuance pursuant to currently outstanding ISO 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 17, 1997 was $14.00 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 qualified 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; Annua1 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, retirement, or become exercisable within
specified time periods, 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 by the recipient. 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 Corporations 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 2% of the number of shares of the
Corporation's common stock outstanding at July 31 of the prior year. As of the
end of fiscal year 1997, 242,902 shares remained eligible for issuance under the
Plan.
The following table lists the number of stock grants and option grants
issued to the Corporation's current named Executive Officers, Directors as a
group, and non-officer and former employees as a group from the inception of the
Plan.
Name and Position Stock Grants Options Granted
Robert G. Dutcher............................................. 21,553 92,000
Chief Executive Officer, President and Director
Joseph J. Afryl, Vice President............................... 4,567 43,700
Sales and Marketing
Russel E. Carlson, Vice President............................. 5,776 53,600
Finance and Chief Financial Officer
Irving R. Colacci, Vice President............................. 5,276 53,000
Legal Affairs & Human Resources, General Counsel and
Secretary
James D. Gustafson, Vice President............................ 5,064 56,600
Quality Assurance and Regulatory/Clinical Affairs
Directors as a Group.......................................... -- 130,320
Employees as a Group.......................................... 33,142 623,150
(excluding above-named persons)
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 therefore 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 mid-term or long-term
capital gain, and any loss sustained will be a mid-term or long-term loss
depending upon whether the holding period thereof is more than 18 months; 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, mid-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, mid-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 entitld 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 may be entitled to a loss for tax purposes only in an amount
equal to the tax basis of the forfeited shares. With respect to the sale of
shares after the forfeiture period has expired, the holding period to determine
whether the participant has long-term, mid-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 OF THE CORPORATION 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.
APPROVAL OF AMENDMENT TO
EMPLOYEE STOCK PURCHASE PLAN
(Proposal Number 3)
The Board of Directors is recommending to the shareholders the approval of
an amendment to the Corporation's 1991 Employee Stock Purchase Plan (the
"Purchase Plan"). The purpose of the Purchase Plan is to encourage equity
ownership by all employees by providing an opportunity to purchase the
Corporation's Common Shares at an attractive price. The proposed amendment
shortens the eligibility waiting period so that full-time employees as of the
first day of each Purchase Plan Year shall be eligible to participate in the
Purchase Plan for that year. Currently, an additional one-year waiting period is
imposed.
The Purchase Plan was approved by the shareholders and became effective as
of January 1, 1991. The Purchase Plan has been previously amended, effective
December 11, 1996, to require a $20 minimum payroll deduction per pay period and
to require that at least 25 shares of stock be purchased during any Purchase
Period. These amendments did not require shareholder approval. The Purchase Plan
has no expiration date. A summary of the Purchase Plan follows, but this summary
is qualified in its entirety by reference to the full text of the Purchase Plan,
which is available by written request to Irving R. Colacci, Secretary, at the
Corporation's address.
Number of Shares. The Purchase Plan is authorized to issue 300,000 of the
Corporation's Common Shares ("Stock"), a number equal to approximately 2-1/2% of
the Corporation's Common Shares outstanding as of July 31, 1997. Stock issued
under the Purchase Plan consists of authorized and unissued shares. If Stock
subject to a purchase right under the Purchase Plan ceases to be subject to such
purchase right, such Stock will again be available for future distribution under
the Purchase Plan. Through Purchase Plan Year 1996, a total of 86,950 shares
have been issued under the Purchase Plan.
Stock Purchase Rights. The Purchase Plan provides for the grant of rights
to purchase Stock through payroll deductions of no less than $20 per pay period.
The purchase price for such Stock is 85% of the lower of (a) the closing price
of the Stock as reported on the Nasdaq/National Market System (NASDAQ/NMS) on
the first business day of the Purchase Period or (b) the closing price of the
Stock as reported on NASDAQ/NMS on the last business day of the Purchase Period.
Each Purchase Period is the period from January 1 to the next following December
31. On October 17, 1997, the closing price of the Stock as reported on
NASDAQ/NMS was $14.00.
No right is deemed to be granted under the Purchase Plan to any employee if
such grant would permit the employee to purchase in any calendar year a number
of shares of Stock under the Purchase Plan and all other stock purchase plans,
if any, of the Corporation exceeding $25,000 in fair market value (determined as
of the date of grant). No employee is permitted to purchase more than 200 shares
per $10,000 of such employee's Annual Compensation (as defined in the Purchase
Plan). The Purchase Plan requires a minimum purchase of 25 shares.
Participation. Grants of stock purchase rights are made to all employees
eligible under the terms of the Purchase Plan effective January 1 of each year.
Under the proposed amended Purchase Plan, employees are eligible to participate
in the Purchase Plan if they are employed on the first day of the Purchase Plan
Year, except that no employee who is employed fewer than 20 hours per week for
fewer than five months in any calendar year, or who, immediately after a right
to purchase is granted, owns stock possessing 5% or more of the total combined
voting power of the Corporation (or any parent or subsidiary), including stock
that the employee may purchase pursuant to any outstanding options, is eligible.
As of September 1, 1997, the Corporation had 171 employees eligible for stock
purchase rights under the Purchase Plan beginning with the 1998
Purchase Plan Year.
Administration. The Purchase Plan is administered by a Committee of three
individuals appointed by the Board.
Amendment and Termination. The Purchase Plan may be amended 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 available for
issuance under the Purchase Plan, extend the right to exercise a stock purchase
right to a date more than five years from the date of grant, change the class of
employees eligible to receive awards under the Purchase Plan, increase the
maximum number of shares that may be purchased by an employee, or decrease the
purchase price below the amount described therein. The proposed amendment herein
changes the class of employees eligible to receive awards.
Adjustment. In the case of a stock split, stock dividend, consolidation,
recapitalization, merger, reorganization, or other change in the Corporation's
structure affecting the Stock, appropriate adjustments will be made by the
Board, in its sole discretion, in the number of shares reserved under the
Purchase Plan and in the number of shares covered by options then outstanding
under the Purchase Plan and, where applicable, the exercise price for such
options.
Federal Income Tax Aspects. The following is a brief summary of the federal
income tax aspects of the stock purchase rights that may be granted under the
Purchase Plan based upon 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.
The Stock purchased pursuant to the stock purchase rights is intended to be
eligible for the favorable tax treatment provided by Section 423 of the Internal
Revenue Code of 1986 (the "Code"). A participant realizes no income upon the
grant of the stock purchase rights and no income upon purchase of shares
pursuant to stock purchase rights if no disposition of the shares purchased is
made within two years after grant of the right and within one year after
purchase and at all times during the period beginning with the date of
participation and ending three months before acquiring shares as an employee of
the Corporation. The Corporation is not entitled to any deduction. After
satisfying the foregoing holding period, upon disposition of shares acquired,
the participant recognizes ordinary income on the lesser of (a) the excess of
the fair market value of the shares at the time of such disposition over the
purchase price of the shares subject to the purchase right (the "right price")
or (b) the excess of the fair market value of the shares at the time the
purchase right was granted over an amount equal to what the right price would
have been if it had bee computed as of the date of the grant of the purchase
right. Any further gain upon such disposition will be treated as long-term
capital gain. The Corporation receives no deduction for the amount recognized as
ordinary income.
Conclusions and Recommendations. The Board of Directors believes it is in
the interests of the Corporation and its shareholders to approve the proposed
amendment to make the Purchase Plan more attractive as a recruitment and
retention tool in a period of increasing competition for qualified employees.
The affirmative vote of the holders of a majority of the Common Shares
present and voting is necessary for approval of the proposed amendment to the
Stock Purchase Plan. All Proxies not voted against the approval of the Purchase
Plan or abstaining from voting will be voted for approval of the proposed
amendment.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE FOR APPROVAL OF
THE PROPOSAL TO AMEND THE EMPLOYEE STOCK PURCHASE PLAN.
APPOINTMENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
(Proposal Number 4)
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
A shareholder proposal to be presented at the Corporation's 1998 Annual
Meeting must be received at the Corporation's executive offices, 9055 Evergreen
Boulevard N.W., Minneapolis, Minnesota 55433-8003, no later than July 3, 1998,
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 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 Russel E. Carlson, 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 5, 1997
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