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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Possis Medical, Inc.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] 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 transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[GRAPHIC OMITTED]
9055 Evergreen Boulevard N.W.
Minneapolis, Minnesota 55433-8003
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December 9, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Possis
Medical, Inc., a Minnesota corporation, will be held on Wednesday, December 9,
1998, 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 five (5) directors.
2. To approve issuance of the Corporation's Common Stock upon conversion of
the Corporation's Series A Convertible Debentures.
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 16, 1998, 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, 1998
[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,
1998, 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, 1998. 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 October 30, 1998.
VOTING RIGHTS
At October 16, 1998, 12,254,941 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 16, 1998, will be entitled to notice of and to vote at this Annual
Meeting of Shareholders.
COMMON STOCK OWNERSHIP
The following table sets forth the beneficial holdings as of October 12,
1998, 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 46,886 (1) *
Donald C. Wegmiller, Director 54,947 (2) *
Seymour J. Mansfield, Director 158,575 (3) 1.3
Whitney A. McFarlin, Director -- --
Robert G. Dutcher, Director, 197,321 (4) 1.6
President & Chief Executive Officer
Russel E. Carlson, Vice President of 72,743 (5) *
Finance and Chief Financial Officer
Irving R. Colacci, Vice President, 75,222 (6) *
Legal Affairs & Human Resources,
General Counsel and Secretary
James G. Gustafson, Vice President of 64,563 (7) *
Regulatory/Clinical Affairs
Robert J. Scott, Vice President 118,719 (8)
Manufacturing Operations
Directors and Executive Officers
as a Group (11 persons) 847,428 (9) 6.9
<FN>
(1) Includes 29,746 shares issuable upon exercise of currently exercisable
options.
(2) Includes 40,947 shares issuable upon exercise of currently exercisable
options.
(3) Includes 35,164 shares issuable upon exercise of currently exercisable
options and 15,000 shares owned by children.
(4) Includes 150,250 shares issuable upon exercise of currently exercisable
options.
(5) Includes 59,150 shares issuable upon exercise of currently exercisable
options.
(6) Includes 66,875 shares issuable upon exercise of currently exercisable
options.
(7) Includes 56,350 shares issuable upon exercise of currently exercisable
options.
(8) Includes 90,900 shares issuable upon exercise of currently exercisable
options.
(9) Includes 572,882 shares issuable upon exercise of currently exercisable
options.
* Denotes ownership of less than 1% of shares outstanding
</FN>
ELECTION OF DIRECTORS
(Proposal Number One)
At the Annual Meeting, five 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 five 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, 66 1984 Executive and
Director of Investor Relations, General Compensation
Mills, Inc., Minneapolis, Committees
Minnesota, since January 1993.
Prior thereto, Vice President,
Director of Corporate
Communications, General Mills, Inc.,
Minneapolis, Minnesota.
Donald C. Wegmiller President and CEO, Management 60 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,
LecTec Corporation, and Select Care.
Seymour J. Mansfield Officer and Shareholder, Mansfield, 53 1987 Executive, Audit
Tanick & Cohen P.A., Attorneys, and Compensation
Minneapolis, Minnesota. Committees
Whitney A. McFarlin Chairman of the Board of Directors 58 1998 Audit Committee
of Angeion Corporation. From 1993
to July 1998, President, CEO and
Chairman of the Board of Angeion
Corporation. Director, Autonomous
Technologies.
Robert G. Dutcher President and Chief Executive 53 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.
Meetings. During fiscal year 1998, the Board of Directors had four regular
meetings and one special meeting. 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 seven times during fiscal
year 1998, four times by telephonic meeting and three times in person. The
Executive Committee 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 1998
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 1998 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
1998, twice in person and once telephonically, and is responsible for defining
and administering the Corporation's executive compensation
policy.
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 $59,100 were earned by outside Directors during fiscal 1998.
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
eligible current outside Directors elected to receive discounted stock options
in lieu of cash payment of director fees for calendar year 1998.
On January 2, 1998, all current eligible outside Directors received
discounted stock options in lieu of cash payments of fees for calendar year
1997. These options were granted pursuant to elections made in May 1997. A total
of 7,465 options at an exercise price of $5.50 were granted to current
directors. An additional 1,409 shares were granted to one director who retired
from the Board in August 1998. Options that would have been issued to a second
director, who retired in December 1997, were converted to a cash payment equal
to fees earned.
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 1997, 15,000 options were granted to
outside Directors under this Plan at an exercise price of $11.00.
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, 1998, 1997 and 1996, 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 $100,000 during fiscal year 1998 ("Named Executive
Officers"):
Name and Annual Long-Term Compensation
Principal Position Year Compensation Awards
Securities
Restricted Underlying All Other
Salary Bonus(1) Stock Award Option(2) Compensation(3)
($) ($) ($) SARs(#) ($)
Robert G. Dutcher 1998 155,577 46,000 172,500(4) 30,000 4,672
President and 1997 145,746 46,300 -- 24,000 3,078
Chief Executive Officer 1996 137,720 50,000 29,500(5) 25,000 3,321
Russel E. Carlson 1998 98,919 20,000 86,250(6) 20,000 3,495
Vice President, Finance 1997 91,890 19,700 -- 14,300 3,440
Chief Financial Officer 1996 87,397 19,400 59,000(7) 15,100 3,204
Irving R. Colacci 1998 98,788 20,000 86,250(6) 20,000 3,567
Vice President, 1997 93,890 20,100 -- 14,300 3,511
Legal Affairs & Human 1996 90,711 19,700 59,000(7) 14,800 3,327
Resources, General
Counsel and Secretary
James D. Gustafson 1998 95,346 20,000 86,250(6) 20,000 3,621
Vice President, 1997 89,890 19,700 -- 14,600 3,369
Quality Systems, 1996 86,078 19,100 59,000(7) 15,100 3,161
Regulatory/Clinical Affairs
Robert J.Scott 1988 94,106 19,000 86,250(6) 20,000 2,871
Vice President, 1997 92,820 19,300 -- 14,300 3,346
Manufacturing Operations 1996 86,079 18,700 14,800 3,032
<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 12,000 shares of restricted stock, of which
4,000 shares vested on September 24, 1998, 4,000 shares vest on September 24,
1999, and 4,000 shares vest on September 24, 2000. The dollar value shown
represents the fair market value of the stock on the date of grant, September
24, 1997.
(5) 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. The
dollar value shown represents the fair market value of the stock on the date of
grant, February 28, 1996.
(6) Mssrs. Carlson, Colacci, Gustafson and Scott were each granted 6,000
shares of restricted stock of which 2,000 shares vested on September 24, 1998
and 2,000 shares vest on September 24, 1999 and 2,000 shares vest on September
24, 2000. The dollar value shown represents the fair market value of the stock
on the date of grant, September 24, 1997.
(7) Mssrs. Colacci, Carlson, and Gustafson 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. The dollar value shown represents the fair market
value of the stock on the date of grant, February 28, 1996.
</FN>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information concerning stock option grants to
Named Executive Officers during fiscal year 1998.
Individual Grants
Number of Percent of
Securities Total Potential Realizable
Underlying Options/SARs Exercise or Value at Assumed Annual
Option/SARs Granted to Base Price Rates of Stock Price
Name Granted (#) Employees in ($/Sh) Expiration Date(1) Appreciation for Option
Fiscal Year (%) Term(2)
5% ($) 10% ($)
Robert G. Dutcher 24,000 8.8 14.375 September 24, 2007 216,969 549,841
Robert S. Scott 14,300 5.2 14.375 September 24, 2007 129,277 327,614
Russel E. Carlson 14,300 5.2 14.375 September 24, 2007 129,277 327,614
Irving R. Colacci 14,300 5.2 14.375 September 24, 2007 129,277 327,614
James D. Gustafson 14,600 5.3 14.375 September 24, 2007 131,989 334.487
(1) All option grants shown vest in four equal annual installments
beginning one year following the September 24, 1997 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
Compan'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, 1998, 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 54,000 134,750/55,250 305,663/0
Robert J.Scott 3,000 27,000 80,650/33,350 169,298/0
Russel E. Carlson 1,750 8,312 43,925/33,875 31,375/0
Irving R. Colacci -- -- 51,926/33,500 107,751/0
James D. Gustafson -- -- 40,800/30,400 35,000/0
<FN>
(1) The dollar values shown are calculated by determining the difference
between the fair market value of the common stock underlying the options at
fiscal year-end and the exercise price of the options. The closing price of the
stock on July 31, 1998 was $9.25.
</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 defining and administering the Company's executive compensation policy.
Introduction
The Corporation's compensation program is intended to attract and retain
the highest quality personnel possible consistent with the Corporation's
resources. The current overall compensation program reflects the continuing need
to maintain competitive levels of compensation in the face of a tight job
market, particularly for the highly skilled employees necessary for the
Corporation's continuing growth.
Compensation decisions for fiscal 1998 were guided by the belief that 1998
was a transitional year in the development of the Corporation and in the
development of appropriate criteria to be applied by the Committee in
determining appropriate compensation. While decisions on base salary and on the
types of cash and equity-based compensation awarded continued to be guided by
the general compensation philosophy adopted by the Committee in 1993, the scope
and amounts of such awards reflect a movement toward establishing performance
criteria that are more heavily weighted on financial and commercialization
goals, with relatively less emphasis on research and product development
milestones compared with recent years. As the Corporation commercializes more of
its products, corporate and individual performance measures will reflect a
greater emphasis on meeting financial goals, sales targets, financing
requirements and research and development necessary to support sales growth.
Awards for fiscal year 1998 performance reflect that while the Corporation
did not meet its sales revenue and financial performance goals, it did achieve
satisfactory results relating to research and development, regulatory milestone
and product placement objectives. Total incentive awards for 1998 were,
therefore, substantially similar to 1997, but lower when measured as a
percentage of base salaries.
Program Elements
Compensation of executive management and key managerial and technical
personnel is based on three types of compensation: a) base salaries; b) annual
cash incentives; and c) long term equity-based compensation.
(a) Base Salaries
Base salaries are determined and adjusted consistent with a policy of
rewarding performance and maintaining competitive salary levels necessary to
retain and attract quality personnel. Emerging companies continue to be used for
comparison purposes because the Corporation has not yet achieved profitability.
During the transition to commercialization and in the absence of sizable
revenues and profitable operations, the Corporation does not have the financial
resources to match salaries offered by larger and profitable medical companies.
By augmenting base salary with performance-based incentives and longer term
equity-based compensation, and by offering or 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
awarded based on merit and on the degree of responsibility held by each officer.
Increases are also given, as appropriate, to reflect changes in job
responsibility and authority, and to acknowledge and reward superior
performance. Base salary increases granted January 1, 1998 ranged from 4.3% to
6.7%.
(b) Annual Cash Incentives
The Corporation provides executives with an opportunity to earn annual cash
incentive awards. An Incentive Compensation Plan containing objective guidelines
continues to condition incentive awards on corporate and individual performance.
A revised Plan is expected to be implemented for 1999, following an extensive
review and evaluation of the existing Plan in relation to similarly situated
companies in the medical device industry. The revised Plan will continue
existing compensation philosophies and programs, but will be adjusted to offer
opportunities for awards competitive with similar companies, and to apply
appropriate corporate and individual performance objectives reflecting the
Corporation's transition from an emerging research and development driven
organization to one actively commercializing its products.
Cash incentives 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 incentives were awarded
in September 1998 to 45 employees (excluding the CEO) to reflect fiscal year
1998 performance. The incentive pool of $163,000 was determined by the
Compensation Committee to reflect its evaluation of corporate performance.
Awards granted represented a modest increase over the $160,800 awarded to eight
fewer employees one year ago.
(c) Long-term Equity-based Compensation
The major component of the Corporation's long-term equity-based
compensation program consists of stock options awarded under the Corporation's
1992 Stock Compensation Plan. Stock options are intended by the Committee to
maximize personnel performance and align management interests with that of the
shareholders. Stock options have historically been granted annually to officers
and other key employees based on progress toward achievement of long-term
strategic objectives, technical and regulatory milestones, and Corporate
financial performance goals. Stock option awards in the amount of 215,000 shares
to a total of 45 employees (excluding the CEO) were approved September 1998 to
reward performance during fiscal year 1998 and, significantly, to provide an
incentive toward achievement of specified corporate and individual performance
objectives into the future. The September 1998 awards represent an increase of
eight recipients and 71,200 stock options over one year ago.
The increase in stock option awards reflect the Committee's periodic review
of the size of option grants awarded by other similar companies and an emphasis
on stock options as an incentive for future performance.
The second component of the Corporatio's long-term compensation system is
a restricted stock program originally instituted in June 1993, primarily as a
vehicle to retain key officers. Based on its assessment of the need to utilize
this form of equity compensation to retain key employees in addition to
officers, in light of the Corporation's financial resources and its need 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 3 years. Two additional restricted stock
grants have been made since the initial grants. Future grants will depend on an
assessment of how this type of equity compensation supports the overall
compensation program.
CEO Compensation
Robert G. Dutcher, as President and CEO of the Corporation, participates in
the general compensation program of the Company, as described above, along with
all other key employees. Mr. Dutcher's base salary is set at a level determined
by the Committee to be appropriate for the scope of his responsibilities and his
individual performance as an officer of the Corporation. During 1998, Mr.
Dutcher's base salary was increased 6.7% to recognize favorable individual
performance and increasing responsibilities. Mr. Dutcher received a cash bonus
equal to 31% of base salary and a grant of 24,000 stock options in September
1997 to reward fiscal year 1997 performance. Mr. Dutcher received a cash bonus
of 29% of base salary and 30,000 stock options in September 1998 to reward
corporate and individual performance during fiscal year 1998. 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 above. These cash and equity 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
financial, 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. Current guidelines and objectives
are contained in the Corporatio's 1999-2003 Strategic Plan, as approved by the
Board.
Compensation Committee
of the Board of Directors
Dean Belbas, Chairman
Donald C. Wegmiller
Seymour J. Mansfield
PERFORMANCE GRAPH
Set forth below are two graphs showing the five-year cumulative returns
through July 31, 1998 of Possis Medical, Inc. Common Stock as compared with (1)
Standard and Poor's Medical Products and Supplies Index and Standard and Poor's
500 Stock Index and (2) Nasdaq Stock Market Index (U.S. companies only) and a
peer group index comprised of seven companies in the medical device industry
with operations similar in size to Possis Medical, Inc. (the "Peer Grou"). Both
graphs assume an investment of $100.00 in the Company's Common Stock in each of
the indexes on July 31, 1993, and the reinvestment of all dividends.
In the future, the Company intends to compare the return on its Common
Stock to the Nasdaq Stock Market Index (U.S. companies only) and the Peer Group
Index. Possis Medical, Inc. is included in the Nasdaq Stock Market Index (U.S.
companies only) and is similar in size and stage of commercialization as the
other companies in the Peer Group. The Nasdaq Stock Market Index does not have
an index specifically for medical devices. The Company believes that the
entities comprising the Peer Group are more representative of the Company's
current medical device operations than those much larger entities that comprise
the Standard and Poo's Medical Products and Supplies Index.
The Company will provide shareholders with a list of all companies that
comprise the Peer Group Index upon written request made to the Company at its
principal place of business in Minneapolis, Minnesota.
1993 1994 1995 1996 1997 1998
Possis Medical, Inc. 100.00 61.90 132.14 145.24 136.90 88.10
S&P 500 Index 100.00 105.16 132.62 154.59 235.19 280.54
S&P Medical Products &
Supplies Index 100.00 108.15 171.28 197.45 306.38 387.30
1993 1994 1995 1996 1997 1998
Possis Medical, Inc. 100.00 61.90 132.14 145.24 136.90 88.10
Nasdaq US Index 100.00 102.91 144.52 157.42 232.29 274.14
Peer Group Index 100.00 80.33 183.11 123.90 142.75 123.26
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 1998 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 1998 and written representations from certain reporting
persons, the Corporation believes that, with one exception, all filing
requirements applicable to its Executive Officers and Directors have been
complied with. The Form 3 Initial Statement of Beneficial Ownership of
Securities on behalf of T.V. Rao was not filed within ten days of Mr. Rao's
assumption of duties as an officer of the Corporation. The Corporation is aware
of no person who owns more than 10% of the Corporation's Common Shares.
APPROVE THE ISSUANCE OF COMMON STOCK
UPON CONVERSION OF THE COMPANY'S
SERIES A 5% CONVERTIBLE DEBENTURES DUE JULY 15, 2004
(Proposal Number Two)
On July 15, 1998, the Corporation issued in a private placement (the
"Private Placement") an aggregate principal amount of $12,000,000 of the
Corporatio's Series A 5% Convertible Debentures Due July 15, 2004 (the
"Debentures"). The Debentures are convertible into Common Stock of the
Corporation, subject to certain restrictions, at variable conversion rates. As a
result of the variable conversion price, the number of shares of Common Stock
issuable upon conversion of the Debentures cannot be determined. On July 15,
1998, and based upon the initial conversion price of $14.79, a total of 811,359
shares of Common Stock would have been issuable upon conversion of all of the
outstanding Debentures. If the variable conversion rate were in effect as of
October 16, 1998, the conversion price as of such date would have been $4.7595
per share.
In connection with the Private Placement, the Company also issued to the
holders of the Debentures a total of 110,640 warrants to purchase shares of
Common Stock of the Company, with an exercise price equal to $15.578 per share.
The warrants are exercisable for a period of four years from the date of their
issuance.
The terms of the Debentures require that the Company seek shareholder
approval if the issuance of the number of shares of Common Stock upon conversion
of the Debentures exceeds 20% of the outstanding Common Stock of the Company
(2,450,988 shares as of October 16, 1998). Such shareholder approval is
necessary in order to comply with applicable rules of the Nasdaq Stock Market,
Inc., which limits the Company's ability to issue such shares absent such
approval.
Debentures
The Debentures were issued to certain purchasers pursuant to a Convertible
Debenture Purchase Agreement, dated as of July 14, 1998, and are convertible
into shares of Common Stock. The price at which the Debentures may be converted
and the maximum number of shares available for conversion may vary depending on
the date of the conversion and the trading price of the Common Stock prior to
conversion. Between July 15, 1998 and for a period of 180 days thereafter, the
Debentures are convertible, at the option of the holder thereof, at a price of
$14.79 per share. Between the 181st day and 365th day following July 15, 1998
(the "Second Period"), the Debentures are convertible, at the option of the
holder thereof, at the lesser of $14.79 or the average of the closing bid prices
for any 10 consecutive trading days selected by the holder during a look-back
period consisting of 30 consecutive trading days prior to the date of conversion
(such lesser amount, the "Conversion Price"), subject to a maximum number of
shares of Common Stock available for such conversion equal to the amount
obtained by dividing (x) the total principal amount of Debentures held by such
holder on the first day of the Second Period by (y) 50% of the average closing
bid price for the 10 trading days immediately preceding the commencement of the
Second Period (the "Initial Maximum Share Number"). From and after the 366th day
following July 15, 1998 (the "Third Period"), the Debentures are convertible, at
the option of the holder thereof, at the Conversion Price, subject to a maximum
number of shares of Common Stock available for such conversion (minus any shares
of Common Stock received by the holder upon conversion of Debentures during the
Second Period) equal to the greater of (i) the amount obtained by dividing (x)
the total principal amount of Debentures held by such holder on the first day of
the Second Period by (y) 50% of the average closing bid price of the Common
Stock for the 5 trading days immediately preceding the commencement of the Third
Period, and (ii) the Initial Maximum Share Number.
The Debentures are subject to certain conversion restrictions; for example,
holders of the Debentures may not convert to the extent that such conversion
would result in the holder beneficially owning in excess of 4.999% of the Common
Stock of the Company. In addition, the Debentures are convertible at the option
of the Company, subject to certain conditions. The Debentures are due on or
prior to July 15, 2004, and bear an interest rate of 5% per annum, which is
payable in cash or shares of Common Stock of the Company. The Debentures also
contain certain antidilution protections.
The foregoing is a brief summary of certain of the material terms of the
Debentures and is not intended to be a complete description thereof. For more
complete information regarding the terms of the Debentures, reference should be
made to the documents filed as exhibits to the Corporation's Current Report on
Form 8-K filed on July 24, 1998.
The Board of Directors recommends a vote FOR the proposal to approval the
issuance of Common Stock upon conversion of the Debentures.
APPOINTMENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
(Proposal Number Three)
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 1999 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, 1999,
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: October 30, 1998
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