<PAGE>
EMPI-Registered Trademark-
5255 EAST RIVER ROAD
MINNEAPOLIS, MINNESOTA 55421
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 1996
TO THE SHAREHOLDERS OF EMPI, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of Empi, Inc. (the "Company") will be held at the Minneapolis
Marriott City Center, 30 South Seventh Street, Minneapolis, Minnesota on Monday,
May 6, 1996 at 3:30 p.m. local time, for the following purposes:
1. To set the number of directors at seven (7).
2. To elect two Class One directors to terms expiring in 1999.
3. To approve the Company's 1997 Employee Stock Purchase Plan.
4. To consider and act upon such other business as may properly come
before the Meeting or any adjournments thereof.
Shareholders of record on March 22, 1996, are the only persons entitled to
notice of and to vote at the Meeting and any adjournments thereof.
Information concerning the matters to be acted upon at the Meeting is set
forth in the accompanying Proxy Statement.
A PROXY FOR THE MEETING IS ENCLOSED HEREWITH. IF YOU DO NOT EXPECT TO BE
PRESENT AT THE MEETING, PLEASE FILL IN, SIGN AND DATE THE PROXY, WHICH IS
SOLICITED BY THE BOARD OF DIRECTORS, AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE FOR WHICH NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
Empi, Inc.
Thomas R. King
Secretary
March 27, 1996
<PAGE>
PROXY STATEMENT OF
EMPI-Registered Trademark-
5255 EAST RIVER ROAD
MINNEAPOLIS, MINNESOTA 55421
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 1996
The enclosed proxy is solicited by the Board of Directors of Empi, Inc.
(the "Company") for use at the Annual Meeting of Shareholders (the "Meeting")
to be held on Monday, May 6, 1996, and at any adjournment thereof, for the
purposes set forth in the Notice of Annual Meeting.
The cost of soliciting proxies, including the cost of preparing, assembling
and mailing proxies and soliciting materials, as well as the cost of forwarding
such materials to the beneficial owners of stock, will be borne by the Company.
Directors, officers and regular employees of the Company may, without
compensation other than their regular compensation, solicit proxies personally
or by telephone. The Proxy Statement and accompanying form of Proxy will be
first mailed to shareholders on or about March 27, 1996.
Any shareholder executing a proxy may revoke it at any time prior to its
exercise at the Meeting by giving written notice of such revocation to the
Company's Secretary or any other officer of the Company, by filing a new
written proxy with an officer of the Company or by voting the shares in person
at the Meeting. Proxies will be voted in accordance with the choice specified
thereon by shareholders. Proxies which are signed by shareholders but which
lack specification for a particular proposal will be voted in favor of such
proposal.
The record date for determining the shareholders entitled to vote at the
Meeting was the close of business on March 22, 1996, at which time the Company
had issued and outstanding 8,608,417 shares of Common Stock, no par value, the
only voting securities of the Company. Each shareholder is entitled to one vote
for each share of Common Stock held. The presence at the Meeting in person or
by proxy of the holders of a majority of the outstanding shares of Common Stock
entitled to vote shall constitute a quorum for the transaction of business. 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.
An abstention as to any proposal will therefore have the same effect as a vote
against the proposal. If a broker returns a "non-vote" proxy, indicating 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 be deemed present at the
Meeting for purposes of determining a quorum but shall not be deemed to be
represented at the Meeting for purposes of calculating the vote required for
approval of such matter.
1
<PAGE>
PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP
The following information concerning ownership of the Common Stock of the
Company is furnished as of the record date, March 22, 1996, with respect to (i)
all persons known by the Company to be the owner, of record or beneficially, of
more than 5% of the outstanding Common Stock of the Company; (ii) each of the
directors and nominees for election to the Board of Directors of the Company;
(iii) the executive officers of the Company named in the Summary Compensation
Table as set forth under the caption "Executive Compensation"; and (iv) all
directors and executive officers of the Company as a group. Unless otherwise
indicated, the shareholders listed in the table have sole voting and investment
powers with respect to the shares indicated.
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME (AND ADDRESSES OF 5% BENEFICIALLY COMMON STOCK
OWNERS) OR IDENTITY OF GROUP (1) OWNED OWNERSHIP
--------------------------------------- ---------------- ---------------
<S> <C> <C>
Kopp Investment Advisors, Inc.
6600 France Avenue South, Suite 672
Edina, MN 55435 . . . . . . . . . . . . . . . . . 3,137,510 (10) 36.4%
LeRoy C. Kopp
6600 France Avenue South, Suite 672
Edina, MN 55435 . . . . . . . . . . . . . . . . . 3,268,510 (11) 38.0%
Scott R. Anderson . . . . . . . . . . . . . . . . 3,500 (2) *
Everett F. Carter . . . . . . . . . . . . . . . . 3,875 (2) *
Joseph E. Laptewicz, Jr . . . . . . . . . . . . . 13,388 (3) .2%
Donald D. Maurer . . . . . . . . . . . . . . . . 336,792 (4) 3.9%
Harold G. Olson . . . . . . . . . . . . . . . . . 12,000 (2) .1%
Kenneth F. Tempero. . . . . . . . . . . . . . . . 10,500 (5) .1%
Warren S. West . . . . . . . . . . . . . . . . . 30,050 (6) .4%
Timothy E. Briggs . . . . . . . . . . . . . . . . 94,077 (7) 1.1%
John A. Shipley . . . . . . . . . . . . . . . . . 65,232 (8) .8%
Gary D. Sullivan. . . . . . . . . . . . . . . . . 6,022 (9) *
All directors and executive officers as a
group (thirteen persons) . . . . . . . . . . . . 626,414(12) 7.1%
</TABLE>
_______________________________
* Less than .1%
(1) Each person listed herein except Kopp Investment Advisors, Inc. and LeRoy
C. Kopp is either a nominee or a member of the Board of Directors or an
executive officer of the Company.
(2) Includes for the following persons the number of shares indicated, which
shares are subject to stock options exercisable within 60 days of the
record date: Scott R. Anderson, 2,500; Everett F. Carter, 2,000; and
Harold G. Olson, 2,000.
(3) Includes (a) 10,000 shares issuable pursuant to options exercisable within
60 days of the record date, (b) 2,815 shares held jointly by Mr. Laptewicz
and his spouse and (c) 573 shares held in the Empi, Inc. Retirement, Profit
Sharing and Savings Plan over which Mr. Laptewicz has no voting power.
(4) Includes (a) 62,300 shares issuable pursuant to options exercisable within
60 days of the record date, (b) 1,034 shares held in an Individual
Retirement Account for the benefit of Mr. Maurer's spouse, (c) 9,019 shares
held jointly by Mr. Maurer and his spouse and (d) 3,800 shares owned by Mr.
Maurer's son.
2
<PAGE>
(5) Includes (a) 7,500 shares issuable pursuant to options exercisable within
60 days of the record date and (b) 3,000 shares held in an Individual
Retirement Account for the benefit of Dr. Tempero.
(6) Includes (a) 2,000 shares issuable pursuant to options exercisable within
60 days of the record date, (b) 1,000 shares held in an Individual
Retirement Account for the benefit of Mr. West and (c) 27,050 held in the
Elizabeth A. West Living Trust of which Mr. West's spouse is beneficiary
and co-trustee with Mr. West.
(7) Includes (a) 51,482 shares issuable pursuant to options exercisable within
60 days of the record date, (b) 6,103 shares held in the Empi, Inc.
Retirement, Profit Sharing and Savings Plan over which Mr. Briggs has no
voting power, (c) 1,200 and 600 shares held in Individual Retirement
Accounts for the benefit of Mr. Briggs and his spouse, respectively, (d)
31,242 shares held jointly by Mr. Briggs and his spouse and (e) 200 shares
held by Mr. Briggs as custodian for his minor children.
(8) Includes (a) 33,832 shares issuable pursuant to options exercisable within
60 days of the record date, (b) 6,499 shares held in the Empi, Inc.
Retirement, Profit Sharing and Savings Plan over which Mr. Shipley has no
voting power and (c) 3,973 shares held by Mr. Shipley as custodian for his
minor son. Does not include 12,366 shares beneficially held by Mr.
Shipley's spouse, in which shares all beneficial ownership is disclaimed by
Mr. Shipley.
(9) Includes (a) 5,000 shares issuable pursuant to options exercisable within
60 days of the record date, and (b) 22 shares held in the Empi, Inc.
Retirement, Profit Sharing and Savings Plan over which Mr. Sullivan has no
voting power.
(10) Kopp Investment Advisors, Inc. ("KIA") serves as an investment advisor for
the accounts of individual clients. KIA has the following powers over the
shares indicated: sole voting and dispositive power, 5,000; and shared
dispositive power, 3,132,510.
(11) Includes (a) 75,000 shares held in an Individual Retirement Account for the
benefit of Mr. Kopp, (b) 4,000 shares held by the Kopp Investment Advisors,
Inc. Profit Sharing Plan of which Mr. Kopp is sole trustee, (c) 50,000
shares held by the Caring and Sharing Foundation over which Mr. Kopp has
shared voting and dispositive power and (d) 3,137,510 shares held by Kopp
Investment Advisors, Inc.
(12) Includes in total for the directors and executive officers as a group (a)
214,947 shares issuable pursuant to options exercisable within 60 days of
the record date, (b) 16,916 shares held in the Empi, Inc. Retirement,
Profit Sharing and Savings Plan over which the participants have no voting
power, (c) 6,834 shares held in Individual Retirement Accounts, (d) 27,050
shares held in trust, (e) 48,630 shares held jointly with a spouse and (f)
7,973 shares owned by dependent children.
ELECTION OF DIRECTORS
(PROPOSALS #1 AND #2)
The Bylaws of the Company provide that the Board of Directors shall consist
of not less than three and not more than seven directors and that the number of
directors to be elected shall be determined by the shareholders at each Annual
Meeting. The Bylaws of the Company also provide for the election of three
classes of directors with terms staggered so as to require the election of only
one class of directors each year. Only directors who are members of Class One
will be elected at the Annual Meeting. Directors who are members of Class Two
and Class Three will continue to serve for the terms for which they were elected
at prior Annual Meetings.
Accordingly, the Board recommends that the number of directors be set at
seven and that two Class One directors be elected at the Annual Meeting. Under
applicable Minnesota law, approval of the proposals to set the number of the
directors at seven and elect the Class One directors require the affirmative
vote of the holders of the greater of (i) a majority of the voting power of the
shares represented in person or by proxy at the Annual
3
<PAGE>
Meeting with authority to vote on such matter, or (ii) a majority of the voting
power of the minimum number of shares that would constitute a quorum for the
transaction of business at the Annual Meeting. The Board of Directors nominates
Donald D. Maurer and Dr. Kenneth F. Tempero for reelection as Class One
directors of the Company. If elected, Mr. Maurer and Dr. Tempero will serve for
three-year terms as Class One directors and until their successors are duly
elected and qualified.
Unless authority is withheld, the proxies solicited hereby will be voted
for the election of Donald D. Maurer and Dr. Kenneth F. Tempero as Class One
directors for terms of three years. If, prior to the Annual Meeting, it should
become known that Mr. Maurer or Dr. Tempero will be unable to serve as a
director after the Annual Meeting by reason of death, incapacity or other
unexpected occurrence, the proxies will be voted for such substitute nominees as
are selected by the Board of Directors, or, alternatively, not voted for any to
serve. Following is information about the nominees and all other directors of
the Company.
NAME AND AGE OF PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE
NOMINEES AND PAST FIVE YEARS AND DIRECTORSHIPS DIRECTOR
CURRENT DIRECTORS IN PUBLIC COMPANIES SINCE
----------------- ----------------------------------------- --------
Donald D. Maurer (59) Chairman of the Company since 1979
(Class One, term December 1979 and Chief
ending in 1996) Scientific Officer since October
1994. Chief Executive Officer of
the Company from April 1979 to
September 1994. Mr. Maurer held
the additional position of
President from April 1979 to
December 1988 and from February
1993 to September 1994. Mr.
Maurer is a director of Angeion,
Inc. and Daktronics, Inc.
Dr. Kenneth F. Tempero (56) Chairman and Chief Executive 1993
(Class One, term Officer of MGI PHARMA, INC., an
ending in 1996) acquirer, developer and marketer
of pharmaceuticals, since 1987.
Scott R. Anderson (56) President and Chief Executive 1993
(Class Two, term Officer of North Memorial Medical
ending in 1997) Center, a general, acute medical
center, since 1981.
Joseph E . Laptewicz, (47) President and Chief Executive 1994
(Class Two, term Jr. Officer of the Company since
ending in 1997) October 1994. President and
Chief Executive Officer of
Schneider (USA), Inc.,
manufacturer of products for
interventional medicine from
April 1992 to September 1994 and
Executive Vice President from
July 1991 to March 1992. Vice
President and General Manager of
the Stent Division of Schneider
(USA), Inc. from March 1990 to
June 1991.
Warren S. West (66) Independent management consultant 1980
(Class Two, term since June 1990. Executive Vice
ending in 1997) President from March 1988 to June
1990 of Eye Technology, Inc., a
manufacturer of intraocular
lenses.
Everett F. Carter (68) President and Chief Executive 1985
(Class Three, term Officer of Wadia Digital, Inc., a
ending in 1998) manufacturer of audio equipment,
since August 1991. From 1986 to
1991, an independent consultant
including interim presidencies of
Enercon Data, a producer of
energy and lighting control
systems and Altair International,
a Mt. Clemens, Michigan
manufacturer of electrical
connectors.
Harold G. Olson (72) President of Comelex Corporation, 1985
(Class three, term a rebuilder of compressors for
ending in 1998) industrial and commercial use,
since 1976.
4
<PAGE>
BOARD AND COMMITTEE MEETINGS
The Board of Directors formed Audit and Compensation Committees in March
1984. A Stock Option Committee, which is vested with the same authority as the
Board with respect to the granting of options and the administration of the
Company's stock option plan, was formed in June 1987. The Compensation
Committee, which is responsible for establishing compensation policies and
overseeing compensation plans with respect to both executives and non-employee
directors, and the Stock Option Committee merged in 1992. The Company does not
have a Nominating Committee.
Members of the Audit Committee through 1995 were Scott Anderson and Everett
Carter. Franklin Brown was a member of the Audit Committee through the date of
his resignation, February 9, 1995. The Audit Committee met three times during
1995 to review the procedures and recommendations of the Company's independent
auditors. Since January 1996, members of the Audit Committee are Harold Olson
and Warren West. Members of the Compensation and Stock Option Committee
through 1995 were Harold Olson, Kenneth Tempero and Warren West. During fiscal
year 1995, the Compensation and Stock Option Committee held three meetings and
took action in writing one time. Since January 1996, members of the
Compensation and Stock Option Committee are Scott Anderson, Everett Carter and
Kenneth Tempero.
The Board of Directors held five formal meetings during the last fiscal
year and took action in writing three times. All current directors attended at
least 75% of the aggregate number of meetings of the Board of Directors plus the
meetings of each of the committees on which each director served.
COMPENSATION OF DIRECTORS
Directors who are not full-time employees of the Company receive an annual
retainer of $2,000, a fee of $750 for each Board meeting attended and $200 for
each committee meeting attended.
Pursuant to the Company's 1987 Stock Option Plan, each non-employee
director of the Company is automatically granted an option to purchase 5,000
shares of Common Stock on the date of such non-employee's initial election,
which option is exercisable to the extent of 1,250 shares on each anniversary
date of the date of grant. On the date of each Annual Meeting of Shareholders,
each incumbent non-employee director is automatically granted an option to
purchase 500 shares of the Company's Common Stock ("Annual Grant"), which option
is exercisable on the first anniversary date of the date of grant; provided,
however, that a non-employee director may not receive an Annual Grant until the
Annual Meeting on or following the third anniversary of such non-employee
director's initial election. The automatic options have an exercise price per
share equal to 100% of the fair market value of the Company's Common Stock on
the date of grant and expire on the earlier of (i) three months after the
optionee ceases to be a director (except by death or disability) and (ii) seven
years. If a non-employee director ceases to be a director because of a
disability, the option may be exercised, to the extent such option was
exercisable on the date of termination, at any time within twelve months after
the non-employee director ceases to be a director because of a disability or on
the date on which the option, by its terms, expires, whichever is earlier. In
the event of the death of a non-employee director (i) during the term of
directorship, (ii) within three months following termination of directorship for
any reason other than disability, or (iii) within twelve months following
termination of directorship because of disability, the option shall become
immediately exercisable and shall not expire until the original expiration date
of the option.
EXECUTIVE COMPENSATION
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
PHILOSOPHY
The Compensation and Stock Option Committee of the Board of Directors (the
"Committee") is composed entirely of independent, non-employee directors. The
Committee is responsible for recommending to the Board the amount and type of
compensation, with the exception of base salaries, for the Chief Executive
Officer and each of the other executive officers of the Company, and the
administration of the Company's stock-based benefit plans. Base salaries are
approved by the Committee.
5
<PAGE>
The Committee has implemented a compensation program which it believes is
fair to the shareholders, uses a basic philosophy of keeping the compensation
mix weighted toward performance, and is competitive in the Company's industry.
The goals of the Company's executive compensation program are to provide
compensation that will attract and retain the management talent required to
achieve Company goals and objectives; to reward performance which results in
achievement of Company goals and objectives; and to encourage consistent, long-
term growth in shareholder value.
The Company's executive officer compensation program includes three key
components: base salary, annual cash incentive compensation based on corporate
goals and objectives, and long-term incentive compensation in the form of
options to acquire Common Stock. In addition, executive officers are entitled
to participate in the Company's benefit plans such as the 401(k) Retirement,
Profit Sharing and Savings Plan, the 1992 Employee Stock Purchase Plan and
health, dental, life, and disability insurance plans generally available to
other employees of the Company.
In recognition of Code Section 162(m) of the Internal Revenue Code (the
"IRC"), which limits the deductibility of certain executive compensation to $1
million, the Committee will, to the extent programs can be excluded from the $1
million limit and to the extent no pre-existing, contractual obligations exist,
take the necessary action to secure tax deductibility under the IRC.
BASE SALARY
For 1995, base salaries were recommended to the Committee by the Chief
Executive Officer after consultation with the Company's Vice President of Human
Resources, who determined a salary scale for each executive officer's position
based on commercially available compensation surveys of a mix of high technology
and medical companies of comparable size to the Company. These compensation
surveys include companies located throughout the nation, and generally provide
information pertaining to salary ranges as well as to total compensation ranges.
Based on these surveys, base salaries of the executive officers, including the
Chief Executive Officer, are set slightly below or at the midpoint of their
respective salary ranges. The Committee's philosophy is that a large percentage
of the executive officer's total compensation should be based on the overall
financial performance of the Company.
ANNUAL INCENTIVE COMPENSATION
The Management Incentive Compensation Plan (the "Incentive Plan") is the
Company's annual incentive plan for executive officers and other key management
personnel. The Incentive Plan is intended to provide a direct cash incentive to
executives and managers for the achievement of corporate performance and
individual performance goals. In fiscal 1995, the corporate performance goal
was pre-tax income for the Company as set forth in its annual budget plan. No
incentive is paid for the achievement of individual performance goals unless
certain levels of corporate performance are achieved. The Incentive Plan has
various levels of participants, each with a different incentive amount as a
percentage of their base salary. Potential payouts are then based on the
Company's financial performance, and, for certain levels, the individual's
performance versus a set of personal, measurable objectives, approved by senior
management. Target bonus award levels are set to be competitive within the
Company's industry and to emphasize overachievement.
STOCK OPTION PROGRAM
The stock option program is the Company's long-term incentive plan for
executive officers and other key management personnel. The objective is to
provide incentive to encourage consistent, long-term growth in shareholder
value and to encourage and assist executive officers and other key employees
to acquire and maintain an ownership position in the Company. The Company's
stock option program uses a formula plan developed by an independent
consulting firm to determine the number of options to be granted based on
compensation, individual performance and the market value of the Company's
Common Stock. In addition, in determining the number of options to be
granted to executive officers and other key employees, the Committee takes
into account the number of options then held by such executive officers and
employees. Stock options are also granted from time to time based upon an
individual's potential contributions to Company performance. Named executive
officers received stock option grants to purchase an aggregate of 40,000
shares during fiscal
6
<PAGE>
1995. Generally, stock options are granted at an exercise price equal to fair
market value of the Company's Common Stock on the date of grant, have ten-year
terms and have exercise restrictions which lapse over a four or five year
period.
CHIEF EXECUTIVE OFFICER COMPENSATION
During fiscal 1995, Mr. Laptewicz received a base salary increase of
$6,000, a 3% increase over his 1994 base salary. His base salary at the end of
the 1995 fiscal year was $206,000. Mr. Laptewicz became employed by the Company
on October 1, 1994 and replaced Mr. Maurer as President and Chief Executive
Officer. Mr. Laptewicz earned in fiscal 1995 a bonus of $126,278 in accordance
with the Management Incentive Compensation Plan. Mr. Laptewicz through his
management and leadership of the Company achieved significantly above-average
results in fiscal 1995 in comparison to other companies in the medical device
manufacturing industry. A special one-time bonus of $35,000 was granted to Mr.
Laptewicz at the time of his performance review. Stock options granted to Mr.
Laptewicz during fiscal 1995 are consistent with the design of the overall
program and are shown in the Summary Compensation Table.
Scott R. Anderson, Committee Chairman
Everett F. Carter
Dr. Kenneth F. Tempero
Members of the Compensation and Stock Option
Committee
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years ended December 31,
1995, 1994, and 1993, all cash and noncash compensation paid or to be paid by
the Company to Joseph E. Laptewicz, Jr., the Company's President and Chief
Executive Officer, and to each of the other four most highly compensated
executive officers of the Company whose total cash compensation exceeded
$100,000 during fiscal year 1995 in all capacities in which they served.
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------------
Annual Compensation Awards Payouts
--------------------------------------- ------------------------ ------------
Restricted
Other Annual Stock Options/ LTIP All Other
Name and Principal Fiscal Salary Bonus Compensation Awards SARs Payout Compensation
Position Year ($)(1) ($)(2) ($)(3) ($) (#)(4) ($) ($)(5)
- ----------------------- ------ ------ ------ ------------ ------------ -------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald D. Maurer 1995 216,801 132,899 ----- ----- 25,000 ----- 4,620
Chairman of the 1994 210,486 ----- ----- ----- 35,000 ----- 4,620
Board & Chief 1993 200,463 201,676 ----- ----- 77,400 ----- 4,497
Scientific
Officer (6)
Joseph E.Laptewicz, Jr. 1995 206,000 161,278 ----- ----- 5,000 ----- 4,620
President & Chief 1994 50,000 ----- ----- ----- 200,000 ----- -----
Executive Officer (6)
Timothy E. Briggs 1995 123,241 52,883 ----- ----- 5,000 ----- 3,913
Executive Vice President, 1994 119,652 ----- ----- ----- 13,328 ----- 4,620
Chief Financial Officer, 1993 113,954 80,250 ----- ----- 36,200 ----- 4,336
Treasurer & Ass't Secretary
John A. Shipley 1995 126,821 54,419 ----- ----- 5,000 ----- 4,021
Executive Vice President 1994 126,821 ----- ----- ----- 14,128 ----- 4,620
of Rehabilitation Sales 1993 120,782 85,059 ----- ----- 46,400 ----- 4,497
Gary D. Sullivan 1995 114,583 35,120 ----- ----- 25,000 ----- 992
Vice President of
Marketing (7)
</TABLE>
_______________________________
(1) Includes all before-tax contributions to the Empi, Inc. Retirement, Profit
Sharing and Savings Plan.
(2) Reflects bonus amounts earned pursuant to the Company's Management
Incentive Compensation Plan described above under the caption "Compensation
and Stock Option Committee Report on Executive Compensation." For fiscal
years 1993 and 1995, all of the bonuses earned were paid during the next
fiscal year.
(3) No other Annual Compensation for the named executive officers is required
to be disclosed pursuant to the applicable rules of the Securities and
Exchange Commission.
(4) Represents the number of shares of Common Stock purchaseable upon the
exercise of the stock options. Mr. Sullivan was granted options for
25,000 shares upon initial employment by the Company. Option amounts
reflect the Company's 2-for-1 stock split effective May 28, 1993.
(5) Reflects Company matching contributions to the Empi, Inc. Retirement,
Profit Sharing and Savings Plan, a qualified section 401(k) plan.
(6) Mr. Laptewicz became employed by the Company in October 1994 and replaced
Mr. Maurer as President and Chief Executive Officer. Mr. Maurer assumed
the position of Chief Scientific Officer and continues to serve as Chairman
of the Board.
(7) In February 1995, the Company employed Mr. Sullivan as the Vice President
of Marketing. Mr. Shipley assumed the position of Executive Vice President
of Rehabilitation Sales.
8
<PAGE>
OPTION GRANTS DURING 1995
The following table provides information related to options granted to the
named executive officers during the 1995 fiscal year. The Company has not
granted any stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM (4)
- -------------------------------------------------------------------------------------------------- -----------------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SH)(3) DATE 5% ($) 10% ($)
- ---- ------------- -------------- ----------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald D. Maurer . . . . . . . . . . . . 25,000 (1) 23.35% $8.25 01/17/05 129,710 328,709
Joseph E. Laptewicz, Jr. . . . . . . . . 5,000 (1) 4.67% $8.25 01/17/05 25,942 65,742
Timothy E. Briggs. . . . . . . . . . . . 5,000 (1) 4.67% $8.25 01/17/05 25,942 65,742
John A. Shipley . . . . . . . . . . . . 5,000 (1) 4.67% $8.25 01/17/05 25,942 65,742
Gary D. Sullivan . . . . . . . . . . . . 25,000 (2) 23.35% $7.50 02/01/05 117,918 298,827
</TABLE>
_______________________________
(1) These options were granted on January 17, 1995 and become exercisable at
the rate of 25% per year on each anniversary beginning two years from the
grant date.
(2) These options were granted on February 1, 1995 and will become exercisable
at the rate of 20% per year on each anniversary beginning one year from the
grant date.
(3) Exercise price is the fair market value of the Company's Common Stock,
defined as the closing price on the date the option is granted.
(4) Potential realizable values shown above represent potential gains based
upon annual compound price appreciation of 5% and 10% from the date of
grant through the full option term of ten years. The actual values of
these option grants is dependent upon the future performance of the Company
and its Common Stock and overall market conditions. There is no assurance
that the actual values realized will approximate the amounts reflected in
this table.
OPTION EXERCISES DURING 1995 AND OPTION VALUES AT THE END OF 1995
The following table provides information related to options exercised by the
named executive officers during the 1995 fiscal year and the number and value of
options held at fiscal year-end. The Company does not have any outstanding
stock appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE
OPTIONS AT FY-END (#) MONEY OPTIONS AT FY-END ($)
--------------------------- (1)
----------------------------
SHARES
ACQUIRED ON VALUE REALIZED
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald D. Maurer . . . . . . . ----- ----- 35,700 101,700 323,531 1,359,156
Joseph E. Laptewicz, Jr. . . . ----- ----- 10,000 195,000 173,125 3,378,438
Timothy E. Briggs. . . . . . . ----- ----- 40,100 50,428 722,398 763,550
John A. Shipley. . . . . . . . 9,600 137,896 20,200 50,128 183,063 658,133
Gary D. Sullivan . . . . . . . ----- ----- ----- 25,000 ----- 464,063
</TABLE>
_______________________________
(1) Value realized is equivalent to the fair market value of the Company's
Common Stock at the date of exercise or fiscal year-end, less the exercise
price.
9
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Donald Maurer,
Joseph Laptewicz, Timothy Briggs and John Shipley which provide for compensation
in the event their employment with the Company is terminated under certain
circumstances. The primary provisions of the agreements follow.
MR. MAURER:
Mr. Maurer's May 1, 1993 agreement has a term of five years and provided
for an initial annual base salary of $200,000, subject to annual review by the
Board of Directors. Effective January 1, 1996, Mr. Maurer's annual base salary
increased to $250,000. The agreement provides that in the event the Company
terminates Mr. Maurer's employment without cause, in the event he resigns after
the Company takes certain actions causing substantial detriment to him or in the
event he resigns for any reason within one year of a "Change in Control" as
defined in the employment agreement, Mr. Maurer shall be entitled to receive
cash payments from the date of termination through April 30, 1998 equal to (A)
his base salary and automobile allowance in effect on the date of termination,
payable semi-monthly, and (B) an annual incentive bonus equal to the greater of
(i) the average incentive bonus earned by Mr. Maurer for the last three years of
his employment, or (ii) the amount of annual incentive bonus determined pursuant
to the Company's incentive bonus plan in effect on the date of Mr. Maurer's
termination or resignation. Mr. Maurer shall also be entitled to participate in
all of the Company's benefit plans following termination under the circumstances
described above until April 30, 1998. In addition, upon termination in the
manner described above, Mr. Maurer shall be entitled to exercise fully all
outstanding incentive and nonqualified stock options held by him. For purposes
of determining the period during which Mr. Maurer can exercise such options, his
employment with the Company shall be deemed to continue until April 30, 1998.
MR. LAPTEWICZ:
The initial term of Mr. Laptewicz's October 1, 1994 agreement is two years
with automatic term renewals equal to one year unless such agreement is
terminated earlier as provided in such agreement. The agreement initially
provides for an annual base salary of $200,000 with reviews by the Board of
Directors annually thereafter. Effective January 1, 1996, Mr. Laptewicz's
annual base salary increased to $240,000. If the Company and Mr. Laptewicz are
unable to agree to the terms of a new employment agreement at the expiration of
an employment term, Mr. Laptewicz shall receive severance payments in an
aggregate amount equal to his base salary in effect prior to expiration of the
employment term, payable over a period of twelve months. The agreement provides
that in the event the Company terminates Mr. Laptewicz's employment without
cause prior to October 1, 1996, Mr. Laptewicz shall be entitled to receive his
monthly base salary in effect prior to his termination for a period of eighteen
months. If the agreement is extended beyond October 1, 1996 and Mr. Laptewicz
is terminated by the Company without cause thereafter, he shall be entitled to
receive his monthly base salary in effect prior to his termination for a period
of twelve months. In the event Mr. Laptewicz's employment is terminated in
connection with a "Change in Control," as defined in the employment agreement,
or he voluntarily resigns within one year after such Change in Control, Mr.
Laptewicz shall be entitled to receive two times his annual base salary and the
amount of incentive bonus to which, absent termination of Mr. Laptewicz's
employment, could have been earned by him during the year in which his
employment was terminated. If terminated in connection with a Change in
Control, Mr. Laptewicz shall be entitled to exercise fully all outstanding
incentive and nonqualified stock options held by him. Mr. Laptewicz has agreed
to not compete with the Company for a one-year period following termination of
the agreement for any reason.
MR. BRIGGS AND MR. SHIPLEY:
The one-year employment agreements between the Company and each of Mr.
Briggs and Mr. Shipley dated March 1, 1990 and March 1, 1991, respectively, have
automatic term renewals equal to the original term unless such agreement is
terminated earlier as provided in such agreement. The annual base salary for
1996 for each of Mr. Briggs and Mr. Shipley is $125,000 and $132,000,
respectively. Each agreement provides that in the event the Company terminates
the officer's employment without cause or in the event the officer resigns after
the Company takes certain actions causing substantial detriment to him, the
officer shall be entitled to receive a cash payment equal to the greater of (A)
the sum of his monthly base salary times the number of months remaining under
the agreement and the incentive bonus earned by the officer during the prior
fiscal
10
<PAGE>
year, or (B) the sum of his annual base salary and incentive bonus earned by the
officer during the prior fiscal year. The officer shall also be entitled to
participate in the Company's hospital and medical plans for a one-year period,
or such period as required by law, following termination under the
circumstances described above, provided he pays the employee portion of the
costs. In addition, upon termination in the manner described above, the officer
shall be entitled to exercise fully all outstanding incentive and nonqualified
stock options held by him.
In the event that Mr. Briggs' or Mr. Shipley's employment is terminated in
connection with a "Change in Control," as defined in the employment agreement,
or the officer resigns from his employment after the Company or its successor
takes certain actions causing substantial detriment to him, the officer shall be
entitled to a cash payment equal to two times the sum of (A) the amount of his
annual base salary at the time of termination and (B) the amount of incentive
bonus which, absent termination of his employment, would have been earned by the
officer during the year in which his employment is terminated. If terminated in
connection with a Change in Control, the officer shall be entitled to exercise
fully all outstanding incentive and nonqualified stock options held by him. If
terminated in connection with a Change in Control, the officer shall not be
entitled to participate in employee plans or programs such as hospitalization or
medical insurance plans except in accordance with the Company's customary
practices at the officer's expense. In addition, the total amount to be paid by
the Company to the officer in connection with a Change in Control shall be
reduced to the extent that such amount and any other payments or benefits
received or to be received by him in connection with the Change of Control would
not be deductible in whole or in part by the Company under the parachute payment
provisions of the Internal Revenue Code.
For all of the employment agreements referred to above, a "Change in
Control" generally is deemed to have occurred if (i) any person acquires
securities of the Company representing 25% or more of the voting power of the
Company's then outstanding securities, (ii) a majority of the Company's Board of
Directors becomes comprised of individuals who are not currently members nor
nominated by current members, (iii) the Company merges or consolidates with
another corporation and the Company's securities outstanding before the merger
or consolidation represent less than 75% of the voting power of the securities
outstanding immediately following the merger, or (iv) the Company liquidates
itself or sells or disposes of substantially all of its business or assets.
CERTAIN TRANSACTIONS
The spouse of Timothy E. Briggs, Executive Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary of the Company, is a Senior Vice
President, Director and 4.45% shareholder of Padilla Speer Beardsley ("PSB"), a
public relations firm located in Minneapolis, Minnesota. PSB rendered public
relation services to the Company during fiscal 1995 for which it received
compensation of $113,421 on terms customary in the public relations industry.
The Company intends to continue having PSB perform public relation services in
1996.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than 10%
of the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company.
Upon the receipt of the appropriate information, the Company has prepared
all Forms 3, 4 and 5 for its directors and executive officers subject to their
review and signing prior to filing with the SEC. Based solely on the
information provided to the Company by individual directors and executive
officers, the Company believes that all filing requirements applicable to its
directors and executive officers have been complied with for the fiscal year
ended December 31, 1995, except that Everett Carter, a non-employee director of
the Company, filed one late report for April 1995 covering the acquisition of
375 shares of Common Stock in the open market; and Scott Anderson, a non-
employee director of the Company, filed his annual statement of changes in
beneficial ownership (Form 5) late to report three open market transactions
including the acquisition of 1,000 shares of
11
<PAGE>
Common Stock in January, 1995 and the sale of 500 shares of Common Stock both in
June and September of 1995. These transactions should have been timely reported
on statements of changes in beneficial ownership (Forms 4) throughout 1995. In
all cases, the omissions were inadvertent.
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the S&P 500 Index and an index of peer companies selected by the
Company and approved by the Compensation and Stock Option Committee. The
comparison assumes $100 was invested in the Company's Common Stock, the S&P 500
Index and the index of peer companies on December 31, 1990, and a reinvestment
of all dividends. Companies in the peer group are as follows: Aequitron
Medical, Inc., American Medical Electronics, Inc., Danninger Medical Tech.,
Inc., Maxxim Medical, Inc., Medical Graphics Corp., Mentor Corp., Rehabilicare,
Inc., and Staodyn, Inc.
[GRAPH]
<TABLE>
<CAPTION>
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Empi, Inc. $ 100.00 $ 820.27 $ 918.22 $ 1,016.16 $ 434.62 $ 1,248.78
S&P 500 Index $ 100.00 $ 130.47 $ 140.41 $ 154.56 $ 156.60 $ 215.45
Peer Group $ 100.00 $ 146.30 $ 107.39 $ 127.25 $ 114.71 $ 224.72
-------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
APPROVAL OF THE COMPANY'S 1997 EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL #3)
GENERAL
On February 7, 1996, the Board of Directors adopted the Company's 1997
Employee Stock Purchase Plan (the "1997 Plan") with the first phase to commence
January 1, 1997, subject to shareholder approval. The Board of Directors
believes that the 1997 Plan will offer a desirable incentive for employees and
recommends its approval. The 1997 Plan will provide Company employees an
opportunity to purchase Common Stock from the Company at a favorable price and
with generally favorable tax consequences to its employees. Following
shareholder approval of the 1997 Plan, the Company's 1992 Plan will expire as of
December 31, 1996, and no additional options will be granted thereunder.
A general description of the basic features of the 1997 Plan is presented
below, but such description is qualified in its entirety by reference to the
full text of the 1997 Plan, a copy of which may be obtained without charge upon
written request to Mr. Timothy E. Briggs, the Company's Executive Vice President
and Chief Financial Officer.
DESCRIPTION OF THE PLAN
PURPOSE. The purpose of the 1997 Plan is to encourage stock ownership by
the Company's employees and in doing so, to provide an incentive for the
Company's employees to remain in the Company's employ, to improve operations, to
increase profits and to contribute more significantly to the success of the
Company.
ELIGIBILITY; TERM. The 1997 Plan permits employees to purchase stock of
the Company at a favorable price and possibly with favorable tax consequences
for the employees. Any employee (including officers) of the Company or of
subsidiaries authorized by the Board who has been employed by the Company for at
least 61 days immediately prior to the commencement of a phase and is
customarily employed for more than 20 hours per week is eligible to participate
in any of the five phases. However, any employee who would own (as determined
under the Internal Revenue Code), immediately after the grant of an option,
stock possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company will not be granted an option under the Plan.
As of February 7, 1996, the Company had approximately 517 employees.
The term of the Plan will be for a five-year period, beginning January 1,
1997, and ending December 31, 2001, unless such term is extended by the Board of
Directors. The Plan will operate in phases consisting of 12 months, commencing
January 1 and ending December 31 each year.
ADMINISTRATION. The 1997 Plan is administered by the Compensation and
Stock Option Committee ("the Committee") appointed by the Board consisting of
persons who are "disinterested" persons under Rule 16b-3 of the Securities
Exchange Act of 1934. The 1997 Plan gives broad powers to the Committee to
administer and interpret the 1997 Plan, including the authority to limit the
number of shares that may be optioned during a phase.
OPTIONS. Unless otherwise determined by the Committee, phases of the Plan
will commence January 1 each calendar year with the first phase commencing
January 1, 1997. Before the commencement date of the phase, each participating
employee ("participant") must elect the percentage of his or her compensation
during the phase, from 1% to 10%, which will be used to purchase stock under the
Plan. The participant may elect to have the Company withhold the amount elected
from the participant's compensation over the pay periods during the phase, or
the participant may, in lieu of payroll withholding, choose to pay the total
amount elected in a lump sum payment prior to the end of the phase. The amount
designated may be withdrawn entirely by the participant prior to the exercise of
the options with no penalty. Based on the amount of salary withheld or lump sum
payment made at the end of the phase, shares will be purchased for the account
of each participant at the termination date of such phase (twelve months after
the commencement date). In no event, however, may a participant receive a grant
of shares which would cause the participant to own 5% or more of the common
stock of the Company. The purchase price to be paid by a participant will be
the lower of the amounts determined under the following Paragraphs A and B:
13
<PAGE>
A. 85% of the closing price for the Company's Common Stock as
reported on the NASDAQ National Market System or on an established
securities exchange on the commencement date of the phase; or
B. 85% of the closing price for the Company's Common Stock as
reported on the NASDAQ National Market System or on an established
securities exchange on the termination date of the phase.
In no event may a participant purchase more shares than that number
determined by dividing the aggregate amount to be deducted or paid during the
phase by 85% of the price of the Company's Common Stock on the commencement date
of the phase under Paragraph A above.
As required by tax law, no participant may receive an option under the Plan for
shares which have a fair market value in excess of $25,000 for each calendar
year, determined at the time such option is granted. Any funds not used to
purchase shares will be returned to the participant. No interest is paid by the
Company on funds withheld and such funds are used by the Company for general
operating purposes. No options or shares of Common Stock have been granted to
date under the 1997 Plan.
AMENDMENT. The Board of Directors may, from time to time, revise or amend
the 1997 Plan as the Board may deem proper and in the best interest of the
Company or as may be necessary to comply with Section 423 of the Internal
Revenue Code; provided, that no such revision or amendment may, without prior
approval of the Company's shareholders, (i) increase the total number of shares
for which options may be granted under the Plan except as provided in the case
of stock splits, consolidations, stock dividends or similar events, (ii) impair
any outstanding option, (iii) modify the requirements for eligibility for
participation in the Plan or (iv) materially increase the benefits accruing to
participants in the Plan.
Under the 1997 Plan, 300,000 shares of the Company's Common Stock are
reserved for issuance during the duration of the Plan.
The Board of Directors shall equitably adjust the number of shares
remaining reserved for grant, the number of shares of stock subject to
outstanding options and the price per share of stock subject to an option in the
event of certain increases or decreases in the number of outstanding shares of
Common Stock of the Company effected as a result of stock splits or
consolidations, stock dividends or other transactions in which the Company
receives no consideration.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1997 PLAN. Options granted under
the 1997 Plan are intended to qualify for favorable tax treatment to the
participant under Sections 421 and 423 of the Internal Revenue Code. A
participant's contributions are made on an after-tax basis. The Company
understands that under existing federal income tax provisions, if shares are
purchased pursuant to the 1997 Plan and are not disposed of by the participant
within the two-year period after the date the option was granted nor within the
one-year period after the date of the transfer of the shares to the participant,
and if the participant was an employee of the Company at all times from the date
of grant of the option until three months before the date of exercise of the
option, then the participant will not realize any taxable income until he or she
sells the shares and the Company will generally not be entitled to a deduction
in connection with either the grant or exercise of the option.
PLAN BENEFITS
Because participation in the 1997 Plan is voluntary, the future benefits
that may be received by participating individuals or groups under the 1997 Plan
cannot be determined at this time.
APPROVAL REQUIRED
The Board of Directors recommends that the shareholders approve the 1997
Employee Stock Purchase Plan. The affirmative vote of the holders of the
greater of (i) a majority of the voting power of the shares represented in
person or by proxy at the Annual Meeting with authority to vote on such matter,
or (ii) a majority of the voting power of the minimum number of shares that
would constitute a quorum for the transaction of business at the Annual Meeting
is required for approval of the 1997 Plan.
14
<PAGE>
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP has been the independent auditors of the
Company since January 1981. A representative of Ernst & Young LLP is expected
to be in attendance at the Meeting and will be afforded the opportunity to make
a statement, if desired. The representative will also be available to respond
to appropriate questions.
OTHER BUSINESS
Management knows of no other matters to be presented at the Meeting. If
any other matter properly comes before the Meeting, the appointees named in the
proxies will vote the proxies in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the next Annual Meeting of Shareholders subsequent
to the Meeting for which the Company is presently soliciting proxies must be
received by the Company before November 27, 1996.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1995, accompanies this Notice of Annual Meeting and Proxy
Statement. No part of such Annual Report is incorporated herein, and no part
thereof is to be considered proxy soliciting material.
FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS
AND THE FINANCIAL STATEMENT SCHEDULES THERETO. THE COMPANY WILL FURNISH TO ANY
SUCH PERSON ANY EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING THE FORM 10-K, UPON
THE PAYMENT, IN ADVANCE, OF REASONABLE FEES RELATED TO THE COMPANY'S FURNISHING
SUCH EXHIBIT(S). REQUESTS FOR COPIES OF SUCH REPORT AND/OR EXHIBIT(S) SHOULD BE
DIRECTED TO MR. TIMOTHY E. BRIGGS AT THE COMPANY'S PRINCIPAL ADDRESS.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas R. King
Secretary
Dated: March 27, 1996
St. Paul, Minnesota
15
<PAGE>
EXHIBIT A
PROPOSED 1997 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I - ESTABLISHMENT OF PLAN
1.01) ADOPTION BY BOARD OF DIRECTORS. By action of the Board of Directors
of Empi, Inc. (the "Corporation") on February 7, 1996, and subject to approval
by its shareholders, the Corporation has adopted an employee stock purchase plan
pursuant to which eligible employees of the Corporation and certain of its
Subsidiaries may be offered the opportunity to purchase shares of Stock of the
Corporation. The terms and conditions of the Plan are set forth in this plan
document, as amended from time to time as provided herein. The Corporation
intends that the Plan shall qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended from time to time,
(the "Code") and shall be construed in a manner consistent with the requirements
of Code Section 423 and the regulations thereunder.
1.02) SHAREHOLDER APPROVAL AND TERM. This Plan shall become effective
January 1, 1997, and shall terminate on December 31, 2001; provided, however,
that the Plan shall be subject to approval by the shareholders of the
Corporation within twelve (12) months after the Plan was adopted by the Board
or, if earlier, at the next Annual Meeting of the Shareholders, in the manner
provided under Code Section 423 and the regulations thereunder; and provided,
further, that the Board of Directors may extend the term of the Plan for such
period as the Board, in its sole discretion, deems advisable. In the event that
the shareholders fail to approve the Plan at such annual shareholders' meeting,
this Plan shall not become effective and shall have no force or effect.
ARTICLE II - PURPOSE
2.01) PURPOSE. The primary purpose of the Plan is to provide an
opportunity for Eligible Employees of the Corporation to become shareholders of
the Corporation, thereby providing them with an incentive to remain in the
Corporation's employ, to improve operations, to increase profits and to
contribute more significantly to the Corporation's success.
ARTICLE III - DEFINITIONS
3.01) "ADMINISTRATOR" means the Compensation and Stock Option Committee
(the "Committee") appointed by the Board of Directors. The Administrator may,
in its sole discretion, authorize the officers of the Corporation to carry out
the day-to-day operation of the Plan. In its sole discretion, the Board may
take such actions as may be taken by the Administrator, in addition to those
powers expressly reserved to the Board under this Plan.
3.02) "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of Empi,
Inc.
3.03) "COMPENSATION" means the Participant's gross cash compensation to be
paid during the Phase, including overtime, commissions, bonuses and taxable
automobile allowances, but excluding disability payments, severance pay and
other payments excluded from the definition of "covered compensation" under the
Corporation's Retirement Profit Sharing and Savings Plan.
3.04) "CORPORATION" means Empi, Inc., a Minnesota corporation.
3.05) "DISABILITY" means the Participant's inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than twelve (12)
months, as determined by a physician acceptable to the Corporation or
Subsidiary.
3.06) "ELIGIBLE EMPLOYEE" means any employee who is a full-time or part-
time employee of the Corporation or one of its Subsidiaries and, as of the date
set forth in Section 6.01, has been employed by the Corporation or Subsidiary
for at least thirty (30) days and is customarily employed for more than twenty
(20) hours per week.
16
<PAGE>
3.07) "ENROLLMENT PERIOD" means the period determined by the Administrator
for purposes of accepting elections to participate during a Phase from Eligible
Employees.
3.08) "PARTICIPANT" means an Eligible Employee who has been granted an
option and is participating during a Phase through payroll deductions or by
electing to pay a lump sum amount, subject to the limitations set forth in
Section 9.03.
3.09) "PHASE" means the period beginning on the date that the option was
granted, otherwise referred to as the commencement date of the Phase, and ending
on the date that the option is exercised, otherwise referred to as the
termination date of the Phase. Phases shall be numbered consecutively,
beginning with Phase 1.
3.10) "PLAN" means the Empi, Inc. 1997 Employee Stock Purchase Plan.
3.11) "STOCK" means the voting Common Stock of the Corporation.
3.12) "SUBSIDIARY" or "SUBSIDIARIES" means any corporation defined as a
subsidiary of the Corporation in Code Section 424(f), or any successor
provision, as of the effective date of the Plan, and such other corporations
that qualify as subsidiaries of the Corporation under Code Section 424(f), or
any successor provision, as the Board approves to participate in this Plan from
time to time.
ARTICLE IV - ADMINISTRATION
4.01) ADMINISTRATION. Except for those matters expressly reserved to the
Board pursuant to any provisions of the Plan, the Administrator shall have full
responsibility for administration of the Plan, which responsibility shall
include, but shall not be limited to, the following:
(a) The Administrator shall, subject to the provisions of the Plan,
establish, adopt and revise such rules and procedures for administering the
Plan, and shall make all other determinations as it may deem necessary or
advisable for the administration of the Plan;
(b) The Administrator shall, subject to the provisions of the Plan,
determine all terms and conditions that shall apply to the grant and
exercise of options under this Plan, including, but not limited to, the
number of shares of Stock that may be granted, the date of grant, the
exercise price and the manner of exercise of an option. The Administrator
may, in its discretion, consider the recommendations of the management of
the Corporation when determining such terms and conditions;
(c) The Administrator shall have the exclusive authority to interpret
the provisions of the Plan, and each such interpretation or determination
shall be conclusive and binding for all purposes and on all persons,
including, but not limited to, the Corporation and its Subsidiaries, the
shareholders of the Corporation and its Subsidiaries, the Administrator,
the Board, the officers and the employees of the Corporation and its
Subsidiaries, and the Participants and the respective successors-in-
interest of all of the foregoing; and
(d) The Administrator shall keep minutes of its meetings or other
written records of its decisions regarding the Plan and shall, upon
requests, provide copies to the Board.
ARTICLE V - PHASES OF THE PLAN
5.01) PHASES. The Plan shall be carried out in one or more Phases of
twelve (12) months each. Unless otherwise determined by the Administrator, in
its discretion, Phases shall commence on January 1 of each calendar year during
the term of the Plan, with the first Phase beginning January 1, 1997, and ending
December 31, 1997. No two Phases shall run concurrently.
5.02) LIMITATIONS. The Administrator may, in its discretion, limit the
number of shares available for option grants during any Phase as it deems
appropriate. Without limiting the foregoing, in the event all of the shares of
Stock reserved for the grant of options under Section 12.01 is issued pursuant
to the terms hereof prior to the commencement of one or more Phases or the
number of shares of Stock remaining is so small, in the opinion of the
Administrator, as to render administration of any succeeding Phase
impracticable, such Phase or Phases may be canceled or the number
17
<PAGE>
of shares of Stock limited as provided herein. In addition, if, based on the
payroll deductions or the lump sum payments elected by Participants at the
beginning of a Phase, the Administrator determines that the number of shares of
Stock which would be purchased at the end of a Phase exceeds the number of
shares of Stock remaining reserved under Section 12.01 hereof for issuance under
the Plan, or if the number of shares of Stock for which options are to be
granted exceeds the number of shares designated for option grants by the
Administrator for such Phase, then the Administrator shall make a pro rata
allocation of the shares of Stock remaining available in as nearly uniform and
equitable a manner as the Administrator shall consider practicable as of the
commencement date of the Phase or, if the Administrator so elects, as of the
termination date of the Phase. In the event such allocation is made as of the
commencement date of a Phase, the payroll deductions or lump sum payments which
otherwise would have been made by or on behalf of Participants shall be reduced
accordingly.
ARTICLE VI - ELIGIBILITY
6.01) ELIGIBILITY. Subject to the limitations of Section 9.03, each
employee who is an Eligible Employee on the first of December immediately prior
to the commencement of a Phase shall be eligible to participate in such Phase.
If, in the discretion of the Administrator, any Phase commences on a date other
than January 1, whether an employee is an Eligible Employee shall be determined
on a date selected by the Administrator, which date shall be at least thirty
(30) days prior to the commencement date of the Phase.
ARTICLE VII - PARTICIPATION
7.01) PARTICIPATION. Participation in the Plan is voluntary. An Eligible
Employee who desires to participate in any Phase of the Plan must complete the
Plan enrollment form provided by the Administrator and deliver such form to the
Administrator or its designated representative during the Enrollment Period
established by the Administrator prior to the commencement date of the Phase.
The Administrator may, in its discretion and subject to rules of uniform
application, provide that an Eligible Employee's election to participate in a
Phase shall apply to all subsequent Phases of the Plan.
ARTICLE VIII - PAYMENT
8.01) ENROLLMENT. Each Participant shall designate on the Plan enrollment
form a percentage of such Participant's Compensation to be paid on an after-tax
basis during the Phase. Such percentage shall be at least one percent (1%) but
not more than ten percent (10%) of such Participant's Compensation to be paid
during such Phase, or such other maximum percentage as the Administrator may
establish from time to time, and must be designated in whole percentages. In
order to be effective, such Plan enrollment form must be properly completed and
received by the Administrator by the due date indicated on such form, or by such
other date established by the Administrator. Each Participant shall also
indicate on the Plan enrollment forms whether the percentage of Compensation
elected by such Participant shall be paid by payroll deductions during the Phase
or in a lump sum payment prior to the termination of the Phase. Participants
must elect either payroll deductions or a lump sum payment and not a combination
of both payment methods. Participants cannot change the payment method after
the due date for submitting the Plan enrollment form established by the
Administrator.
8.02) PAYROLL DEDUCTIONS. Payroll deductions for a Participant shall
commence on the first paycheck issued for the payroll period which begins on or
immediately after the commencement date of the Phase and shall terminate on the
last paycheck issued for the payroll period which begins on or immediately prior
to the termination date of that Phase, unless the Participant elects to
discontinue payroll deductions or exercises his or her right to withdraw all
accumulated payroll deductions previously withheld during the Phase as provided
in Article 10 hereof. The authorized payroll deductions shall be made over the
pay periods of such Phase by deducting from the Participant's Compensation for
each such pay period that percentage specified by the Participant in the Plan
enrollment form.
8.03) LUMP SUM PAYMENTS. Unless otherwise determined by the
Administrator, lump sum payments must be received by the Corporation on a date
prior to the termination of the Phase as established by the Administrator, and
must be in such form as approved by the Administrator. If payment is not made
by such due date or is made in an unauthorized form, the option granted pursuant
to Article IX shall lapse in its entirety, and any amounts paid to the
Corporation shall be returned to the Participant, without interest, as soon as
administratively feasible. During the last
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<PAGE>
month of the Phase, a Participant may decrease the percentage of his or her
Compensation designated to be paid in a lump sum payment by completing and
filing such forms as the Administrator may require.
8.04) INCREASES OR DECREASES DURING A PHASE. In addition to the right to
discontinue or withdraw payroll deductions during a Phase as provided in Article
X, a Participant may increase or decrease the percentage of Compensation
designated to be deducted as payroll deductions during a Phase by completing and
filing such forms as the Administrator may require. Such increase or decrease
shall be effective with the next payroll period beginning after the date that
the Administrator receives such forms and shall apply to all remaining
Compensation paid during the Phase. The Participant may exercise the right to
increase or decrease his or her payroll deductions only once during each Phase.
8.05) CHANGE IN COMPENSATION DURING A PHASE. In the event that the
Participant elects to make payroll deductions during a Phase and such
Participant's Compensation is discontinued or reduced during the Phase for any
reason, such that the amount actually withheld on behalf of the Participant as
of the termination date of the Phase is less than the amount anticipated to be
withheld as determined on the commencement date of the Phase, then the extent to
which the Participant may exercise his or her option shall be based on the
amounts actually withheld on his or her behalf. In the event of a change in the
pay period of any Participant, such as from biweekly to monthly, an appropriate
adjustment shall be made to the deduction in each new pay period so as to insure
the deduction of the proper amount authorized by the Participant.
ARTICLE IX - OPTIONS
9.01) GRANT OF OPTION. Subject to Article X, a Participant who has
elected to participate in the manner described in Article VIII and who is
employed by the Corporation or a Subsidiary as of the commencement date of a
Phase shall be granted an option as of such date to purchase that number of
whole shares of Stock determined by dividing the total amount to be credited to
the Participant's account by the option price per share set forth in Section
9.02(a) below. The option price per share for such Stock shall be determined
under Section 9.02 hereof, and the number of shares exercisable shall be
determined under Section 9.03 hereof.
9.02) OPTION PRICE. Subject to the limitations hereinbelow, the option
price for such Stock shall be the lower of the amounts determined under
paragraphs (a) and (b) below:
(a) Eighty-five percent (85%) of the closing price for a share of the
Corporation's Stock as reported on the NASDAQ National Market System or on
an established securities exchange as of the commencement date of the
Phase; or
(b) Eighty-five percent (85%) of the closing price for a share of the
Corporation's Stock as reported on the NASDAQ National Market System or on
an established securities exchange as of the termination date of the Phase.
In the event that the commencement or termination date of a Phase is a
Saturday, Sunday or holiday, or in the event there was no trade of the
Corporation's Stock on such applicable date, the amounts determined under the
foregoing subsections shall be determined using the price as of the last
preceding trading day.
If the Corporation's Stock is not listed on the NASDAQ National Market
System or on an established securities exchange, then the option price shall
equal the lesser of (i) eighty-five percent (85%) of the fair market value of a
share of the Corporation's Stock as of the commencement date of the Phase; or
(ii) eighty-five percent (85%) of the fair market value of such stock as of the
termination date of the Phase. Such "fair market value" shall be determined by
the Board.
9.03) LIMITATIONS. No employee shall be granted an option hereunder:
(a) Which permits his or her rights to purchase Stock under all
employee stock purchase plans of the Corporation or its Subsidiaries to
accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of
fair market value of such Stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding at any
time;
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(b) If such employee would own and/or hold, immediately after the
grant of the option, Stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the
Corporation or of any Subsidiary. For purposes of determining stock
ownership under this paragraph, the rules of Section 424(d), or any
successor provision, of the Code shall apply.
(c) Which, if exercised, would cause the limits established by the
Administrator under Section 5.02 to be exceeded.
9.04) EXERCISE OF OPTION. In addition to a Participant's right of
withdrawal provided in Section 10.01, any Participant may, by written notice to
the Corporation at any time during the last month of the Phase, elect, effective
as of such termination date, not to exercise the option for any or all of the
shares Stock subject to the option or may elect to reduce the amount of
Compensation used to exercise the option, in which event such option shall be
exercised or shall lapse in whole or in part in accordance with the
Participant's election.
If a Participant fails to give such written notice to the Corporation, such
Participant's option for the purchase of the shares of Stock will be exercised
automatically on the termination date of that Phase, subject to the timely and
appropriate receipt of any lump sum payment elected by such Participant. Except
as otherwise provided for lump sum payments in Section 9.05, in no event shall a
Participant be allowed to exercise an option for more shares of Stock than can
be purchased with the payroll deductions accumulated or lump sum payment made by
the Participant during such Phase, whether or not such amounts are less than the
full percentage amount that such Participant elected to contribute at the
beginning of such Phase.
9.05) DELIVERY OF SHARES. As promptly as practicable after the
termination of any Phase, the Corporation's transfer agent or other authorized
representative shall deliver to each Participant herein certificates for that
number of whole shares of Stock purchased upon the exercise of the Participant's
option. The Corporation may, in its sole discretion, arrange with the
Corporation's transfer agent or other authorized representative to establish, at
the direction of the Participant, individual securities accounts to which will
be credited that number of whole shares of Stock that are purchased upon such
exercise, such securities account to be subject to such terms and conditions as
may be imposed by the transfer agent or authorized representative.
Any accumulated payroll deductions or portion of a lump sum payment
remaining after the exercise of the Participant's option shall be returned to
the Participant, without interest; provided, however, that the Corporation may,
under rules of uniform application, retain such remaining amount in the
Participant's bookkeeping account and apply it toward the purchase of shares of
Stock in the next succeeding Phase, unless the Participant requests a withdrawal
of such amount pursuant to Section 10.01.
If the Participant elected to make a lump sum payment and the final amount
of such lump sum payment cannot be determined by the end of the Phase, the
Corporation shall have the right to deduct from the first paycheck issued for
the payroll period which begins on or immediately after the commencement date of
the next Phase any amount that may remain due and payable for the shares of
Stock purchased upon the exercise of the Participant's option.
ARTICLE X - WITHDRAWAL OR DISCONTINUATION
10.01) WITHDRAWAL. At any time during a Phase, a Participant may request
a withdrawal of all accumulated payroll deductions, or during the last month of
the phase may request a withdrawal of all lump sum payments, then credited to
the Participant's bookkeeping account by completing and returning such forms as
the Administrator may require. As soon as administratively feasible after the
Administrator's receipt of such forms, all payroll deductions or lump sum
payments credited to the bookkeeping account for the Participant during that
Phase will be paid to such Participant, without interest. No further lump sum
payments or payroll deductions will be made by or on behalf of the Participant
in any Phase until the Participant completes a new Plan enrollment form as
provided in Section 8.01 above. If, during a Phase, the Participant requests a
withdrawal, the option granted to the Participant under that Phase of the Plan
shall immediately lapse and shall not be exercisable. Partial withdrawals are
not permitted, except as provided in Section 9.04.
10.02) DISCONTINUATION. A Participant may also request that the
Administrator discontinue any further payroll deductions that would otherwise be
made during the remainder of the Phase by completing and filing such forms as
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<PAGE>
the Administrator may require. The Participant's request shall be effective as
of the beginning of the next payroll period immediately following the date that
the Administrator receives such forms. Upon the effective date of the
Participant's request, the Corporation will discontinue making payroll
deductions for such Participant for that Phase.
ARTICLE XI - TERMINATION OF EMPLOYMENT
11.01) DEATH. If a Participant dies prior to the period commencing three
(3) months before the termination date of a Phase, the payroll deductions
credited to the Participant's bookkeeping account for such Phase, if any, shall
be paid to the Participant's validly designated beneficiary as soon as
administratively feasible after the Participant's date of death. If the
Participant elected to make a lump sum payment at the end of the Phase, such
election shall terminate and shall be of no further force and effect. Any
option granted to such Participant under the Plan shall immediately lapse and
shall not be exercisable.
If there is no living and validly designated beneficiary on the date of the
Participant's death, the Corporation shall deliver the payroll deductions
credited to the Participant's bookkeeping account, if any, to the representative
of the Participant's estate. If, to the knowledge of the Corporation, no such
representative has been appointed as of the date such amounts are to be paid,
the Corporation may, in its discretion, pay such amounts to the spouse of the
Participant or to any one or more dependents or relatives of the Participant.
If no such spouse, dependent or relative is known to the Corporation, the
Corporation may, in its discretion, pay such amounts to such other person as the
Corporation may designate.
11.02) DISABILITY. If a Participant's employment terminates with the
Corporation or Subsidiary because of Disability prior to the period commencing
three (3) months before the termination date of a Phase, the payroll deductions
credited to the Participant's bookkeeping account for such Phase, if any, shall
be returned to the Participant, without interest, as soon as administratively
feasible after such termination. If the Participant elected to make a lump sum
payment at the end of the Phase, such election shall terminate and shall be of
no further force and effect. Any option granted to such Participant under the
Plan shall immediately lapse and shall not be exercisable.
If a Participant's employment terminates with the Corporation or Subsidiary
because of Disability during the last three (3) months of a Phase, such
Participant shall remain a Participant hereunder until the earlier of (i) the
Participant's death, and (ii) the termination of the Phase and the distribution
of the shares of Stock and/or cash payments, as the case may be.
11.03) OTHER TERMINATIONS. If a Participant's employment with the
Corporation or Subsidiary terminates for any reason other than death or
Disability prior to the last month of a Phase, the payroll deductions credited
to such Participant's bookkeeping account for such Phase, if any, shall be
returned to the Participant, without interest, as soon as administratively
feasible after such termination. If such Participant elected to make a lump sum
payment at the end of the Phase, such election shall terminate and shall be of
no further force and effect. Any option granted to such Participant under the
Plan shall immediately lapse and shall not be exercisable.
If a Participant's employment terminates with the Corporation or Subsidiary
for any reason other than death or Disability during the last month of a Phase,
such Participant shall remain a Participant hereunder until the earlier of (i)
the Participant's death, and (ii) the termination of the Phase and the
distribution of the shares of Stock and/or cash payments, as the case may be.
11.04) EXERCISE BY ESTATE OR BENEFICIARY. If a Participant:
(a) Dies during the last three (3) months of a Phase while an active
employee;
(b) Terminates employment with the Corporation because of Disability
during the last three (3) months of a Phase and subsequently dies before
the termination of the Phase in which the Participant terminated
employment; or
(c) Terminates employment for any other reason during the last month
of a Phase and subsequently dies before the termination of the Phase in
which the Participant terminated employment;
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<PAGE>
then, in any of such events, the Participant's option may be exercised by the
Participant's validly designated beneficiary as of the termination date of the
Phase by using the payroll deductions credited to the deceased Participant's
bookkeeping account to purchase the shares of Stock or by paying to the Company
in a timely and authorized form the lump sum payment, if any, elected by the
deceased Participant at the commencement of the Phase. If there is no living
and validly designated beneficiary as of the termination date of the Phase, the
option will lapse unexercised on the such termination date; provided, however,
that if a representative of such Participant's estate has been duly appointed on
or before the termination date of the Phase, such representative may exercise
the option on behalf of the Participant's estate. If such beneficiary or
representative, as the case may be, exercises the Participant's option pursuant
to this Section 11.04, the beneficiary or the representative shall have the same
rights to exercise the option in whole or in part on behalf of the Participant
as if the Participant had survived to the termination date of the Phase and
shall be entitled to receive any shares of Stock and/or cash payments as a
result of such exercise.
If the option lapses without exercise pursuant to this Section 11.04, any
payroll deductions credited to the Participant's bookkeeping account as of such
Participant's death will be paid to the representative of the Participant's
estate, without interest, as soon as administratively feasible after the
termination of the Phase. If, to the knowledge of the Corporation, no such
representative has been appointed as of the date such amounts are to be paid,
the Corporation may, in its discretion, pay such amounts to the spouse of the
Participant or to any one or more dependents or relatives of the Participant.
If no such spouse, dependent or relative is known to the Corporation, the
Corporation may, in its discretion, pay such amounts to such other person as the
Corporation may designate.
11.05) DEATH AFTER EXERCISE OF OPTION. In the event a Participant dies
after exercise of the Participant's option but prior to delivery of the Stock
and/or cash payments, as the case may be, as a result of the exercise of the
option, any such Stock and/or cash payments shall be delivered by the
Corporation to the representative of the Participant's estate. If no such
representative has been appointed as of the date such Stock and/or cash payments
are to be delivered, such Stock and/or cash payments shall be held by the
Corporation until it receives written notification from the Participant's estate
of such appointment, at which time such Stock and/or cash payments shall be
delivered to such representative. Notwithstanding the foregoing, if no Stock is
to be transferred, the Corporation may, in its discretion, deliver the cash
payments in accordance with the provisions Section 11.04 as if the Participant
died prior to the exercise of the option and the option lapsed without exercise.
11.06) DESIGNATION OF BENEFICIARY. A Participant may file with the
Corporation a written designation of a beneficiary who is to receive any payroll
deductions credited to the Participant's bookkeeping account under any Phase of
the Plan or who shall have the right to exercise the Participant's option and
become entitled to any Stock and/or cash payments upon such exercise, as the
case may be, as provided in this Article XI. The Participant may change his or
her beneficiary designation at any time by written notice to the Corporation.
The Corporation may, in its discretion, require proof of the identity of a
beneficiary or proof of the existence of a valid beneficiary designation prior
to the delivery of any Stock or cash payments pursuant to this Article XI.
The Corporation will not be responsible for or be required to give effect
to the disposition of any cash payments or Stock or the exercise of any option
in accordance with any will or other testamentary disposition made by such
Participant or in accordance with the provisions of any law concerning
intestacy, or otherwise. No person shall, prior to the death of a Participant,
acquire any interest in any Stock, in any option or in the payroll deductions
credited to the Participant's bookkeeping account during any Phase of the Plan.
11.07) In the event that any Subsidiary ceases to be a Subsidiary of the
Corporation, the employees of such Subsidiary shall be considered to have
terminated their employment for purposes of Section 11.03 hereof as of the date
the Subsidiary ceased to be a Subsidiary of the Corporation.
ARTICLE XII - STOCK RESERVED FOR OPTIONS
12.01) Three Hundred Thousand (300,000) shares of Stock, which may be
authorized but unissued shares of the Corporation (or the number and kind of
securities to which said 300,000 shares may be adjusted in accordance with
Section 14.01 hereof) are reserved for issuance upon the exercise of options to
be granted under the Plan. Shares subject to the unexercised portion of any
lapsed or expired option may again be subject to option under the Plan.
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<PAGE>
12.02) The Participant shall have no rights as a shareholder with respect
to any shares of Stock subject to the Participant's option until the date of the
issuance of a stock certificate evidencing such shares as provided in Section
9.05. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property), distributions or other rights
for which the record date is prior to the date such stock certificate is
actually issued, except as otherwise provided in Section 14.01 hereof.
ARTICLE XIII - ACCOUNTING AND USE OF FUNDS
13.01) Payroll deductions and lump sum payments made by Participants
shall be credited to bookkeeping accounts established by the Corporation for
each such Participant under the Plan. A Participant may not make any other cash
payments into such account. Such account shall be solely for bookkeeping
purposes and shall not require the Corporation to establish any separate fund or
trust hereunder. All funds from payroll deductions and lump sum payments
received or held by the Corporation under the Plan may be used, without
limitation, for any corporate purpose by the Corporation, which shall not be
obligated to segregate such funds from its other funds. In no event shall
Participants be entitled to interest on the amounts credited to such bookkeeping
accounts.
ARTICLE XIV - ADJUSTMENT PROVISION
14.01) Subject to any required action by the shareholders of the
Corporation, in the event of an increase or decrease in the number of
outstanding shares of Stock or in the event the Stock is changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Corporation or another corporation by reason of a reorganization, merger,
consolidation, divestiture (including a spin-off), liquidation,
recapitalization, reclassification, stock dividend, stock split, combination of
shares, rights offering or any other change in the corporate structure or shares
of the Corporation, the Board (or, if the Corporation is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation), in its sole discretion, shall adjust the number and kind of
securities subject to and reserved under the Plan and, to prevent the dilution
or enlargement of rights of those Eligible Employees to whom options have been
granted, shall adjust the number and kind of securities subject to such
outstanding options and, where applicable, the exercise price per share for such
securities.
In the event of the sale by the Corporation of substantially all of its
assets and the consequent discontinuance of its business, or in the event of a
merger, exchange, consolidation, reorganization, divestiture (including a spin-
off), liquidation, reclassification or extraordinary dividend (collectively
referred to as a "transaction"), after which the Corporation is not the
surviving corporation, the Board may, in its sole discretion, provide for one or
more of the following:
(a) The acceleration of the exercisability of outstanding options
granted at the commencement of the Phase then in effect, to the extent of
the accumulated payroll deductions made as of the date of such acceleration
pursuant to Article 8 hereof, and, with respect to those Participants who
elected to make lump sum payments, the opportunity to make all or a portion
of such payments for the exercise of their options;
(b) The complete termination of this Plan and a refund of amounts
credited to the Participants' bookkeeping accounts hereunder; or
(c) The continuance of the Plan only with respect to completion of
the then current Phase and the exercise of options thereunder. In the
event of such continuance, Participants shall have the right to exercise
their options as to an equivalent number of shares of stock of the
corporation succeeding the Corporation by reason of such transaction.
In the event of a transaction where the Corporation survives, then the Plan
shall continue in effect, unless the Board takes one or more of the actions set
forth above. The grant of an option pursuant to the Plan shall not limit in any
way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes in its capital or business
structure or to merge, exchange or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
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ARTICLE XV - NONTRANSFERABILITY OF OPTIONS
15.01) Options granted under any Phase of the Plan shall not be
transferable and shall be exercisable only by the Participant during the
Participant's lifetime. After the Participant's death, the option shall be
exercisable only by the Participant's validly designated beneficiary or the
representative of the Participant's estate as provided in Article XI.
15.02) Neither payroll deductions granted to a Participant's account, nor
any rights with regard to the exercise of an option or to receive Stock under
any Phase of the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way by the Participant. Any such attempted assignment,
transfer, pledge or other disposition shall be null and void and without effect,
except that the Corporation may, at its option, treat such act as an election to
withdraw in accordance with Section 10.01.
ARTICLE XVI - AMENDMENT AND TERMINATION
16.01) The Plan may be terminated at any time by the Board of Directors,
provided that, except as permitted in Section 14.01 hereof, no such termination
shall take effect with respect to any options then outstanding. The Board may,
from time to time, amend the Plan as it may deem proper and in the best
interests of the Corporation or as may be necessary to comply with Code Section
423, or any successor provision, or other applicable laws or regulations;
provided, however, no such amendment shall, without the consent of a
Participant, materially adversely affect or impair the right of a Participant
with respect to any outstanding option; and provided, further, that no such
amendment shall, unless the shareholders of the Corporation have approved the
same, directly or indirectly:
(a) Increase the total number of shares for which options may be
granted under the Plan (except as provided in Section 14.01 herein);
(b) Modify the group of Subsidiaries whose employees may be eligible
to participate in the Plan or materially modify any other requirements as
to eligibility for participation in the Plan; or
(c) Materially increase the benefits accruing to Participants under
the Plan.
ARTICLE XVII - NOTICES
17.01) All notices, forms, elections or other communications in
connection with the Plan or any Phase thereof shall be in such form as specified
by the Corporation from time to time, and shall be deemed to have been duly
given when received by the Participant or his or her personal representative or
by the Corporation or its designated representative, as the case may be.
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[LOGO]
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS--MAY 6, 1996
The undersigned, a shareholder of Empi, Inc. hereby appoints JOSEPH E.
LAPTEWICZ, JR. and TIMOTHY E. BRIGGS and each of them as proxies with full power
of substitution, to vote on behalf of the undersigned the number of shares which
the undersigned is then entitled to vote, at the Annual Meeting of the
Shareholders of Empi, Inc. to be held at the Minneapolis Marriott City Center,
30 South Seventh Street, in Minneapolis, Minnesota on Monday, May 6, 1996 at
3:30 p.m. local time, and at any and all adjournments thereof with all the
powers the undersigned would possess if personally present, upon the matters
indicated below.
(1) Set the number of directors at seven:
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C>
(2) Election of / / For all nominees (except as / / WITHHOLD AUTHORITY to vote
Directors: marked to the contrary below) for all nominees listed below
</TABLE>
Class One, three year term: Donald D. Maurer and Dr. Kenneth F. Tempero
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST ABOVE.)
(3) Approval of the Company's 1997 Employee Stock Purchase Plan
/ / FOR / / AGAINST / / ABSTAIN
(4) OTHER MATTERS: In their discretion, the appointed proxies are authorized to
vote upon such other business as may properly come before the meeting or any
adjournment thereof.
<PAGE>
The undersigned hereby revokes all previous proxies relating to the shares
covered hereby and acknowledges receipt of the Notice and Proxy Statement
relating to the Annual Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS. It will be
voted on the proposals set forth on
this form as directed by the
shareholder, but IF NO DIRECTION IS
GIVEN for a particular proposal, it
will be voted FOR such proposal.
Dated ___________________________, 1996
_______________________________________
_______________________________________
(Shareholder must sign exactly as the
name appears at left. When signed as a
corporate officer, executor,
administrator, trustee, guardian, etc.,
please give full title as such. Both
joint tenants must sign.)
