<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MINNTECH CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
--------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount Previously Paid:
--------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------
3) Filing Party:
--------------------------------------------------------------------
4) Date Filed:
--------------------------------------------------------------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
MINNTECH -REGISTRATION MARK-
14605 28TH AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55447
------------------------
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held at the Lutheran Brotherhood Auditorium, 625 Fourth Avenue South,
Minneapolis, Minnesota, at 3:30 p.m., Central Daylight Time, on August 26, 1998.
The Notice of Annual Meeting of Stockholders and the Proxy Statement that
follow describe the business to be conducted at the meeting. We will also report
on matters of current interest to our stockholders.
Whether you own a few or many shares of stock, it is important that your
shares be represented. If you cannot personally attend, we encourage you to make
certain that you are represented at the meeting by signing the accompanying
proxy and promptly returning it in the enclosed envelope.
Sincerely,
/s/ Thomas J. McGoldrick
Thomas J. McGoldrick
PRESIDENT AND CHIEF EXECUTIVE OFFICER
July 24, 1998
<PAGE>
MINNTECH -REGISTRATION MARK-
14605 28TH AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55447
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, AUGUST 26, 1998
---------------------
The Annual Meeting of Stockholders of Minntech Corporation will be held at
the Lutheran Brotherhood Auditorium, 625 Fourth Avenue South, Minneapolis,
Minnesota at 3:30 p.m., Central Daylight Time, on Wednesday, August 26, 1998,
for the following purposes:
1. To elect three directors for three-year terms each.
2. To consider and act upon a proposal to approve an amendment to the
Company's Restated Articles of Incorporation to increase the authorized
number of shares of common stock from 10,000,000 shares to 20,000,000
shares.
3. To consider and act upon a proposal to approve the Minntech Corporation
1998 Stock Option Plan.
4. To consider and act upon a proposal to amend the Minntech Corporation
1990 Employee Stock Purchase Plan to extend its term for an additional
five years.
5. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent accountants of the Company for the fiscal year ending March
31, 1999.
6. To transact such other business as may properly come before the meeting.
Pursuant to due action of the Board of Directors, stockholders of record on
July 10, 1998 will be entitled to vote at the meeting or any adjournments
thereof.
By Order of the Board of Directors
/s/ Barbara A. Wrigley
Barbara A. Wrigley
SECRETARY
July 24, 1998
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY ON THE ENCLOSED PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON.
STOCKHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON
IF THEY DESIRE.
<PAGE>
PROXY STATEMENT
OF
MINNTECH CORPORATION
14605 28TH AVENUE NORTH, MINNEAPOLIS, MINNESOTA 55447
------------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
AUGUST 26, 1998
------------------------
PROXIES AND VOTING
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Minntech Corporation (the "Company") to be
used at the Annual Meeting of Stockholders of the Company to be held August 26,
1998. The approximate date on which this Proxy Statement and accompanying proxy
were first sent or given to stockholders was July 24, 1998. Each stockholder who
signs and returns a proxy in the form enclosed with this Proxy Statement may
revoke the same at any time prior to use by giving notice of such revocation to
the Company in writing or in open meeting. Unless so revoked, the shares
represented by such proxy will be voted at the meeting and at any adjournment or
adjournments thereof. Presence at the meeting of a stockholder who has signed a
proxy does not alone revoke the proxy. Only stockholders of record at the close
of business on July 10, 1998 will be entitled to vote at the meeting or any
adjournment or adjournments thereof.
Under Minnesota law, each item of business properly presented at a meeting
of stockholders generally must be approved by the affirmative vote of the
holders of a majority of the voting power of the shares present, in person or by
proxy, and entitled to vote on that item of business. However, if the shares
present and entitled to vote on that item of business would not constitute a
quorum for the transaction of business at the meeting, then the item must be
approved by a majority of the voting power of the minimum number of shares that
would constitute such a quorum. Votes cast by proxy or in person at the Annual
Meeting of Stockholders will be tabulated by the election inspectors appointed
for the meeting and such inspectors will determine whether or not a quorum is
present. The election inspectors will treat abstentions as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum and in tabulating votes cast on proposals presented to stockholders for a
vote but as not being voted for the approval of the matter from which the
stockholder abstains. Consequently, an abstention will have the same effect as a
negative vote. If a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to that matter.
The Company has outstanding only one class of voting securities, common
stock, $.05 par value. As of the close of business on the record date, July 10,
1998, 6,825,009 shares of common stock were outstanding. Each share of common
stock is entitled to one vote. There is not cumulative voting for the election
of directors.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERSHIP AND MANAGEMENT
The following table sets forth certain information concerning the beneficial
ownership of the common stock of the Company as of July 10, 1998 with respect to
(i) all persons known by the Company to be the beneficial owners of more than 5%
of the outstanding common stock of the Company, (ii) each director of the
Company, (iii) each executive officer named in the Summary Compensation Table on
page 6, and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
BENEFICIAL OWNER OWNED(1) SHARES
- ------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Heartland Advisors (2) 1,099,400 16.1
790 North Milwaukee St.
Milwaukee, WI 53202
The Kaufman Fund, Inc. (2) 700,000 10.3
140 East 45th Street
New York, NY 10017
Wellington Management (2) 660,000 9.7
75 State Street
Boston, MA 02109
T. Rowe Price Associates, Inc. (3) 645,000 9.5
100 East Pratt Street
Baltimore, Maryland 21202
Louis C. Cosentino 328,018 4.6
Thomas J. McGoldrick 175,172 2.5
Fred L. Shapiro, M.D. 158,867 2.3
George Heenan 119,969 1.7
Donald H. Soukup 111,307 1.6
Daniel H. Schyma 91,290 1.3
Amos Heilicher 90,246 1.3
Richard P. Goldhaber 76,574 1.1
Barbara A. Wrigley 50,750 *
Norman Dann 30,120 *
Paul E. Helms 15,760 *
Malcolm W. McDonald 351 *
William Hope -- *
All directors and executive officers as a
group (15 persons) 1,307,924 16.7
</TABLE>
- ------------------------
* Less than one percent.
(1) Includes shares subject to currently exercisable options as follows: Dr.
Cosentino, 302,029 shares; Mr. McGoldrick, 125,000 shares; Dr. Fred Shapiro,
56,240 shares; Mr. Heenan, 70,300 shares;
2
<PAGE>
Mr. Soukup, 70,300 shares; Mr. Schyma, 90,000 shares; Mr. Heilicher, 56,240
shares; Mr. Goldhaber, 70,000 shares; Ms. Wrigley, 50,750 shares; Mr. Dann,
28,120 shares; Mr. Helms, 15,000 shares; and all directors and executive
officers as a group, 986,979 shares.
(2) Information is based on Schedule 13G filed with the Securities and Exchange
Commission dated as of December 31, 1997.
(3) These securities are owned by various individual and institutional
investors, including T. Rowe Price Small Cap Value Fund, Inc. (which owns
645,000 shares, representing 9.5% of the outstanding shares), which R. Rowe
Price Associates, Inc. ("Price Associates") serves as investment adviser
with power to direct investments and/or sole power to vote the securities.
Price Associates expressly disclaims beneficial owner of such securities.
3
<PAGE>
ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation provide for the election of
approximately one-third of the Board of Directors annually. Accordingly, three
directors are to be elected at this year's annual meeting for terms expiring in
the year 2001. Set forth below is certain information with respect to each
person nominated by the Board of Directors and each person whose term of office
will continue after the meeting:
<TABLE>
<CAPTION>
DIRECTOR PRESENT TERM
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS SINCE EXPIRES
- --------------------------------- ------------------------------------------------------ ----------- ---------------
<S> <C> <C> <C>
NOMINEES:
Norman Dann (71) Consultant. Director of Medwave Inc. and several 1995 1998
private companies.
William Hope (65) Chief Executive Officer, President and a director of 1998 1998
G&K Services, Inc., an international supplier of
uniforms and specialty garments. Mr. Hope has been
Chief Executive Officer of G&K Services, Inc. since
January 1997, President since 1993 and a director
since 1983. Mr. Hope was the Vice President
Operations of G&K Services, Inc. from 1977 to 1993,
General Manager from 1969 to 1977 and controller
from 1965 to 1969.
Malcolm W. McDonald (61) Director and Vice President of Space Center, Inc., a 1998 1998
real estate consulting and advisory firm, since
1977. Mr. McDonald is also a director of several
private companies and a director or trustee of
several nonprofit organizations.
CONTINUING DIRECTORS:
Fred L. Shapiro, M.D. (63) Chairman of the Board of the Company. Consultant to 1982 1999
Hennepin Faculty Associates, a nonprofit
organization involved in medical education, research
and patient care, since June 1995. President of
Hennepin Faculty Associates from January 1984 to
June 1995. Medical Director of the Regional Kidney
Disease Program from 1966 to January 1984. Professor
of Medicine at Hennepin County Medical Center and
the University of Minnesota. Dr. Shapiro is the
nephew by marriage of Amos Heilicher. Dr. Shapiro is
also a director of MediJect, Inc.
Donald H. Soukup (57) Independent venture capitalist since 1984. Mr. Soukup 1980 1999
is also a director of Ciprico, Inc. and several
private companies.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR PRESENT TERM
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS SINCE EXPIRES
- --------------------------------- ------------------------------------------------------ ----------- ---------------
<S> <C> <C> <C>
George Heenan (58) Director and Executive Fellow of the Institute of 1982 2000
Venture Management at the University of St. Thomas
since September 1994. President of Bissell
Healthcare Corporation, North American Operations, a
manufacturer and distributor of medical products,
from February 1991 to August 1994. Chairman of
Clarus Medical Systems, Inc., a manufacturer of
diagnostic and interventional endoscopes, from May
1987 to February 1991. Mr. Heenan has also been a
principal of Heenan Investments, Inc., a venture
development and investment company, since January
1986.
Amos Heilicher (80) President of Advance Carter Co., a distributor of 1982 2000
coin-operated machines, and Advance Realty Co. for
more than five years. Mr. Heilicher is also the
director of a private company. Mr. Heilicher is the
uncle by marriage of Fred L. Shapiro.
Thomas J. McGoldrick (57) President and Chief Executive Officer of the Company 1997 2000
since March 1997; Acting President and Chief
Executive Officer from January 1997 to March 1997;
Executive Vice President from June 1995 to January
1997; and Vice President Corporate Development from
March 1985 to June 1995.
</TABLE>
All shares represented by proxies will be voted for the election of Mr.
Dann, Mr. Hope and Mr. McDonald except as otherwise provided therein. If a
nominee should withdraw or otherwise become unavailable for reasons not
presently known, such shares may be voted for another person in the place of
such nominee in accordance with the best judgment of the persons named in the
proxy.
The Board of Directors had 16 meetings during the last fiscal year. Each
director participated in at least 75% of the meetings of the Board of Directors
and any committees on which such person served.
COMMITTEES
The Board of Directors has established an Audit Committee, a Compensation
Committee and an Acquisitions Committee. The Board does not have a Nominating
Committee.
The Audit Committee consists of two non-employee directors, Donald H. Soukup
and Norman Dann, and is responsible for matters relating to accounting policies
and practices, financial reporting and internal controls. The Audit Committee
held one meeting during the last fiscal year.
The Compensation Committee consists of three non-employee directors, George
Heenan, Amos Heilicher and Fred L. Shapiro, M.D., and is responsible for making
recommendations to the Board of Directors concerning the amount and form of
compensation paid by the Company to its executive officers and members of the
Board of Directors. The Compensation Committee held one meeting during the last
fiscal year.
5
<PAGE>
The Acquisitions Committee consists of two non-employee directors, Amos
Heilicher and Donald H. Soukup, and is responsible for the review, evaluation
and proposal to the Board of Directors of possible mergers, acquisitions and
other business combinations on behalf of the Company. The Acquisitions Committee
did not meet during the last fiscal year.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending March 31, 1998, 1997
and 1996, the cash compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to Thomas J. McGoldrick, the
Company's President and Chief Executive Officer, and to each of the other four
most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
FISCAL YEAR ANNUAL COMPENSATION -------------
ENDED MARCH ---------------------- STOCK ALL OTHER
NAME AND POSITION 31 SALARY BONUS OPTIONS(1) COMPENSATION(2)
- ------------------------------------------- ------------- ---------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Thomas J. McGoldrick 1998 $ 225,000 $ 126,563 40,000 $ 18,176
President and Chief 1997 159,994 -- 40,000 557
Executive Officer 1996 151,200 -- 40,000 900
Richard P. Goldhaber 1998 $ 206,856 $ 116,357 20,000 $ 16,282
Vice President Research & 1997 202,650 -- 20,000 --
Development 1996 195,000 -- 40,000 --
Daniel H. Schyma 1998 $ 158,000 $ 88,875 20,000 $ 13,496
Vice President 1997 125,046 -- 20,000 780
Sales & Marketing 1996 119,200 -- 40,000 900
Barbara A. Wrigley 1998 $ 173,000 $ 64,875 20,000 $ 12,633
Vice President, General 1997 144,118 -- 20,000 764
Counsel and Secretary 1996 120,000 -- 40,000 900
Paul E. Helms (3) 1998 $ 163,700 $ 61,201 20,000 $ 28,939(4)
Sr. Vice President Operations 1997 101,538 -- 20,000 15,588(4)
</TABLE>
- ------------------------
(1) Number of shares purchasable under stock option grants. Options granted in
fiscal 1996 include options granted with respect to fiscal 1995 all of which
were repriced in fiscal 1997, including options to purchase 40,000 shares
held by each of Messrs. McGoldrick, Goldhaber, Schyma and Ms. Wrigley.
(2) Except as otherwise noted, includes profit sharing contributions and/or
401(k) matching contributions under the Company's Profit Sharing and
Retirement Plan. See "Report of the Compensation Committee."
(3) Mr. Helms commenced his employment with the Company on August 5, 1996.
(4) Includes for fiscal years 1997 and 1998 amounts reimbursed to Mr. Helms for
moving and temporary living expenses.
6
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1998 Stock Option Plan during fiscal 1998 to the
named executive officers of the Company identified in the Summary Compensation
Table above.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED RATES
OPTIONS GRANTED OF STOCK PRICE
TO EMPLOYEES IN APPRECIATION FOR
NUMBER OF FISCAL YEAR OPTION TERM(2)
SHARES ENDED EXERCISE EXPIRATION ----------------------
NAME GRANTED(1) MARCH 31, 1998 PRICE DATE 5% 10%
- -------------------------- ----------- ---------------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. McGoldrick 40,000 10.99% $ 12.375 3/24/08 $ 311,400 $ 789,000
Richard P. Goldhaber 20,000 5.48% 12.375 3/24/08 155,700 394,500
Daniel H. Schyma 20,000 5.48% 12.375 3/24/08 155,700 394,500
Barbara A. Wrigley 20,000 5.48% 12.375 3/24/08 155,700 394,500
Paul E. Helms 20,000 5.48% 12.375 3/24/08 155,700 394,500
</TABLE>
- ------------------------
(1) Fifty percent of each option becomes exercisable on September 24, 1998, the
remaining shares become exercisable in four equal installments on March 24,
1999, 2000, 2001 and 2002. The options have a ten-year term and were granted
at the fair market value of the Company's common stock on the date of grant.
(2) Potential realized values shown above represent the potential gains based
upon annual compound price appreciation of 5% and 10% from the date of grant
through the full option term. The accrual value realized, if any, on stock
option exercises will be dependent upon overall market conditions and the
future performance of the Company and its common stock. There is no
assurance that the actual value realized will approximate the amounts
reflected in this table.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the named
executives concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year.
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT MARCH 31, 1998 AS OF MARCH 31, 1998(2)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. McGoldrick 22,500 $ 166,883 125,000 85,000 $ 236,250 $ 115,625
Richard P. Goldhaber -- -- 65,000 55,000 127,813 77,188
Daniel H. Schyma -- -- 85,000 55,000 177,813 77,188
Barbara A. Wrigley -- -- 45,750 55,000 90,516 77,188
Paul E. Helms -- -- 10,000 50,000 21,250 67,500
</TABLE>
- ------------------------
(1) Market value of shares covered by options exercised on the date of exercise,
less option exercise price.
(2) Market value of shares covered by in-the-money options on March 31, 1998,
less option exercise price. Options are in-the-money if the market value of
the shares covered thereby is greater than the option exercise price. Market
price was $12.653 per share on March 31, 1998.
7
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into agreements with its executive officers,
including the executive officers named in the Summary Compensation Table above,
which provide for a lump sum cash severance payment equal to an amount of $1
less than three times the executive's average annual compensation for the
preceding five year period or, if less, the period of the executive's employment
with the Company, plus fringe benefits, in the event of a "change of control" of
the Company. The maximum amounts currently payable to the named executives in
the event of a change of control are as follows: Mr. McGoldrick, $845,312; Mr.
Goldhaber, $633,859; Mr. Schyma, $454,890; Ms. Wrigley, $447,479; and Mr. Helms,
$559,011. The agreements are in effect until September 1, 1998. The agreements
automatically renew for additional periods of one year after the end of the
effective period until notice of termination of the agreement is given to the
executive by the Company. Such notice must be given by the Company within 60
days prior to the expiration of the original term of the agreement or the annual
renewal period then in effect. If a change in control of the Company occurs
during the original term of the agreement or any renewal term then in effect,
the severance payments are due any executive who either is involuntarily
terminated by the Company or voluntarily terminates his or her employment after
a reduction in his or her duties, compensation or fringe benefits which occurs
within the 36-month period following the change of control. Under the agreement,
each executive agrees to remain with the Company for 90 days following a change
of control to assist the transition, after which time the executive may, during
the next 90 days, voluntarily terminate his or her employment and receive 50% of
such severance payment.
DIRECTOR COMPENSATION
All non-employee directors received an annual fee of $8,000 (provided such
directors attended at least 75% of all meetings of the Board of Directors during
the fiscal year) and also received $1,000 for each full meeting attended in
fiscal 1998. All directors received $750 for each committee meeting attended.
Directors and their spouses are reimbursed for all travel expenses incurred in
connection with attendance at meetings of the Board of Directors. Effective
April 1, 1998, the Board of Directors approved an increase in the annual fee to
$10,000.
Effective April 1, 1995, the Company adopted the Emeritus Director
Consulting Plan (the "Plan"). The Plan has been adopted to enable the Company to
continue to utilize the expertise of directors after retirement. Non-employee
directors who have served on the Board of Directors for five full consecutive
years are eligible for, and in the event of a change in control of the Company
are, subject to certain exceptions entitled to, participation in the Plan. An
annual fee equal to the annual retainer in effect at the time of the director's
retirement will be paid in consideration for consulting services to be provided
to the Company following the director's retirement. Determination of eligibility
and participation in the Plan will be made annually. The length of participation
in the Plan will be limited to the number of years of service on the Board of
Directors. There are presently no directors participating in the Plan.
The Company's 1989 Stock Plan (the "1989 Plan") provides for the annual,
automatic granting of a defined number of options to non-employee directors at
the last regularly scheduled meeting of the Board of Directors during the fiscal
year. Such options are granted to each director who (a) is not an employee of
the Company and who (i) is elected or reelected as a director by the
stockholders at any annual or special meeting of the stockholders or (ii) is
serving an unexpired term as a director, on the date of the last regularly
scheduled meeting of the Board of Directors during the fiscal year, and (b) at
the time of any such meeting, has served as a director for at least six months
of the year preceding the date of such meeting. The 1989 Plan provides that each
such director shall, as of the date of the applicable meeting, automatically
receive a non-qualified option to purchase 7,030 shares of the Company's common
stock, with the option price equal to the fair market value of the Company's
common stock on such date. Non-employee directors as a group from April 1, 1997
through March 31, 1998 were granted options under the 1989 Plan to purchase
49,210 shares at an exercise price of $12.625 per share. Upon the approval of
the
8
<PAGE>
1998 Stock Option Plan, the Board of Directors intends to provide non-employee
directors with future annual grants under that plan rather than under the 1989
Plan.
REPORT OF THE COMPENSATION COMMITTEE
OVERVIEW
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for establishing compensation policies for all executive officers of
the Company, including the five most highly compensated executive officers named
in the accompanying tables (the "Named Executives"). The Committee establishes
the total compensation for the executive officers in light of these policies.
The Committee is composed entirely of non-employee directors.
The following report addresses the Company's executive compensation policies
and discusses factors considered by the Committee in determining the
compensation of the Company's President and Chief Executive Officer and other
executive officers for its fiscal year ended March 31, 1998.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The Committee's executive compensation policies are designed to provide
competitive levels of compensation that integrate pay with the Company's annual
and long-term performance goals, reward above-average corporate performance,
recognize individual initiative and achievements, and assist the Company in
attracting and retaining qualified executives. To that end, the Committee has
established certain parameters of corporate performance that must be met before
the discretionary features of its executive compensation plans apply. These
discretionary features include stock option grants and performance bonuses,
which are from 50% to 75% of an executive officer's base salary. Absent the
discretionary features, the Company's executive officers are paid base salaries
that are subject to annual cost-of-living increases, along with periodic
adjustments to make such salaries competitive with other similar sized companies
in the medical device industry. The Company's executive officers are also given
the opportunity to participate in certain other broad-based employee benefit
plans. As the result of the Company's increased emphasis on tying executive
compensation to corporate performance, in any particular year the Company's
executives may be paid more or less than the executives of other companies in
the medical device industry. The Company's use of stock option grants as a key
component of its executive compensation plans reflects the Committee's position
that stock ownership by management and stock-based compensation arrangements are
beneficial in aligning management's and stockholders' interests to enhance
stockholder value.
RELATIONSHIP OF PERFORMANCE UNDER THE COMPENSATION PLANS
Compensation paid to the Company's executive officers in fiscal 1998, as
reflected in the Summary Compensation Table above as to the Named Executives,
consisted of base salary and bonuses paid pursuant to a plan adopted by the
Committee prior to the beginning of fiscal 1998. In addition, the Committee had
established target performance levels and corresponding bonus amounts if those
performance levels are met for the current fiscal year under the Company's bonus
plan. The measures of performance that are utilized under the Company's
performance bonus plan for fiscal 1998 were based on achieving specified pre-tax
profits, taking into account certain levels of projected growth in earnings per
share and return on stockholders' equity.
The various performance-related aspects of the Company's executive
compensation plans are set forth below:
PERFORMANCE BONUS AWARDS. Performance bonus opportunities for the Company's
executive officers, including the Named Executives and other key employees, are
linked to a percentage of base salary, generally limited to 50% to 75% of an
executive's base salary for fiscal 1998. Prior to the start of fiscal
9
<PAGE>
1998, the Committee established a maximum bonus pool payable based on the
Company reaching certain increases in pre-tax profits. The Committee has once
again established corporate target performance levels and corresponding bonus
amounts if those performance levels are met for the current fiscal year under
the Company's bonus plan. The measures of performance utilized under the
Company's performance bonus plan for fiscal 1998 were based on achieving pre-tax
profits of varying levels, taking into account projected growth in earnings per
share and return on stockholders' equity.
At the time it establishes the target profit levels, the Committee also sets
out a list of the executives allowed to participate in the performance bonus
plan for the coming fiscal year, along with maximum bonus amounts payable to
each participant. The Company's President and Chief Executive Officer is then
allowed to determine actual amounts payable to each participant, generally
limited to such maximum amounts established by the Committee, based upon his
evaluation of the individual's performance, subject to ratification by the
Committee.
The Company's operating results met the pre-tax profit level established by
the Committee for fiscal 1998 and $560,471 was paid out in bonus awards out of a
total bonus pool of $747,294.
STOCK OPTION GRANTS. For fiscal 1998, the Compensation Committee granted
stock options to various executives, including the options granted to the Named
Executives as reflected in the table above. Stock options are intended to focus
the Company's key employees, including the Named Executives, on long-term
Company performance which results in improvement in stockholder value and
provides significant earnings potential to the executives.
OTHER COMPENSATION PLANS. The executive officers are able to defer a
portion of their income to future years under the Company's deferred
compensation plan. In addition, at various times in the past the Company has
adopted certain broad-based employee benefit plans in which the Company's
executive officers, including the Named Executives, have been permitted to
participate. The incremental cost to the Company of the Named Executives'
benefits provided under these plans (which is not set forth in any of the
Tables) equaled approximately 2% to 3% of their base salaries for fiscal 1998.
Other than with respect to the Company's Profit Sharing and Retirement Plan
and its 1990 Employee Stock Purchase Plan, benefits under these plans are not
directly or indirectly tied to Company performance.
MR. MCGOLDRICK'S FISCAL 1998 COMPENSATION
Mr. McGoldrick's compensation for fiscal 1998, as reflected in the Summary
Compensation Table above, consisted of base compensation, a cash performance
bonus and a grant of an option to purchase 40,000 shares of the Company's common
stock. Mr. McGoldrick's base salary for fiscal 1998 was increased 7.1% over his
base salary paid for fiscal 1997. Mr. McGoldrick was paid a performance bonus of
$126,563 for fiscal year 1998. The Company met the target performance bonus
standards set by the Committee, and the Company continued to perform well during
fiscal 1998, with revenues and net earnings increasing 5.3% and 60.3% (before
restructuring charges), respectively, over the previous year. The strong
performance of the Company's earnings in addition to the belief that stock
options provide the Company's executives with incentives tied to the Company's
long-term performance, were factors considered by the Committee in its
determination to grant Mr. McGoldrick an option to purchase 40,000 additional
shares of the Company's common stock in March 1998.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
George Heenan Amos Heilicher Fred L. Shapiro, M.D.
10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
common stock of the Company for the last five fiscal years with the cumulative
total return of the Standard & Poor's 500 Stock Index and the Standard & Poor's
Medical Products and Supplies Index over the same period (assuming the
investment of $100 in each on March 31, 1993, and the reinvestment of all
dividends).
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG MINNTECH CORPORATION,
THE S&P 500 STOCK INDEX AND THE S&P MEDICAL PRODUCTS AND SUPPLIES INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S & P HEALTH CARE
MINNTECH S & P 500 (MEDICAL PRODUCTS
CORPORATION & SUPPLIES)
<S> <C> <C> <C>
3/93 $100 $100 $100
3/94 $79 $101 $84
3/95 $106 $117 $122
3/96 $143 $155 $181
3/97 $70 $186 $199
3/98 $89 $275 $288
</TABLE>
11
<PAGE>
2. PROPOSAL TO INCREASE AUTHORIZED SHARES
The Board of Directors has approved an amendment to the Company's Restated
Articles of Incorporation (the "Articles") on April 4, 1998 which would increase
the number of authorized shares of common stock from 10,000,000 shares to
20,000,000 shares. The Board believes the adoption of this amendment is in the
best interests of shareholders and recommends that shareholders vote in favor of
this proposal.
As of the July 10, 1998 record date, after taking into account the 6,825,009
outstanding shares of common stock and 3,225,164 shares of common stock reserved
for issuance under the Company's stock option and employee stock purchase plans,
there are no shares of common stock available for general corporate purposes
assuming adoption of the Minntech Corporation 1998 Stock Option Plan described
below. The Board of Directors believes the Company needs additional authorized
shares in order to provide the Company with the flexibility to use common stock,
or securities convertible into common stock (such as its preferred stock), for
any future public offerings, private placements, acquisitions or stock
dividends. Such activities might require more shares of common stock than
currently would be available to the Company.
The newly authorized common stock would be identical to the existing
authorized common stock in all respects. The holders of the Company's common
stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. On any liquidation
of the Company, after payment of all indebtedness, the assets of the Company
will be distributed pro rata to the holders of the common stock, subject to such
rights as may have been granted to any holders of preferred stock. Holders of
the common stock have no preemptive rights and are entitled to one vote for each
share held on each matter submitted to a vote of shareholders. Cumulative voting
for the election of directors is not permitted. Accordingly, the owners of the
majority of the shares outstanding may elect all of the directors, if they
choose to do so, and the owners of the balance of such shares would not be able
to elect any directors.
Although the Board of Directors has no present plans to do so, authorized
and unissued common stock and preferred stock could be issued in one or more
transactions with terms, provisions and rights which would make more difficult,
and less likely, a takeover of the Company. Any such issuance of additional
shares could have the effect of diluting the earnings per share and book value
per share of existing shares of common stock, and such additional shares could
be used to dilute the share ownership of persons seeking to obtain control of
the Company. Potentially, the Company's newly authorized common stock could be
used to create voting impediments or to frustrate persons seeking to effect a
merger or otherwise gain control of the Company. Also, the common stock could be
privately placed with purchasers who might side with the management of the
Company in opposing a hostile tender offer or other attempt to obtain control.
In addition, the Board of Directors could, although it has no present intention
of doing so, authorize the issuance of common stock or preferred stock to a
holder who might thereby obtain sufficient voting power to ensure that any
proposal to remove directors would not receive the requisite shareholder vote
required to remove the directors. Issuance of common stock or preferred stock as
an anti-takeover device might preclude shareholders from taking advantage of a
situation which they may consider to be favorable to their interests.
The proposed amendment is not part of a plan to adopt in the future a series
of related amendments. Nevertheless, the Board and its financial and legal
advisors are aware that a number of corporations have adopted special
"shareholders' rights plans" or "poison pills" with a view toward creating
significant defensive mechanisms against the possibilities of hostile takeover
actions. The Board of Directors is not presently considering adopting such a
plan. Whether or not the proposed amendment to the Articles is adopted by
shareholders, the Board could determine to implement a shareholders' rights plan
in the future. The Board has no present intention to propose in the future any
additional amendments to the Articles or Bylaws that might be considered
anti-takeover devices.
12
<PAGE>
The affirmative vote of the holders of a majority of the common stock
represented at the meeting and entitled to vote is necessary to approve the
proposed amendment to the Articles of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE FOLLOWING
PROPOSED RESOLUTIONS:
RESOLVED, that paragraph (1) of Article V of the Company's Restated Articles
of Incorporation be amended to read as follows:
"(1) The total number of shares which the Company shall have authority
to issue is twenty-five million (25,000,000) divided into twenty
million (20,000,000) shares of common stock with the par value of
five cents ($.05) and five million (5,000,000) shares of preferred
stock with no par value."
FURTHER RESOLVED, that the officers be, and they hereby are, authorized and
directed to execute such documents and certificates and take such other actions
as may be necessary or appropriate to give effect to the foregoing resolution.
3. PROPOSAL TO APPROVE THE MINNTECH CORPORATION
1998 STOCK OPTION PLAN
The Board of Directors adopted the Minntech Corporation 1998 Stock Option
Plan (the "1998 Plan") on March 24, 1998, and now seeks stockholder approval of
the 1998 Plan. The 1998 Plan provides for the issuance of stock options to
employees, officers, executives and directors of, and consultants and
independent contractors to, the Company. The Company has historically
compensated executive officers and other key employees with grants under the
Minntech Corporation 1989 Stock Plan (the "1989 Stock Plan"). As of March 24,
1998, there were 52,080 shares remaining available for awards under the 1989
Stock Plan.
Mr. McGoldrick, who became President and Chief Executive Officer in March of
1997, recommended to the Board, and the Board agreed, that, given significant
issues relating to employee retention and recruiting, the interests of the
Company and its stockholders would be well served by continuing the Company's
practice of providing annual stock option grants to the Company's executive
officers and a number of key employees. Accordingly, the Board approved the 1998
Plan for a total of 1,000,000 shares, which provides for the 330,350 options
granted on March 24, 1998 under the 1998 Plan and allows for the number of
options that, based on the Company's practices in recent years, would be
anticipated to be granted pursuant to the 1998 Plan through calendar year 1999.
The options already granted under the 1998 plan will terminate on the date of
the Annual Meeting if the plan is not approved by the stockholders. The 1989
Stock Plan will remain in effect and the shares reserved under it will remain
available for awards.
The Board believes that the issuance of stock options under the 1998 Plan
will be beneficial to the Company by aligning the personal interests of its
employees, officers, executives, directors, consultants and independent
contractors with those of its stockholders and by providing such individuals
with incentives for outstanding performance. These incentives also provide the
Company with flexibility in its ability to attract and retain the services of
individuals upon whose judgment, interest and special effort the successful
conduct of the Company's operations is largely dependent. The full text of the
1998 Plan is set forth in Exhibit A to this Proxy Statement and the following
description is qualified in its entirety by the text of the 1998 Plan.
SUMMARY OF THE PLAN
LIMITATION ON OPTIONS AND SHARES AVAILABLE. An aggregate of 1,000,000
shares of the common stock of the Company are available for grant under the 1998
Plan. The maximum number of shares of stock that may be subject to one or more
options to a single participant under the 1998 Plan during any fiscal year is
200,000.
13
<PAGE>
ELIGIBILITY AND ADMINISTRATION. Officers and other key employees of the
Company and its subsidiaries who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company and its
subsidiaries, as well as consultants and non-employee directors, are eligible to
be granted options under the 1998 Plan. The 1998 Plan is administered by a
committee appointed by the Board of not less than two directors each of whom is
a "non-employee director" as that term is defined in Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor statute or regulation comprehending the same subject matter, and
an "outside director" under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations issued thereunder (the
"Committee"). The Committee has the power to make grants (other than grants to
non-employee directors, which must be made by the Board except for automatic
grants provided for by the 1998 Plan), determine the number of shares covered by
each grant and other terms and conditions of such grants, interpret the 1998
Plan, and adopt rules, regulations and procedures with respect to the
administration of the 1998 Plan. The Committee may delegate its authority to
officers of the Company for the purpose of selecting employees who are not
officers of the Company to be participants in the 1998 Plan.
OPTION GRANTS. The Committee may grant stock options that either are
qualified as "incentive stock options" under the Code or are "non-qualified
stock options" in such form and upon such terms as the Committee may approve
from time to time. Stock options granted under the 1998 Plan may be exercised
during their respective terms as determined by the Committee. The purchase price
may be paid by tendering cash or, in the Committee's discretion, by tendering
common stock.
The agreement relating to any stock option may, in the Committee's
discretion, provide for the issuance of "reload" stock options pursuant to which
the optionee will be granted a new stock option when the payment of the exercise
price of the original stock option and/or the payment of tax withholdings is
made through the delivery to the Company of shares of common stock by the
optionee. Such new reload stock options will (i) be non-statutory stock options
to purchase the number of shares provided as consideration for the exercise
price and in payment of taxes in connection with the exercise of the original
stock option (ii) have a per share exercise price equal to the fair market value
as of the date of exercise of the original stock option, (iii) be immediately
exercisable and have a term of ten years from the date of the original stock
option and (iv) otherwise have the same terms and conditions as the original
stock option, except that a reload option will not be an incentive stock option
and will not provide for an automatic grant of additional reload stock options
upon its exercise.
No stock option shall be transferable by the optionee or exercised by anyone
else during the optionee's lifetime, except that any optionee may transfer any
non-qualified stock option, to members of his or her immediate family or to one
or more trusts for the benefit of such family members or partnerships in which
such family members are the only partners, if the applicable option agreement so
provides and the optionee does not receive any consideration for the transfer.
Stock options may be exercised during varying periods of time after a
participant's termination of employment, depending upon the reason for
termination. Following a participant's death, the participant's stock options
may be exercised to the extent they were exercisable at the time of death by the
legal representative of the estate or the optionee's legatee for a period of
three years or until the expiration of the stated term of the option, whichever
is less. The same time periods apply if the participant is terminated by reason
of disability or retirement. If the participant is involuntarily terminated
without cause, the participant's options may be exercised to the extent they
were exercisable at the time of termination for the lesser of three months or
the balance of the options' terms. If a participant's employment is voluntarily
terminated by the participant, the participant's options may be exercised to the
extent they were exercisable at the time of the termination for the lessor of
ten days or the balance of the options' term. If the participant's employment is
terminated for any other reason, the participant's stock options immediately
terminate. These exercise periods may be extended or reduced by the Committee
for particular options. The Committee may, in its discretion, accelerate the
exercisability of stock options which would not otherwise be exercisable upon
death, disability or retirement.
14
<PAGE>
Upon a change of control of the Company (as defined in the 1998 Plan), the
1998 Plan provides that, without any action by the Committee, each option
granted under the 1998 Plan and not then exercised in full or otherwise
terminated, expired or cancelled shall become immediately exercisable in full.
Options may also be accelerated upon the occurrence of an "event" as defined in
the 1998 Plan.
No incentive stock options may be granted under the 1998 Plan after March
24, 2008. The term of an option may not exceed ten years (or five years if
issued to a participant who owns or is deemed to own more than 10% of the
combined voting power of all classes of stock of the Company, any subsidiary or
affiliate). The aggregate fair market value of the common stock with respect to
which an incentive stock option is exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000. The exercise price under an
incentive stock option may not be less than the fair market value of the common
stock on the date the option is granted (or, in the event the participant owns
more than 10% of the combined voting power of all classes of stock of the
Company, the option price shall be not less than 110% of the fair market value
of the stock on the date the option is granted). The exercise price for non-
qualified options granted under the 1998 Plan may not be less than 100% of the
fair market value of the common stock on the date of grant.
The 1998 Plan provides for the annual, automatic granting of a defined
number of options to non-employee directors. Such options are granted to each
person who (a) is not, and has not been, an employee of the Company and is
serving an unexpired term as a director on the date of the last Board of
Directors meeting of each fiscal year; and (b) at the time of any such meeting,
has served as a director for at least six months of the year preceding the date
of such meeting. Each such person shall, as of the date of such meeting,
automatically receive a non-qualified option to purchase 7,030 shares of common
stock with the option price equal to the fair market value of the Company's
common stock on such date. These options will have ten-year terms and will be
exercisable beginning six months after the date of grant. All provisions of the
1998 Plan not inconsistent with the foregoing shall apply to the options granted
to non-employee directors. The maximum number of shares as to which options may
be granted to any one director pursuant to such annual automatic grants shall be
140,600 shares.
FEDERAL INCOME TAX CONSEQUENCES. An optionee will not realize taxable
compensation income upon the grant of an incentive stock option. In addition, an
optionee generally will not realize taxable compensation income upon the
exercise of an incentive stock option if he or she exercises it while employed
by the Company or within three months after termination of employment (or within
one year after termination if the termination results from a permanent and total
disability). The amount by which the fair market value of the shares purchased
exceeds the aggregate option price at the time of exercise shall be treated as
alternative minimum taxable income for purposes of the alternative minimum tax.
If stock acquired pursuant to an incentive stock option is not disposed of prior
to the expiration of the statutory holding period, any gain or loss realized
upon the sale of such shares will be characterized as capital gain or loss. If
the applicable holding periods are not satisfied, then any gain realized in
connection with the disposition of such stock will generally be taxable as
compensation income in the year in which the disposition occurred, to the extent
of the difference between the fair market value of such stock on the date of
exercise and the option exercise price. The Company is entitled to a tax
deduction to the extent, and at the time, that the optionee realizes
compensation income. The balance of any gain will be characterized as a capital
gain to the optionee.
An optionee will not realize taxable compensation income upon the grant of a
non-qualified stock option. When an optionee exercises a non-qualified stock
option, he or she will realize taxable compensation income at that time equal to
the difference between the aggregate option price and the fair market value of
the stock on the date of exercise. The Company is entitled to a tax deduction to
the extent, and at the time, that the optionee realizes compensation income.
The 1998 Plan is designed so that options issued under it will comply with
Section 162(m) of the Code, which denies deductions for compensation in excess
of $1,000,000 paid by the Company to the Chief
15
<PAGE>
Executive Officer and each of the four other most highly compensated executive
officers, except to the extent such compensation is performance based.
The 1998 Plan requires each participant, no later than the date as of which
any part of the value of an award first becomes includible as compensation in
the gross income of the participant, to pay to the Company any federal, state or
local taxes required by law to be withheld with respect to the award. The
Company shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment otherwise due to the participant. With respect to any
award under the 1998 Plan, if the terms of the award so permit, a participant
may elect to satisfy part or all of the withholding tax requirements associated
with the award by delivering to the Company from shares of Company common stock
already owned by the participant that number of shares having an aggregate fair
market value equal to part or all of the tax payable by the participant. If a
participant uses shares to satisfy tax withholding requirements, the Company
would pay the tax liability from its own funds.
REGISTRATION WITH THE SEC
The Company intends to file a Registration Statement covering the 1998 Plan
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended.
The following table represents options granted under the 1998 Plan. If the
1998 Plan is not approved by the stockholders, the options granted under it will
terminate as of the date of the Annual Meeting and no further options will be
granted under the 1998 Plan.
NEW PLAN BENEFITS
MINNTECH CORPORATION 1998 STOCK OPTION PLAN
<TABLE>
<CAPTION>
EXERCISE
PRICE PER NUMBER OF
NAME AND POSITION SHARE STOCK OPTIONS
- ------------------------------------------------------------------------------------ ------------- -------------
<S> <C> <C>
Thomas J. McGoldrick ............................................................... $ 12.375 40,000
President and Chief Executive Officer
Richard P. Goldhaber ............................................................... $ 12.375 20,000
Vice President Research & Development
Daniel H. Schyma ................................................................... $ 12.375 20,000
Vice President Sales & Marketing
Barbara A. Wrigley ................................................................. $ 12.375 20,000
Vice President, General Counsel and Secretary
Paul E. Helms ...................................................................... $ 12.375 20,000
Sr. Vice President Operations
Other Executive Officers............................................................ $ 12.375 40,000
Non-executive officer employees..................................................... $ 12.375 170,350
-------------
Total 330,350
-------------
-------------
</TABLE>
On July 15, 1998, the closing price of the common stock of the Company on
the Nasdaq National Market was $13.50 per share.
VOTE REQUIRED
Stockholder approval of the proposed 1998 Plan requires the affirmative vote
of the holders of a majority of the shares of common stock represented at the
meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1998 PLAN.
16
<PAGE>
4. PROPOSAL TO AMEND THE MINNTECH CORPORATION
1990 EMPLOYEE STOCK PURCHASE PLAN
TO EXTEND ITS TERM
INTRODUCTION
The Company's 1990 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted in April 1990 and approved by the Company's stockholders in August 1990.
The purpose of the Purchase Plan is to facilitate purchase by employees of
shares of stock in the Company in order to provide a greater community of
interest between the Company and its employees. The Purchase Plan is carried out
in phases, each phase being for a period of one year. With respect to any
particular phase of the Purchase Plan, the commencement date is the date
established by the Committee appointed to administer the Plan. There were
250,000 shares of common stock of the Company originally reserved for issuance
under the Purchase Plan. This amount was increased to 562,500 shares as a result
of three-for-two stock splits in February 1991 and August 1991.
There are approximately 329 employees, including seven executive officers,
who are currently eligible to participate in the Purchase Plan. During the last
phase of the Purchase Plan, ended May 31, 1998, 102 employees, including two
executive officers, participated in the Purchase Plan, purchasing 19,248 shares
at an exercise price of $10.63 for a net value realized of $204,606. Eligible
employees do not pay any consideration to the Company to receive options under
the Purchase Plan on the terms described below.
PROPOSED PLAN AMENDMENT
As originally adopted, the Purchase Plan became effective on June 1, 1990
and terminated by its terms on June 1, 1993. On May 27, 1993, the Board of
Directors, pursuant to shareholder ratification on August 25, 1993, extended the
term of the Purchase Plan for five years, which terminated on June 1, 1998. On
May 13, 1998, the Board of Directors extended the term of the Purchase Plan for
an additional five years, subject to ratification of the Company's stockholders,
and, as amended, the Purchase Plan will terminate on June 1, 2003. As of May 28,
1998, only 91,431 shares had been issued out of the 562,500 shares reserved for
issuance under the Purchase Plan. Accordingly, the number of shares reserved for
issuance under the Purchase Plan was not increased by the Board of Directors.
SUMMARY OF THE PURCHASE PLAN
In summary, the Purchase Plan provides as follows:
ELIGIBILITY AND PARTICIPATION. All employees of the Company who are
customarily employed twenty hours or more per week and more than five months in
a calendar year and who have completed at least six months of service prior to
the commencement date of a phase of the Purchase Plan are eligible to
participate in such phase. Employees who are members of the Board of Directors
are eligible under the Purchase Plan. Employees of a subsidiary of the Company
may participate if the Board of Directors of the Company and the subsidiary make
the Purchase Plan applicable to the subsidiary. Eligible employees elect to
participate in a phase of the Purchase Plan by filing with the Company a payroll
deduction authorization form at least ten days prior to the commencement date of
such phase. Such form will authorize the Company to deduct an amount established
by the participant up to a maximum of 10% of his or her base pay for the term of
the phase.
TERMS AND CONDITIONS OF OPTIONS. As of the commencement date of a phase of
the Purchase Plan, an eligible employee who elects to participate in that phase
is granted an option for as many full shares as the employee will be able to
purchase pursuant to the payroll deduction procedure described above (assuming
the purchase price is 85% of the fair market value of the shares on the
commencement date of the phase). The option price for employees who participate
on the commencement date of a phase of the Purchase Plan is the lower of: (i)
85% of the fair market value of the shares on the commencement date of the
phase, or (ii) 85% of the fair market value of the shares on the termination
date of the phase. The option price for the last Phase of the Purchase Plan,
ended May 31, 1998, was determined based on the fair
17
<PAGE>
market value of the shares on the commencement date of the phase of $12.50,
reflecting the closing transaction price of the Company's common stock on the
NASDAQ National Market System as of such date.
EXERCISE AND WITHDRAWAL. Exercise of the option occurs automatically on the
termination date of any phase, unless a participant gives written notice prior
to such date as to his election to exercise the option in part or not to
exercise the option, in which event the balance of the payroll deductions is
distributed to the participant in cash (with interest calculated under a formula
set forth in the Purchase Plan document in the event of an election not to
exercise). A participant may at any time during the term of any phase give
notice that he or she wishes to withdraw payroll deductions credited to his or
her account, and all amounts withheld will be refunded to him with interest. If
the employee is an officer or director, an election to withdraw from any phase
of the Purchase Plan must be made at least six months prior to the termination
of such phase in accordance with Section 16(b) of the 1934 Act.
A participant may withdraw payroll deductions credited to his account under
the Purchase Plan, with interest, at any time by giving written notice to the
Company. However, a participant who is also an officer or director of the
Company may withdraw payroll deductions for a phase of the Purchase Plan, with
interest, only at a time at least six months before the termination date of such
phase in accordance with Section 16(b) of the 1934 Act.
ADMINISTRATION AND AMENDMENT. The Purchase Plan is administered by the
Board of Directors or by a committee appointed by the Board of Directors. The
Board of Directors may at any time amend the Purchase Plan, except that no
amendment may make changes in options already granted which would adversely
affect the rights of any participant, and no amendment shall be made without
stockholder approval if the amendment increases the number of shares subject to
the Purchase Plan or changes the qualifications of eligible employees.
INCOME TAX CONSEQUENCES. The Company believes that the Purchase Plan is a
"qualified" plan under Section 423 of the Code. Under the Code, no income will
result to a grantee of an option upon the granting or exercise of his option,
and no deduction will be allowed to the Company. For tax purposes, the date of
grant of the option will be the commencement date of a phase of the Purchase
Plan.
If a participant does not dispose of his shares until more than two years
after the date of grant of the option and more than one year after the stock is
acquired, any profit realized upon such disposition will be taxed in part as
ordinary income and in part as long-term capital gain. The ordinary income will
be the lesser of (a) the excess of the fair market value of the shares at the
time of disposition over the price paid, or (b) the excess of the fair market
value of the shares at the time the option was granted over the option price.
Any additional gain will be long-term capital gain. If the participant disposes
of shares received pursuant to the Purchase Plan within two years after the date
that the option is granted or within one year after the stock is acquired,
ordinary income will be recognized to the extent of the difference, if any,
between the option price and the fair market value of the shares when the option
was exercised. Any additional gain realized will be capital gain and if the
shares have been held for more than one year, such additional gain will be
characterized as long-term capital gain. The holding period requirements
discussed above relate only to tax treatment and do not preclude an earlier
disposition of shares acquired pursuant to an option.
REGISTRATION WITH SEC
The Company has an effective registration statement covering the offering of
shares under the Purchase Plan filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended. The registration statement
will not require amendment as a result of the amendment proposed above, since
the number of shares purchasable under the Purchase Plan is not being increased.
A prospectus prepared in accordance with the rules and regulations of the
Securities and Exchange Commission and reflecting the amendment proposed above
will be delivered to each eligible employee prior to each time an election to
participate must be made.
18
<PAGE>
VOTE REQUIRED
Stockholder approval of the amendment to the Purchase Plan requires the
affirmative vote of holders of a majority of the shares of the Company's Common
Stock represented at the meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
THE PURCHASE PLAN.
PROPOSALS OF STOCKHOLDERS
The proxy rules of the Securities and Exchange Commission permit
stockholders, after timely notice to issuers, to present proposals for
stockholder action in issuer proxy statements where such proposals are
consistent with applicable law, pertain to matters appropriate for stockholder
action, and are not properly omitted by company action in accordance with the
proxy rules. Stockholder proposals prepared in accordance with the proxy rules
and intended to be presented at the next annual meeting of stockholders must be
received by the Secretary of the Company, 14605 28th Avenue North, Minneapolis,
Minnesota 55447 on or before March 20, 1999 for inclusion in the proxy statement
for such annual meeting.
Under the Company's Restated Bylaws, stockholder proposals to be brought
before any meeting of stockholders must be made pursuant to timely notice in
writing to the corporate secretary at 14605 28th Avenue North, Minneapolis,
Minnesota 55447. Notice by the stockholder to be timely must be received not
less than 50 nor more than 75 days prior to the meeting or, if less than 60
days' disclosure of the meeting date is given, not later than the close of
business on the 10th day following the day on which notice of the meeting date
is mailed or public disclosure of such date is made. The notice must set forth
certain information concerning such proposal, including a brief description of
the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting, the name and address of record of the
stockholder proposing such business, the class or series (if any) and the number
of shares of the corporation that are owned by the stockholder, and any material
interest of the stockholder in such business. The presiding officer of the
meeting may refuse to acknowledge any proposal not made in compliance with the
foregoing procedure.
Under the Company's Restated Bylaws, nominations of persons for election as
a director at any meeting of stockholders must be made pursuant to timely notice
in writing to the corporate secretary at 14605 28th Avenue North, Minneapolis,
Minnesota 55447. Notice by the stockholder to be timely must be received not
less than 50 nor more than 75 days prior to the meeting or, if less than 60
days' disclosure of the meeting date is given, not later than the close of
business on the 10th day following the day on which notice of the meeting date
is mailed or public disclosure of such date is made. The notice must set forth
certain information concerning such stockholder and the nominees, including
their names and addresses, their principal occupation or employment, the capital
stock of the Company which they beneficially own, such other information as
would be required in a proxy statement soliciting proxies for the election of
the nominees, a description of any arrangement or understanding between the
stockholder and each nominee or other persons pursuant to which the nominations
are to be made by the stockholder and the consent of each nominee to serve as a
director if so elected. The presiding officer of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
At the meeting, a vote will be taken on a proposal to ratify the appointment
of PricewaterhouseCoopers LLP by the Board of Directors to act as independent
accountants of the Company for the year ending March 31, 1999.
PricewaterhouseCoopers LLP, independent certified public accountants, have
audited the Company's financial statements since 1995. A representative of
PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting to
make a statement if such representative so desires and to respond to appropriate
questions.
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OTHER MATTERS
SOLICITATION
The Company will bear the cost of preparing, assembling and mailing the
proxy, Proxy Statement, annual report and other material which may be sent to
the stockholders in connection with this solicitation. Brokerage houses and
other custodians, nominees and fiduciaries may be requested to forward
soliciting material to the beneficial owners of stock, in which case they will
be reimbursed by the Company for their expenses in doing so. Proxies are being
solicited primarily by mail but, in addition, officers, employees and agents of
the Company may solicit proxies personally by telephone or special letter
without remuneration other than regular compensation. The Company has engaged
the firm of Morrow & Co., Inc. to assist in the proxy solicitation effort with a
total anticipated cost of approximately $7,500.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the Company. These
insiders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file, including
Forms 3, 4 and 5.
To the Company's knowledge, based solely on a review of copies of such
reports furnished to the Company and written representations that no other
reports were required during and with respect to the fiscal year ended March 31,
1998, there were no failures in such fiscal year to file on a timely basis a
report required under Section 16(a) except (i) the failure to file a report
related to the exercise of a stock option and the gifting of shares to children
by Mr. McGoldrick in fiscal 1998, and (ii) the failure to file reports relating
to the disposition by Mr. Shapiro of 5,250 shares in an indeterminate number of
distributions in years prior to fiscal 1998 from trusts of which Mr. Shapiro's
spouse was trustee for the benefit of children and grandchildren.
OTHER MATTERS
The Board of Directors does not intend to present to the meeting any matter
not referred to above and does not presently know of any matters that may be
presented to the meeting by others. However, if other matters come before the
meeting, it is the intention of the persons named in the enclosed form of proxy
to vote the proxy in accordance with their best judgment.
The Company is including with this Proxy Statement its Annual Report to
Stockholders for the year ended March 31, 1998, which includes an audited
balance sheet as of that date and the related statements of earnings, cash flows
and stockholders' equity, as well as other financial information relating to the
Company, including Management's Discussion and Analysis of Financial Condition
and Results of Operations. STOCKHOLDERS MAY RECEIVE, WITHOUT CHARGE, A COPY OF
THE COMPANY'S 1998 FORM 10-K REPORT AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION BY WRITING TO MINNTECH CORPORATION, 14605 28TH AVENUE NORTH,
MINNEAPOLIS, MINNESOTA 55447, ATTENTION: CHIEF FINANCIAL OFFICER.
By Order of the Board of Directors
/s/ Barbara A. Wrigley
Barbara A. Wrigley
SECRETARY
July 24, 1998
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EXHIBIT A
MINNTECH CORPORATION
1998 STOCK OPTION PLAN
1. PURPOSE. The purpose of this 1998 Stock Option Plan (the "Plan") is to
promote the interests of Minntech Corporation, a Minnesota corporation (the
"Company"), and its shareholders by providing personnel of the Company and any
subsidiaries thereof with an opportunity to acquire a proprietary interest in
the Company and thereby develop a stronger incentive to put forth maximum effort
for the continued success and growth of the Company. In addition, the
opportunity to acquire a proprietary interest in the Company will aid in
attracting and retaining personnel of outstanding ability.
2. ADMINISTRATION.
(a) GENERAL. This Plan shall be administered by a committee of two or
more directors of the Company (the "Committee") appointed by the Company's
Board of Directors (the "Board"). If the Board has not appointed a committee
to administer this Plan, then the Board shall constitute the Committee. The
Committee shall have the power, subject to the limitations contained in this
Plan, to fix any terms and conditions for the grant or exercise of any
option under this Plan. No director shall serve as a member of the Committee
unless such director shall be (i) a "non-employee director" as that term is
defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or any successor statute or regulation
comprehending the same subject matter and (ii) an "outside director" under
Section 162(m) of the Internal Revenue code of 1986, as amended (the
"Code"), and the regulations issued thereunder. A majority of the members of
the Committee shall constitute a quorum for any meeting of the Committee,
and the acts of a majority of the members present at any meeting at which a
quorum is present or the acts unanimously approved in writing by all members
of the Committee shall be the acts of the Committee. Subject to the
provisions of this Plan, the Committee may from time to time adopt such
rules for the administration of this Plan as it deems appropriate. The
decision of the Committee on any matter affecting this Plan or the rights
and obligations arising under this Plan or any option granted hereunder,
shall be final, conclusive and binding upon all persons, including without
limitation the Company, shareholders and optionees.
(b) INDEMNIFICATION. To the full extent permitted by law, (i) no
member of the Committee or person to whom authority under this Plan is
delegated shall be liable for any action or determination taken or made in
good faith with respect to this Plan or any option granted hereunder and
(ii) the members of the Committee and each person to whom authority under
this Plan is delegated shall be entitled to indemnification by the Company
against and from any loss incurred by such member or person by reason of any
such actions and determinations.
(c) DELEGATION OF AUTHORITY. The Committee may delegate all or any
part of its authority under this Plan to the Chief Executive Officer of the
Company for purposes of granting and administering options granted to
persons other than persons who are then subject to the reporting
requirements of Section 16 of the Exchange Act ("Section 16 Individuals").
The Chief Executive Officer of the Company may, in turn, delegate such
authority to such other officer of the Company as the Chief Executive
Officer may determine.
(d) ACTION BY BOARD. Notwithstanding paragraph 2(a), above, any grant
of options hereunder to any director of the Company who is not an employee
of the Company, and any action taken by the Company with respect to any such
option, including any amendment thereto, and any acceleration of the vesting
of any option granted to or held by a director who is not an employee of the
Company, any extension of the time within which any such option may be
exercised, any determination pursuant to paragraph 9 relating to the payment
of the purchase price of Shares (as defined in paragraph 3 below) subject to
any such option, or any action pursuant to paragraph 10 relating to the
payment of withholding taxes, if any, through the use of Shares with respect
to any such option shall be subject to prior approval by the Board.
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3. SHARES. The shares that may be made subject to options granted under
this Plan shall be authorized and unissued shares of Common Stock of the
Company, par value $.05 per share ("Shares," and each individually a "Share"),
and they shall not exceed 1,000,000 Shares in the aggregate, subject to
adjustment as provided in paragraph 15, below, except that, if any option lapses
or terminates for any reason before such option has been completely exercised,
the Shares covered by the unexercised portion of such option may again be made
subject to options granted under this Plan.
4. ELIGIBLE PARTICIPANTS. Stock options may be granted under this Plan to
any part-time or full-time employee of the Company, or any parent or subsidiary
thereof, including any such person who is also an officer or director of the
Company or any parent or subsidiary thereof. Non-statutory stock options (as
defined in paragraph 5(a) below) also may be granted to (i) any director of the
Company who is not an employee of the Company or any parent or subsidiary
thereof, (ii) other individuals or entities who are not employees but who
provide services to the Company or a parent or subsidiary thereof in the
capacity of an advisor or consultant, and (iii) any individual or entity that
the Company desires to induce to become an employee, advisor or consultant, but
any such grant shall be contingent upon such individual or entity becoming
employed by the Company or a parent or subsidiary thereof. References herein to
"employment" and similar terms (except "employee") shall include the providing
of services in the capacity of an advisor or consultant or as a director. The
employees and other individuals and entities to whom options may be granted
pursuant to this paragraph 4 are referred to herein as "Eligible Participants."
5. TERMS AND CONDITIONS OF OPTIONS.
(a) GENERAL. Subject to the terms and conditions of this Plan, the
Committee may, from time to time during the term of this Plan, grant to such
Eligible Participants as the Committee may determine options to purchase
such number of Shares of the Company on such terms and conditions as the
Committee may determine. In determining the Eligible Participants to whom
options shall be granted and the number of Shares to be covered by each
option, the Committee may take into account the nature of the services
rendered by the respective Eligible Participants, their present and
potential contributions to the success of the Company, and such other
factors as the Committee in its sole discretion may deem relevant. The date
and time of approval by the Committee of the granting of an option shall be
considered the date and the time of the grant of such option. The Committee
in its sole discretion may designate whether an option granted to an
employee is to be considered an "incentive stock option" (as that term is
defined in Section 422 of the Code, or any amendment thereto) or a
non-statutory stock option (an option granted under this Plan that is not
intended to be an "incentive stock option"). The Committee may grant both
incentive stock options and non-statutory stock options to the same
employee. However, if an incentive stock option and a non-statutory stock
option are awarded simultaneously, such options shall be deemed to have been
awarded in separate grants, shall be clearly identified, and in no event
shall the exercise of one such option affect the right to exercise the
other. To the extent that the aggregate Fair Market Value (as defined in
paragraph 8 below) of Shares with respect to which incentive stock options
are exercisable for the first time by any employee during any calendar year
(under all plans of the Company and its parent and subsidiary corporations)
exceeds $100,000, such options shall be treated as non-statutory stock
options. The maximum number of Shares subject to options that may be granted
to any one Eligible Participant under the Plan in any fiscal year of the
Company may not exceed 200,000 Shares (subject to adjustment pursuant to
paragraph 15 hereof).
(b) PURCHASE PRICE. The purchase price of each Share subject to an
option granted pursuant to this paragraph 5 shall be not less than 100% of
the Fair Market Value of a Share on the date of grant; provided that if an
incentive stock option is granted to an employee who owns, or is deemed
under Section 424(d) of the Code to own, at the time such option is granted,
stock of the Company (or of any parent or subsidiary of the Company)
possessing more than 10% of the total combined voting
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power of all classes of stock therein (a "10% Shareholder"), such purchase
price shall be no less than 110% of the Fair Market Value of a Share on the
date of grant.
(c) VESTING. Each option agreement provided for in paragraph 7 shall
specify when each option granted under this Plan shall become exercisable
with respect to the Shares covered by the option. Notwithstanding the
provisions of any option agreement provided for in paragraph 7, the
Committee may at any time, in its sole discretion, declare that any option
granted under this Plan shall be immediately exercisable in whole or in
part.
(d) TERMINATION. Each option granted pursuant to this paragraph 5
shall expire, and all rights to purchase Shares thereunder shall terminate,
on the earliest of:
(i) ten years after the date such option is granted (or in the case
of an incentive stock option granted to a 10% Shareholder, five years
after the date such option is granted) or on such date prior thereto as
may be fixed by the Committee on or before the date such option is
granted;
(ii) the expiration of the period after the termination of the
optionee's employment within which the option is exercisable as specified
in paragraph 12(b) (provided that the Committee may, in any option
agreement provided for in paragraph 7 or by Committee action with respect
to any outstanding option, extend the periods specified in paragraph
12(b)); or
(iii) the date, if any, fixed for cancellation pursuant to paragraph
13(c) or 14 below.
6. AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS. Each director of the
Company who is not and has never been an employee of the Company and who (i) is
serving an unexpired term as a director of the Company as of the date of the
last regularly scheduled meeting of the Board during any fiscal year of the
Company and (ii) at the time of such meeting has served as a director for at
least six months of the twelve month period preceding the date of such meeting,
shall as of the date of such meeting automatically be granted an option to
purchase 7,030 Shares at an option price per share equal to 100% of the Fair
Market Value of a Share on such date. All such options shall be non-statutory
stock options and shall be subject to the same terms and conditions as are then
in effect with respect to non-statutory stock options granted to officers and
employees of the Company, except that (x) the term of each such option shall be
ten years, (y) each such option shall remain in effect for its full ten year
term and shall not terminate or expire following the death, disability or
retirement of the non-employee director and (z) each such option shall become
exercisable as to all or any part of the Shares subject thereto six months after
the date the option is granted. Subject to the foregoing, all provisions of this
Plan not inconsistent with the foregoing shall apply to options granted to
non-employee directors pursuant to this paragraph 6. The maximum number of
Shares as to which options may be granted to any non-employee director under
this paragraph 6 shall be 140,600 Shares.
7. OPTION AGREEMENTS. All options granted under this Plan shall be
evidenced by a written agreement in such form or forms as the Committee may from
time to time determine, which agreement shall, among other things, designate
whether the options being granted thereunder are non-statutory stock options or
incentive stock options.
8. FAIR MARKET VALUE. For purposes of this Plan, the "Fair Market Value"
of a Share at a specified date shall, unless otherwise expressly provided in
this Plan, mean the closing sale price of a Share on the date immediately
preceding such date or, if no sale of Shares shall have occurred on that date,
on the next preceding day on which a sale of Shares occurred, on the Composite
Tape for New York Stock Exchange listed shares or, if Shares are not quoted on
the Composite Tape for New York Stock Exchange listed shares, on the Nasdaq
National Market or any similar system then in use or, if Shares are not included
in the Nasdaq National Market or any similar system then in use, the mean
between the closing "bid" and the closing "asked" quotation of a Share on the
date immediately preceding the date as of which such Fair Market Value is being
determined, or, if no closing bid or asked quotation is made on that date, on
the next preceding day on which a quotation is made, on the Nasdaq SmallCap
Market or any similar system
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then in use, provided that if the Shares in question are not quoted on any such
system, Fair Market Value shall be what the Committee determines in good faith
to be 100% of the fair market value of a Share as of the date in question.
Notwithstanding anything stated in this paragraph 8, if the applicable
securities exchange or system has closed for the day by the time the
determination is being made, all references in this paragraph to the date
immediately preceding the date in question shall be deemed to be references to
the date in question.
9. MANNER OF EXERCISE OF OPTIONS. A person entitled to exercise an option
granted under this Plan may, subject to its terms and conditions and the terms
and conditions of this Plan, exercise it in whole at any time, or in part from
time to time, by delivery to the Company at its principal executive office of
written notice of exercise, specifying the number of Shares with respect to
which the option is being exercised. The purchase price of the Shares with
respect to which an option is being exercised shall be payable in full at the
time of exercise, provided that, to the extent permitted by law, the holder of
an option may simultaneously exercise an option and sell all or a portion of the
Shares thereby acquired pursuant to a brokerage or similar relationship and use
the proceeds from such sale to pay the purchase price of such Shares. The
purchase price of each Share on the exercise of any option shall be paid in full
in cash (including check, bank draft or money order) or, at the discretion of
the person exercising the option, by tender or delivery to the Company of
unencumbered Shares having an aggregate Fair Market Value on the date of
exercise equal to the amount of the purchase price being paid through such
tender or delivery of Shares, or by a combination of cash and such Shares;
provided, however, that no person shall be permitted to pay any portion of the
purchase price with Shares if the Committee, in its sole discretion, determines
that payment in such manner is undesirable. The granting of an option to a
person shall give such person no rights as a shareholder except as to Shares
issued to such person.
10. TAX WITHHOLDING. Delivery of Shares pursuant to a stock award or upon
exercise of any non-statutory stock option granted under this Plan shall be
subject to any required withholding taxes. A person receiving a stock award or
exercising a non-statutory stock option may, as a condition precedent to
receiving the Shares, be required to pay the Company a cash amount equal to the
amount of any required withholdings. In lieu of all or any part of such a cash
payment, the Committee may, but shall not be required to, provide in any option
agreement provided for in paragraph 7 (or provide by Committee action with
respect to any outstanding option) that a person exercising an option may cover
all or any part of the required withholdings, and any additional withholdings up
to the amount needed to cover the individual's full FICA and federal, state and
local income tax liability with respect to income arising from the exercise of
the option, through the tender or delivery to the Company of unencumbered Shares
having an aggregate Fair Market Value on the date of exercise equal to the
amount of the withholding taxes being paid through such delivery, reduction or
subsequent return of Share.
11. RELOAD OPTIONS. If the Committee so determines, the Agreement relating
to any option may provide for the issuance of "reload" options pursuant to
which, subject to the terms and conditions established by the Committee and any
requirements of applicable law, the person exercising the option will, either
automatically (to the extent Shares remain available under this Plan) or subject
to subsequent Committee approval, be granted a new option when the payment of
the exercise price of the original option and/or the payment of tax withholding
pursuant to paragraph 10 hereof is made through the tender or delivery of Shares
to the Company. Each such reload option shall (i) be a non-statutory option to
purchase the number of Shares provided as consideration for the exercise price
of and in payment of taxes in connection with the exercise of the original
option, (ii) have a per share exercise price equal to the Fair Market Value as
of the date of exercise of the original option, (iii) be immediately exercisable
and have a term of ten years from the date of the original option (that is, such
reload option will terminate on the date the original option terminates or would
have terminated) and (iv) otherwise have the same terms and conditions as the
original option, except that the reload option will not be an incentive stock
option and will not provide for an automatic grant of additional reload options
upon its exercise.
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12. TRANSFERABILITY AND TERMINATION OF EMPLOYMENT.
(a) TRANSFERABILITY. During the lifetime of an optionee, only such
optionee or his or her guardian or legal representative may exercise options
granted under this Plan, and no option granted under this Plan shall be
assignable or transferable by the optionee otherwise than by will or the
laws of descent and distribution or pursuant to a domestic relations order
as defined by the Code or Title I of the Employee Retirement Income Security
Act, or the rules thereunder; provided, however, that any optionee may
transfer a non-statutory stock option granted under this Plan to a member or
members of his or her immediate family (i.e., his or her children,
grandchildren and spouse) or to one or more trusts for the benefit of such
family members or partnerships in which such family members are the only
partners, if (i) the option agreement with respect to such option expressly
so provides either at the time of initial grant or by amendment to an
outstanding option agreement and (ii) the optionee does not receive any
consideration for the transfer. Any options held by any such transferee
shall continue to be subject to the same terms and conditions that were
applicable to such options immediately prior to their transfer and may be
exercised by such transferee as and to the extent that such option has
become exercisable and has not terminated in accordance with the provisions
of the Plan and the applicable option agreement. For purposes of any
provision of this Plan relating to notice to an optionee or to vesting or
termination of an option upon the death, disability or termination of
employment of an optionee, the references to "optionee" shall mean the
original grantee of an option and not any transferee.
(b) TERMINATION OF EMPLOYMENT DURING LIFETIME. During the lifetime of
an optionee, an option granted to such optionee may be exercised only while
the optionee is employed by the Company or by a parent or subsidiary
thereof, and only if such optionee has been continuously so employed since
the date the option was granted, provided that (except as may be otherwise
provided in the applicable option agreement at the time of grant or
thereafter):
(i) if an optionee's employment is terminated for cause (which for
purposes hereof shall mean that the optionee was convicted of a felony or
the optionee failed to contest prosecution for a felony or the optionee
engaged in willful misconduct or dishonesty, any of which is directly and
materially harmful to the business or reputation of the Company), then
the option shall terminate immediately upon such termination of
employment;
(ii) if an optionee's employment is voluntarily terminated by the
optionee, otherwise than in connection with the optionee's retirement
(which for purposes hereof shall mean (a) retirement from active
employment with the Company or any subsidiary or parent of the Company
prior to age 60 with the consent of the Committee or (b) retirement from
active employment with the Company or any subsidiary or parent of the
Company on or after age 60) then the option shall continue to be
exercisable for ten days after the termination of the optionee's
employment but only to the extent that the option was exercisable
immediately prior to such optionee's termination of employment;
(iii) if an optionee's employment is terminated by the Company
otherwise than for cause, then the option shall continue to be
exercisable for three months after termination of the optionee's
employment but only to the extent that the option was exercisable
immediately prior to such optionee's termination of employment;
(iv) if an optionee's employment is terminated by reason of
retirement, death or disability (which for purposes hereof shall mean
permanent and total disability as determined by the Committee), then the
option shall continue to be exercisable for three years after termination
of the optionee's employment but only to the extent that the option was
exercisable immediately prior to such optionee's termination of
employment; and
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(v) as to any optionee whose termination of employment occurs
following a declaration pursuant to paragraph 14 below, an option may be
exercised at any time permitted by such declaration.
(c) TRANSFERS AND LEAVES OF ABSENCE. Neither the transfer of
employment of a person to whom an option is granted between any combination
of the Company, a parent corporation or a subsidiary thereof, nor a leave of
absence granted to such person and approved by the Committee, shall be
deemed a termination of employment for purposes of this Plan. The terms
"parent" or "parent corporation" and "subsidiary" as used in this Plan shall
have the meaning ascribed to "parent corporation" and "subsidiary
corporation", respectively, in Sections 424(e) and (f) of the Code.
(d) RIGHT TO TERMINATE EMPLOYMENT. Nothing contained in this Plan, or
in any option granted pursuant to this Plan, shall confer upon any optionee
any right to continued employment by the Company or any parent or subsidiary
of the Company or limit in any way the right of the Company or any such
parent or subsidiary to terminate such optionee's employment at any time.
(e) EXPIRATION DATE. In no event shall any option be exercisable at
any time after the time it shall have expired in accordance with paragraph
5(d) of this Plan. When an option is no longer exercisable, it shall be
deemed to have lapsed or terminated and will no longer be outstanding.
13. CHANGE IN CONTROL.
(a) For purposes of this Plan, a "Change in Control" of the Company
shall be deemed to occur if any of the following occur:
(1) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) acquires or becomes a "beneficial owner" (as defined in
Rule 13d-3 or any successor rule under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities
entitled to vote generally in the election of directors ("Voting
Securities"), provided, however, that the following shall not constitute
a Change in Control pursuant to this paragraph (a)(1):
(A) any acquisition or beneficial ownership by the Company or a
subsidiary;
(B) any acquisition or beneficial ownership by any employee benefit plan
(or related trust) sponsored or maintained by the Company or one or
more of its subsidiaries;
(C) any acquisition or beneficial ownership by any corporation with
respect to which, immediately following such acquisition, more than
70% of both the combined voting power of the Company's then
outstanding Voting Securities and the Shares of the Company is then
beneficially owned, directly or indirectly, by all or substantially
all of the persons who beneficially owned Voting Securities and
Shares of the Company immediately prior to such acquisition in
substantially the same proportions as their ownership of such Voting
Securities and Shares, as the case may be, immediately prior to such
acquisition;
(2) A majority of the members of the Board of Directors of the
Company shall not be Continuing Directors. "Continuing Directors" shall
mean: (A) individuals who, on the date hereof, are directors of the
Company, (B) individuals elected as directors of the Company subsequent
to the date hereof for whose election proxies shall have been solicited
by the Board of Directors of the Company or (C) any individual elected or
appointed by the Board of Directors of the Company to fill vacancies on
the Board of Directors of the Company caused by death or resignation (but
not by removal) or to fill newly-created directorships;
(3) Approval by the shareholders of the Company of a reorganization,
merger or consolidation of the Company or a statutory exchange of
outstanding Voting Securities of the Company, unless immediately
following such reorganization, merger, consolidation or exchange,
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all or substantially all of the persons who were the beneficial owners,
respectively, of Voting Securities and Shares of the Company immediately
prior to such reorganization, merger, consolidation or exchange
beneficially own, directly or indirectly, more than 70% of, respectively,
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors and the then
outstanding shares of common stock, as the case may be, of the
corporation resulting from such reorganization, merger, consolidation or
exchange in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger, consolidation or
exchange, of the Voting Securities and Stock of the Company, as the case
may be; or
(4) Approval by the shareholders of the Company of (x) a complete
liquidation or dissolution of the Company or (y) the sale or other
disposition of all or substantially all of the assets of the Company (in
one or a series of transactions), other than to a corporation with
respect to which, immediately following such sale or other disposition,
more than 70% of, respectively, the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and the then outstanding shares of
common stock of such corporation is then beneficially owned, directly or
indirectly, by all or substantially all of the persons who were the
beneficial owners, respectively, of the Voting Securities and Shares of
the Company immediately prior to such sale or other disposition in
substantially the same proportions as their ownership, immediately prior
to such sale or other disposition, of the Voting Securities and Shares of
the Company, as the case may be.
(b) ACCELERATION OF VESTING. Notwithstanding anything in paragraph
5(c) above to the contrary, if a Change of Control of the Company shall
occur, then, without any action by the Committee or the Board, each option
granted under this Plan and not already exercised in full or otherwise
terminated, expired or canceled shall become immediately exercisable in
full.
(c) CASH PAYMENT. If a Change in Control of the Company shall occur,
then, so long as a majority of the members of the Board are Continuing
Directors, the Committee, in its sole discretion, and without the consent of
the holder of any option affected thereby, may determine that some or all
outstanding options shall be cancelled as of the effective date of any such
Change in Control and that the holder or holders of such cancelled options
shall receive, with respect to some or all of the Common Shares subject to
such options, as of the date of such cancellation, cash in an amount, for
each Share subject to an option, equal to the excess of the per Share Fair
Market Value of such Shares immediately prior to such Change in Control of
the Company over the exercise price per Share of such options.
(d) LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding anything
in paragraph 13(b) or 13(c) above or paragraph 14 below to the contrary, if,
with respect to an optionee, the acceleration of the exercisability of an
option or the payment of cash in exchange for all or part of an option as
provided in paragraph 13(b) or 13(c) above or paragraph 14 (which
acceleration or payment could be deemed a "payment" within the meaning of
Section 280G(b)(2) of the Code), together with any other payments which such
optionee has the right to receive from the Company or any corporation which
is a member of an "affiliated group" (as defined in Section 1504(a) of the
Code without regard to Section 1504(b) of the Code) of which the Company is
a member, would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Code), then such acceleration of exercisability and
payments pursuant to paragraph 13(b) or 13(c) above or paragraph 14 shall be
reduced to the largest amount as, in the sole judgment of the Committee,
will result in no portion of such payments being subject to the excise tax
imposed by Section 4999 of the Code.
14. DISSOLUTION, LIQUIDATION, MERGER. In the event of (a) the proposed
dissolution or liquidation of the Company, (b) a proposed sale of substantially
all of the assets of the Company or (c) a proposed merger, consolidation of the
Company with or into any other entity, regardless of whether the Company is the
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surviving corporation, or a proposed statutory share exchange with any other
entity (the actual effective date of the dissolution, liquidation, sale, merger,
consolidation or exchange being herein called an "Event"), the Committee may,
but shall not be obligated to, either (i) if the Event is a merger,
consolidation or statutory share exchange, make appropriate provision for the
protection of outstanding options granted under this Plan by the substitution,
in lieu of such options, of options to purchase appropriate voting common stock
(the "Survivor's Stock") of the corporation surviving any such merger or
consolidation or, if appropriate, the parent corporation of the Company or such
surviving corporation, or, alternatively, by the delivery of a number of shares
of the Survivor's Stock which has a Fair Market Value as of the effective date
of such merger, consolidation or statutory share exchange equal to the product
of (x) the excess of (A) the Event Proceeds per Share (as hereinafter defined)
covered by the option as of such effective date over (B) the exercise price per
Share of the Shares subject to such option, times (y) the number of Shares
covered by such option or (ii) declare, at least twenty days prior to the Event,
and provide written notice to each optionee of the declaration, that each
outstanding option, whether or not then exercisable, shall be canceled at the
time of, or immediately prior to the occurrence of, the Event (unless it shall
have been exercised prior to the occurrence of the Event). In connection with
any declaration pursuant to clause (ii) of the preceding sentence, the Committee
may, but shall not be obligated to, cause payment to be made, within twenty days
after the Event, in exchange for each cancelled option to each holder of an
option that is cancelled, of cash equal to the amount (if any), for each Share
covered by the canceled option, by which the Event Proceeds per Share (as
hereinafter defined) exceeds the exercise price per Share covered by such
option. At the time of any declaration pursuant to clause (ii) of the first
sentence of this paragraph 14, each option that has not previously expired
pursuant to paragraph 5(d)(i) or 5(d)(ii) of this Plan or been cancelled
pursuant to paragraph 13(c) of this Plan shall immediately become exercisable in
full and each holder of an option shall have the right, during the period
preceding the time of cancellation of the option, to exercise his or her option
as to all or any part of the Shares covered thereby. In the event of a
declaration pursuant to clause (ii) of the first sentence of this paragraph 14,
each outstanding option granted pursuant to this Plan that shall not have been
exercised prior to the Event shall be canceled at the time of, or immediately
prior to, the Event, as provided in the declaration, and this Plan shall
terminate at the time of such cancellation, subject to the payment obligations
of the Company provided in this paragraph 14. Notwithstanding the foregoing, no
person holding an option shall be entitled to the payment provided in this
paragraph 14 if such option shall have expired pursuant to paragraph 5(d)(i) or
5(d)(ii) of this Plan or been cancelled pursuant to paragraph 13(c) of this
Plan. For purposes of this paragraph 14, "Event Proceeds per Share" shall mean
the cash plus the fair market value, as determined in good faith by the
Committee, of the non-cash consideration to be received per Share by the
shareholders of the Company upon the occurrence of the Event.
15. ADJUSTMENTS. In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock dividend,
stock split, combination of shares, rights offering, or extraordinary dividend
or divestiture (including a spin-off), or any other change in the corporate
structure or Shares of the Company, the Committee (or if the Company does not
survive any such transaction, a comparable committee of the Board of Directors
of the surviving corporation) may, without the consent of any holder of an
option, make such adjustment as it determines in its discretion to be
appropriate as to the number and kind of securities subject to and reserved
under this Plan and, in order to prevent dilution or enlargement of rights of
participants in this Plan, the number and kind of securities issuable upon
exercise of outstanding options and the exercise price thereof.
16. SUBSTITUTE OPTIONS. Options may be granted under this Plan from time
to time in substitution for stock options held by employees of other
corporations who are about to become employees of the Company, or any parent or
subsidiary thereof, or whose employer is about to become a subsidiary of the
Company, as the result of a merger or consolidation of the Company or a
subsidiary of the Company with another corporation, the acquisition by the
Company or a subsidiary of the Company of all or substantially all the assets of
another corporation or the acquisition by the Company or a subsidiary of the
Company of at least 50% of the issued and outstanding stock of another
corporation. The terms and conditions of the
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substitute options so granted may vary from the terms and conditions set forth
in this Plan to such extent as the Board at the time of the grant may deem
appropriate to conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted, but with respect to stock
options which are incentive stock options, no such variation shall be permitted
which affects the status of any such substitute option as an incentive stock
option.
17. COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) GENERAL. No certificate for Shares distributable under this Plan
shall be issued and delivered unless the issuance of such certificate
complies with all applicable legal requirements including, without
limitation, compliance with the provisions of applicable state securities
laws, the Securities Act of 1933, as amended, and the Exchange Act.
(b) RULE 16B-3. With respect to Section 16 Individuals, transactions
under this Plan are intended to comply with all applicable conditions of
Rule 16b-3 or its successors under the Exchange Act. To the extent any
provision of this Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
18. GOVERNING LAW. To the extent that federal laws do not otherwise
control, this Plan and all determinations made and actions taken under this Plan
shall be governed by the laws of the State of Minnesota, without regard to the
conflicts of law provisions thereof, and construed accordingly.
19. AMENDMENT AND DISCONTINUANCE OF PLAN. The Board may at any time amend,
suspend or discontinue this Plan; provided, however, that no amendment to this
Plan shall, without the consent of the holder of the option, alter or impair any
option previously granted under this Plan. To the extent considered necessary to
comply with applicable provisions of the Code, any such amendments to this Plan
may be made subject to approval by the shareholders of the Company.
20. TERM.
(a) EFFECTIVE DATE. This Plan shall be effective as of March 24, 1998.
(b) TERMINATION. This Plan shall remain in effect until all Shares
subject to it are distributed or this Plan is terminated under paragraph 19
above. No award of an incentive stock option shall be made under this Plan
more than ten years after the effective date of this Plan (or such other
limit as may be required by the Code) if such limitation is necessary to
qualify the option as an incentive stock option.
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PROXY
MINNTECH CORPORATION
ANNUAL MEETING OF STOCKHOLDERS -- AUGUST 26, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas J. McGoldrick and Barbara A. Wrigley,
and each of them, as Proxies, each with the power to appoint his or her
substitute, and hereby authorizes such Proxies to represent and to vote, as
designated below, all the shares of common stock of MINNTECH CORPORATION, held
of record by the undersigned on July 10, 1998, at the ANNUAL MEETING OF
STOCKHOLDERS to be held on August 26, 1998, or any adjournment thereof:
1. ELECTION OF FOR all nominees listed below WITHHOLD AUTHORITY
DIRECTORS: (EXCEPT AS MARKED BELOW) / / TO VOTE FOR ALL NOMINEES
LISTED BELOW / /
Norman Dann, Malcolm W. McDonald and William Hope
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW)
________________________________________________________________________________
2. Amend the Company's Restated Articles of Incorporation to increase the
authorized number of shares of common stock from 10,000,000 shares to
20,000,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
3. Approve the Minntech Corporation 1998 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. Amend the Minntech Corporation 1990 Employee Stock Purchase Plan to extend
its term for an additional five years.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
5. Ratify the appointment of PricewaterhouseCoopers LLP as the independent
accountants of the Company for the fiscal year ending March 31, 1999.
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL
BE VOTED "FOR" PROPOSALS (1), (2), (3), (4) AND (5). THE PROXIES ARE AUTHORIZED
TO VOTE THIS PROXY IN THEIR DISCRETION WITH RESPECT TO OTHER MATTERS WHICH MAY
PROPERLY COME BEFORE THE MEETING.
Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
_____________________________________
Signature
_____________________________________
Signature (if held jointly)
Dated: ______________________________
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
