SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ___________)
Filed by the Registrant [X]
Check the appropriate box:
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Possis Medical, Inc.
(Name of Registrant as specified in its Charter)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[ ]Fee computed on table below per Exchange Act Rules 14a-11(c) or
Section 240.14a-12
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 tranaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid: [] Fee paid previously with preliminary materials.
[] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
(GRAPHIC OMITTED)
9055 Evergreen Boulevard NW
Minneapolis, Minnesota 55433-8003
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December 15, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Possis
Medical, Inc., a Minnesota corporation, will be held on Wednesday, December 15,
1999, at 4:00 p.m. at the Minneapolis Marriott City Center, 30 South Seventh
Street, Minneapolis, Minnesota 55402, for the following purposes:
1. To elect seven (7) directors.
2. To approve adoption of the Corporation's 1999 Stock Compensation Plan.
3. To ratify the selection of Deloitte & Touche LLP as independent
certified public accountants for the Corporation.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
All shareholders of record on the transfer books of the Corporation as of
the close of business on Friday, October 22, 1999, will be entitled to vote at
the meeting.
Your attention is respectfully directed to the enclosed Proxy. Whether or
not you intend to be present at the meeting, please complete, sign and return
the Proxy in the enclosed envelope.
By Order of the Board of Directors
IRVING R. COLACCI
Secretary
Dated: November 1, 1999
<PAGE>
(GRAPHIC OMITTED)
PROXY STATEMENT
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished to the Shareholders of Possis Medical,
Inc. (the "Corporation" or the "Company"), in connection with the solicitation
of proxies to be used in voting at the Annual Meeting of Shareholders to be held
on December 15, 1999, and any adjournments thereof. The enclosed Proxy is
solicited by the Board of Directors of the Corporation.
A person giving the enclosed Proxy has the power to revoke it at any time
before the convening of the Annual Meeting. Revocation must be in writing,
signed in exactly the same manner as the Proxy, and dated. Revocations of Proxy
will be honored if received at the offices of the Corporation, addressed to the
attention of Irving R. Colacci, Secretary, on or before December 14, 1999. In
addition, on the day of the Meeting, prior to the convening thereof, revocations
may be delivered to the Company representatives who will be seated at the door
of the meeting hall.
Proxies not revoked will be voted in accordance with the choice specified
by Shareholders by means of the ballot provided on the Proxy for that purpose.
Proxies which are signed but which lack any such specification will, subject to
the following, be voted in favor of the proposals set forth in the Notice of
Meeting and in favor of the slate of Directors proposed by the Board of
Directors and listed herein. If a Shareholder abstains from voting as to any
matter, then the shares held by such Shareholder shall be deemed present at the
Meeting for purposes of determining a quorum and for purposes of calculating the
vote with respect to such matter, but shall not be deemed to have been voted in
favor of such matter. Abstentions, therefore, as to any proposal will have the
same effect as votes against such proposal. If a broker returns a "non-vote"
proxy, indicating a lack of voting instruction by the beneficial holder of the
shares and a lack of discretionary authority on the part of the broker to vote
on a particular matter, then the shares covered by such non-vote shall not be
deemed to be represented at the Meeting for purposes of calculating the vote for
approval of such matter, but will be deemed to be present for purposes of
determining the presence of a quorum.
The Corporation will bear the cost of the solicitation of Proxies,
including the charges and expenses of brokerage firms and others for forwarding
solicitation material to, and obtaining Proxies from, beneficial owners of the
Corporation's Common Shares. In addition to the use of the mails, Proxies may be
solicited by personal interview, telephone, letter or facsimile. Proxies may be
solicited by officers or other employees of the Corporation, who will receive no
special compensation for their services. The Corporation's management intends to
send this Proxy Statement and the enclosed Proxy to Shareholders commencing on
approximately November 3, 1999.
<PAGE>
VOTING RIGHTS
At October 22, 1999, 15,003,404 shares of Common Stock, the only voting
securities of the Corporation, were outstanding. Each share of Common Stock is
entitled to one vote. Shareholders are not entitled to cumulate their votes in
the election of Directors. Only holders of Common Stock of record at the close
of business on October 22, 1999, will be entitled to notice of and to vote at
this Annual Meeting of Shareholders.
<PAGE>
COMMON STOCK OWNERSHIP
The following table sets forth the beneficial holdings as of October 8,
1999, of each Director and Named Executive Officer (as defined under the heading
"Executive Compensation") and all Directors and Executive Officers as a group.
The Corporation is aware of no person who beneficially owns more than five
percent of the Corporation's Common Shares.
<TABLE>
<CAPTION>
Name of Beneficial Owner or Voting and Total %
Identity of Group Investment Power of Class
<S> <C> <C>
Donald C. Wegmiller, Chairman 63,342 (1) *
Dean Belbas, Director 52,478 (2) *
Seymour J. Mansfield, Director 165,045 (3) 1.0
Whitney A. McFarlin, Director 1,000 *
William C. Mattison, Jr., Director 240,000 (4) 1.5
Rodney A. Young, Director 460 *
Robert G. Dutcher, Director, 218,942 (5) 1.4
President & Chief Executive Officer
Russel E. Carlson, Vice President of 88,218 (6) *
Finance and Chief Financial Officer
Irving R. Colacci, Vice President, 87,137 (7) *
Legal Affairs & Human Resources,
General Counsel and Secretary
James G. Gustafson, Vice President of 87,036 (8) *
Regulatory/Clinical Affairs
T. V. Rao, Vice President/General Manager 31,627 (9) *
Directors and Executive Officers
as a Group (13 persons) 1,181,558(10) 7.6
<FN>
(1) Includes 48,342 shares issuable upon exercise of currently exercisable
options.
(2) Includes 27,866 shares issuable upon exercise of currently exercisable
options.
(3) Includes 41,634 shares issuable upon exercise of currently exercisable
options and 15,000 shares owned by children.
(4) Includes 80,000 shares owned directly and 160,000 shares held
indirectly in Trust and by an IRA
(5) Includes 169,750 shares issuable upon exercise of currently exercisable
options.
(6) Includes 74,625 shares issuable upon exercise of currently exercisable
options.
(7) Includes 78,450 shares issuable upon exercise of currently exercisable
options.
(8) Includes 68,125 shares issuable upon exercise of currently exercisable
options.
(9) Includes 25,000 shares issuable upon exercise of currently exercisable
options.
(10) Includes 636,942 shares issuable upon exercise of currently
exercisable options.
* Denotes ownership of less than 1% of shares outstanding
</FN>
</TABLE>
<PAGE>
ELECTION OF DIRECTORS
(Proposal Number One)
At the Annual Meeting, seven Directors will be elected to serve until the
next Annual Meeting of Shareholders and until their respective successors are
elected and qualified.
Unless instructed not to vote for the election of Directors or not to vote
for any specific nominee, the Proxy will vote FOR the election as Directors of
the seven nominees named below. If any nominee becomes unavailable for any
reason or if a vacancy should occur before the election, which events are not
anticipated, the Proxy may vote for such other person as he, in his discretion,
may determine.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS THAT THE NOMINEES
LISTED BELOW BE ELECTED.
Information Concerning Nominees. The following information concerning the
principal occupations of the nominees has been furnished by the nominees. Each
of the nominees has held their principal occupation for more than the past five
years, unless otherwise indicated.
<TABLE>
<CAPTION>
Director Committee
Director Nominees Principal Occupation Age Since Positions
<S> <C> <C> <C> <C>
Donald C. Wegmiller President and CEO, HealthCare 61 1987 Executive, Audit,
Compensation Strategies (formerly and Compensation
Management Compensation Group/Health Committees
Care), Minneapolis, Minnesota, since
April 1993. Director, Minnesota Power,
Medical Graphics Corporation, LecTec
Corporation, Select Care, and JLJ
Medical Devices International, LLC.
Dean Belbas Retired. Former Senior Vice President, 67 1984 Executive and
Director of Investor Relations, General Compensation
Mills, Inc., Minneapolis, Committees
Minnesota, since January 1993.
Seymour J. Mansfield Officer and Shareholder, Mansfield, 54 1987 Executive, Audit,
Tanick & Cohen, P.A., Attorneys, and Compensation
Minneapolis, Minnesota. Committees
Whitney A. McFarlin Chairman of the Board of Directors 59 1998 Audit Committee
of Angeion Corporation. From 1993
to July 1998, President, CEO and
Chairman of the Board of Angeion
Corporation.
William C. Mattison, Jr. Principal of Gerard, Klauer 52 1999
Mattison & Co., Inc., since its
founding in 1989; served as
President or Vice Chairman of
Gerard Klauer from 1989 to 1998.
Rodney A. Young Chairman, CEO and President 44 1999
of LecTec Corporation since 1996.
Formerly Vice President/General
Manager Specialized Distribution
Division of Baxter International.
Robert G. Dutcher President and Chief Executive 54 1993 Executive
Officer of the Corporation since Committee
October 1993; Executive Vice President
from December 1992 to October 1993;
President, Possis Holdings, Inc.,
since 1987.
</TABLE>
<PAGE>
Meetings. During fiscal year 1999, the Board of Directors had three regular
meetings, one special meeting, and two telephonic meetings. Actions were also
taken by written consent. All director nominees attended at least 75% of all
meetings of the Board and the Committees of which they are members.
Committees. The Corporation has established three committees to address the
Corporation's business: the Executive Committee met seven times during fiscal
year 1999, four times by telephonic meeting, one of which was a joint meeting
with the Compensation Committee, and three times in person, all of which were
joint meetings with the Compensation Committee. The Executive Committee is
responsible for exercising the authority of the Board during the intervals
between meetings of the Board and for formulating and recommending general
policies for Board consideration. The Audit Committee met once during fiscal
year 1999 and is responsible for reviewing the scope and the results of the
annual independent audit of the books and records of the Corporation and to
review compliance with all corporate financial policies as approved by the
Board. The Compensation Committee met five times during fiscal 1999, four times
in person, three of which were joint meetings with the Executive Committee, and
once telephonically in a joint meeting with the Executive Committee, and is
responsible for defining and administering the Corporation's executive
compensation policy.
Director Fees. With the exception of the Chairman of the Board, each
outside Director received a $2,000 annual retainer during 1999. Mr. Wegmiller
received an $8,000 annual retainer as Chairman. Each outside Director also
received $500 for each Board meeting attended and $200 for each teleconference
Board meeting attended. Outside Directors sitting on the Executive Committee
received an additional $4,000 annual retainer. All committee chairmen received
an additional $3,000 annual retainer. The chairmen of the Compensation and Audit
Committees each also received $500 per meeting; the members received $250 per
meeting. Total fees of $54,750 were earned by outside Directors during fiscal
1999.
Pursuant to the Corporation's 1992 Stock Compensation Plan, each outside
Director may elect to receive Director fees in the form of discounted stock
options. Each Director must make an election on or before June 1 of each year
with regard to fees that would otherwise be payable for that calendar year. The
exercise price of the options is 50% of the fair market value on the date of
grant, which is January 2 of the year following the year for which the fees are
earned. Each option becomes exercisable in full six months following the date of
grant, is exercisable for 10 years following the date of grant, and is subject
to the general restrictions on exercise and transferability applicable to stock
options issued to employees. The number of shares subject to each option is
calculated by dividing the fees owed to the particular Director by the dollar
amount of the discount from fair market value in the exercise price. All
eligible outside Directors elected to receive discounted stock options in lieu
of cash payment of director fees for calendar year 1999.
On January 4, 1999, all eligible outside Directors received discounted
stock options in lieu of cash payments of fees for calendar year 1998. These
options were granted pursuant to elections made in May 1998. A total of 11,477
options at an exercise price of $3.52 were granted to current directors.
The Corporation's 1992 Stock Compensation Plan provides for the annual
grant of options to purchase 3,000 Common Shares to outside Directors. The
exercise price of these options must be at least 100% of the fair market value
at date of grant. The date of grant is the first business day of each calendar
year. The options vest ratably over a four-year period and expire ten years
after the date of grant. During fiscal 1999, 12,000 options were granted to
outside Directors under this Plan at an exercise price of $7.03.
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid for services rendered to
the Corporation and its subsidiaries during each of the three fiscal years ended
July 31, 1999, 1998 and 1997, to the President and CEO of the Corporation and
the Corporation's four other highest paid executive officers who received salary
and bonus in excess of $100,000 during fiscal year 1999 ("Named Executive
Officers"):
<TABLE>
<CAPTION>
Long-Term Compensation Awards
Securities
Name and Annual Compensation Restricted Underlying All Other
Principal Position Year Salary Bonus(1) Stock Award ($) Options/ (2) Compensation(3)
($) ($) SARs (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Robert G. Dutcher 1999 167,250 88,000 -- 90,000 6,398
President and 1998 155,577 46,000 172,500(4) 30,000 4,672
Chief Executive Officer 1997 145,746 46,300 -- 24,000 3,078
Russel E. Carlson 1999 102,904 36,200 -- 30,000 3,687
Vice President, Finance 1998 98,919 20,000 86,250(5) 20,000 3,495
Chief Financial Officer 1997 91,890 19,700 -- 14,300 3,440
Irving R. Colacci 1999 104,904 36,900 -- 30,000 3,747
Vice President, 1998 98,788 20,000 86,250(5) 20,000 3,567
Legal Affairs & Human 1997 93,890 20,100 -- 14,300 3,511
Resources, General
Counsel and Secretary
James D. Gustafson 1999 102,482 36,700 -- 30,000 3,674
Vice President, 1998 95,346 20,000 86,250(5) 20,000 3,621
Quality Systems, 1997 89,890 19,700 -- 14,600 3,369
Regulatory/Clinical
Affairs
1999 140,462 47,300 -- 45,000 --
T.V. Rao 1998 23,192 3,000 70,500(6) 45,000(7) --
Vice President,
General Manager
<FN>
(1) Cash bonuses shown are awarded following end of fiscal year, based on
fiscal year performance.
(2) Stock options shown are awarded following end of fiscal year, based on
fiscal year performance. Grants awarded for 1997 and 1998 vest over a four-year
period. Grants awarded for 1999 vest in one year, subject to specified
conditions relating to the appreciation in the value of the Company's stock:
one-third vests when the stock reaches $15 per share; one-third vests when the
stock reaches $20 per share; one-third vests when the stock reaches $25 per
share. After seven years, 100% of the grant vests notwithstanding other vesting
contingencies.
(3) Includes only Company matching contributions to its 401(k) Plan.
(4) Mr. Dutcher was granted 12,000 shares of restricted stock, of which
4,000 shares vested on September 24, 1998; 4,000 shares vested on September 24,
1999; and 4,000 shares vest on September 24, 2000. The dollar value shown
represents the fair market value of the stock on the date of grant, September
24, 1997.
(5) Mssrs. Carlson, Colacci, and Gustafson were each granted 6,000 shares
of restricted stock of which 2,000 shares vested on September 24, 1998; 2,000
shares vested on September 24, 199; and 2,000 shares vest on September 24, 2000.
The dollar value shown represents the fair market value of the stock on the date
of grant, September 24, 1997.
(6) Mr. Rao was granted 9,000 shares of restricted stock, of which 3,000
shares vested in September 24, 1998; 3,000 shares vested on September 24,1999;
and 3,000 shares vest on September 24, 2000. The dollar value shown represents
the fair market value of the stock on the date of grant, June 22, 1998.
(7) Mr. Rao received 20,000 stock options on June 22, 1998, his hire date.
In addition, Mr. Rao received 25,000 stock options based on fiscal year
performance.
</FN>
</TABLE>
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information concerning stock option grants to
Named Executive Officers during fiscal year 1999.
<TABLE>
Individual Grants
Number of Percent of
Securities Total Potential Realizable
Underlying Options/SARs Exercise or Value at Assumed Annual
Options/SARs Granted to Base Price Rates of Stock Price
Name Granted (#) Employees in ($/Sh) Expiration Date(1) Appreciation for Option
Fiscal Year Term(2)
(%)
5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Robert G. Dutcher 30,000 6.5 5.813 September 14, 2008 109,673 277,933
Russel E. Carlson 20,000 4.3 5.813 September 14, 2008 73,115 185,288
Irving R. Colacci 20,000 4.3 5.813 September 14, 2008 73,115 185,288
James D. Gustafson 20,000 4.3 5.813 September 14, 2008 73,115 185,288
T. V. Rao 25,000 5.4 5.813 September 14, 2008 91,394 231,611
<FN>
(1) All option grants shown vest in five equal annual installments
beginning on the September 14, 1998 grant date.
(2) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange Commission
(the "SEC") and do not represent the Company's estimate or projection of the
Company's future Common Stock prices. These amounts represent certain assumed
rates of appreciation only. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Common Stock and overall stock market
conditions. The amounts reflected in this table may not necessarily be achieved.
</FN>
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information concerning stock option exercises
and the value of unexercised options at July 31, 1999, for the Named Executive
Officers.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at Fiscal Year-End at Fiscal Year-End (1)
(#) ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name Upon Exercise (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Robert G. Dutcher 14,000 86,250 145,250/60,750 426,497/119,988
Russel E. Carlson -- -- 59,150/38,400 98,976/79,992
Irving R. Colacci 4,126 25,673 63,125/38,175 163,748/79,992
James D. Gustafson -- -- 52,575/38,625 94,061/79,992
T. V. Rao -- -- 25,000/20,000 24,998/99,990
<FN>
(1) The dollar values shown are calculated by determining the difference
between the fair market value of the common stock underlying the options at
fiscal year-end and the exercise price of the options. The closing price of the
stock on July 30, 1999 was $10.81.
</FN>
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee")
consists of three independent, outside directors. The Committee is responsible
for defining and administering the Company's executive compensation policy and
meets as may be necessary to review executive compensation policies, the design
of compensation programs and individual salaries and awards for executive
officers.
Introduction
The Corporation's compensation program is intended to attract and retain
the highest quality personnel possible consistent with the Corporation's
resources. The current overall compensation program reflects the continuing need
to maintain competitive levels of compensation in the face of a tight job
market, particularly for the highly skilled employees necessary for the
Corporation's continuing growth.
Compensation decisions for 1999 were guided by the belief that 1999 was a
critical and successful year in the development of the Corporation and its
progress toward meeting growth and profitability goals. The development of
appropriate criteria to guide compensation decisions is increasingly influenced
by two factors: the fact that the Company has entered a new stage in its
development and is establishing a foundation for long-term profitability and by
the need to continue to enhance the alignment of management's interests with
those of the shareholders. While decisions on base salary and on the types of
cash and equity-based compensation awarded continue to be guided by the general
compensation philosophy previously adopted by the Committee, the scope and
amounts of such awards reflect a movement toward establishing performance
criteria that are more heavily weighted on financial and commercialization
goals. While still important, relatively less emphasis was placed on research
and product development milestones as compared with recent years. As the
Corporation increases its market penetration through the sale and placement of
AngioJet System drive units, continues its growth in the sales of AngioJet
System disposable components, and increases gross margins, its performance will
increasingly be evaluated on its ability to achieve and increase profitability.
Corporate and individual performance measures will reflect a greater emphasis on
achieving financial goals, sales and profitability targets, financing
requirements and research, development and regulatory approvals necessary to
support sustained growth.
Awards for fiscal year 1999 performance reflect significant improvement in
overall corporate performance as compared to 1998. Most important, this is
reflected by the fact that the Corporation exceeded its goals as they related to
market penetration and the placement of AngioJet System drive units, sales of
disposable components, and improvement in gross margins. Despite increased sales
and marketing expense associated with new product launch efforts and the
building of its sales force, the Corporation met its overall financial goals. In
addition, the Corporation achieved significant progress relating to research,
development and regulatory milestones.
<PAGE>
Program Elements
Compensation of executive management and key managerial and technical
personnel is based on three types of compensation: a) base salaries; b) annual
cash incentives; and c) long term equity-based compensation.
(a) Base Salaries
Base salaries are determined and adjusted consistent with a policy of
rewarding performance and maintaining competitive salary levels necessary to
retain and attract quality personnel. During the transition to commercialization
and in the absence of sizable revenues and profitable operations, the
Corporation does not have the financial resources to match salaries offered by
larger and profitable medical companies. By augmenting base salary with
performance-based incentives and longer term equity-based compensation, and by
increasing base salaries as necessary to attract and retain skilled personnel,
the Corporation seeks to continue to attract and retain quality technical and
management personnel despite limited financial resources. Annual increases in
base salaries for existing officers are awarded based on merit and on each
officer's scope of responsibility. Increases are also given, as appropriate, to
reflect changes in job responsibility and authority, and to acknowledge and
reward superior performance. Base salary increases granted January 1, 1999
ranged from 6% to 8%. In addition, review and adjustment of base salary levels
for the executive management team was changed to a fiscal year review cycle to
better evaluate performance as measured by the achievement of corporate
objectives. Adjustments granted effective with the start of the fiscal year on
August 1, 1999, ranged from 3.8% to 4.4%. An additional increase of 6.5% was
granted to one executive officer to reflect enhanced responsibilities.
(b) Annual Cash Incentives
The Corporation provides executives with an opportunity to earn annual cash
incentive awards pursuant to an Incentive Compensation Plan that incorporates
objective guidelines and conditions incentive awards on corporate and individual
performance. The Plan offers opportunities for awards competitive with similar
companies based on corporate and individual performance objectives reflecting
the Corporation's continuing commitment to alignment of management's interests
with those of the shareholders and its transition to an organization actively
commercializing its products and achieving profitability.
Cash incentives were awarded under the Incentive Compensation Plan in
August 1999 to 46 employees (excluding the CEO) to reflect fiscal year 1999
performance. Cash awards of $395,200 reflect both an improvement of the
Corporation's performance against corporate objectives for 1999 and awards to
high-level management personnel in the Sales and Marketing Departments not
awarded in 1998. The Corporation added, and made substantial awards to, a new
Director of Sales, a new Director of Marketing and a Vice President, General
Manager hired in June 1998. Total awards reflect this addition of high-level
personnel and improved overall performance. Cash awards of $163,000 were granted
to 45 employees (excluding the CEO) one year ago to reward fiscal year 1998
performance.
(c) Long-term Equity-based Compensation
The major component of the Corporation's long-term equity-based
compensation program consists of stock options awarded under the Corporation's
1992 Stock Compensation Plan. Stock options are intended by the Committee to
maximize individual performance and dramatically strengthen the alignment of
management interests with that of the shareholders. Stock options have
historically been granted annually to officers and other key employees based on
progress toward achievement of long-term strategic objectives, technical and
regulatory milestones, and corporate financial performance goals. Exercisability
has been conditioned on passage of time, with no specific performance
categories. Stock options awarded in August 1999 for fiscal year 1999 were
divided between those granted to officers and those granted to other key
management and technical personnel. The options granted to officers will only
have value if the market price of the stock rises substantially from the price
of the stock on the date of grant, which was $8.625. One-third of these options
become exercisable only if the stock price increases to $15 per share (a
seventy-four percent (74%) increase); an additional one-third becomes
exercisable only when the stock price increases to $20 per share (a one-hundred
and thirty-two percent (132%) increase); and the final one-third becomes
exercisable only when the stock price increases to $25 per share (a one-hundred
and ninety percent (190%) increase). Notwithstanding the vesting contingencies
described above, all options granted to these officers vest seven years from
date of grant. The total number of shares granted to the officer group was
intended and designed to be substantially equivalent in value to those granted
in 1998, considered relative to the value of past grants of restricted stock and
in light of grants made for the newly-created position of Vice President/General
Manager. No new restricted stock awards were granted in 1999.
<PAGE>
Stock option grants to non-officer managers and key management personnel
were substantially unchanged from 1998 and contain similar vesting provisions as
past years. Twenty-five percent of each grant vests annually over four years. In
total, options covering 285,000 shares to a total of 46 employees (excluding the
CEO) were approved in August 1999.
The Corporation established a restricted stock program in June 1993 as a
vehicle to retain officers and other key personnel. During 1999, no restricted
stock grants were made to existing participants in this program. A total of
2,500 shares of restricted stock were granted to three new senior managers.
These grants were consistent in amount and on terms identical to previous
grants. Future grants will depend on an assessment of how this type of equity
compensation supports the overall compensation program.
Change in Control Plans
The Corporation's Board of Directors has approved a Change in Control
Termination Pay Plan that provides, at the discretion of the Board, salary and
benefit continuation payments to executive officers and selected key management
and technical personnel in the event they are terminated within twenty-four
months of a change in control. In addition, executive officers and other key
management personnel may, under the Plan, receive an additional bonus payment,
as described below, upon a change in control notwithstanding their employment
status following a change in control. The purpose of this Plan is to ensure that
senior management approach the prospects of a change in control from an
objective perspective, not unduly influenced by any potential personal impact on
job status or prospects. The Plan provides for termination payments to executive
officers and other key management and technical personnel ranging from six to
thirty-six times monthly base salary. Additional bonus payments contingent on a
change in control, notwithstanding subsequent employment status, will be
calculated based on achievement of sales revenue goals and increase as these
revenue levels increase. No bonus payments will be paid if the Corporation's
performance does not create substantial growth in value. Awards in the aggregate
are intended and designed to fall between one percent (1%) and a maximum of four
percent (4%) of the value of the Corporation as measured on the date of a change
in control.
CEO Compensation
Robert G. Dutcher, as President and CEO of the Corporation, participates in
the general compensation program of the Company, as described above, along with
all other key employees. Mr. Dutcher's base salary is set at a level determined
by the Committee to be competitive with other similarly-situated companies based
on salary surveys and other comparative data, and reflects the scope of his
responsibilities and individual performance as an officer of the Corporation.
Effective January 1999, Mr. Dutcher's base salary was increased 8% to recognize
favorable individual performance. An additional increase of 3.8% was effective
August 1999 to bring base salary review into a fiscal year review cycle. Mr.
Dutcher received a cash bonus equal to 29% of base salary and a grant of 30,000
stock options in September 1998 to reward fiscal year 1998 performance. Mr.
Dutcher received a cash bonus of 50% of base salary and 90,000 stock options in
August 1999 to reward fiscal year 1999 performance. All cash and equity awards
reflect the Committee's judgment as to Mr. Dutcher's individual performance, the
overall performance of the Corporation as measured against Corporate objectives,
and the Committee's commitment to aligning the interests of the CEO with those
of shareholders. The terms and conditions of the option awards are identical to
those contained in grants to other officers. No new grants of restricted stock
were awarded to the CEO in 1999.
At this time the Committee has no formal, written plan for CEO compensation
separate and apart from the Corporation's general compensation philosophy and
the Incentive Compensation Plan. Until a plan specific to the CEO is developed,
CEO compensation will be based on corporate and individual performance measured
against established guidelines and objectives. Current guidelines and objectives
are contained in the Corporation's 2000-2004 Strategic Plan, as approved by the
Board.
Compensation Committee of the Board of Directors
Dean Belbas, Chairman
Donald C. Wegmiller
Seymour J. Mansfield
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph showing the five-year cumulative returns through
July 31, 1999 of Possis Medical, Inc. Common Stock as compared with the Nasdaq
Stock Market Index (U.S. companies only) and a peer group index comprised of
seven companies in the medical device industry with operations similar in size
to Possis Medical, Inc. (the "Peer Group"). The graph assumes an investment of
$100.00 in the Company's Common Stock in each of the indexes on July 31, 1994,
and the reinvestment of all dividends.
Possis Medical, Inc. is included in the Nasdaq Stock Market Index (U.S.
companies only) and is similar in size and stage of commercialization as the
other companies in the Peer Group. The Nasdaq Stock Market Index does not have
an index specifically for medical devices. The Company believes that the
following entities comprising the Peer Group are representative of the Company's
current medical device operations: Angeion Corporation; Arrow International,
Inc.; Cardima, Inc.; Micro Therapeutics, Inc.; Novoste Corporation; PLC Systems,
Inc.; and Rochester Medical Corporation.
1994 1995 1996 1997 1998 1999
Possis Medical, Inc 100.00 213.46 234.62 221.15 142.31 166.35
Nasdaq US Index 100.00 140.40 152.98 225.75 265.76 380.09
Peer Group Index 100.00 231.39 157.75 181.75 156.30 141.69
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Seymour J. Mansfield, a Director of the Corporation, is a shareholder
in a law firm that performs legal services for the Corporation from time to
time. The amount of fees paid by the Corporation during fiscal 1999 to Mr.
Mansfield's law firm does not exceed five percent of that firm's gross revenues
for its last full fiscal year. Mr. William C. Mattison, Jr. is a Principal of an
investment banking firm that has performed services for the Corporation. No fees
were paid by the Corporation to this firm during fiscal 1999.
<PAGE>
SECTION 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that Executive Officers and Directors of the Corporation and persons who own
more than 10% of a registered class of the Corporation's equity securities file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission (the "SEC"). Such persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it with
respect to fiscal 1999 and written representations from certain reporting
persons, the Corporation believes that all filing requirements applicable to its
Executive Officers and Directors have been complied with, with the exception
that the Form 3 Initial Statement of Beneficial Ownership of Securities, due for
filing within ten (10) days of T.V. Rao's date of hire was not filed within the
required time frame. This Form 3 was subsequently filed. The Corporation is
aware of no person who owns more than 10% of the Corporation's Common Shares.
APPROVAL OF 1999
STOCK COMPENSATION PLAN
(Proposal Number 2)
The Board of Directors is recommending that the shareholders approve the
Possis Medical, Inc. 1999 Stock Compensation Plan (the "Plan"). The purpose of
the Plan is to promote the interests of the Company and its shareholders by
aiding the Company in attracting, retaining and providing incentives to
employees, officers, consultants, independent contractors and non-employee
directors. The Plan is intended to replace the 1992 Stock Compensation Plan.
While no further options shall be granted under the 1992 Plan following
shareholder approval of the 1999 Stock Compensation Plan, the 1992 Plan shall
remain in effect until all options or awards granted pursuant thereto have been
exercised or have expired or terminated by their terms.
The Board adopted the Plan on September 15, 1999, subject to shareholder
approval. The following description of the Plan is qualified in its entirety by
the full text thereof, copies of which may be obtained without charge upon
request to Irving R. Colacci, the Corporation's Secretary. If approved by the
shareholders, the Plan will become effective on December 16, 1999. The market
price of the Company's Common Stock as of October 20, 1999 was $8.125 per share.
Administration. The Plan is administered by the Board of Directors of the
Company or a Committee appointed by the Board of Directors. Current
administration is by the Compensation Committee of the Board.
Types of Compensation. The Plan authorizes awards of the following types of
equity-based compensation: Incentive Stock Options (ISOs); Non-Qualified Stock
Options (NQSOs); Stock Appreciation Rights (SARs); Restricted Stock and
Restricted Stock Units; Performance Awards; Dividend Equivalents; Annual Grants
of Stock Options to Directors; Stock Options to Directors in Lieu of
Compensation for services rendered as Directors; other Stock Grants and Other
Stock-Based Awards valued in whole or in part by reference to stock of the
Corporation. No ISOs may be granted on or after December 15, 2009, nor shall
such options remain valid beyond ten years following the date of grant. The
following describes each type of award in greater detail:
<PAGE>
1. Stock Options. Stock Options may be granted for such number of shares as
the Committee will determine and may be granted alone, in addition to, or in
tandem with other awards under the Plan.
Stock options will be exercisable at such times and subject to such terms
and conditions as the Committee will determine and over a term to be determined
by the Committee, which term will be no more than ten years after the date of
grant. The option price for any Incentive Stock Option will not be less than
100% of the fair market value of the Corporation's common stock as of the date
of grant. Payment of the option price may be in cash, shares of the Company,
other securities, other awards under the Plan, other property, or any
combination thereof having a fair market value on the exercise date equal to the
relevant exercise price, or such other instrument or method as the Committee may
accept. Stock options are not transferable other than by will or by the laws of
descent and distribution. Upon the death of an employee, stock options will be
exercisable by the deceased employee's representative.
2. Stock Appreciation Rights. Stock Appreciation Rights ("SAR") may be
granted either alone or in addition to other awards granted under the Plan and
may, but need not, relate to all or part of any stock option granted under the
Plan. SARs may be exercised in accordance with procedures established by the
Committee as set forth in the applicable Award Agreement, subject to specific
restrictions contained in the Plan.
3. Restricted Stock. Restricted stock may be granted alone, in addition to,
or in tandem with other awards under the Plan, and shall be subject to such
restrictions as the Committee may determine.
4. Performance Awards. Performance Awards may be granted to participants
subject to the terms of the Plan and any applicable Award Agreement. A
performance award granted under the Plan (i) may be denominated or payable in
cash, shares (including, with limitation, restricted stock and restricted stock
units), other securities, other awards or other property and (ii) shall confer
on the holder thereof the right to receive payments, in whole or in part, upon
the achievement of such performance goals during such performance periods as the
Committee shall establish. Subject to the terms of the Plan and any applicable
Award Agreement, the performance goals to be achieved during any performance
period, the length of any performance period, the amount of any performance
award granted, the amount of any payment or transfer to be made pursuant to any
performance award and any other terms and conditions of any performance award
shall be determined by the Committee.
5. Dividend Equivalents. The Dividend Equivalents may be granted to
participants, subject to the terms of the Plan and any applicable Award
Agreement, under which such participants shall be entitled to receive payments
(in cash, shares, other securities, other awards or other property as determined
in the discretion of the Committee) equivalent to the amount of cash dividends
paid by the Company to holders of shares with respect to a number of shares
determined by the Committee.
6. Annual Stock Options to Directors. Directors of the Corporation who are
not otherwise employees shall be granted annually, on January 2nd, options to
purchase 3,000 shares of the Corporation's common stock. The option price will
not be less than 100% of the fair market value of the Corporation's common stock
as of the date of grant. Each option shall become exercisable in annual
increments of 750 shares beginning on the first annual anniversary of the date
of grant, shall be exercisable for ten years following the date of grant and
shall be subject to the same terms and conditions as apply to other stock
options granted under the Plan. Directors shall be entitled to receive awards
under the Plan in addition to the award provided in this section, at the
discretion of the Committee.
<PAGE>
7. Stock Options to Directors in Lieu of Fees. On or before June 1 of each
year, each director who is not otherwise an employee of the Corporation shall be
permitted to elect to receive fees that would otherwise be due for services
rendered that year as a director in the form of discounted stock options. The
exercise price of each option shall be 50% of the fair market value of the
Corporation's common stock on the date of grant. The difference between 100% and
50% of the fair market value of the Corporation's common stock on the date of
grant times the number of options granted shall equal the fees that would
otherwise be due for services for the year immediately preceding the date of
grant. The date of grant shall be January 2. Each option shall become
exercisable in full six months following the date of grant, shall be exercisable
for ten years following the date of grant and shall be subject to the same
additional terms and conditions as apply to other stock options granted under
the Plan. Directors shall be entitled to receive awards under the Plan in
addition to the award provided in this section, at the discretion of the
Committee.
8. Other Stock-Based Awards. The Committee may also grant other types of
awards that are valued, in whole or in part, by reference to or otherwise based
on the Corporation's common stock.
Number of Shares. The total number of shares of stock reserved and
available for distribution under the Plan shall initially be 2,000,000 shares of
stock, a maximum of 2,000,000 of which may be issued as Incentive Stock Options.
The total number of shares of stock reserved and available for distribution
under the Plan shall be increased annually on August 1 by 2% of the number of
shares of the Corporation's common stock outstanding at July 31 of each prior
fiscal year.
Eligibility. Under the Plan, only employees shall be eligible to be granted
Incentive Stock Options ("ISOs") that are intended to qualify as ISOs pursuant
to the Internal Revenue Code. All other grants under the Plan may be granted to
officers, directors, consultants, and independent consultants.
Amendment and Termination. Except to the extent prohibited by applicable
law and unless otherwise expressly provided in an Award Agreement or in the
Plan, the Plan may be amended, altered, suspended, discontinued, or terminated
by the Board of Directors, except that the Board may not, without the approval
of the Corporation's shareholders, increase the number of shares reserved for
purposes of the Plan or authorize an increase in the total number of shares
reserved for issuance upon exercise of Incentive Stock Options.
Change in Control. In the event of a "Change in Control" or a "Potential
Change in Control" of the Corporation, as those terms are defined in the Plan,
the Board or the Committee may determine that any award, if so provided in the
related Award Agreement, shall become fully exercisable and vested. The value of
all outstanding awards may, at the Committee's discretion, be cashed out on the
basis of the "Change in Control Price" as defined in the plan.
Federal Income Tax Consequences. The following is a brief summary of the
federal income tax consequences generally applicable to awards under the Plan.
This summary is not intended to be exhaustive and does not describe state or
local tax consequences.
<PAGE>
The grant of an option or SAR is not expected to result in any taxable
income for the recipient. The holder of an ISO generally will have no taxable
income upon exercising the ISO (except that a liability may arise pursuant to
the alternative minimum tax), and the Corporation will not be entitled to a tax
deduction when an ISO is exercised. Upon exercising a Nonqualified Stock Option,
the optionee must recognize ordinary income equal to the excess of the fair
market value of the shares of Common Stock acquired on the date of exercise over
the exercise price, and the Corporation will be entitled at that time to a tax
deduction for the same amount. Upon exercising an SAR, the amount of any cash
received and the fair market value on the exercise date of any shares of Common
Stock received are taxable to the recipient as ordinary income and deductible by
the Corporation. The tax consequence to an optionee upon a disposition of shares
acquired through the exercise of an option will depend on how long the shares
have been held and upon whether such shares were acquired by exercising an ISO
or by exercising a Nonqualified Stock Option or SAR. Generally, there will be no
tax consequence to the Corporation in connection with disposition of shares
acquired under an option, except that the Corporation may be entitled to a tax
deduction in the case of a disposition of shares acquired under an Incentive
Stock Option before the applicable ISO holding periods set forth in the Code
have been satisfied.
With respect to other awards granted under the Plan that are payable either
in cash or shares of Common Stock that are either transferable or not subject to
substantial risk of forfeiture, the holder of such an award must recognize
ordinary income equal to the excess of (a) the cash or the fair market value of
the shares of Common Stock received (determined as of the date of such receipt)
over (b) the amount (if any) paid for such shares of Common Stock by the holder
of the award, and the Corporation will be entitled at that time to a deduction
for the same amount. With respect to an award that is payable in shares of
Common Stock that are restricted as to transferability and subject to
substantial risk of forfeiture, unless a special election is made pursuant to
the Code, the holder of the award must recognize ordinary income equal to the
excess of (i) the fair market value of the shares of Common Stock received
(determined as of the first time the shares become transferable or not subject
to substantial risk of forfeiture, whichever occurs earlier) over (ii) the
amount (if any) paid for such shares of Common Stock by the holder, and the
Corporation will be entitled at that time to a tax deduction for the same
amount.
Special rules may apply in the case of individuals subject to Section 16 of
the Exchange Act. In particular, unless a special election is made pursuant to
the Code, shares received pursuant to the exercise of a stock option or SAR may
be treated as restricted as to transferability and subject to a substantial risk
of forfeiture for a period of up to six months after the date of exercise.
Accordingly, the amount of any ordinary income recognized, and the amount of the
Corporation's tax deduction, are determined as of the end of such period.
Under the Plan, the Committee may permit participants receiving or
exercising awards, subject to discretion of the Committee and upon such terms
and conditions as it may impose, to surrender shares of Common Stock (either
shares received upon the receipt or exercise of the award or shares previously
owned by the optionee) to the Corporation to satisfy federal and state tax
obligations. In addition, the Committee may grant, subject to its discretion and
such rules as it may adopt, a bonus to a participant in order to provide funds
to pay all or a portion of federal and state taxes due as a result of the
receipt or exercise of (or lapse of restrictions relating to) an award. The
amount of any such bonus will be taxable to the participant as ordinary income,
and the Corporation will have a corresponding deduction equal to such amount
(subject to the usual rules concerning reasonable compensation).
<PAGE>
Shareholder Approval. The affirmative vote of a majority of the Common
Stock of the Corporation present in person or by proxy and entitled to vote on
approval of the Plan is required for approval of the proposed 1999 Stock
Compensation Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. 2 TO
APPROVE ADOPTION OF THE PLAN. The enclosed Proxy will be so voted unless a
contrary specification is made.
APPOINTMENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
(Proposal Number Three)
Deloitte & Touche LLP, independent certified public accountants, have been
auditors of the accounts of the Corporation since July 31, 1960. They have been
appointed by the Board of Directors of the Corporation for the purpose of
auditing the Corporation's accounts in the current fiscal year. Shareholder
approval of such appointment is requested. The Board of Directors considers such
accountants to be well qualified.
Representatives of the firm of Deloitte & Touche LLP will be in attendance
at the Annual Meeting of Shareholders and will have the opportunity to make a
statement if they desire to do so. In addition, they will be available to
respond to appropriate questions.
In the event that the appointment of Deloitte & Touche LLP should not be
approved by shareholders, the Board of Directors will make another appointment
to be effective at the earliest feasible time either this fiscal year or the
next.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPOINTMENT OF
DELOITTE & TOUCHE LLP. The enclosed Proxy will be so voted unless a contrary
specification is made.
SHAREHOLDER PROPOSALS
Pursuant to the Corporation's Bylaws, in order for business to be properly
brought before the next annual meeting by a shareholder, the shareholder must
give written notice of such shareholder's intent to bring a matter before the
annual meeting no later than July 3, 2000. Each notice should be sent to the
Secretary at the Corporation's executive offices, 9055 Evergreen Boulevard N.W.,
Minneapolis, Minnesota 55433-8003, and must set forth certain information with
respect to the shareholder who intends to bring such matter before the meeting
and the business desired to be conducted, as set forth in greater detail in the
Corporation's Bylaws. Any such proposal will be subject to the requirements of
the proxy rules adopted under the Securities Exchange Act of 1934. Management
may use discretionary authority to vote against any shareholder proposal
presented at the 2000 annual meeting if: 1) such proposal has been properly
omitted from the Corporation's proxy materials under federal securities law; 2)
notice of such proposal was not submitted to the Secretary of the Corporation at
the address listed above by July 3, 2000; or 3) the proponent has not solicited
proxies in compliance with federal securities laws from the holders of at least
the percentage of the Corporation's voting shares required to carry the
proposal.
<PAGE>
MISCELLANEOUS
The Board of Directors is aware of no matter, other than as described in
the Notice, that will be presented for action at the Meeting. If, however, other
matters do properly come before the Meeting, it is the intention of the person
named in the Proxy to vote the proxied shares in accordance with his best
judgment on such matters.
OTHER MATTERS
A copy of the Corporation's Annual Report on Form 10-K may be obtained
without charge by any beneficial owner of the Corporation's Common Shares on the
record date upon written request addressed to Russel E. Carlson, Vice President,
Finance and Chief Financial Officer, Possis Medical, Inc., 9055 Evergreen
Boulevard N.W., Minneapolis, Minnesota 55433-8003.
By Order of the Board of Directors
IRVING R. COLACCI,
Secretary
Dated: November 1, 1999
POSSIS MEDICAL, INC.
1999 STOCK COMPENSATION PLAN
Section 1. Purpose.
The purpose of the Possis Medical, Inc. 1999 Stock Compensation Plan (the
"Plan") is to promote the interests of Possis Medical, Inc. (the "Company") and
its shareholders by aiding the Company in attracting, retaining and providing
incentives to employees, officers, consultants, independent contractors and
non-employee
directors.
Section 2. Definitions.
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly
through one or more intermediaries, is controlled by the Company; and (ii) any
entity in which the Company has a significant equity interest, in each case as
determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent, Other
Stock Grant or Other Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean either the Board of Directors of the Company or
a committee of the Board of Directors appointed by the Board of Directors to
administer the Plan, comprised of not less than such number of Directors as
shall be required to permit Awards granted under the Plan to qualify under Rule
16b-3. The Company expects to have the Plan administered in accordance with the
requirements for the award of "qualified performance-based compensation" within
the meaning of Section 162(m) of the Code.
(f) "Company" shall mean Possis Medical, Inc., a Minnesota corporation, and
any successor corporation.
(g) "Director" shall mean a member of the Board of Directors of the
Company.
(h) "Dividend Equivalent" shall mean any right granted under Section 6(e)
of the Plan.
<PAGE>
(i) "Eligible Person" shall mean any employee, officer, consultant,
independent contractor or director providing services to the Company or any
Affiliate whom the Committee determines to be an Eligible Person.
(j) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee. Notwithstanding the foregoing,
unless otherwise determined by the Committee, the Fair Market Value of Shares on
a given date for purposes of the Plan shall not be less than: (i) the closing
price as reported for composite transactions, if the Shares are then listed on a
national securities exchange; (ii) the last sale price, if the Shares are then
quoted on the NASDAQ National Market; or (iii) the average of the closing
representative bid and asked prices of the Shares in all other cases; on the
date as of which fair market value is being determined. If on a given date the
Shares are not traded in an established securities market, the Committee shall
make a good faith attempt to satisfy the requirements of this clause and in
connection therewith shall take such action as it deems necessary or advisable.
(k) "Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision.
(l) "Non-Qualified Stock Option" shall mean an option granted under Section
6(a) of the Plan that is not intended to be an Incentive Stock Option.
(m) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option, and shall include Reload Options.
(n) "Other Stock Grant" shall mean any right granted under Section 6(f) of
the Plan.
(o) "Other Stock-Based Award" shall mean any right granted under Section
6(g) of the Plan.
(p) "Participant" shall mean an Eligible Person designated to be granted an
Award under the Plan.
(q) "Performance Award" shall mean any right granted under Section 6(d) of
the Plan.
(r) "Person" shall mean any individual, corporation, partnership,
association or trust.
(s) "Plan" shall mean the Possis Medical, Inc. 1999 Stock Compensation
Plan, as amended from time to time.
<PAGE>
(t) "Reload Option" shall mean any Option granted under Section 6(a)(iv) of
the Plan.
(u) "Restricted Stock" shall mean any Shares granted under Section 6(c) of
the Plan.
(v) "Restricted Stock Unit" shall mean any unit granted under Section 6(c)
of the Plan evidencing the right to receive a Share (or a cash payment equal to
the Fair Market Value of a Share) at some future date.
(w) "Shares" shall mean shares of Common Stock, $0.40 par value, of the
Company or such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 4(c) of the Plan.
(x) "Stock Appreciation Right" shall mean any right granted under Section
6(b) of the Plan.
Section 3. Administration.
(a) Power and Authority of the Committee. The Plan shall be administered by
the Committee. Subject to the express provisions of the Plan and to applicable
law, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to each
Participant under the Plan; (iii) determine the number of Shares to be covered
by (or the method by which payments or other rights are to be calculated in
connection with) each Award; (iv) determine the terms and conditions of any
Award or Award Agreement; (v) amend the terms and conditions of any Award or
Award Agreement and accelerate the exercisability of any Award or the lapse of
restrictions relating to any Award; (vi) determine whether, to what extent and
under what circumstances Awards may be exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited or suspended;
(vii) determine whether, to what extent and under what circumstances cash,
Shares, other securities, other Awards, other property and other amounts payable
with respect to an Award under the Plan shall be deferred either automatically
or at the election of the holder thereof or the Committee; (viii) interpret and
administer the Plan and any instrument or agreement, including an Award
Agreement, relating to the Plan; (ix) establish, amend, suspend or waive such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; and (x) make any other determination and
take any other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon any Participant, any holder or beneficiary of any Award, and any employee
of the Company.
<PAGE>
(b) Delegation. The Committee may delegate its powers and duties under the
Plan to one or more Directors or a committee of Directors, subject to such
terms, conditions and limitations as the Committee may establish in its sole
discretion.
Section 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in Section 4(c),
the aggregate number of Shares that may be issued under all Awards under the
Plan shall be 2,000,000, which number shall be increased annually effective
August 1 by a number of shares equal to 2% of the number of shares of the
Company issued and outstanding at the end of the immediately preceding fiscal
year. Shares to be issued under the Plan may be either authorized but unissued
Shares or Shares acquired in the open market or otherwise. Any Shares that are
used by a Participant as full or partial payment to the Company of the purchase
price relating to an Award, or in connection with the satisfaction of tax
obligations relating to an Award, shall again be available for granting Awards
(other than Incentive Stock Options) under the Plan. If any Shares covered by an
Award or to which an Award relates are not purchased or are forfeited, or if an
Award otherwise terminates without delivery of any Shares, then the number of
Shares counted against the aggregate number of Shares available under the Plan
with respect to such Award, to the extent of any such forfeiture or termination,
shall again be available for granting Awards under the Plan. Notwithstanding the
foregoing, the number of Shares available for granting Incentive Stock Options
under the Plan shall not exceed 2,000,000, subject to adjustment as provided in
the Plan and Section 422 or 424 of the Code or any successor provision.
(b) Accounting for Awards. For purposes of this Section 4, if an Award
entitles the holder thereof to receive or purchase Shares, the number of Shares
covered by such Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of Shares available for
granting Awards under the Plan.
(c) Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company
or other similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and type of Shares (or
other securities or other property) that thereafter may be made the subject of
Awards, (ii) the number and type of Shares (or other securities or other
property) subject to outstanding Awards and (iii) the purchase or exercise price
with respect to any Award; provided, however, that the number of Shares covered
by any Award or to which such Award relates shall always be a whole number.
<PAGE>
(d) Award Limitations Under the Plan. No Eligible Person may be granted any
Award or Awards under the Plan, the value of which Awards is based solely on an
increase in the value of the Shares after the date of grant of such Awards, for
more than 500,000 Shares (subject to adjustment as provided for in Section
4(c)), in the aggregate in any calendar year. The foregoing annual limitation
specifically includes the grant of any Awards representing "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code.
Section 5. Eligibility.
Any Eligible Person of the Company or any Affiliate shall be eligible to be
designated a Participant. In determining which Eligible Persons shall receive an
Award and the terms of any Award, the Committee may take into account the nature
of the services rendered by the respective Eligible Persons, their present and
potential contributions to the success of the Company or such other factors as
the Committee, in its discretion, shall deem relevant. Notwithstanding the
foregoing, an Incentive Stock Option may only be granted to full-time or
part-time employees (which term as used herein includes, without limitation,
officers and Directors who are also employees), and an Incentive Stock Option
shall not be granted to an employee of an Affiliate unless such Affiliate is
also a "subsidiary corporation" of the Company within the meaning of Section
424(f) of the Code or any successor provision.
Section 6. Awards.
(a) Options. The Committee is hereby authorized to grant Options to
Eligible Persons with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable under an
Option shall be determined by the Committee; provided however, that the purchase
price of an Incentive Stock Option shall not be less than 100% of the Fair
Market Value of a Share on the date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by the Committee.
(iii) Time and Method of Exercise. The Committee shall determine the time
or times at which an Option may be exercised in whole or in part and the method
or methods by which, and the form or forms (including, without limitation, cash,
Shares, other securities, other Awards or other property, or any combination
thereof, having a Fair Market Value on the exercise date equal to the relevant
exercise price) in which payment of the exercise price with respect thereto may
be made or deemed to have been made.
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(iv) Reload Options. The Committee may grant Reload Options, separately or
together with another Option, pursuant to which, subject to the terms and
conditions established by the Committee, the Participant would be granted a new
Option when the payment of the exercise price of a previously granted option is
made by the delivery of Shares owned by the Participant pursuant to Section
6(a)(iii) hereof or the relevant provisions of another plan of the Company,
and/or when Shares are tendered or withheld as payment of the amount to be
withheld under applicable income tax laws in connection with the exercise of an
Option, which new Option would be an Option to purchase the number of Shares not
exceeding the sum of (A) the number of Shares so provided as consideration upon
the exercise of the previously granted option to which such Reload Option
relates and (B) the number of Shares, if any, tendered or withheld as payment of
the amount to be withheld under applicable tax laws in connection with the
exercise of the option to which such Reload Option relates pursuant to the
relevant provisions of the plan or agreement relating to such option. Reload
Options may be granted with respect to Options previously granted under the Plan
or any other stock option plan of the Company, or may be granted in connection
with any Option granted under the Plan or any other stock option plan of the
Company at the time of such grant. Such Reload Options shall have a per share
exercise price equal to the Fair Market Value as of the date of grant of the new
Option. Any Reload Option shall be subject to availability of sufficient Shares
for grant under the Plan. Shares surrendered as part or all of the exercise
price of the Option to which it relates that have been owned by the Participant
less than six months will not be counted for purposes of determining the number
of Shares that may be purchased pursuant to a Reload Option.
(b) Stock Appreciation Rights. The Committee is hereby authorized to grant
Stock Appreciation Rights to Eligible Persons subject to the terms of the Plan
and any applicable Award Agreement. A Stock Appreciation Right granted under the
Plan shall confer on the holder thereof a right to receive upon exercise thereof
the excess of (i) the Fair Market Value of one Share on the date of exercise
(or, if the Committee shall so determine, at any time during a specified period
before or after the date of exercise) over (ii) the grant price of the Stock
Appreciation Right as specified by the Committee, which price shall not be less
than 100% of the Fair Market Value of one Share on the date of grant of the
Stock Appreciation Right. Subject to the terms of the Plan and any applicable
Award Agreement, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units. The Committee is hereby
authorized to grant Restricted Stock and Restricted Stock Units to Eligible
Persons with the following terms and conditions and with such additional terms
and conditions not inconsistent with the provisions of the Plan as the Committee
shall determine:
<PAGE>
(i) Restrictions. Shares of Restricted Stock and Restricted Stock Units
shall be subject to such restrictions as the Committee may impose (including,
without limitation, a waiver by the Participant of the right to vote or to
receive any dividend or other right or property with respect thereto), which
restrictions may lapse separately or in combination at such time or times, in
such installments or otherwise as the Committee may deem appropriate.
(ii) Stock Certificates: Delivery of Shares. Any Restricted Stock shall be
registered in the name of the Participant and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such
Restricted Stock. In the case of Restricted Stock Units, no Shares shall be
issued at the time such Awards are granted. Upon the lapse or waiver of
restrictions and the restricted period relating to Restricted Stock Units
evidencing the right to receive Shares, such Shares shall be issued and
delivered to the holder of the Restricted Stock Units.
(iii) Forfeiture. Except as otherwise determined by the Committee, upon a
Participant's Termination of employment (as determined under criteria
established by the Committee) during the applicable restriction period, all
Shares of Restricted Stock and all Restricted Stock Units held by the
Participant at such time shall be forfeited and reacquired by the Company;
provided, however, that the Committee may, when it finds that a waiver would be
in the best interest of the Company, waive in whole or in part any or all
remaining restrictions with respect to Shares of Restricted Stock or Restricted
Stock Units.
(d) Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Eligible Persons subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i) may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock and Restricted Stock Units), other securities, other Awards or
other property and (ii) shall confer on the holder thereof the right to receive
payments, in whole or in part, upon the achievement of such performance goals
during such performance periods as the Committee shall establish. Subject to the
terms of the Plan and any applicable Award Agreement, the performance goals to
be achieved during any performance period, the length of any performance period,
the amount of any Performance Award granted, the amount of any payment or
transfer to be made pursuant to any Performance Award and any other terms and
conditions of any Performance Award shall be determined by the Committee.
(e) Dividend Equivalents. The Committee is hereby authorized to grant
Dividend Equivalents to Eligible Persons, subject to the terms of the Plan and
any applicable Award Agreement, under which the Participants shall be entitled
to receive payments (in cash, Shares, other securities, other Awards or other
property as determined in the discretion of the Committee) equivalent to the
amount of cash dividends paid by the Company to holders of Shares with respect
to a number of Shares determined by the Committee.
(f) Other Stock Grants. The Committee is hereby authorized, subject to the
terms of the Plan and any applicable Award Agreement, to grant to Eligible
Persons Shares without restrictions thereon as are deemed by the Committee to be
consistent with the purpose of the Plan.
<PAGE>
(g) Other Stock-Based Awards. The Committee is hereby authorized to grant
to Eligible Persons, subject to the terms of the Plan and any applicable Award
Agreement, such other Awards that are denominated or payable in, valued in whole
or in part by reference to, or otherwise based on or related to, Shares
(including, without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purpose of the Plan. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(g) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms (including, without limitation,
cash, Shares, other securities, other Awards or other property or any
combination thereof), as the Committee shall determine.
(h) General.
(i) No Cash Consideration for Awards. Awards shall be granted for no cash
consideration or for such minimal cash consideration as may be required by
applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award or any award granted under
any plan of the Company or any Affiliate other than the Plan. Awards granted in
addition to or in tandem with other Awards or in addition to or in tandem with
awards granted under any such other plan of the Company or any Affiliate may be
granted either at the same time as or at a different time from the grant of such
other Awards or awards.
(iii) Forms of Payment under Awards. Subject to the terms of the Plan and
of any applicable Award Agreement, payments or transfers to be made by the
Company or an Affiliate upon the grant, exercise or payment of an Award may be
made in such form or forms as the Committee shall determine (including, without
limitation, cash, Shares, other securities, other Awards or other property or
any combination thereof), and may be made in a single payment or transfer, in
installments or on a deferred basis, in each case in accordance with rules and
procedures established by the Committee. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents with respect to installment or deferred payments.
(iv) Limits on Transfer of Awards. No Award (other than Other Stock Grants)
and no right under any such Award shall be transferable by a Participant
otherwise than by will or by the laws of descent and distribution; provided,
however, that, if so determined by the Committee, a Participant may, in the
manner established by the Committee, transfer Options (other than Incentive
Stock Options) or designate a beneficiary or beneficiaries to exercise the
rights of the Participant and receive any property distributable with respect to
any Award upon the death of the Participant. Each Award or right under any Award
shall be exercisable during the Participant's lifetime only by the Participant
or, if permissible under applicable law, by the Participant's guardian or legal
representative. No Award or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.
<PAGE>
(v) Term of Awards. The term of each Award shall be for such period as may
be determined by the Committee.
(vi) Restrictions: Securities Exchange Listing. All Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such restrictions as the Committee may deem
advisable under the Plan, applicable federal or state securities laws and
regulatory requirements, and the Committee may cause appropriate entries to be
made or legends to be affixed to reflect such restrictions. If the Shares or
other securities are listed on a securities exchange, the Company shall not be
required to deliver any Shares or other securities covered by an Award until
such Shares or other securities have been listed on such securities exchange.
(i) Directors' Options.
(i) Annual Grant. Directors of the Company who are not otherwise employees
shall receive annually on January 2 Non-Qualified Options to purchase 3,000
shares of Stock. The exercise price for the Shares shall be the Fair Market
Value of the stock on the date of the grant. Each Option shall become
exercisable in annual increments of 750 shares beginning on the first
anniversary of the date of grant, shall be exercisable for ten years following
grant, and shall be generally subject to the terms and conditions set forth in
the Plan.
(ii) Options in Lieu of Director's Fees. Each Director who is not otherwise
an employee of the Company shall be permitted to elect to receive fees that
would otherwise be due for services as a Director in the form of discounted
Non-Qualified Stock Options. Such election must be made on or before June 1 of
each year with regard to fees that would otherwise be payable for that calendar
year. The exercise price of such Options shall be 50% of the Fair Market Value
on the date of grant, which shall be January 2 of the year following the year
for which the fees were earned. Each Option shall become exercisable in full six
months following the date of grant, shall be exercisable for ten years following
the date of grant, and shall be generally subject to the terms and conditions
set forth in the Plan. The number of Shares subject to each Option shall be
calculated by dividing the fees owed by the dollar amount of the discount from
Fair Market Value in the exercise price.
(iii) The provisions of this Section 6(i) herein shall not prevent the
Committee or the Board from granting other and additional Awards to Directors of
the Company who are not employees of the Company, subject only to the terms and
conditions set forth in the Plan.
<PAGE>
Section 7. Change in Control Provisions
(a) In the event of a "Change in Control" as defined herein, the following
acceleration and valuation provisions shall apply:
(i) Any Award, unless provided to the contrary in the related Award
Agreement, shall become fully exercisable and vested.
(ii) The value of all outstanding Awards shall, unless otherwise determined
by the Committee in its sole discretion at or after grant but prior to any
Change in Control, with respect to Options granted to employees and
non-Directors, be cashed out on the basis of the "Change in Control Price" as
defined herein as of the date such Change in Control is determined to have
occurred or such other date as the Committee may determine prior to the Change
in Control.
(b) Change in Control shall mean:
(i) a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Company is then subject to such reporting requirement; or
(ii) the public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Company or any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) that such person has become the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly
or indirectly, of securities of the Company (i) representing 25% or more, but
not more than 50%, of the combined voting power of the Company's then
outstanding securities unless the transaction resulting in such ownership has
been approved in advance by the Continuing Directors (as hereinafter defined) or
(ii) representing more than 50% of the combined voting power of the Company's
then outstanding securities (regardless of any approval by the Continuing
Directors); provided, however, that notwithstanding the foregoing, no Change in
Control shall be deemed to have occurred for purposes of the Plan by reason of
the ownership of 25% or more of the total voting capital stock of the Company
then issued and outstanding by the Company, any subsidiary of the Company or any
employee benefit plan of the Company or of any subsidiary of the Company or any
entity holding Shares organized, appointed or established for, or pursuant to
the terms of, any such plan; or
<PAGE>
(iii) the announcement of a tender offer by any person or entity for 20% or
more of the Company's voting capital stock then issued and outstanding, which
tender offer has not been approved by the Board, a majority of the members of
which are Continuing Directors, and recommended to the shareholders of the
Company; or
(iv) the Continuing Directors cease to constitute a majority of the
Company's Board of Directors; or
(v) the shareholders of the Company approve (i) any consolidation or merger
of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Company stock would be converted into
cash, securities or other property, other than a merger of the Company in which
shareholders immediately prior to the merger have the same proportionate
ownership of stock of the surviving corporation immediately after the merger;
(ii) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all or substantially all of the assets of the
Company; or (iii) any plan of liquidation or dissolution of the Company.
(c) Continuing Director shall mean: any person who is a member of the Board
of Directors of the Company, while such person is a member of the Board of
Directors, who is not an Acquiring Person (as hereinafter defined) or an
Affiliate or Associate (as hereinafter defined) of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, and
who (i) was a member of the Board of Directors as of the Effective Date or (ii)
subsequently becomes a member of the Board of Directors, if such person's
initial nomination for election or initial election to the Board of Directors is
recommended or approved by a majority of the Continuing Directors. For purposes
of this definition, "Acquiring Person" shall mean any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) who or which, together
with all Affiliates and Associates of such person, is the "beneficial owner" (as
defined in Rule 1 3d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities; and
"Affiliate" and "Associate" shall have their respective meanings ascribed to
such terms in Rule 12b-2 promulgated under the Exchange Act.
(d) Change in Control Price shall mean: the highest price per share paid in
any transaction reported on NASDAQ/NMS or, if the Company's Stock is listed on a
national securities exchange, such exchange, or paid or offered in any bona fide
transaction related to the Change in Control of the Company at any time during
the 60-day period immediately preceding the occurrence of the Change in Control
in each case as determined by the Committee.
<PAGE>
Section 8. Amendment and Termination: Adjustments.
(a) Amendments to the Plan. The Board of Directors of the Company may
amend, alter, suspend, discontinue or terminate the Plan.
(b) Amendments to Awards. Subject to the provisions of the Plan, the
Committee may waive any conditions of or rights of the Company under any
outstanding Award, prospectively or retroactively, except as otherwise provided
herein or in an Award Agreement. The Committee may not amend, alter, suspend,
discontinue or terminate any outstanding Award, prospectively or retroactively,
if such action would adversely affect the rights of the holder of such Award,
without the consent of the Participant or holder or beneficiary thereof.
(c) Correction of Defects, Omissions and Inconsistencies. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award in the manner and to the extent it shall deem desirable to
carry the Plan into effect.
Section 9. Income Tax Withholding; Tax Bonuses.
(a) Withholding. In order to comply with all applicable federal or state
income tax laws or regulations, the Company may take such action as it deems
appropriate to ensure that all applicable federal or state payroll, withholding,
income or other taxes, which are the sole and absolute responsibility of a
Participant, are withheld or collected from such Participant. In order to assist
a Participant in paying all or a portion of the federal and state taxes to be
withheld or collected upon exercise or receipt of (or the lapse of restrictions
relating to) an Award, the Committee, in its discretion and subject to such
additional terms and conditions as it may adopt, may permit the Participant to
satisfy such tax obligation by (i) electing to have the Company withhold a
portion of the Shares otherwise to be delivered upon exercise or receipt of (or
the lapse of restrictions relating to) such Award with a Fair Market Value equal
to the amount of such taxes or (ii) delivering to the Company Shares other than
Shares issuable upon exercise or receipt of (or the lapse of restrictions
relating to) such Award with a Fair Market Value equal to the amount of such
taxes. The election, if any, must be made on or before the date that the amount
of tax to be withheld is determined.
(b) Tax Bonuses. The Committee, in its discretion, shall have the
authority, at the time of grant of any Award under this Plan or at any time
thereafter, to approve cash bonuses to designated Participants to be paid upon
their exercise or receipt of (or the lapse of restrictions relating to) Awards
in order to provide funds to pay all or a portion of federal and state taxes due
as a result of such exercise or receipt (or the lapse of such restrictions). The
Committee shall have full authority in its discretion to determine the amount of
any such tax bonus.
<PAGE>
Section 10. General Provisions.
(a) No Rights to Awards. No Eligible Person, Participant or other Person
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Eligible Persons, Participants or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to any Participant or with respect to
different Participants.
(b) Award Agreements. No Participant will have rights under an Award
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company and, if requested by the Company, signed
by the Participant.
(c) No Rights of Shareholders. Except with respect to Restricted Stock and
other Stock grants, neither a Participant nor the Participant's legal
representative shall be, or have any of the rights and privileges of, a
Shareholder of the Company in respect of any shares issuable upon the exercise
or payment of any Award, in whole or in part, unless and until the Shares have
been issued.
(d) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.
(e) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or
any Affiliate, nor will it affect in any way the right of the Company or an
Affiliate to terminate such employment at any time, with or without cause. In
addition, the Company or an Affiliate may at any time dismiss a Participant from
employment free from any liability or any claim under the Plan or any Award,
unless otherwise expressly provided in the Plan or in any Award Agreement.
(f) Governing Law. The validity, construction and effect of the Plan or any
Award, and any rules and regulations relating to the Plan or any Award, shall be
determined in accordance with the laws of the State of Minnesota.
(g) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.
<PAGE>
(h) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(i) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash shall be paid in lieu of any fractional Share or whether such fractional
Share or any rights thereto shall be canceled, terminated or otherwise
eliminated.
(j) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
(k) Other Benefits. No compensation or benefit awarded to or realized by
any Participant under the Plan shall be included for the purpose of computing
such Participant's compensation under any compensation-based retirement,
disability or similar plan of the Company unless required by law or otherwise
provided by such other plan.
Section 11. Effective Date of the Plan.
The Plan shall be effective as of December 16, 1999. If the Company's
shareholders do not approve the Plan at the Annual Meeting of Shareholders
scheduled for December 15, 1999, the Plan shall be null and void.
Section 12. Term of the Plan.
Awards shall only be granted under the Plan during a 10-year period
beginning on the effective date of the Plan. However, unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award theretofore
granted may extend beyond the end of such 10-year period, and the authority of
the Committee provided for hereunder with respect to the Plan and any Awards,
and the authority of the Board of Directors of the Company to amend the Plan,
shall extend beyond the termination of the Plan.
Section 13. Applicability to Grants under Other Company Plans.
No further Awards shall be granted under any other Stock Compensation Plan
currently maintained by the Company. All existing Plans shall, however, remain
in effect until all options or awards granted pursuant thereto have been
exercised or have expired or terminated by their terms.
