SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
LECTEC CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
- --------------------------------------------------------------------------------
LECTEC CORPORATION
10701 RED CIRCLE DRIVE
MINNETONKA, MINNESOTA 55343
NOTICE OF REGULAR MEETING OF SHAREHOLDERS
The 1995 Regular Meeting of the Shareholders of LecTec Corporation, a
Minnesota corporation (the "Company"), will be held at The Minneapolis
Marriott Southwest Hotel, 5801 Opus Parkway, Minnetonka, Minnesota 55343, on
Friday, November 17, 1995, at 3:00 p.m., for the following purposes:
1. To elect five directors to serve on the Board of Directors for a term of
one year.
2. To ratify the appointment of Grant Thornton LLP as the Company's
independent auditor for the Company's current fiscal year.
3. To transact such other business as may properly come before the meeting.
Only shareholders of record as at the close of business on Friday, September
15, 1995, the record date, are entitled to notice of and to vote at the
meeting.
THE COMPANY HAS FILED AN ANNUAL REPORT ON FORM 10-K WITH THE SECURITIES AND
EXCHANGE COMMISSION. SHAREHOLDERS MAY OBTAIN A COPY OF THIS REPORT WITHOUT
CHARGE BY WRITING TO LECTEC CORPORATION, SHAREHOLDER RELATIONS, 10701 RED
CIRCLE DRIVE, MINNETONKA, MINNESOTA 55343.
Whether or not you expect to attend the meeting in person, please complete,
sign and promptly return the enclosed form of Proxy.
By Order of the Board of Directors
/s/ Erwin W. Templin
Erwin W. Templin II
Secretary
Minnetonka, Minnesota
October 19, 1995
LECTEC CORPORATION
10701 RED CIRCLE DRIVE
MINNETONKA, MINNESOTA 55343
PROXY STATEMENT
REGULAR MEETING OF SHAREHOLDERS -- NOVEMBER 17, 1995
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed Proxy is solicited by the Board of Directors of LecTec
Corporation (the "Company") for use at the Regular Meeting of Shareholders to
be held Friday, November 17, 1995, at 3:00 p.m., local time, at The
Minneapolis Marriott Southwest Hotel, 5801 Opus Parkway, Minnetonka,
Minnesota 55343, or any adjournments thereof (the "Meeting"), for the
purposes set forth herein and in the accompanying Notice of Regular Meeting
of Shareholders. Proxies will be voted in accordance with the directions
specified therein. ANY PROPERLY EXECUTED PROXY IN WHICH THE SHAREHOLDER
SPECIFIES NO DIRECTION WITH RESPECT TO ANY ITEM(S) OF BUSINESS WILL BE VOTED
IN FAVOR OF EACH OF THE ITEM(S) OF BUSINESS DESCRIBED IN THIS PROXY
STATEMENT. ANY PROPERLY EXECUTED PROXY IN WHICH THE SHAREHOLDER ABSTAINS WITH
RESPECT TO ANY ITEM(S) OF BUSINESS IS CONSIDERED TO BE A NEGATIVE VOTE ON ANY
ITEM(S) OF BUSINESS TO WHICH THE SHAREHOLDER ABSTAINS. A SHAREHOLDER
(INCLUDING A BROKER) WHO DOES NOT GIVE AUTHORITY TO A PROXY TO VOTE, OR
WITHHOLDS AUTHORITY TO VOTE ON ANY ITEM(S) OF BUSINESS, SHALL NOT BE
CONSIDERED PRESENT AND ENTITLED TO VOTE ON ANY ITEM(S) OF BUSINESS FOR WHICH
AUTHORITY TO VOTE WAS WITHHELD. These Proxy solicitation materials and the
annual report for the fiscal year 1995 are first being sent to Shareholders
on or about October 19, 1995.
Under Minnesota law, the affirmative vote of a majority of the shares of
Common Stock present or represented and entitled to vote at the Meeting is
necessary to approve each item of business properly presented at the meeting
of stockholders. However, if the shares present and entitled to vote on that
item of business would not constitute a quorum for the transaction of
business at the meeting, then the item must be approved by a majority of the
voting power of the minimum number of shares that would constitute such a
quorum.
As of September 15, 1995, the record date fixed for the determination of
shareholders of the Company entitled to notice of and to vote at the Meeting,
there were 3,792,239 outstanding shares of Common Stock, which is the only
class of capital stock of the Company. Each shareholder will be entitled to
one vote per share on all matters acted upon at the Meeting.
Votes cast by proxy or in person at the Annual Meeting of Shareholders will
be tabulated by the election inspectors appointed for the meeting.
Any Proxy given pursuant to this solicitation may be revoked by the person
giving it at any time prior to its use by (i) delivering to the principal
office of the Company a written notice of revocation, (ii) filing with the
Company a duly executed Proxy bearing a later date or (iii) attending the
Meeting and voting in person.
The costs of this solicitation will be borne by the Company. Proxies may be
solicited by the Company's directors, officers and regular employees, without
extra compensation, by mail, telegram, telephone and personal solicitation.
The Company will request brokerage houses and other nominees, custodians and
fiduciaries to forward soliciting material to beneficial owners of the
Company's Common Stock. The Company may reimburse brokerage firms and other
persons representing beneficial owners for their expenses in forwarding
solicitation materials to beneficial owners.
ELECTION OF DIRECTORS
GENERALLY
The Company's Amended and Restated By-laws provide that the size of the Board
of Directors shall be one or more directors, with the number of directors to
be determined by the shareholders from time to time prior to the election of
directors. The Board of Directors may increase the number of directors at any
time. At their last meeting on November 18, 1994, the shareholders elected
seven directors.
THE BOARD OF DIRECTORS RECOMMEND THAT THOMAS E. BRUNELLE, PH.D., LEE M.
BERLIN, ALAN C. HYMES, M.D., PAUL O. JOHNSON AND ALAN J. WILENSKY BE
RE-ELECTED AS DIRECTORS, EACH TO HOLD OFFICE FOR A TERM OF ONE YEAR AND UNTIL
HIS SUCCESSOR IS DULY ELECTED AND QUALIFIED. All of the nominees are members
of the Board of Directors of the Company and have served in that capacity
since originally elected or designated as indicated below.
The Board of Directors held five meetings during the fiscal year ended June
30, 1995. All nominees then serving as a member of the Board of Directors
participated in each meeting.
VOTING INFORMATION
A shareholder submitting a Proxy may vote for all or any of the nominees for
election to the Board of Directors or may withhold his or her vote from all
or any of such nominees. IF A SUBMITTED PROXY IS PROPERLY SIGNED BUT UNMARKED
IN RESPECT OF THE ELECTION OF DIRECTORS, IT IS INTENDED THAT THE PROXY AGENTS
NAMED IN THE PROXY WILL VOTE THE SHARES REPRESENTED THEREBY FOR THE ELECTION
OF ALL OF THE NOMINEES. Each of the nominees has agreed to serve the Company
as a director if elected; however, should any nominee become unwilling or
unable to serve if elected, the Proxy Agents named in the Proxy will exercise
their voting power in favor of such other person as the Board of Directors of
the Company may recommend. The Company's Articles of Incorporation prohibit
cumulative voting.
NOMINEES AND DIRECTORS
NAME AGE TITLE
Thomas E. Brunelle, Ph.D. 60 Chairman
President, Chief Executive Officer
and Director
Alan C. Hymes, M.D. 63 Director
Lee M. Berlin 73 Director
Paul O. Johnson 58 Director
Alan J. Wilensky 48 Director
There is no family relationship among the nominees.
Thomas E. Brunelle, Ph.D. is the Chairman of the Board, President and Chief
Executive Officer of the Company. Dr. Brunelle joined the Company in July
1987 and assumed his current positions in June 1993. Prior to June 1993, Dr.
Brunelle was a Senior Vice President of the Company responsible for the
Company's production, research and development and the Therapeutic Products
Program. He has been a director since 1987.
Alan C. Hymes, M.D. is a founder of the Company, has been a director since
1977 and acts as the Company's medical consultant. He has been engaged in the
private practice of surgery since 1968. He is a diplomate of the American
Board of Surgery and the American Board of Thoracic and Cardiovascular
Surgery.
Lee M. Berlin has been a Director since 1981 and served as Chairman of the
Board from 1983 through May 1993. He served as the Company's Chief Executive
Officer from 1983 through January 1989. Prior to joining the Company, Mr.
Berlin served in a variety of foreign and domestic marketing, product
development and general management positions with Minnesota Mining &
Manufacturing ("3M").
Paul O. Johnson has been a director of the Company since 1988. He was
employed by H.B. Fuller Company from 1979 until December 31, 1988 when he
resigned his position as Senior Vice President-Administration and Corporate
Secretary. Currently, Mr. Johnson manages personal business interests.
Alan J. Wilensky became a director of the Company in 1994. He is a partner in
the Washington office of the international law firm of Bryan Cave. In 1992
and 1993, he served as Acting Assistant Secretary and Deputy Assistant
Secretary for Tax Policy of the United States Department of the Treasury.
Prior to his government service, he was engaged in the private practice of
law in Minneapolis.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely upon the review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company during the fiscal year ending June 30, 1995, the
Company is not aware of any delinquent, late or untimely filings of any
director, officer, beneficial owner of ten percent or more of the Company's
common stock or any other persons subject to Section 16(a) filing
requirements.
DIRECTORS' COMPENSATION
In December 1990 the Board of Directors of the Company adopted a proposal
effective January 1, 1991 to pay outside directors for their services at the
rate of $1,000 per quarter and $100 per each Board or Committee meeting
attended, with the chairperson of each committee receiving an additional $50
per meeting attended and to include reasonable meeting expenses. During the
fiscal year ending June 30, 1995, the Company paid or accrued $5,000 for the
benefit of Dr. Hymes, $5,100 for Mr. Johnson, $4,950 for Mr. Berlin and
$4,700 for Mr. Wilensky.
1991 DIRECTORS' STOCK OPTION PLAN
The Company's 1991 Directors' Stock Option Plan (the "Plan") was adopted by
shareholders on November 26, 1991, and has reserved 115,762 shares (when
adjusted for stock dividends) for issuance pursuant to options granted under
the Plan. Under the Plan, options to purchase shares of the Company's Common
Stock may be granted to persons participating in the Plan at an option price
equal to the fair market value of the stock on the date the option is
granted. A committee consisting of three or more disinterested persons
appointed by the Board of Directors (the "Committee") selects participants in
the Plan from among outside directors (directors who are not employees) of
the Company or its domestic and international subsidiaries. The Committee
determines, in its sole discretion, upon recommendations by management, who
will be granted options, or if options will be granted, from an eligibility
list of all outside directors. The Committee is permitted, pursuant to the
Plan, to impose such conditions on the manner of exercise and to set such
terms of the options, as the Committee, in its sole discretion, may
determine.
Included within the eligible group under the Plan are the current outside
directors of the Company (4 persons). During the three fiscal years ending
June 30, 1995, June 30, 1994 and June 30, 1993, the Company granted 7,881
shares at an average per share price of $9.20 each to Paul O. Johnson and
Alan C. Hymes, M.D. During the two fiscal years ending June 30, 1995 and June
30, 1994, the Company granted 5,125 shares at an average price of $9.27 per
share to Lee M. Berlin. During the fiscal year ended June 30, 1995, the
Company granted 2,500 shares at an average price of $9.00 per share, to Alan
J. Wilensky. The number of options that may be granted to eligible persons in
the foregoing groups in the future cannot be determined. At this time, no
options have been exercised by the nominees presently serving as members of
the Board of Directors.
STANDING COMMITTEES
The Board of Directors of the Company has five standing committees, each
established in 1984. The Executive Committee was established to act on behalf
of the Board for all matters except those designated. The Audit Committee was
established to review and investigate all matters pertaining to the
accounting activities of the Company and the relationship of the Company with
its independent auditor. The Compensation Committee was established to
determine and periodically evaluate various levels and methods of
compensation for directors, officers and employees of the Company. The
Finance Committee was established to provide guidance with respect to the
Company's financing needs, to the review of investment policies for the
Company's funds and to review the Company's insurance program. The Board
Organization Committee was established to identify potential candidates for
Board membership, to review the composition and size of the Board and to
audit the Company's program for senior management succession. The Board
Organization Committee will also review potential candidates suggested by
shareholders for director membership. The Audit Committee held two meetings
during the last fiscal year. The Compensation Committee held three meetings
during the last fiscal year. All members of the committees attended each
meeting. The Executive, Finance and Board Organization Committees did not
meet during the last fiscal year. The following table shows the names of the
nominees for election as directors who will be serving on each committee:
COMMITTEE MEMBERS
Executive Thomas E. Brunelle, Ph.D.*
Alan J. Wilensky
Audit Paul O. Johnson*
Alan C. Hymes, M.D.
Compensation Lee M. Berlin*
Paul O. Johnson
Alan C. Hymes, M.D.
Alan J. Wilensky
Finance Alan J. Wilensky*
Paul O. Johnson
Board Organization Lee M. Berlin*
Alan C. Hymes, M.D.
Thomas E. Brunelle, Ph.D.
* Committee Chairman
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT
The following table provides certain information as of September 15, 1995, as
to each nominee for election as a director, all directors and officers as a
group and each person known to the Company to be the beneficial owner of more
than five percent of the outstanding shares of Common Stock of the Company:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME BENEFICIALLY OWNED BENEFICIALLY OWNED
<S> <C> <C>
Lee M. Berlin 557,053(1) 14.2%
Alan C. Hymes, M.D. 432,034(2) 11.0%
Thomas E. Brunelle, Ph.D. 36,974(3) *
Paul O. Johnson 21,067(4) *
Alan J. Wilensky 3,500(5) *
All directors and executive officers as a group
(9 individuals) 1,113,902(6) 28.4%
</TABLE>
(Note: The mailing address of all beneficial owners listed above is c/o
LecTec Corporation, 10701 Red Circle Drive, Minnetonka, MN 55343.)
* Less than 1%
(1) The figure includes 75,605 shares owned by Mr. Berlin's wife, 137,145
shares owned by Mr. Berlin's son (Mr. Berlin has disclaimed beneficial
ownership of such shares), and options, granted to Mr. Berlin, available
for exercise within 60 days to purchase 21,380 shares.
(2) The figure includes options granted to Dr. Hymes, available for exercise
within 60 days, to purchase 9,599 shares.
(3) The figure includes options, granted to Dr. Brunelle, available for
exercise within 60 days, to purchase 28,081 shares.
(4) The figure includes options, granted to Mr. Johnson, available for exercise
within 60 days, to purchase 17,702 shares.
(5) The figure includes options, granted to Mr. Wilensky, available for
exercise within 60 days, to purchase 2,500 shares.
(6) The figure includes shares and options described in the preceding footnotes
and 16,489 shares owned by the Company's other officers and directors, and
options, available for exercise within 60 days, to purchase 46,785 shares
granted to the Company's other officers and directors.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for establishing compensation policy and administering the
compensation programs for the Company's executive officers. The Committee is
comprised of four independent outside directors. The Committee meets as may
be necessary to review executive compensation policies, the design of
compensation programs and individual salaries and awards for the executive
officers. The purpose of this report is to inform shareholders of the
Company's compensation policies for executive officers and the rationale for
the compensation paid to executive officers.
COMPENSATION PHILOSOPHY
The Company's compensation program is designed to motivate and reward
executives responsible for attaining the financial and strategic objectives
essential to the Company's long-term success and continued growth in
shareholder value. The compensation program has been designed to provide a
competitive level of total compensation and offers incentive and equity
ownership opportunities directly linked to the Company's performance and
shareholder return. The Committee believes it is in the best interests of the
shareholders to reward executives when the Company's performance objectives
are achieved and to provide significantly less compensation when these
objectives are not met. Therefore, a significant portion of executive
compensation is comprised of "at risk" performance and stock-based
incentives.
Key objectives of the compensation program are to:
* Provide a strong, direct link between the Company's financial and
strategic goals and executive compensation.
* Motivate executives to achieve corporate operating goals through an
emphasis on performance-based compensation.
* Align the interests of executives with those of the Company's
shareholders by providing a significant portion of compensation in
Company Common Stock.
* Provide competitive total compensation in order to attract and retain
high caliber key executives critical to the long-term success of the
Company.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The key components of the Company's executive officer compensation program
are base salary, annual incentives and long-term incentives. These elements
are described below. During fiscal year 1995, specific and objective criteria
were utilized to determine each element of an executive's compensation
package.
BASE SALARY. The Committee annually reviews the base salaries of executive
officers. In determining appropriate salary levels, the Committee considers
individual performance, level of responsibility, scope and complexity of the
position, internal equity and salary levels for comparable positions at peer
industry companies. During the fiscal years ending June 30, 1995, 1994 and
1993, the executive officers named in the "Summary Compensation Table" have
received nominal base salary increases. This reflects the Company's
philosophy of shifting more of executive compensation to the "at risk"
performance and stock-based incentives.
ANNUAL INCENTIVE AWARDS. The purpose of the Company's annual incentive
program is to provide a direct financial incentive in the form of an annual
cash bonus to executive officers and key managers who achieve corporate
operating goals established under the Company's annual operating plan.
Executive officers are eligible for target awards under an annual incentive
program ranging from 10% to 60% of base salary. The size of the target award
is determined by the executive officer's position and competitive data for
similar positions at peer industry companies. The Company will set aggressive
earnings per share performance goals and, in keeping with the strong
performance-based philosophy, the resulting awards will decrease or increase
substantially if actual Company performance fails to meet or exceed targeted
levels.
For the fiscal year 1995, the minimum earnings per share performance goals under
the annual incentive program were not achieved. Consequently, no cash bonus
payments were made under the annual incentive program.
Awards received under the aforementioned program will be offset against bonus
awards granted under the "Profit Sharing Bonus Plan" described under the section
entitled "Executive Compensation and Other Information."
LONG-TERM INCENTIVE PLANS. Long-term incentives are provided to executive
officers through the Company's stock option program.
The Company's stock option program provides compensation that directly links the
interest of management and shareholders, and aids in retaining key executive
officers. Executive officers are eligible for annual grants of stock options.
Guideline levels of options are prepared based on competitive data from peer
industry companies. Individual awards are based on the individual's
responsibilities and performance, ability to impact financial performance and
future potential. All individual stock options are reviewed and approved by the
Committee. Executive officers receive gains from stock options only to the
extent that the fair market value of the stock has increased since the date of
option grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
Dr. Brunelle's base salary during the fiscal year was $105,000. The base
salary of the Chief Executive Officer is established by the Compensation
Committee in generally the same way as the base salary is determined for
other executive officers.
Dr. Brunelle's bonus in fiscal 1995 consisted of a $699 payment under the
"Profit Sharing Bonus Plan". A bonus payment under the annual incentive
program described above was not granted during fiscal 1995 due to the Company
not achieving the minimum performance goals established by the Committee.
In fiscal 1995, Dr. Brunelle received options to purchase up to 15,000 shares
of the Company's common stock at an average exercise price of $9.75 per
share.
CONCLUSION
The executive officer compensation program administered by the Committee
provides incentive to attain strong financial performance and an alignment
with shareholder interests. The Committee believes that the Company's
compensation program focuses the efforts of the Company's executive officers
on the continued achievement of growth and profitability for the benefit of
the Company's shareholders.
COMPENSATION COMMITTEE
Lee M. Berlin, Chairman
Alan C. Hymes, M.D.
Paul O. Johnson
Alan J. Wilensky
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows the cash and non-cash compensation for the fiscal
years ending June 30, 1995, 1994 and 1993, awarded to or earned by Thomas E.
Brunelle, Ph.D., the Chairman of the Board and the Company's President and
Chief Executive Officer, and to each other executive officer of the Company
whose total cash compensation exceeded $100,000 during fiscal 1995
(collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
FISCAL YEAR SECURITIES
ENDED UNDERLYING ALL OTHER
NAME AND POSITION JUNE 30, SALARY BONUS OPTIONS COMPENSATION(1)
<S> <C> <C> <C> <C> <C>
Thomas E. Brunelle, Ph.D. 1995 $105,000 $ 699 15,000 $5,276
Chairman 1994 100,000 2,398 37,626 5,169
President 1993 99,000 1,604 5,513 7,470
Chief Executive Officer
George B. Ingebrand(2) 1995 95,000 699 0 4,786
Vice Chairman 1994 95,000 2,398 0 4,917
1993 95,000 1,604 5,513 7,170
</TABLE>
(1) Reflects Profit Sharing Pension Plan and Trust contributions for Dr.
Brunelle of $2,638, $2,585 and $4,980 in fiscal years 1995, 1994 and 1993,
respectively, and for Mr. Ingebrand of $2,393, $2,459 and $4,780 in fiscal
years 1995, 1994 and 1993, respectively. Also includes, matching
contributions under the Company's 401(k) and Profit Sharing Plan for Dr.
Brunelle of $2,638, $2,584, and $2,490 in fiscal years 1995, 1994 and 1993,
respectively, and for Mr. Ingebrand of $2,393, $2,458 and $2,390 in fiscal
years 1995, 1994 and 1993, respectively.
(2) Mr. Ingebrand retired from the Company on June 30, 1995, relinquishing the
executive officer position of Vice Chairman.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options under the Company's 1989 Stock Plan to the Named Executives of the
Company identified on the preceding table during the fiscal year ended June
30, 1995.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
POTENTIAL
REALIZABLE
PERCENT VALUE AT
OF TOTAL ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF
SECURITIES GRANTED TO EXERCISE STOCK PRICE
UNDERLYING EMPLOYEES PRICE APPRECIATION
OPTIONS IN FISCAL PER EXPIRATION FOR OPTION TERM
NAME GRANTED YEAR SHARE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Brunelle, Ph.D. 15,000(1) 14.02% $9.75 7-22-04 $91,980 $233,100
George B. Ingebrand 0 0 % N/A N/A 0 0
</TABLE>
(1) This option becomes exercisable in four equal installments on July 22,
1995, 1996, 1997 and 1998.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
The following table sets forth information with respect to the Named
Executives, concerning the exercise of options during the fiscal year ended
June 30, 1995 and unexercised options held as of June 30, 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT JUNE 30, 1995 AS OF JUNE 30, 1995(1)
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Brunelle, Ph.D. 0 0 28,081 47,422 $149,330 $125,355
George B. Ingebrand 0 0 18,674 4,203 121,922 13,139
</TABLE>
(1) The value of in-the-money options on June 30, 1995 equals the market value
of underlying unexercised options less the option exercise price. Options
are in-the-money if the market value of the shares covered thereby is
greater than the option price.
1989 STOCK OPTION PLAN
The Company's 1989 Stock Option Plan (the "Plan") was adopted by the
shareholders on November 26, 1990. A total of 557,287 shares (when adjusted
for stock dividends) of Common Stock were reserved for issuance under the
Plan. At June 30, 1995, options granted to 59 persons pursuant to the Plan to
purchase 437,292 shares in the aggregate were outstanding. The outstanding
options have expiration dates between September 7, 1999 and April 24, 2005.
Under the Plan, options to purchase shares of the Company's Common Stock may
be granted to persons participating in the Plan at an option price equal to
the fair market value of the stock on the date the option is granted. A
committee consisting of three or more disinterested persons appointed by the
Board of Directors (the "Committee"), select participants in the Plan from
among salaried employees (including directors who are also employees) of the
Company or its domestic and international subsidiaries. The Committee
determines, in its sole discretion, upon recommendations by management, who
will be granted options, or if options will be granted, from an eligibility
list of all full time employees. The Committee is permitted, pursuant to the
Plan, to impose such conditions on the manner of exercise and to set such
terms of the options, as the Committee, in its sole discretion, may
determine.
During the past three fiscal years, options for 58,139 and 5,513 shares at an
average per share price of $9.09 and $9.07 were granted individually to Dr.
Brunelle and Mr. Ingebrand, respectively; options for 132,647 shares at an
average price of $9.11 per share were granted to all executive officers as a
group; and options for 333,196 shares at an average per share price of $9.21
were granted to all employees as a group. During the last three fiscal years,
realized net value of securities (market value less exercise price) pursuant
to the exercise of options granted under the Option Plan, in the amount of $0
was realized by all executive officers as a group (4 persons), and $397,679
was realized by all employees as a group.
PROFIT SHARING BONUS PLAN
In June 1986, the Company's Board of Directors adopted a Profit Sharing Bonus
Plan (the "Bonus Plan") pursuant to which all the Company's full-time
employees who have completed two calendar quarters of employment are able to
participate in a quarterly bonus pool equal to up to 9% of the Company's
pretax income, reduced by certain amounts. An aggregate of $107,130 was
expensed under the Bonus Plan for the three fiscal years ended June 30, 1995
for all employees as a group, including $4,701 allocated to Dr. Brunelle,
$4,701 to Mr. Ingebrand and $16,594 to all executive officers as a group (4
persons). The amounts accrued for the fiscal year ended June 30, 1995 under
the plan are $18,534 for all employees as a group, including $699 for the
benefit of Dr. Brunelle, $699 for Mr. Ingebrand, and $2,796 for all executive
officers as a group (4 persons).
PROFIT SHARING PENSION PLAN AND TRUST
In 1984, the Company entered into an indenture creating its Profit Sharing
Pension Plan and Trust ("Trust"). The Trust is funded through discretionary
employer contributions. All employees who have completed at least one year of
full-time employment are eligible to participate. An employee becomes vested
in the Company contribution in 20% annual increments beginning at the
completion of two years of service. Full vesting occurs upon retirement,
death, or disability of the employee. The Company contributed an aggregate of
$183,211 to the Trust for the three fiscal years ended June 30, 1995 for all
employees as a group, including $10,204 for the benefit of Dr. Brunelle,
$9,633 for Mr. Ingebrand and $30,515 for all executive officers as a group (4
persons).
LECTEC CORPORATION 401(K) AND PROFIT SHARING PLAN
Effective July 1, 1989, the Company adopted the LecTec 401(k) Plan ("401(k)
Plan"). All full time employees who have at least one year of continuous
service are eligible to participate in the 401(k) Plan. Any participating
employee may contribute as much as 12% of his or her direct compensation by
payroll deduction. The Company matches 50% of voluntary employee
contributions to the Plan not to exceed 50% of a maximum of 5% of a
participant's direct compensation. Contributions may be invested, at the
employee's option, in the following fourteen investment options: Guaranteed
interest account, stock account, money market account, bond account, stock
index account, LecTec Corporation common stock, government securities
account, bond emphasis balanced account, stock emphasis balanced account,
growth stock account, value stock account, small company stock account,
international stock account and real estate account.
Employee contributions and earnings thereon are maintained in separate
accounts for each employee. An employee is always 100% vested in his or her
contributions and becomes vested in the Company contribution in 20 percent
annual increments beginning at the completion of two years of service. Full
vesting occurs upon retirement, death, or disability of the employee.
Generally, an employee may not withdraw any portion of the Company
contribution prior to retirement, termination of employment, death or
disability. However, an employee who can show evidence of hardship may
withdraw all or a part of his or her contribution at any time.
During the three fiscal years ending June 30, 1995, the Company contributed
to the employees, under the 401(k) Plan, an aggregate of $104,562 for all
employees as a group, including $7,712 for the benefit of Dr. Brunelle,
$7,242 for Mr. Ingebrand and $20,781 for all executive officers as a group (4
persons.)
NON-DIRECTOR, EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME AGE TITLE
<S> <C> <C>
Erwin W. Templin II 42 Executive Vice President, Chief Financial Officer,
Secretary and Treasurer
Robert T. Leick 54 Vice President, Sales and Marketing
David A. Montecalvo 30 Vice President, Operations
</TABLE>
Erwin W. Templin II is Executive Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company. Mr. Templin is also Chairman of the
Board of Natus Corporation, a 51% owned subsidiary of LecTec. Mr. Templin
joined the Company in July, 1993 as a Vice President of the Company and has
served as a director from 1990 to 1995. From 1991 to 1993, he was Senior Vice
President and Chief Financial Officer of Aviation Services Holdings, Inc., a
privately held general aviation investment company. From 1988 to 1990, Mr.
Templin was Senior Vice President and Chief Financial Officer of Van Dusen
Airport Services Company. Prior to 1988, he served in various financial
management positions with H.B. Fuller Company and Jostens, Inc.
Robert T. Leick is Vice President, Sales and Marketing. Mr. Leick joined the
Company in 1992 as the Director of Sales and Marketing, Therapeutic Products.
In July 1993, Mr. Leick was promoted to Vice President, Sales and Marketing.
Prior to joining LecTec, Mr. Leick held various sales and marketing positions
during a 23-year career with Bristol-Myers Squibb Company in the Mead Johnson
and Company Division and the Mead Johnson Nutritional Group.
David A. Montecalvo is Vice President, Operations. Mr. Montecalvo joined the
Company in 1986 and held the position of Director, Corporate Science and
Technology prior to July, 1995, when he was promoted to Vice President,
Operations.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee (the "Committee") consists of four non-employee
directors. Directors Berlin, Johnson, Hymes and Wilensky each served on the
Committee for the entire fiscal year ended June 30, 1995.
Dr. Brunelle, Chairman of the Board, Chief Executive Officer and President of
the Company, participated in portions of the meetings of the Committee, at
the invitation of the Committee, and made various proposals to the Committee
at its request. In addition, at the Committee's direction, Dr. Brunelle has
set the cash compensation of certain other executives, subject to review and
approval by the Committee.
Mr. Berlin was formerly an officer of the Company, having served as both
Chairman of the Board and Chief Executive Officer of the Company. There were
no other Compensation Committee "interlocks" within the meaning of the SEC
rules.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All current transactions between the Company and its officers, directors,
principal shareholders or affiliates are and all future transactions between
the Company and such affiliated parties will be on terms no less favorable to
the Company than could have been obtained in arm's-length transactions with
unaffiliated third parties, as determined by a majority of the disinterested
members of the Company's Board of Directors. All future transactions with and
loans to affiliated parties will be approved by a majority of the
disinterested members of the Company's Board of Directors. In addition, the
Company will make or guarantee loans to officers, directors, principal
shareholders or other affiliates only for bona fide business purposes.
During 1993 and 1994, Alan J. Wilensky, while a partner in the Washington
office of Akin, Gump, Strauss, Hauer & Feld, served as the outside corporate
counsel to the Company.
SHAREHOLDER RETURN PERFORMANCE GRAPH
The graph and table below compare the cumulative total shareholder return on
the Company's Common Stock for the last five fiscal years with the cumulative
total return on the S & P 500 Index and the S & P Medical Products and
Supplies Index over the same period. The graph and table assume the
investment of $100 in each of the Company's Common Stock, the S & P 500 Index
and the S & P Medical Products and Supplies Index on June 30, 1990 and that
all dividends (cash and stock) were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPH]
<TABLE>
<CAPTION>
6/30/90 6/30/91 6/30/92 6/30/93 6/30/94 6/30/95
<S> <C> <C> <C> <C> <C> <C>
LecTec Corporation 100 200 194 235 227 313
S&P 500 100 107 122 138 140 177
S&P Med. P&S 100 133 152 124 120 184
</TABLE>
RATIFICATION OF APPOINTMENTS OF AUDITOR
The Board of Directors has appointed Grant Thornton LLP as the Company's
independent auditor for the fiscal year which began July 1, 1995. A proposal
to ratify that appointment will be presented at the Meeting. Grant Thornton
LLP has served as the Company's auditor since June 1987. Representatives of
Grant Thornton LLP are expected to be present at the Meeting, will have an
opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF GRANT THORNTON LLP. If the appointment is not ratified by the
shareholders, the Board of Directors is not obligated to appoint another
auditor, but the Board of Directors will give consideration to an unfavorable
vote.
OTHER BUSINESS
The Company knows of no other matters to be acted upon at the Meeting. If any
other matters properly come before the Meeting, it is the intention of the
persons named in the enclosed Proxy to vote the shares they represent as the
Board of Directors may recommend.
PROPOSALS FOR THE NEXT REGULAR MEETING
Any proposal by a shareholder to be presented at the 1996 Regular Meeting of
Shareholders must be received at the Company's principal executive offices at
10701 Red Circle Drive, Minnetonka, Minnesota 55343, not later than June 12,
1996.
By Order of the Board of Directors
/s/ Erwin W. Templin
Erwin W. Templin II
Secretary
Dated: October 19, 1995
- --------------------------------------------------------------------------------
LECTEC CORPORATION
10701 RED CIRCLE DRIVE
MINNETONKA, MN 55343
REGULAR MEETING OF SHAREHOLDERS -- NOVEMBER 17, 1995
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT
The undersigned hereby appoint(s) Thomas E. Brunelle, Ph.D. and Erwin W. Templin
II, or either of them, each with the power of substitution, as proxies and
agents ("Proxy Agents"), in the name of the undersigned, to represent and to
vote as designated below all of the shares of Common Stock of LecTec Corporation
(the "Company") held of record by the undersigned on September 15, 1995, at the
Regular Meeting of Shareholders to be held on Friday, November 17, 1995, at 3:00
p.m., and any adjournment(s) thereof, the undersigned herewith ratifying all
that the said Proxy Agents may so do. The undersigned further acknowledges
receipt of the Notice of Regular Meeting and the Proxy Statement in support of
Management's solicitation of proxies dated October 19, 1995.
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed below
(except as marked to the contrary)
[ ] WITHHOLD authority
to vote for all nominees listed below
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
LEE M. BERLIN ALAN C. HYMES, M.D. PAUL O. JOHNSON
ALAN J. WILENSKY THOMAS E. BRUNELLE, Ph.D.
2. PROPOSAL TO RATIFY THE APPOINTMENT OF GRANT THORNTON LLP as the Company's
independent auditor for the Company's current fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued on other side)
(continued from other side)
3. In their discretion, the Proxy Agents are authorized to vote upon such
other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED AND RETURNED TO THE COMPANY WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
Dated: ___________________, 1995
________________________________
(Signature)
________________________________
(Signature)
PLEASE DATE AND SIGN exactly as
name(s) appears hereon and
return promptly in the
accompanying postage paid
envelope. If shares are held by
joint tenants or as community
property, both shareholders
should sign.
