<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
[X] Definitive proxy statement Commission Only (as permitted
[ ] Definitive additional materials by Rule 14a-6(e)(2))
[ ] Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
TECNOL MEDICAL PRODUCTS, INC.
----------------------------------------------
(Name of Registrant as Specified in Its Charter)
TECNOL MEDICAL PRODUCTS, INC.
----------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11*:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] 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> 2
TECNOL MEDICAL PRODUCTS, INC.
7201 INDUSTRIAL PARK BLVD.
FORT WORTH, TEXAS 76180
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 17, 1997
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Tecnol
Medical Products, Inc. ("Tecnol") will be held at the Dorothea Leonhardt
Lecture Hall, Fort Worth Botanic Garden, 3220 Botanic Garden Boulevard, Fort
Worth, Texas 76107, on Thursday, the 17th day of April, 1997, at 2:00 p.m.,
Central Time, for the following purposes:
1. To elect two Class III directors of Tecnol to serve as directors for a
three-year term or until their respective successors are duly elected and
qualified.
2. To transact such other business as may properly come before the meeting
or any adjournments of the meeting, subject to limitations set forth in
applicable regulations under the Securities Exchange Act of 1934.
The board of directors has fixed the close of business on February 18, 1997,
as the record date for determining stockholders entitled to vote at and to
receive notice of the annual meeting.
The Dorothea Leonhardt Lecture Hall is located on the north side of the Fort
Worth Botanic Garden in the Botanic Garden Center. The closest entrance to the
Botanic Garden Center is on University Drive, approximately 1/4 mile north of
the intersection of University Drive and Interstate 30 in Fort Worth. For more
detailed directions, you may contact Ms. Jan Martini at (817) 577-7767.
Whether or not you expect to attend the annual meeting in person, you are
urged to sign and date the enclosed form of proxy and return it promptly so
that your shares of stock may be represented and voted at the meeting. If you
are present at the meeting, your proxy will be returned to you if you so
request.
/s/DAVID RADUNSKY
David Radunsky,
Secretary
Dated: March 24, 1997
<PAGE> 3
TECNOL MEDICAL PRODUCTS, INC.
7201 INDUSTRIAL PARK BLVD.
FORT WORTH, TEXAS 76180
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 17, 1997
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying form of proxy is solicited by the management of Tecnol
Medical Products, Inc., a Delaware corporation ("Tecnol"), on Tecnol's behalf
to be voted at Tecnol's annual meeting of stockholders to be held Thursday,
April 17, 1997 (the "Annual Meeting"), at the time and place and for the
purposes set forth in the accompanying Notice of Annual Meeting. When proxies
in the accompanying form are received, properly completed, the shares
represented by the proxies will be voted at the Annual Meeting in accordance
with the directions noted on the proxies; if no direction is indicated, then
such shares will be voted FOR the nominees for director.
The accompanying form of proxy confers discretionary authority to vote with
respect to any and all of the following matters that may come before the Annual
Meeting (subject to limitations set forth in applicable regulations under the
Securities Exchange Act of 1934): (1) matters that Tecnol does not know a
reasonable time before the Annual Meeting are to be presented at the Annual
Meeting; (2) matters incident to the conduct of the Annual Meeting; (3)
approval of the form of the minutes of the prior meeting; (4) the election of
directors in the event the nominees become unavailable to serve; and (5) any
stockholder proposals not included in this proxy statement which are properly
before the meeting. Management does not intend to present any business at the
Annual Meeting for a vote other than the election of directors as set forth in
the accompanying Notice of Annual Meeting, and management has no information
that others will do so. If other matters requiring the vote of the
stockholders properly come before the Annual Meeting, then the persons named in
the accompanying form of proxy intend to vote the proxies that they hold in
accordance with their judgment on such matters.
Any stockholder giving a proxy has the power to revoke that proxy at any time
before it is voted. Any stockholder may attend the Annual Meeting and vote in
person whether or not the stockholder has previously given a proxy.
Tecnol will bear the cost of preparing, printing, assembling, and mailing the
Notice of Annual Meeting, this proxy statement, the accompanying form of proxy,
and any additional material, as well as the cost of forwarding solicitation
material to the beneficial owners of stock.
This proxy statement and the accompanying form of proxy are first being sent
or given to Tecnol's stockholders on or about March 25, 1997.
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<PAGE> 4
VOTING RIGHTS
The record date for determining stockholders entitled to notice of and to
vote at the Annual Meeting is the close of business on February 18, 1997. On
that date, 19,975,657 shares of Tecnol's $.001 par value common stock were
issued and outstanding. Each share of Tecnol's common stock that was issued
and outstanding on the record date is entitled to one vote on the matter of
election of directors and on any other matter that may be acted upon at the
Annual Meeting. Neither Tecnol's certificate of incorporation nor its bylaws
permits cumulative voting.
Tecnol's bylaws require the presence of holders of a majority of Tecnol's
common shares issued and outstanding and entitled to vote at the Annual
Meeting, in person or represented by proxy, to constitute a quorum at the
Annual Meeting. The bylaws also require (i) the affirmative vote of the
holders of a plurality of Tecnol's common shares entitled to vote and
represented in person or by proxy at the Annual Meeting to elect directors, and
(ii) the affirmative vote of a majority of Tecnol's common shares entitled to
vote and represented in person or by proxy at the Annual Meeting to approve any
other matters to be voted on at the Annual Meeting.
Abstentions and broker nonvotes are each included in determining the number
of shares present at the Annual Meeting for purposes of determining a quorum.
A broker nonvote occurs if a registered broker-dealer holding securities for a
customer in the broker-dealer's name does not receive instructions from its
customer on how to vote the customer's securities as to nonroutine matters.
Because the election of directors is a routine matter, no broker nonvotes are
anticipated.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld and any broker nonvotes will be excluded
entirely from the vote and will have no effect.
PROPOSAL I
ELECTION OF DIRECTORS
Tecnol's board of directors is composed of six members and is divided into
three classes, each consisting of two members. Only Class III positions are
due for nomination and election at the Annual Meeting. Class I and Class II
positions are due for nomination and election at the annual meetings of
stockholders to be held in 1998 and 1999, respectively.
The persons named in the accompanying form of proxy, unless the proxy
specifies otherwise, will vote the shares represented by the proxy FOR the
election of Van Hubbard and Kirk Brunson as the Class III directors. The
members of the board of directors unanimously support Mr. Hubbard and Mr.
Brunson for re-election to hold office until their terms expire or until their
respective successors are duly elected and qualified. Mr. Hubbard and Mr.
Brunson are presently directors of Tecnol. If either of the nominees for
director becomes unavailable to stand for election as a director, then the
shares represented by the
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<PAGE> 5
accompanying form of proxy will be voted for substitute nominees to be
nominated by the board of directors or in accordance with Tecnol's bylaws.
Tecnol has no reason to believe, however, that either of the nominees is, or
will be, unavailable to serve as a director. Certain information regarding
each nominee and director is set forth below. The number of shares of Tecnol's
common stock beneficially owned by each nominee and director is listed under
"Security Ownership of Principal Stockholders and Management."
CLASS I DIRECTORS
James W. Kenney, 55, has served as a director of Tecnol since 1978. Since
November of 1993, Mr. Kenney has been Executive Vice President of San Jacinto
Securities, Inc., a securities brokerage firm located in Dallas, Texas. From
February 1992 to October 1993, he was a partner of Renaissance Capital Group,
Inc., a Dallas money management firm. From 1989 to February 1992, Mr. Kenney
was Senior Vice President of Capital Institutional Services, Inc., a brokerage
firm located in Dallas, Texas, that provides third party research. Mr. Kenney
is also a director of Amerishop Corporation, Consolidated Health Care
Associates, Inc., Industrial Holdings, Inc., Scientific Measurement Systems,
Inc., and Tricom Corporation.
David Radunsky, 50, joined Tecnol as its Chief Operating Officer, General
Counsel and Secretary and was appointed to serve as a director in June of 1991.
Before joining Tecnol, Mr. Radunsky was engaged in the practice of law for 20
years at the Dallas law firm of Carrington, Coleman, Sloman & Blumenthal,
L.L.P.
CLASS II DIRECTORS
Valerie Hubbard, 41, has been President of the International Division since
1988, served as President of the Hospital Products Division from January 1992
through December 1996, has served as Tecnol's Assistant Secretary since 1991,
and has been a director of Tecnol since 1987. She joined Tecnol in 1983, has
been an officer since 1985, and has been an executive officer since 1987.
Valerie Hubbard is married to Van Hubbard.
Jack G. Johnson, 68, has served as a director of Tecnol since 1982. Mr.
Johnson also served as a director from 1978 to 1981. From 1955 to 1990, Mr.
Johnson was primarily engaged in the practice of law. From 1984 to 1990, he
was of counsel to the Dallas law firm, Carrington, Coleman, Sloman &
Blumenthal, L.L.P. He retired from the practice of law in 1990 and has managed
his personal investments since then.
CLASS III DIRECTORS
Van Hubbard, 57, was a principal founder and organizer of Tecnol, Inc., in
1976. He has been a director, Chairman, Chief Executive Officer, and President
of Tecnol since 1978. Van Hubbard is married to Valerie Hubbard.
Kirk Brunson, 59, was one of Tecnol, Inc.'s original founders and has been a
director, Vice Chairman, and Executive Vice President since 1978. He has
served as Assistant Secretary of Tecnol since 1991.
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<PAGE> 6
BOARD MEETINGS AND COMMITTEES
Tecnol's board of directors has Audit, Executive Compensation, and Stock
Option Committees, whose members are noted below. During Tecnol's last fiscal
year, the board of directors met on seven occasions and took action by consent
on three occasions. The Audit Committee met twice, the Executive Compensation
Committee met once, and the Stock Option Committee met three times. All
members of the board of directors participate in selecting nominees to the
board.
The Audit Committee reviews the scope of the independent auditors'
examinations and receives and reviews their reports. The Audit Committee also
meets (without management's presence, if the Audit Committee so desires) with
the independent auditors, receives recommendations or suggestions for change,
and may initiate or supervise any special investigations it may choose to
undertake. The members of the Audit Committee are Jack G. Johnson and James W.
Kenney.
The Executive Compensation Committee determines all salaries, bonuses, and
promotions for officers of Tecnol who are also directors. The members of the
Executive Compensation Committee are Van Hubbard, Jack G. Johnson, and James W.
Kenney.
The Stock Option Committee determines the employees of Tecnol and its
subsidiaries who will receive stock options and the amount and terms of such
options. The members of the Stock Option Committee are Jack G. Johnson and
James W. Kenney.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
Members of Tecnol's board of directors who are not employees of Tecnol
receive $1,000 for each regular meeting of the board attended. Directors who
are also employees of Tecnol or its subsidiaries receive no payment for serving
as directors.
Effective September 26, 1991, Tecnol granted options to acquire 15,000 shares
(as adjusted for a 1993 stock dividend) of Tecnol's common stock to each of its
two outside directors, Jack G. Johnson and James W. Kenney, at Tecnol's initial
public offering price of $11.33 per share (as adjusted). These options become
exercisable as to one-ninth of the shares subject to the option each year over
a nine-year period. The first one-ninth of the shares subject to the option
became exercisable one year after the date of grant. Each of these options
will expire upon the earlier of termination of service as a director (except
for later expiration in the case of termination of service upon death or
disability) and ten years after the date of grant.
Jack Johnson was also engaged by Tecnol beginning September 1, 1996, to
assist management in overseeing various legal matters handled by the Company's
outside counsel. Mr. Johnson, a former practicing attorney, serves as a
consultant in this capacity on a temporary, as-needed basis, at a rate of
$10,000 per month. Amounts due pursuant to this agreement are payable in
February, 1999.
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<PAGE> 7
JOINT REPORT OF EXECUTIVE COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE ON
ANNUAL EXECUTIVE COMPENSATION
The policies of the Executive Compensation Committee are to provide to each
of Tecnol's executive officers fair compensation based on responsibilities and
performance and strong incentives for enhanced performance of both Tecnol and
the specific operations under the supervision of the executive.
Tecnol's Chief Executive Officer, Van Hubbard, is employed under a contract
entered into in 1989 that originally extended to the end of fiscal 1995. The
contract has now been extended to the end of fiscal 1998. The contract
provides a base salary, with modest annual increases of less than 10%. Before
Tecnol entered into the contract with Mr. Hubbard, he had received regular
modest annual increases in base salary, and the initial base salary provided in
his employment contract represented a modest increase over the prior year. The
Executive Compensation Committee considers that Mr. Hubbard's excellent past
performance justifies its confidence that his future performance will fully
merit the base salary increases provided in his contract. Mr. Hubbard's
contract also provides for the continuation of an annual performance bonus
program that was in effect for him in prior years. Under the bonus program, he
can earn an annual bonus in an amount up to 30% of his base salary for the
year. The actual amount of bonus earned for a year depends upon Tecnol's
success in achieving its goal of operating earnings for that year. That goal is
established by the board of directors in advance, based upon a comprehensive
planning process conducted throughout Tecnol. Historically, those goals have
provided for aggressive increases within limits considered conceivably
attainable. No bonus is earned unless Tecnol achieves more than 90% of its
goal, and the bonus is earned in uniform increments between 90% and 105% of the
goal. Mr. Hubbard earned no bonus for fiscal 1996.
Tecnol's other executive officers are also paid base salaries with the
potential to earn performance bonuses. In most cases, Tecnol has employed its
executive officers for many years, and their present base salary levels are the
result of annual increases awarded because of their increased value to Tecnol
in terms of added experience, skill, and responsibilities. The annual
increases have usually been modest, in keeping with Tecnol's cost containment
policies.
The purpose of the bonus program for such executives is to reward them for
their contributions and efforts for Tecnol above and beyond their normal job
requirements. It consists of two parts. Seventy percent (70%) of the bonus
package consists of a quarterly bonus based upon individual job objectives
agreed upon by the executive and the executive's supervisor and approved by the
Chief Executive Officer. The objectives established for an executive, which
may be specific or general, and, if applicable, the portion of the quarterly
bonus that the executive can earn for accomplishing each objective, are matters
of subjective judgment of the executive and the executive's supervisor. They
change quarterly. The executive receives no bonus for any quarterly objectives
that are not met. The remaining 30% of the bonus package consists of an annual
bonus, the amount of which is determined by a formula based upon year-end
operating income compared to budgeted operating income. For executives
responsible for particular operating divisions of Tecnol, the formula is
applied against the operating income of the operating divisions for which the
executives are responsible. For the other executives, the formula is applied
against Tecnol's operating income. The total amount of the combined bonus
package that an executive can earn is established annually
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<PAGE> 8
within the subjective judgment of an executive's supervisor and approved by the
Chief Executive Officer and the Executive Compensation Committee. The
executive officers earned the bonuses set forth in the Summary Compensation
Table on the following page for 1996.
No options were granted to Tecnol's Chief Executive Officer and its other
most highly compensated executive officers (whose compensation exceeded
$100,000 in fiscal 1996) during the fiscal year ended November 30, 1996.
Although Mr. Hubbard is Chairman of the Executive Compensation Committee, he
does not participate in any final committee decisions with respect to his own
compensation or that of Valerie Hubbard. Those decisions are made solely by
the other two members of the committee, both of whom are outside directors.
EXECUTIVE COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
Van Hubbard, Chairman Jack G. Johnson
Jack G. Johnson James W. Kenney
James W. Kenney
The above joint report of the Executive Compensation Committee and the Stock
Option Committee will not be deemed to be incorporated by reference into any
filing by Tecnol under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent that Tecnol specifically incorporates same by
reference.
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
Van Hubbard, who is Chairman of the Board, Chief Executive Officer, and
President of Tecnol, served as a member of the Executive Compensation Committee
of the board of directors during fiscal 1996, with Jack G. Johnson and James W.
Kenney. Mr. Johnson and Mr. Kenney also serve on the Stock Option Committee.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to Tecnol's Chief
Executive Officer and its other most highly compensated executive officers
(whose compensation exceeded $100,000 in fiscal 1996) for services rendered in
all capacities to Tecnol during the fiscal years ended November 30, 1996,
December 2, 1995, and December 2, 1994.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
OPTIONS
AWARDS
------
NAME AND FISCAL OTHER ANNUAL (NUMBER OF ALL OTHER
PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION(1) SHARES) COMPENSATION(2)
------------------- ---- ------ ----- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Van Hubbard, Chairman of the 1996 $493,200 $ - 0 - $ - - $ 2,428
Board of Directors, Chief 1995 463,200 - 0 - - - 458
Executive Officer, and President 1994 433,200 - 0 - - - 908
Kirk Brunson, Vice Chairman and 1996 204,167 22,458 - - 3,398
Executive Vice President 1995 194,167 28,700 - - 5,338
1994 184,167 36,283 - - 2,883
Valerie Hubbard, President of 1996 179,167 24,438 - - 1,220
International Division, Tecnol, 1995 169,000 38,325 - - 5,130
Inc. 1994 157,333 36,283 - - 2,359
David Radunsky, Chief Operating 1996 284,167 48,708 - - 3,398
Officer, General Counsel, and 1995 274,583 45,500 - - 5,338
Secretary 1994 269,167 45,500 - - 3,861
Jeff Nick, Vice President of 1996 105,000 12,833 - - 2,189
Finance and Accounting 1995 89,805 9,163 - 11,667 2,346
1994 84,500 10,646 - - 2,697
</TABLE>
(1) Certain of Tecnol's executive officers receive personal benefits in
addition to salary and cash bonuses. The aggregate amounts of the
personal benefits, however, do not exceed the lesser of $50,000 or 10% of
the total of the annual salary and bonus reported for the named executive
officers.
(2) Tecnol contributed a portion of these amounts to the executives' accounts
under the Tecnol, Inc. 401(k) Employee Capital Accumulation Plan (the
"401(k)"). The amounts included in the table also include the value of
the shares allocated to the executives' Employee Stock Ownership Plan
("ESOP") accounts during the fiscal years noted, as of the date the
allocations were made, although the allocations made in any year were
made for the previous ESOP fiscal year. For fiscal 1996, Tecnol
contributed $250 of the amounts shown on the table to the 401(k) accounts
of each of the executives; the remainder of the amounts shown on the
table represent the value of ESOP shares. See "Compensation of Directors
and Executive Officers--Employee Stock Ownership Plan."
EMPLOYMENT AGREEMENTS
Tecnol has entered into employment agreements with Van Hubbard and David
Radunsky.
Pursuant to Mr. Hubbard's employment agreement, Tecnol agreed to employ Mr.
Hubbard as its Chairman of the Board and Chief Executive Officer through
November 30, 1998. Mr. Hubbard will receive a base salary of $523,200 for
fiscal 1997 and $553,200 for fiscal 1998. Mr. Hubbard will also receive an
annual bonus of up to 30% of his annual salary based upon Tecnol's
profitability each fiscal year.
Pursuant to Mr. Radunsky's employment agreement, dated as of May 1, 1991,
Tecnol agreed to employ Mr. Radunsky as its Chief Operating Officer and General
Counsel at an initial base salary of
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$220,000 per year, subject to increase as the Executive Compensation Committee
of the board of directors determined. The agreement also provided that Mr.
Radunsky could receive an annual bonus of up to $60,000 each year pursuant to
Tecnol's management bonus plan (raised to $70,000 by the Executive Compensation
Committee effective January 1, 1996). Mr. Radunsky's employment agreement
expired May 31, 1996. He has continued as an employee and officer in the same
capacities with no change in compensation resulting from such expiration.
STOCK OPTION PLAN
The Tecnol 1991 Stock Option Plan (the "Stock Option Plan") is designed to
attract and retain key employees of Tecnol and its subsidiaries, and to
encourage stock ownership by key employees in order to align their interests
with the interests of the stockholders.
Pursuant to the Stock Option Plan, Tecnol is authorized to grant to executive
officers and key employees both "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options to acquire shares of common stock. Two million
shares of common stock have been reserved for issuance upon the exercise of
options granted under the Stock Option Plan.
The Stock Option Committee of Tecnol's board of directors administers the
Stock Option Plan and determines who receives options, the terms of any options
granted, including, subject to the limitations described below and in the Stock
Option Plan, the exercise price, the number of shares subject to the option,
and the manner of exercising the option. The Stock Option Committee is
composed of the two outside members of the board of directors, who have no
options issued pursuant to the Stock Option Plan.
Typically, the agreement governing options granted under the Stock Option
Plan includes the agreement by the optionee not to disclose Tecnol's
confidential information and, for a specified term, not to compete with Tecnol
upon the termination of the optionee's employment. No option granted under the
Stock Option Plan is transferable by the optionee other than by will or by the
laws of descent and distribution. Each option is exercisable, during the
lifetime of the optionee, only by the optionee (in accordance with the Stock
Option Plan).
All stock options granted under the Stock Option Plan must have an exercise
price of at least 100% of the fair market value of Tecnol's common stock on the
date the option is granted. With respect to an incentive stock option granted
to any person who owns more than ten percent of the voting power of Tecnol's
outstanding capital stock, the exercise price must be equal to at least 110% of
the fair market value of the shares on the date of grant and the term of the
option may be no longer than five years. Upon exercise of the option, the
purchase price is payable in cash or, if the agreement governing the options
granted under the Stock Option Plan so permits, by delivering previously owned
Tecnol common stock, a promissory note, or a combination of the foregoing. The
aggregate fair market value of the stock (determined at the time the option is
granted) with respect to which incentive stock options are exercisable for the
first time by any employee during any calendar year may not exceed $100,000.
No option may be exercised more than ten years after the date on which the
option is granted. The options will lapse upon termination of employment with
Tecnol with certain exceptions such as death, retirement, and total and
permanent disability.
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<PAGE> 11
The following table summarizes the number and value of options held by
Tecnol's Chief Executive Officer and its other most highly compensated
executive officers (whose compensation exceeded $100,000 in fiscal 1996) at
November 30, 1996. All of these options except those of Jeff Nick become
exercisable as to one-ninth of the option shares each year over a nine-year
period. The option as to the first one-ninth of the shares subject to the
options of all of the officers named in the table except Jeff Nick became
exercisable on September 26, 1992. Jeff Nick's options become exercisable as
to one-seventh of the option shares each year over a seven-year period. The
option as to the first one-seventh of the shares subject to Jeff Nick's options
became exercisable March 1, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR (1)
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END YEAR-END(2)
NAME OF EXECUTIVE (#) EXERCISABLE/UNEXERCISABLE ($) EXERCISABLE/UNEXERCISABLE
- ---------------------------- ---------------------------------- -----------------------------
<S> <C> <C>
Van Hubbard 41,670/33,330 $87,682/$70,132
Kirk Brunson 33,336/26,664 $70,145/$56,106
Valerie Hubbard 29,169/23,331 $61,377/$49,093
David Radunsky 29,169/23,331 $61,377/$49,093
Jeff Nick 1,667/10,000 $0/$0
</TABLE>
___________________
(1) None of the persons included in the table exercised any options
during fiscal 1996.
(2) Market value of underlying common stock at fiscal year-end minus the
exercise price, $11.33 per share (for all but Jeff Nick's options) or
$17 per share (for Jeff Nick's options).
EMPLOYEE STOCK OWNERSHIP PLAN
In 1981, Tecnol adopted the Tecnol Stock Bonus Plan, a qualified stock bonus
profit sharing plan. In 1988, this plan was converted to the Tecnol Employee
Stock Ownership Plan (the "ESOP"). The purpose of the ESOP is to make assets
available to Tecnol's employees at the time of their retirement and to enable
them to acquire ownership of Tecnol's common stock. All employees of Tecnol
meeting certain eligibility standards may participate in the ESOP after one
year of employment with Tecnol. The ESOP has historically invested exclusively
in Tecnol's common stock. The number of shares of stock of Tecnol in which the
ESOP may invest is unlimited. During 1994, the ESOP purchased 150,000 shares
of Tecnol common stock on the open market at prices ranging from $14.88 to
$15.13 per share. The ESOP borrowed approximately $2.3 million for such
purchases from Tecnol's operating subsidiary, Tecnol, Inc., in February and
March 1994, and delivered to Tecnol, Inc. notes for the purchase price.
Tecnol, Inc. is required to contribute to the ESOP annually an amount at least
equal to the ESOP's payments under the notes, but may
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<PAGE> 12
contribute more. As the outstanding balance of the notes is reduced, shares
will be released from a suspense account and allocated to individual
participants' accounts in the same proportion that each participant's
compensation for the year bears to the total compensation of all participants
for that fiscal year. A participant's interest in the ESOP is distributed upon
his or her normal retirement (at age 65), permanent and total disability,
death, or at a specific time after any other termination of employment. Under
the current provisions of the ESOP, unless the death, disability, or retirement
of a participant at age 65 results in earlier distribution, participants whose
employment with Tecnol terminates may elect to receive their benefits during
the plan year following their termination of service with Tecnol.
Except for distributions made upon a participant's early retirement, all
distributions from the ESOP are made in a lump sum or, at the participant's
option, in installments. The vesting schedules for allocations to a
participant's account provide for vesting at the rate of 20% after three years
of service, increased by 20% per year thereafter until the employee is 100%
vested after seven years of service. Prior to distribution, participants
generally have had no power to direct the disposition of common stock allocated
to their ESOP accounts. Tecnol is in the process of implementing an amendment
to the ESOP which would allow participants whose interests in the ESOP are
fully vested to direct the trustees of the ESOP to dispose of up to 50% of the
shares of common stock allocated to their ESOP accounts and invest the proceeds
in other permitted assets. Prior to that amendment, certain long-term
participants could direct the trustees to diversify under more limited
circumstances.
Each participant in the ESOP is entitled to direct the voting of common stock
allocated to the participant's ESOP account on all matters submitted to the
holders of common stock for a vote. In all cases, the trustees of the ESOP
vote all shares held by the ESOP that have not been allocated to participant
accounts and all shares as to which the participants have not directed the
voting, on all matters submitted to the stockholders for a vote.
Van Hubbard, Kirk Brunson, and David Radunsky serve as trustees of the ESOP.
As of February 18, 1997, the ESOP owned 783,252 shares, or 3.9%, of Tecnol's
outstanding common stock. During fiscal 1996, Tecnol, Inc. contributed
$565,343 to the ESOP. The contribution was applied to pay interest on and
reduce the debt of the ESOP to Tecnol, Inc. in a like amount. As a result of
the payment, 30,000 shares held by the ESOP that were previously pledged to
Tecnol, Inc. to secure the debt were released and are currently being allocated
to individual participant accounts.
The value of the shares of Tecnol common stock that were allocated to the
ESOP accounts of Tecnol's Chief Executive Officer and its other most highly
compensated executive officers (whose compensation exceeded $100,000 in fiscal
1996) during the fiscal years ended November 30, 1996, December 2, 1995, and
December 2, 1994, is reflected in the Summary Compensation Table under the
heading "All Other Compensation."
- 10 -
<PAGE> 13
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph compares the yearly percentage change in cumulative total
stockholder return on Tecnol's common stock to that of the CRSP Total Return
Index for The NASDAQ Stock Market and the CRSP Index for NASDAQ Stocks (SIC
3840- 3849 US & Foreign) Surgical, Medical, and Dental Instruments & Supplies.
The graph assumes that $100 was invested on November 29, 1991, takes into
account the effect of a 1993 stock dividend, and also assumes that any
dividends paid by companies included in the comparative indices were reinvested
in additional shares of the same class of equity securities of such companies
at the frequency with which the dividends were paid during the applicable
fiscal year.
Tecnol will promptly furnish a list of the companies included in the CRSP
Index for NASDAQ stocks (SIC 3840-3849 US & Foreign) Surgical, Medical, and
Dental Instruments & Supplies to any stockholder requesting it. The index
includes all companies that have listed with NASDAQ an SIC Code within the
range of 3840 to 3849.
[GRAPH]
<TABLE>
<CAPTION>
11/29/91 11/27/92 12/3/93 12/2/94 12/2/95 11/30/96
<S> <C> <C> <C> <C> <C> <C>
Tecnol Medical Products, Inc. 100.0 148.9 140.4 142.6 154.3 113.8
CRSP Total Return Index for The NASDAQ Stock Market 100.0 125.3 149.2 145.1 207.6 255.3
CRSP Index for NASDAQ Stocks (SIC 3840-3849 US & Foreign) 100.0 95.1 77.5 83.3 126.2 117.8
Surgical, Medical, and Dental Instruments & Supplies
</TABLE>
The stock price performance depicted in the graph above is not necessarily
indicative of future price performance. The graph will not be deemed to be
incorporated by reference in any filing by Tecnol under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent that Tecnol
specifically incorporates same by reference.
- 11 -
<PAGE> 14
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Tecnol's common stock as of February 18, 1997, by: (i) each
director; (ii) Tecnol's Chief Executive Officer and its other most highly
compensated executive officers (whose compensation exceeded $100,000 in fiscal
1996); (iii) all directors and executive officers of Tecnol as a group; and
(iv) persons deemed to beneficially own more than five percent of Tecnol's
outstanding common stock. Except as noted below, each person included in the
table has sole voting and investment power with respect to the shares that the
person beneficially owns.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ---------------- ----------------------- ----------------
<S> <C> <C>
Van Hubbard (1)(2) 2,886,115 14.4%
Kirk Brunson (1)(3) 1,703,331 8.5%
Valerie Hubbard (1)(4) 168,508 *
David Radunsky (5) 128,509 *
Jack G. Johnson (6) 53,334 *
James W. Kenney (7) 163,284 *
Jeff Nick (8) 2,088 *
All officers and directors
as a group (seven people)(9) 4,925,169 24.5%
Chancellor LGT Asset Management, Inc., Chancellor
LGT Trust Company, and LGT Asset Management, Inc.(10) 1,075,700 5.4%
The Kaufmann Fund(11) 1,000,000 5.0%
</TABLE>
- --------------------
* Less than 1%
(1) The address of Van Hubbard, Kirk Brunson, and Valerie Hubbard is 7201
Industrial Park Blvd., Fort Worth, Texas 76180.
(2) Includes: 2,701,272 shares over which Mr. Hubbard has sole voting and
investment power; 53,173 shares that have been allocated to his ESOP
account over which Mr. Hubbard has full voting power; 41,670 shares that
Mr. Hubbard has the right to acquire upon the exercise of an employee
stock option; and 90,000 shares owned by the ESOP, for which Mr. Hubbard
serves as co-trustee, that have not been allocated to participant
accounts, over which he shares voting and investment power as
co-trustee. The inclusion of the shares subject to Mr. Hubbard's option
and the unallocated ESOP shares is not to be construed as a statement
that Mr. Hubbard is the beneficial owner of those shares. Excludes
640,079 shares held of record by the ESOP that have been allocated to
participant accounts (other than Mr. Hubbard's). See "Compensation of
Directors and Executive Officers -- Employee Stock Ownership Plan."
(3) Includes: 1,554,807 shares over which Mr. Brunson has sole voting and
investment power; 25,188 shares that have been allocated to his ESOP
account over which he has full voting power; 33,336 shares that Mr.
Brunson has the right to acquire upon the exercise of an employee stock
option; and 90,000 shares held of record by the ESOP, for which Mr.
Brunson serves as co-trustee, that have not been allocated to
participant accounts, over which he shares voting and investment power
as co-trustee. The inclusion of the shares subject to Mr. Brunson's
option and the unallocated ESOP shares is not to be construed as a
statement that Mr. Brunson is the beneficial owner of those shares.
Other than shares held of record by the ESOP that have not been allocated
to participant accounts, all shares included in the table are held as
community property of Mr. Brunson and his wife. Excludes 668,064 shares
held of record by the ESOP that have been allocated to participant
accounts (other than Mr. Brunson's). See "Compensation of Directors and
Executive Officers -- Employee Stock Ownership Plan."
- 12 -
<PAGE> 15
(4) Includes: 121,687 shares over which Ms. Hubbard has sole voting and
investment power; 11,690 shares that have been allocated to her ESOP
account over which Ms. Hubbard has full voting power; 5,962 shares held
as custodian for her daughter over which Ms. Hubbard has sole voting and
investment power; and 29,169 shares that she has the right to acquire
upon exercise of an employee stock option. The inclusion of the shares
held as custodian and the shares subject to Ms. Hubbard's option is not
to be construed as a statement that Ms. Hubbard is the beneficial owner
of these shares.
(5) Includes: 7,500 shares over which Mr. Radunsky has sole voting and
investment power; 1,840 shares that have been allocated to his ESOP
account over which Mr. Radunsky has full voting power; 29,169 shares
that he has the right to acquire upon exercise of an employee stock
option; and 90,000 shares held of record by the ESOP, for which Mr.
Radunsky serves as co-trustee, that have not been allocated to
participant accounts, over which he shares voting and investment power
as co-trustee. The inclusion of the shares subject to Mr. Radunsky's
option and the unallocated ESOP shares is not to be construed as a
statement that Mr. Radunsky is the beneficial owner of those shares.
Excludes 691,412 shares held of record by the ESOP that have been
allocated to participant accounts (other than Mr. Radunsky's). See
"Compensation of Directors and Executive Officers -- Employee Stock
Ownership Plan."
(6) Includes: 30,000 shares over which Mr. Johnson has sole voting and
investment power; 8,334 shares that he has the right to acquire upon
exercise of a director stock option; 10,000 shares held of record by a
Dallas bank in trust for the retirement plan and benefit of Mr. Johnson
over which he has sole voting and investment power; and 5,000 shares
owned by his wife, over which he has no voting or investment power. The
inclusion of the shares held by Mr. Johnson's wife and the shares
subject to his option is not to be construed as a statement that he is
the beneficial owner of these shares.
(7) Includes: 2,000 shares over which Mr. Kenney has sole voting and
investment power; 152,950 shares held of record by a Dallas brokers
clearing corporation in trust for the retirement plan and benefit of Mr.
Kenney over which he shares voting and investment power; and 8,334
shares that he has the right to acquire upon exercise of a director
stock option. The inclusion of the shares subject to Mr. Kenney's
option is not to be construed as a statement that he is the beneficial
owner of these shares.
(8) Includes: 33 shares over which Mr. Nick has sole voting and investment
power; 388 shares that have been allocated to his ESOP account over
which Mr. Nick has full voting power; and 1,667 shares that he has the
right to acquire upon the exercise of an employee stock option. The
inclusion of the shares subject to Mr. Nick's option is not to be
construed as a statement that he is the beneficial owner of these
shares.
(9) Includes: 151,679 shares that all directors and executive officers as a
group have the right to acquire upon the exercise of employee, director,
or other stock options.
(10) A Schedule 13G received by Tecnol on February 13, 1997 indicates that
Chancellor LGT Asset Management, Inc., a California corporation, and
Chancellor LGT Trust Company, a New York corporation, hold shares as
investment advisors for various fiduciary accounts, and that LGT Asset
Management, Inc., a California corporation, holds shares as the holding
company for Chancellor LGT Asset Management, Inc. The address of the
principal place of business of Chancellor LGT Asset Management, Inc. and
Chancellor LGT Trust Company is 1166 Avenue of the Americas, New York,
NY 10036. The address of the principal place of business of LGT Asset
Management, Inc. is 50 California Street, San Francisco, California
94111.
(11) The address of The Kaufmann Fund is 140 East 45th Street, 43rd floor,
New York, NY 10017-3144.
INDEPENDENT AUDITORS
Arthur Andersen LLP, certified public accountants, served as Tecnol's
independent auditors for the fiscal year ended November 30, 1996. The board of
directors has appointed Arthur Andersen LLP to continue to serve as Tecnol's
independent auditors for fiscal 1997. A representative of that firm is
expected to be present at the Annual Meeting to respond to appropriate
questions, and will have an opportunity to make a statement if the
representative desires to do so.
- 13 -
<PAGE> 16
PROPOSALS OF STOCKHOLDERS
Stockholders of Tecnol who intend to present a proposal for action at
Tecnol's 1998 annual meeting of stockholders must notify Tecnol's management of
their intention by notice received at Tecnol's principal executive offices by
November 24, 1997, for their proposal to be considered for inclusion in
Tecnol's proxy statement and form of proxy relating to its 1998 annual meeting.
/s/ VAN HUBBARD
Fort Worth, Texas Van Hubbard,
Dated: March 24, 1997 President
- 14 -
<PAGE> 17
TECNOL MEDICAL PRODUCTS, INC.
ANNUAL MEETING OF STOCKHOLDERS-APRIL 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The stockholder of Tecnol Medical Products, Inc. ("Tecnol") whose name and
signature appear on the reverse side of this card, having received the notice
and accompanying proxy statement for Tecnol's annual meeting of stockholders to
be held on April 17, 1997, hereby appoints Valerie Hubbard and James W. Kenney,
or either of them, the proxies of the stockholder, each with full power of
substitution, to vote at such annual meeting, and at any adjournments of such
meeting, all shares of Tecnol common stock that the stockholder is entitled to
vote, in the manner shown on the reverse side of this card.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND THE SHARES REPRESENTED
HEREBY WILL BE VOTED IN ACCORDANCE WITH THE STOCKHOLDER'S DIRECTIONS ON THE
REVERSE SIDE OF THIS CARD. IF NO DIRECTION IS GIVEN, THEN THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND IN THE PROXIES' DISCRETION ON ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENTS, SUBJECT TO LIMITATIONS SET FORTH IN APPLICABLE REGULATIONS UNDER
THE SECURITIES EXCHANGE ACT OF 1934.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
SEE REVERSE
SIDE
<PAGE> 18
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
WITHHOLD
1. Election of FOR AUTHORITY Nominees:Van Hubbard and
Directors [ ] [ ] Kirk Brunson
Nominated
by Tecnol:
To withhold authority to vote for any individual nominee, write that
nominee's name in the space below.
-------------------------------
2. I authorize the aforementioned proxies to vote in their discretion on any
other matters that may properly come before the annual meeting or any
adjournments, subject to limitations set forth in applicable regulations
under the Securities and Exchange Act of 1934.
SIGNATURE(S)______________________________________________DATE___________,1997
SIGNATURE(S)______________________________________________DATE___________,1997
NOTE: Please sign exactly as name(s) appear(s) on this card. When shares are
held jointly, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation or partnership, please sign in full corporate or partnership name by
authorized officer or partner, giving title.
SEE REVERSE SIDE
<PAGE> 19
TECNOL MEDICAL PRODUCTS, INC.
ANNUAL MEETING OF STOCKHOLDERS-APRIL 17,1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The stockholder of Tecnol Medical Products, Inc. ("Tecnol") through the
Tecnol Employee Stock Ownership Plan (the "Plan"), whose name and signature
appear on the reverse side of this card, having received the notice and
accompanying proxy statement for Tecnol's annual meeting of stockholders to be
held on April 17, 1997, hereby directs the trustees of the Plan (the "Trustees")
or any two of them, to vote at such annual meeting, and at any adjournments of
such meeting, all shares of Tecnol common stock that have been allocated to the
stockholder's Plan account, in the manner shown below.
1. Election of Directors Nominated by Tecnol:
Nominees: Van Hubbard and Kirk Brunson
[ ] For [ ] Withhold Authority
To withhold authority to vote for any individual nominee, write that nominee's
name in the space below.
_______________________________________
2. I authorize the aforementioned Trustees to vote in their discretion
on any other matters that may properly come before the annual meeting or
any adjournments, subject to limitations set forth in applicable
regulations under the Securities Exchange Act of 1934.
SEE REVERSE SIDE
<PAGE> 20
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND THE SHARES REPRESENTED
HEREBY WILL BE VOTED IN ACCORDANCE WITH THE STOCKHOLDER'S DIRECTIONS ON THE
REVERSE SIDE OF THIS CARD. IF NO DIRECTION IS GIVEN, THEN THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND IN THE TRUSTEES' DISCRETION ON
ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENTS, SUBJECT TO LIMITATIONS SET FORTH IN APPLICABLE REGULATIONS UNDER
THE SECURITIES EXCHANGE ACT OF 1934.
PLEASE MARK, DATE, SIGN EXACTLY AS NAME APPEARS ON THIS PROXY CARD AND RETURN
THE CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Dated___________________, 1997
______________________________
Signature
SEE REVERSE SIDE
