<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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
POLYMEDICA INDUSTRIES, INC.
(Name of Registrant as Specified In Its Charter)
POLYMEDICA INDUSTRIES, 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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (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> 2
POLYMEDICA INDUSTRIES, INC.
11 STATE STREET
WOBURN, MASSACHUSETTS 01801
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 11, 1997
The 1997 Annual Meeting of Stockholders of PolyMedica Industries, Inc. (the
"Company") will be held at the offices of Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts 02109, on Thursday, September 11, 1997, at 9:00 a.m.,
local time, to consider and act upon the following matters:
1. To elect three Class III Directors for the ensuing three years.
2. To approve an amendment to the Company's Articles of Organization for
the purpose of changing the name of the Company from "PolyMedica
Industries, Inc." to "PolyMedica Corporation."
3. To approve an amendment to the Company's 1992 Employee Stock Purchase
Plan (the "Plan"), extending the termination date of the Plan from May
1, 1998 to May 1, 2000.
4. To ratify the selection by the Board of Directors of Coopers & Lybrand
L.L.P. ("Coopers & Lybrand") as the Company's independent accountants
for the fiscal year ended March 31, 1998.
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on July 18, 1997, are
entitled to notice of, and to vote at, the meeting. The stock transfer books of
the Company will remain open for the purchase and sale of the Company's Common
Stock.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
/s/ ERIC G. WALTERS
ERIC G. WALTERS, CLERK
Woburn, Massachusetts
August 7, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE
AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE> 3
POLYMEDICA INDUSTRIES, INC.
11 STATE STREET
WOBURN, MASSACHUSETTS 01801
PROXY STATEMENT FOR THE 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 11, 1997
GENERAL MATTERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of PolyMedica Industries, Inc. (the "Company"
or "PolyMedica") for use at the 1997 Annual Meeting of Stockholders to be held
on September 11, 1997, and at any adjournment or adjournments of that meeting.
All proxies will be voted in accordance with the instructions contained therein,
and if no choice is specified, the proxies will be voted in favor of the matters
set forth in the accompanying Notice of Meeting. Any proxy may be revoked by a
stockholder at any time before it is exercised by delivery of written revocation
to the Clerk of the Company.
The Company's Annual Report for the fiscal year ended March 31, 1997, is
being mailed to stockholders with the mailing of this Notice and Proxy Statement
on or about August 7, 1997.
All shares and per share price information set forth in this Proxy
Statement have been restated to give effect to the 5% common stock dividend paid
on October 28, 1994, to holders of record as of October 14, 1994.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH
31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, EXCEPT FOR
EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN
REQUEST TO THE TREASURER, POLYMEDICA INDUSTRIES, INC., 11 STATE STREET, WOBURN,
MA 01801.
VOTING SECURITIES AND VOTES REQUIRED
On July 18, 1997, the record date for the determination of stockholders
entitled to notice of and to vote at the meeting, there were outstanding and
entitled to vote an aggregate of 8,491,845 shares of Common Stock of the
Company, $.01 par value per share ("Common Stock"). Each share of Common Stock
is entitled to one vote.
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Annual Meeting shall constitute a quorum
for the transaction of business at the Annual Meeting. Shares of Common Stock
present in person or represented by proxy (including shares which abstain or do
not vote with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum exists at
the Annual Meeting.
The affirmative vote of holders of a plurality of votes cast by the
stockholders entitled to vote at the Annual Meeting is required for the election
of Directors. The affirmative vote of the holders of a majority of the shares of
Common Stock outstanding and entitled to vote is required to approve the
proposal to amend the Company's Articles of Organization. The affirmative vote
of the holders of a majority of the shares of Common Stock voting on the matter
is required for the approval of the amendment to the Company's 1992 Employee
Stock Purchase Plan and the ratification of the selection of the Company's
accountants.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and will also not
be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on a matter
that requires the affirmative vote of a certain percentage of the votes cast or
shares voting on a matter. However, abstentions are considered in determining
the number of votes required to attain a majority of the shares present or
represented.
<PAGE> 4
SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of June 30, 1997,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock; (ii) each director and nominee for director;
(iii) each executive officer named in the Summary Compensation Table under the
heading "Compensation of Executive Officers" below and (iv) all directors and
executive officers of the Company as a group.
The number of shares of Common Stock beneficially owned by each director or
executive officer is determined under the rules of the Securities and Exchange
Commission, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership includes
any shares as to which the individual has sole or shared voting power or
investment power and also any shares which the individual has the right to
acquire within 60 days after June 30, 1997 through the exercise of any stock
option or other right. Unless otherwise indicated, each person has sole
investment and voting power (or shares such power with his or her spouse) with
respect to the shares set forth in the following table. The inclusion herein of
any shares deemed beneficially owned does not constitute an admission of
beneficial ownership of those shares.
<TABLE>
<CAPTION>
NUMBER PERCENTAGE
OF SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OWNED
- ------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Heartland Advisors, Inc (2)........................................ 1,273,300 15.1%
790 North Milwaukee Street
Milwaukee, WI 53202
U.S. Bancorp(3).................................................... 572,600 6.8%
111 S. W. Fifth Avenue
Portland, OR 97208
John Hancock Mutual Life Insurance Company(4)...................... 543,464 6.0%
200 Clarendon Street
Boston, MA 02116
Kennedy Capital Management(5)...................................... 528,900 6.3%
10829 Olive Boulevard
St. Louis, MO 63141
Steven J. Lee(6)................................................... 685,246 7.6%
Arthur A. Siciliano, Ph.D.(7)...................................... 384,754 4.4%
Eric G. Walters(8)................................................. 232,967 2.7%
Robert J. Zappa(9)................................................. 214,733 2.5%
Andrew M. Reed, Ph.D.(10).......................................... 212,802 2.5%
Richard H. Bard(11)................................................ 209,714 2.5%
Thomas S. Soltys(12)............................................... 52,625 *
Daniel S. Bernstein, M.D.(13)...................................... 25,737 *
Marcia J. Hooper(14)............................................... 18,788 *
Frank W. LoGerfo, M.D.(15)......................................... 12,750 *
Peter K. Hoffman(16)............................................... 2,260 *
All directors and executive officers as a group (14 persons)
(17)............................................................. 2,246,504 22.7%
</TABLE>
- ---------------
* Represents holdings of less than one percent.
(1) The persons named in the table have sole voting and investment power with
respect to all shares shown as beneficially owned by them, subject to the
information contained in the footnotes to this table. Amounts shown include
shares issuable pursuant to the exercise of options exercisable within 60
days after June 30, 1997.
(2) Based upon a Schedule 13G filed by Heartland Advisors, Inc. as of December
31, 1996 pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules promulgated
2
<PAGE> 5
thereunder reporting the beneficial ownership by it of 1,273,300 shares of
the Company's Common Stock. Heartland Advisors, Inc. shared voting power
and shared investment power with respect to all shares of Common Stock
beneficially owned by them.
(3) Based upon a Schedule 13G filed by U.S. Bancorp as of December 31, 1996
pursuant to the Exchange Act and the rules promulgated thereunder reporting
the beneficial ownership by it of 572,600 shares of the Company's Common
Stock. U.S. Bancorp shared voting power and shared investment power with
respect to all shares of Common Stock beneficially owned by them.
(4) Represents shares of Common Stock issuable upon the exercise of a stock
purchase warrant at an exercise price of $5.18 per share issued in
connection with the sale by a subsidiary of the Company of $25 million
10.9% Guaranteed Senior Secured Notes due January 31, 2003, to John Hancock
Mutual Life Insurance Company.
(5) Based upon a Schedule 13G filed by Kennedy Capital Management as of
December 31, 1996 pursuant to the Exchange Act and the rules promulgated
thereunder reporting the beneficial ownership by it of 528,900 shares of
the Company's Common Stock. Kennedy Capital Management shared voting power
and shared investment power with respect to all shares of Common Stock
beneficially owned by them.
(6) Includes 92,084 shares held by two family trusts for which Mr. Lee, his
spouse and family are beneficiaries and 532,821 shares issuable upon
exercise of outstanding stock options held by Mr. Lee that are exercisable
within 60 days after June 30, 1997. See "Fiscal Year-End Option Table"
below.
(7) Includes 303,447 shares issuable upon exercise of outstanding stock options
held by Dr. Siciliano that are exercisable within 60 days after June 30,
1997. See "Fiscal Year-End Option Table" below.
(8) Includes 196,881 shares issuable upon exercise of outstanding stock options
held by Mr. Walters that are exercisable within 60 days after June 30,
1997. See "Fiscal Year-End Option Table" below.
(9) Includes 128,031 shares issuable upon exercise of outstanding stock options
held by Mr. Zappa that are exercisable within 60 days after June 30, 1997.
See "Fiscal Year-End Option Table" below.
(10) Includes 153,390 shares issuable upon exercise of outstanding stock options
held by Dr. Reed that are exercisable within 60 days after June 30, 1997.
See "Fiscal Year-End Option Table" below.
(11) Includes 179,527 shares owned by Bard & Co. Inc., of which Mr. Bard is the
Chairman and Chief Executive Officer, and 18,000 shares issuable upon
exercise of outstanding stock options held by Mr. Bard that are exercisable
within 60 days after June 30, 1997. Mr. Bard is the sole stockholder of
Bard & Co., Inc., and has sole investment power and sole voting power over
all shares held by Bard & Co., Inc.
(12) Includes 2,625 shares issuable upon exercise of an outstanding stock option
held by Mr. Soltys that is exercisable within 60 days after June 30, 1997.
(13) Includes 18,000 shares issuable upon exercise of outstanding stock options
that are exercisable within 60 days after June 30, 1997, and 4,620 shares
held by Dr. Bernstein in an IRA account.
(14) Includes 18,000 shares issuable upon exercise of outstanding stock options
held by Ms. Hooper that are exercisable within 60 days after June 30, 1997.
(15) Includes 12,750 shares issuable upon exercise of outstanding stock options
held by Dr. LoGerfo that are exercisable within 60 days after June 30,
1997.
(16) Includes 2,260 shares issuable upon exercise of outstanding stock options
held by Mr. Hoffman that are exercisable within 60 days after June 30,
1997.
(17) Includes 1,466,669 shares issuable upon exercise of outstanding stock
options that are exercisable within 60 days after June 30, 1997. See
"Fiscal Year-End Option Table" below.
3
<PAGE> 6
ITEM ONE
ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of two Class I
Directors, two Class II Directors, and three Class III Directors. The Class I,
Class II, and Class III Directors will serve until the annual meetings of
stockholders to be held in 1998, 1999, and 1997, respectively, and until their
respective successors are elected and qualified. At each annual meeting of
stockholders, one class of directors is elected for a full term of three years
to succeed the class whose term is expiring.
The persons named in the enclosed proxy will vote to elect as Class III
Directors, Steven J. Lee, Peter K. Hoffman and Daniel S. Bernstein, M.D., the
Class III nominees named below, unless the proxy is marked otherwise. Messrs.
Lee and Hoffman and Dr. Bernstein are currently Class III Directors of the
Company.
Messrs. Lee and Hoffman and Dr. Bernstein will be elected to hold office
until the 2000 Annual Meeting of Stockholders and until their successors are
duly elected and qualified. Messrs. Lee and Hoffman and Dr. Bernstein have
indicated their willingness to serve, if elected; however, if Messrs. Lee and
Hoffman and Dr. Bernstein should be unable to serve, the proxies may be voted
for a substitute nominee designated by the Board of Directors. It is not
presently contemplated that any of the nominees will be unavailable to serve.
The following table sets forth the name, age, length of service as a
director of each member of the Board of Directors, including the nominees for
Class III Directors, information given by each concerning all positions he or
she holds with the Company, his or her principal occupation and business
experience for the past five years and the names of other publicly-held
companies of which he or she serves as a director. Information with respect to
the number of shares of Common Stock of the Company beneficially owned by him or
her on June 30, 1997, and the percentage of all outstanding shares of Common
Stock owned by him or her on such date appears above under "Security Ownership
and Certain Beneficial Owners and Management."
NOMINEES FOR TERM
TO EXPIRE IN 2000
(CLASS III DIRECTORS)
STEVEN J. LEE, age 50, has been a director since 1990.
Mr. Lee has served as Chairman since June 1996 and Chief Executive Officer and
a director of the Company since 1990. He served as President of the Company
from 1990 through June 1996. He served as manager in the Mergers and
Acquisitions practice at Coopers & Lybrand from March 1990 to May 1990.
Previously, he was President and a director of Shawmut National Ventures from
November 1987 to March 1990, and served as President, Chief Executive Officer
and a director of RepliGen Corporation from 1984 to 1986. Currently he is a
director of Commonwealth BioVentures, Inc. and Fibersense Technology
Corporation.
DANIEL S. BERNSTEIN, M.D., age 70, has been a director since 1992.
Dr. Bernstein has been a physician at Brigham Medical Associates, Boston,
Massachusetts, since 1993; a lecturer at Harvard Medical School, Cambridge,
Massachusetts, since 1993; and Clinical Professor of Medicine Emeritus, Boston
University School of Medicine since 1973.
PETER K. HOFFMAN, age 48, has been a director since June 1997.
Mr. Hoffman has been Senior Vice President, Business Management, for the North
Atlantic Group of The Gillette Company since 1988. Mr. Hoffman joined The
Gillette Company in 1972 and has held a variety of product management
positions.
4
<PAGE> 7
DIRECTORS WHOSE TERMS
EXPIRE IN 1998
(CLASS I DIRECTORS)
FRANK W. LOGERFO, M.D., age 56, has been a director since 1994.
Dr. LoGerfo has been Attending Surgeon, Associate Chairman for Research,
Department of Surgery, and Chief, Division of Vascular Surgery, Beth Israel
Deaconess Medical Center since 1987. Dr. LoGerfo has served as William V.
McDermott Professor of Surgery at Harvard Medical School since 1991.
MARCIA J. HOOPER, age 43, has been a director since 1991.
Ms. Hooper served as General Partner of three venture capital funds of
Ampersand Ventures from 1985 to 1993 and was a limited partner of the general
partner of three venture capital funds of Ampersand Ventures. Ms. Hooper
served as General Partner of Viking Capital Limited Partnership from 1993 to
1996. Currently, she is Vice President/Partner of Advent International
Corporation.
DIRECTORS WHOSE TERMS
EXPIRE IN 1999
(CLASS II DIRECTORS)
RICHARD H. BARD, age 49, has been a director since 1992.
Mr. Bard served as Vice Chairman of Computerland Corporation, and Chief
Executive Officer of ComputerLand International, Inc. from 1989 to 1991; Chief
Executive Officer of CoastAmerica Corporation from 1986 to 1988 and President
and Chief Operating Officer of FoxMeyer Corporation from 1978 to 1986. He is
currently the Chief Executive Officer of Bard & Co., Inc., and has been a
director and Chief Executive Officer of Optical Security Group, Inc. since
September 1993.
THOMAS S. SOLTYS, age 49, has been a director since 1996.
Mr. Soltys has served as President of Boston Special Risks Insurance Agency,
Inc. since 1988 and as sole owner since 1994.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors which
provides the opportunity for direct contact between the Company's independent
public accountants and the Board. The Audit Committee has responsibility for
recommending the appointment of the Company's independent public accountants,
reviewing the scope and results of audits and reviewing the Company's internal
accounting control policies and procedures. In the year ended March 31, 1997,
the Audit Committee included Mr. Bard and Ms. Hooper and held one meeting.
The Company also has a standing Compensation Committee of the Board of
Directors which provides recommendations to the Board regarding executive and
employee compensation programs of the Company. The Compensation Committee also
administers the Company's Stock Option Plan, the Directors' Plan, and other
employee stock benefits plans. In the year ended March 31, 1997, the
Compensation Committee included Ms. Hooper and Drs. Bernstein and LoGerfo and
held three meetings.
The Company also has a standing Executive Committee which provides
assistance to the Board of Directors. In the year ended March 31, 1997, the
Executive Committee included Messrs. Lee and Bard and Ms. Hooper. As the full
Board of Directors had frequent meetings, no meetings of the Executive Committee
were held in the year ended March 31, 1997.
The Board of Directors held ten meetings during the year ended March 31,
1997. All directors attended at least 75% of the total number of meetings of the
Board of Directors held during their service as directors.
There are no family relationships between or among any officers or
directors of the Company.
5
<PAGE> 8
DIRECTORS' COMPENSATION
Outside directors receive $12,500 in annual cash compensation for attending
Board and Committee Meetings. Directors who are officers or employees of the
Company do not receive any additional compensation for their services as
directors.
Outside directors are entitled to participate in the 1992 Directors' Stock
Option Plan, (the "Directors' Plan") which provides for automatic grants of
non-qualified stock options to members of the Company's Board of Directors who
are not employees of the Company. The Directors' Plan provides that (i) each
eligible director will be granted an option to purchase 2,625 shares of Common
Stock upon his or her initial election as a director and (ii) each director will
also be granted an option to purchase 2,625 shares on September 30 of each year.
Effective July 15, 1996, the annual option grant increased to 7,500 shares for
each director. Effective September 12, 1996, upon his or her initial election as
a director, each eligible director shall be granted an option to purchase such
number of shares of Common Stock as is equal to 7,500 multiplied by a fraction,
the numerator of which is the number of days between the date of such election
and the next following September 30, and the denominator of which is 365.
Thereafter, each eligible director shall be granted an option to purchase 7,500
shares of Common Stock on each September 30 on which he or she is an eligible
director. No director will be granted more than one such option in any calendar
year.
Under the Directors' Plan, Drs. Bernstein and LoGerfo, Ms. Hooper, and Mr.
Bard each were granted an option to purchase 7,500 shares of Common Stock
(exercisable at $5.625 per share) on September 30, 1996. Mr. Hoffman was granted
an option to purchase 2,260 shares of Common Stock (exercisable at $7.00 per
share) upon his appointment to the Board of Directors in June 1997.
The Directors' Plan is administered by the Board of Directors. The exercise
price of options granted under the Directors' Plan will equal 100% of the fair
market value of Common Stock as of the date of grant. The term of each option is
ten years, and options vest immediately. Options generally are not assignable
except by will or by the laws of descent and distribution.
6
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table. The following table sets forth certain
information with respect to the annual and long-term compensation for each of
the last three fiscal years of the Company's Chairman and Chief Executive
Officer and the Company's other four most highly compensated executive officers
who were serving as executive officers on March 31, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- --------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEAR $ (1)($) ($)(2)(3) (#) (4) (6)
- ------------------------------------- ------ -------- -------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven J. Lee 1997 $240,408 $ 90,000 $ 4,469 359,961(5) $ 1,058
Chairman and 1996 246,181 142,000 4,500 30,000 1,043
Chief Executive Officer 1995 230,816 187,500 4,500 131,250 965
Arthur A. Siciliano, Ph.D. 1997 215,447 50,000 4,728 236,094(5) 1,457
President 1996 183,414 59,000 4,561 22,000 1,283
1995 147,153 57,000 4,819 78,750 874
Eric G. Walters 1997 133,406 37,500 4,207 144,839(5) 300
Chief Financial Officer, 1996 135,432 50,000 4,579 16,000 295
Treasurer and Clerk 1995 126,841 46,500 4,570 36,750 271
Robert J. Zappa 1997 131,874 9,000 3,447 80,156(5) 827
President, PolyMedica 1996 129,387 48,000 4,467 21,000 805
Healthcare, Inc. 1995 124,672 46,500 4,942 36,750 740
Andrew M. Reed, Ph.D.(7) 1997 131,299 3,000 3,349 93,132(5) 289
President, PolyMedica 1996 124,817 52,000 4,541 16,000 277
Wound Care Company 1995 117,541 46,500 4,854 36,750 253
</TABLE>
- ---------------
(1) These amounts were either paid or accrued in the year shown.
(2) Other compensation in the form of perquisites and other personal benefits
has been omitted in those instances where such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10% of the
total salary and bonus for each named executive officer for such year.
(3) Represents the Company's matching cash contribution paid or accrued under
the Company's 401(k) Plan.
(4) Represents options granted under the 1990 Stock Option Plan.
(5) Of these options, 161,516, 59,704, 56,689, 36,121, and 49,097 shares,
respectively, represent repriced options. (See "Compensation Committee
Report on Option Repricing" and "Option Grants in Last Fiscal Year").
(6) Represents the taxable portion of group term life insurance paid by the
Company.
(7) In July 1997, as a result of the sale of certain assets relating to the
Company's institutional wound care operations, Dr. Reed became an employee
of the buyer of such assets.
7
<PAGE> 10
Option Grant Table. The following table sets forth certain information
regarding options granted during the year ended March 31, 1997 by the Company to
the executive officers in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED ANNUAL
NUMBER OF TOTAL OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE OR APPRECIATION FOR OPTION TERM
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------
NAME OPTIONS(#) YEAR 1997 ($/SH)(5) DATE(6) 5% 10%(7)
- -------------------------- --------- ------------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven J. Lee............. 70,875(1)(2) 3.57% $5.3750 05/27/2002 $129,560 $ 293,928
17,024(1)(2) 0.86% 5.3750 12/04/2002 31,120 70,600
10,407(1)(2) 0.52% 5.3750 01/15/2003 22,772 53,068
63,210(1)(2) 3.19% 5.3750 03/16/2003 138,313 322,330
150,000(3) 7.56% 4.3125 12/12/2006 406,813 1,030,950
48,445(4) 2.44% 3.8750 01/02/2007 118,058 299,183
Arthur A. Siciliano,
Ph.D.................... 23,626(1)(2) 1.19% 5.3750 05/27/2002 43,188 97,980
5,187(1)(2) 0.26% 5.3750 12/04/2002 9,481 21,511
3,171(1)(2) 0.16% 5.3750 01/15/2003 6,938 16,170
27,720(1)(2) 1.40% 5.3750 03/16/2003 60,655 141,354
150,000(3) 7.56% 4.3125 12/12/2006 406,813 1,030,950
26,390(4) 1.33% 3.8750 01/02/2007 64,311 162,977
Eric G. Walters........... 23,626(1)(2) 1.19% 5.3750 05/27/2002 43,188 97,980
5,922(1)(2) 0.30% 5.3750 12/04/2002 10,825 24,559
3,621(1)(2) 0.18% 5.3750 01/15/2003 7,923 18,464
23,520(1)(2) 1.19% 5.3750 03/16/2003 51,465 119,936
88,150(3) 4.44% 4.3125 12/12/2006 239,070 605,855
Robert J. Zappa........... 15,750(1)(2) 0.79% 5.3750 09/16/2002 28,791 65,317
1,956(1)(2) 0.10% 5.3750 12/04/2002 3,575 8,111
1,195(1)(2) 0.06% 5.3750 01/15/2003 2,614 6,093
17,220(1)(2) 0.87% 5.3750 03/16/2003 37,680 87,810
44,035(3) 2.22% 4.3125 12/12/2006 119,426 302,652
Andrew M. Reed, Ph.D...... 23,626(1)(2) 1.19% 5.3750 05/27/2002 43,188 97,980
5,120(1)(2) 0.26% 5.3750 12/04/2002 9,359 21,233
3,131(1)(2) 0.16% 5.3750 01/15/2003 6,851 15,966
17,220(1)(2) 0.87% 5.3750 03/16/2003 37,680 87,810
44,035(3) 2.22% 4.3125 12/12/2006 119,426 302,652
</TABLE>
- ---------------
(1) These options were granted in exchange for the surrender of options granted
in prior years in connection with the repricing of such options during
fiscal 1997. See "Compensation Committee Report on Option Repricing."
(2) These options were fully vested as of March 31, 1997.
(3) Of the above grants, 90,000, 90,000, 52,890, 26,421, and 26,421 shares for
Mr. Lee, Dr. Siciliano, Mr. Walters, Mr. Zappa and Dr. Reed, respectively,
vest immediately with the remainder vesting in twelve equal quarterly
installments, commencing with the date of grant.
(4) Of the above grants, 29,067 and 15,834 shares for Mr. Lee and Dr. Siciliano,
respectively, vest immediately with the remainder vested over twelve equal
quarterly installments, commencing with the date of grant.
(5) For the repriced grants, the exercise price is described in "Compensation
Committee Report on Option Repricing." For the remaining grants, the
exercise price is equal to the fair market value of the Company's Common
Stock on the date of grant.
(6) Options expire at the end of the option term, which is ten years from the
date of original grant.
(7) Amounts represent hypothetical gains that could be achieved for options if
exercised at the end of the option term. These gains are based on assumed
rates of stock price appreciation of 5% and 10% compounded annually from the
date options are granted or repriced.
8
<PAGE> 11
Fiscal Year-End Option Table. The following table sets forth certain
information regarding stock options exercised during the year ended March 31,
1997 and stock options held as of March 31, 1997 by the executive officers named
in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR END (#) FISCAL YEAR END ($)(1)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven J. Lee............ 0 $ 0 524,532 76,079 $ 540,488 $ 58,669
Arthur A. Siciliano,
Ph.D................... 0 0 296,225 66,656 288,980 48,653
Eric G. Walters.......... 0 0 192,889 35,088 197,856 22,716
Robert J. Zappa.......... 4,875 17,161 125,579 20,202 98,786 12,482
Andrew M. Reed, Ph.D..... 0 0 150,854 20,530 145,484 12,707
</TABLE>
- ---------------
(1) Total value of "in-the-money" unexercised options is based on the difference
between the last sales price of the Company's Common Stock on the American
Stock Exchange on March 31, 1997 ($5.00 per share) and the exercise price of
the "in-the-money" options, multiplied by the number of "in-the-money"
option shares.
REPRICING OF OPTIONS
The following table sets forth certain information concerning the repricing
of stock options held by the Named Executive Officers of the Company during
1997, as well as information concerning the repricing of stock options held by
executive officers of the Company during the past ten years.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES MARKET PRICE OPTION TERM
UNDERLYING OF STOCK AT EXERCISE PRICE REMAINING AT
OPTIONS TIME OF AT TIME OF DATE OF
REPRICED OR REPRICING OR REPRICING OR NEW EXERCISE REPRICING OR
AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
NAME DATE (#) ($) ($) ($) (IN MONTHS)
- --------------------------- --------- ------------ ------------ --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven J. Lee.............. 10/04/96 70,875 $ 5.3750 $ 7.8572 $5.3750 67
10/04/96 17,024 $ 5.3750 $ 12.3810 $5.3750 74
10/04/96 10,407 $ 5.3750 $ 13.3334 $5.3750 75
10/04/96 63,210 $ 5.3750 $ 9.0477 $5.3750 77
Arthur A. Siciliano,
Ph.D..................... 10/04/96 23,626 $ 5.3750 $ 7.8572 $5.3750 67
10/04/96 5,187 $ 5.3750 $ 12.3810 $5.3750 74
10/04/96 3,171 $ 5.3750 $ 13.3334 $5.3750 75
10/04/96 27,720 $ 5.3750 $ 9.0477 $5.3750 77
Eric G. Walters............ 10/04/96 23,626 $ 5.3750 $ 7.8572 $5.3750 67
10/04/96 5,922 $ 5.3750 $ 12.3810 $5.3750 74
10/04/96 3,621 $ 5.3750 $ 13.3334 $5.3750 75
10/04/96 23,520 $ 5.3750 $ 9.0477 $5.3750 77
Robert J. Zappa............ 10/04/96 15,750 $ 5.3750 $ 7.8572 $5.3750 71
10/04/96 1,956 $ 5.3750 $ 12.3810 $5.3750 74
10/04/96 1,195 $ 5.3750 $ 13.3334 $5.3750 75
10/04/96 17,220 $ 5.3750 $ 9.0477 $5.3750 77
Andrew M. Reed, Ph.D....... 10/04/96 23,626 $ 5.3750 $ 7.8572 $5.3750 67
10/04/96 5,120 $ 5.3750 $ 12.3810 $5.3750 74
10/04/96 3,131 $ 5.3750 $ 13.3334 $5.3750 75
10/04/96 17,220 $ 5.3750 $ 9.0477 $5.3750 77
</TABLE>
9
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON OPTION REPRICING
In fiscal 1997, the Compensation Committee approved the repricing of
certain outstanding stock options granted under the 1990 Stock Option Plan (the
"1990 Plan") and the Directors' Plan having an exercise price in excess of the
fair market value of the Company's Common Stock on the date of repricing. Many
outstanding options were exercisable at prices that exceeded the market price of
the Common Stock at that time, thereby substantially impairing the effectiveness
of such options as performance incentives. Consistent with the Company's
philosophy of utilizing equity incentives to motivate and retain management and
employees, the Compensation Committee felt that it was important to restore the
performance incentives intended to be provided by options through the repricing
of options with exercise prices in excess of the market price at the time of
repricing. The exercise price of the repriced options was set by the
Compensation Committee at the fair market value of a share ($5.375 per share) of
the Company's Common Stock on the effective date of the repricing. Other than
the change in the exercise price, the terms of such repriced options are the
same as the options they replaced. A total of 41 option holders, holding options
to purchase an aggregate of 451,461 shares of the Company's Common Stock with
exercise prices ranging from $7.62 to $13.33 per share, were granted new options
on the terms described above.
Compensation Committee
Daniel S. Bernstein, M.D.
Frank W. LoGerfo, M.D.
Marcia J. Hooper
EMPLOYMENT AGREEMENTS
In 1990, the Company entered into employment agreements with Mr. Lee and
Drs. Siciliano and Reed, in 1991 with Mr. Walters, and in 1992 with Mr. Zappa,
pursuant to which each individual agreed to serve as an officer of the Company.
Pursuant to the terms of the employment agreements, the officer receives an
annual base salary which is reviewed annually by the Board of Directors. Each
officer is entitled to receive an annual bonus payment in an amount, if any, to
be determined by the Compensation Committee of the Board of Directors. The
employment agreements, as amended to date, extend to November 30, 1999 for Mr.
Lee, to May 31, 1999 for Dr. Siciliano and Mr. Walters, to May 31, 1998 for Dr.
Reed, and to March 31, 1998 for Mr. Zappa.
The term of the employment agreements will also be deemed to continue on a
month-to-month basis if not expressly extended while each officer remains
employed by the Company. Both the officer and the Company have the right to
terminate an employment agreement at any time with or without cause upon 30
days' prior written notice. In the event that the Company terminates an
employment agreement without cause or an officer terminates his employment for
good reason (as defined in the agreement) following a change of control (as
defined in the agreement), such officer will be entitled to receive his base
salary at termination for the longer of one year or the remainder of his
employment period up to a maximum of eighteen months. In the event of a change
in control, following which an executive's employment is terminated other than
for cause including, without limitation, the failure to renew an employment
contract within two years following such change in control (as defined in the
agreement), such executive will receive 2.99 times his annual compensation. Each
officer has also agreed not to compete with the Company for one year following
termination of his employment.
Pursuant to these agreements, Mr. Lee, Dr. Siciliano, Mr. Walters, and Mr.
Zappa currently receive a base salary of $276,000, $235,000, $151,000, and
$135,000, respectively. In connection with the Company's sale of certain assets
relating to its institutional wound care operations in July 1997, Dr. Reed
became an employee of the buyer of such assets.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by a standing
Compensation Committee composed of three non-employee directors. All decisions
by the Compensation Committee relating to the
10
<PAGE> 13
compensation of the Company's executive officers are reviewed by the full Board
of Directors. The Company's executive compensation program is designed to retain
and reward senior executives who will lead the Company and achieve business
objectives within the markets in which the Company competes.
Compensation Philosophy
The objectives of the Company's compensation programs are to align business
objectives with a combination of base pay, bonuses and stock options tailored
toward individual performance. In a competitive environment, it is important
that the Company be able to attract, retain and reward executive officers who
contribute to the long-term success of the Company. The Company's executive
compensation philosophy is based upon the following principles:
I. Competitive and Fair Compensation
With respect to fiscal 1997 compensation, the Company based
compensation decisions in part on a 1993 study. In 1993, the Company
hired the accounting firm of Coopers & Lybrand to review the
compensation structure for the Company's executive officers and to make
recommendations to the Compensation Committee with respect to base
salary, performance-based bonuses and stock-based compensation, with the
intent to compensate the Company's executive officers in the highest
quartile of comparable entities.
The Company seeks to achieve a balance of the compensation paid to a
particular individual with the contribution made by that individual in
the achievement of the Company's objectives.
II. Business Plan and Goals
The Company holds strategic planning sessions approximately four times
each year to review its strategic and business plan goals including such
factors as achievement of operating budgets, licensing, development of
alliances with third parties, introduction of new processes and
products, manufacturing efficiencies, raising of capital, potential
acquisitions and overall performance relative to its competitors. The
performance of each officer is evaluated by the Board with respect to
how the executive can best contribute to achieving the business plan and
goals.
III. Executive Compensation Program
Annual compensation for executive officers consists of the following
three fundamental elements:
- A base salary within an established competitive salary range that is
determined by individual contributions and sustained performance.
- An annual bonus structure tied to the achievement of corporate
financial performance measures as well as the achievement of
individual business-related objectives.
- A long-term incentive program afforded by stock options.
Prior to determining base salary, cash bonuses and stock options for
fiscal 1997, the Compensation Committee reviewed the extent to which each
executive officer had achieved certain business objectives and analyzed its
recommendations in light of companies at comparable stages of development
and similar capitalization. Each of these three elements of compensation is
discussed below.
Base Salary. Coopers & Lybrand provided the Compensation Committee
with a survey of salary levels of competitors in the biotechnology and
healthcare industries and those companies that have recently completed
initial public offerings. Based on this survey, the Company established a
base salary for each of the executive officers effective as of September
1993.
Bonuses. In 1997, the Compensation Committee determined that a bonus
pool should be established in an amount equal to one-third of the maximum
total available to executives under the 1996 Executive Incentive
Compensation Plan. The 1997 bonus arrangements provides for a cash pool to
be
11
<PAGE> 14
paid out on the basis of achievement of specified individual, financial and
strategic targets and objectives of the Company, including appreciation of
the Company's stock, profitability and revenue targets, research and
development activities, and new product introductions. Bonuses may be
earned through the achievement of a combination of these targets and
objectives. The bonuses are paid at the beginning of each fiscal year with
respect to the achievement of targets in the prior fiscal year.
Long-Term Incentive Compensation. The Company's long-term incentive
compensation program is implemented through the periodic grant of stock
options. The Company's stock option program promotes a long-term congruity
of interest between the Company's employees and its stockholders and
assists in the retention of executives. The number of shares to be granted
to each participant generally reflects the position of the executive within
the Company and his or her contributions to the Company's achievement of
the business plan and goals. Stock options are granted at the current
market price and generally vest over a three-year period to encourage key
employees to continue in the employ of the Company.
Benefits. The Company's executive officers are entitled to receive
medical benefits and life insurance benefits. They participate in the
Company's 401(k) Plan, to which the Company will make matching cash
contributions and the 1992 Employee Stock Purchase Plan, which allows
participants to purchase shares at a discount of approximately 15% from the
fair market value at the beginning or end of the applicable purchase
period. The above benefits are available to the Company's employees,
including executive officers.
Summary of Compensation of Chief Executive Officer. In fiscal 1997,
the Company's Chairman and Chief Executive Officer, Steven J. Lee, received
salary and bonus compensation of $330,408, including base salary, beginning
on April 1, 1996, at the annual rate of $235,872 and bonus compensation of
$90,000, the maximum bonus available under the 1997 plan. The Compensation
Committee has set Mr. Lee's total annual compensation including
compensation derived from the 1997 bonus plan and the grant of stock
options under the 1990 Plan at a level it believes to be competitive. Mr.
Lee's bonus compensation for fiscal 1997 reflected the achievement of a
combination of the Company's financial and strategic goals.
Compensation Committee
Daniel S. Bernstein, M.D.
Frank W. LoGerfo, M.D.
Marcia J. Hooper
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Ms. Hooper and Drs.
Bernstein and LoGerfo. No member of the Compensation Committee was at any time
during fiscal 1997, or formerly, an officer or employee of the Company or any
subsidiary of the Company, nor has any member of the Compensation Committee had
any relationship with the Company requiring disclosure under Item 404 of
Regulation S-K under the Securities Act of 1933, as amended.
COMPARATIVE STOCK PERFORMANCE
The comparative stock performance graph below compares the cumulative
stockholder return on the Common Stock of the Company for the period from March
31, 1992, and through the years ended March 31, 1993, 1994, 1995, 1996 and 1997
and through June 30, 1997 with the cumulative total return on (i) the American
Stock Exchange Composite Index (U.S. Companies) (the "AMEX Composite Index"),
(ii) a peer index determined by the Company used in previous reports (the "Old
Peer Group"), and (iii) a new peer group (the "New Peer Group") determined by
the Company to more accurately reflect the Company's shift to targeted medical
products and services focusing on diabetes supplies and consumer healthcare. The
graph assumes the investment of $100 in the Company's Common Stock, the AMEX
Composite Index, the Old
12
<PAGE> 15
Peer Group and the New Peer Group on March 31, 1992, and reinvestment of all
dividends. Measurement points are on March 31, 1992, 1993, 1994, 1995, 1996 and
1997, and June 30, 1997.
The Old Peer Group consists of Abiomed Inc., Biomet, Inc., Cardiopulmonics,
Inc., Datascope Corp., Electro-Catheter Corp., Gish Biomedical, Inc., Heart
Technology, Inc., Luther Medical Products, Inc., Cygnus Therapeutic Systems, and
Quest Medical, Inc. The following companies were formerly included in the
Company's peer index and were no longer publicly traded as of March 31, 1995:
Advanced Medical Products, Inc., Advanced Interventional Systems, Inc., Namic
U.S.A. Corp., and Pace Medical, Inc. Accordingly, data for these companies is
unavailable for inclusion in the March 31, 1995, 1996 and 1997 peer index on the
Stock Performance Graph.
The New Peer Group consists of Chattem, Inc., Curative Health Services,
Inc., Del Laboratories Inc., Health Management Systems, Inc., KV Pharmaceutical
Company, Suburban Ostomy Supply Co., Transworld Healthcare, Inc., Universal Self
Care, Inc., and Watson Pharmaceuticals Inc.
Effective March 30, 1995, the Company's Common Stock commenced trading on
the American Stock Exchange under the symbol "PM." The Company's Common Stock
had previously been traded on the Nasdaq Stock Market.
[STOCK PERFORMANCE GRAPH]
03/31 03/31 03/31 03/31 03/31 03/31 06/30
1992 1993 1994 1995 1996 1997 1997
AMEX Composite Index $100 $109 $115 $124 $152 $149 $165
Old Peer Group $100 $ 56 $ 51 $ 79 $ 79 $ 80 $ 90
New Peer Group $100 $ 70 $ 71 $119 $169 $140 $164
PolyMedica Industries $100 $ 86 $ 44 $ 61 $ 75 $ 62 $108
13
<PAGE> 16
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than ten percent of the registered
class of the Company's equity securities, to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and reports of changes
in beneficial ownership of Common Stock and other equity securities of the
Company.
Officers, directors and greater than ten percent shareholders are required
by SEC regulations to furnish the Company with copies of all Section 16(a)
reports they file.
Based on a review of its records, the Company believes that all directors,
executive officers and ten percent stockholders filed timely reports under
Section 16(a) of the Exchange Act in fiscal 1997, except that Mark A. Libratore,
President of Liberty Medical Supply, Inc., and Randy M. Sloan, Vice President of
Marketing and Group Executive, each filed an Initial Statement of Beneficial
Ownership on Form 3, which were due on September 9, 1996 and October 11, 1996,
respectively, on October 31, 1996. Daniel S. Bernstein, M.D., a current
director, filed an Annual Statement of Changes in Beneficial Ownership on Form
5, which was due on May 15, 1997, on May 29, 1997.
CERTAIN TRANSACTIONS
In January 1997, certain officers of the Company purchased in the aggregate
100,000 shares of the Company's Common Stock on the open market, with purchases
valued at an aggregate of $607,000, of which one nonexecutive officer purchased
5,000 shares valued at $30,351.
These purchases were funded by interest-free notes issued by the Company to
each officer. The terms of the notes provide for each executive to repay the
Company within five years from the date of the note with Company shares having a
market value equal to the original principal of the note. As required by the
Internal Revenue Code, an annual amount equal to the market rate of interest at
the time each note was issued is imputed to each officer. Total amounts loaned
to Mr. Lee, Dr. Siciliano, Mr. Walters, Mr. Zappa, Dr. Reed, Mr. Sloan, Mr.
Libratore and Christopher L. Ives, Ph.D. were $136,566, $109,253, $91,045,
$45,525, $30,351, $66,767, $66,767, and $30,351, respectively. In August 1997,
Drs. Reed and Ives tendered Company shares whose fair market value was equal to
their officer loans as payment in full for those obligations.
Boston Special Risks Insurance Agency, Inc, of which Mr. Soltys is
President and Owner, is the Company's agent for corporate insurance. In fiscal
year ended March 31, 1997, the Company paid approximately $497,000 in premiums
in connection with these insurance policies.
ITEM TWO
APPROVAL OF AMENDMENT TO ARTICLES OF ORGANIZATION
On July 11, 1997 the Board of Directors adopted, subject to stockholder
approval, an amendment to the Company's Articles of Organization to change the
name of the Company from "PolyMedica Industries, Inc." to "PolyMedica
Corporation." The Board of Directors believes that this change is appropriate as
a result of the spinoff of CardioTech International, Inc., the sale of certain
assets relating to the Company's institutional wound care operations and the
recent shift in the Company's business emphasis to medical products and services
focusing on diabetes supplies and consumer healthcare products.
BOARD RECOMMENDATION
The Board of Directors believes that the amendment to the Articles of
Organization is in the best interest of the Company and its stockholders and
therefore recommends that the stockholders vote FOR this proposal.
14
<PAGE> 17
ITEM THREE
APPROVAL OF AMENDMENT TO 1992 EMPLOYEE STOCK PURCHASE PLAN
On January 10, 1992, the Board of Directors adopted, and on January 21,
1992, the stockholders approved, the Company's 1992 Employee Stock Purchase Plan
(the "Plan") which covers 262,500 shares of the Company's Common Stock. In
addition, as of August 1, 1997, the Board of Directors adopted, subject to
stockholder approval, an amendment to the Plan extending the termination date of
the Plan from May 1, 1998 to May 1, 2000 ( the "Plan Amendment"). The Plan
provides for at least four semiannual offerings, which have been completed, as
well as for additional semiannual offerings (each, an "Offering"), established
at the Company's discretion, through the termination date of the Plan so long as
any shares remain available for purchase under the Plan. Prior to the
commencement date of each Offering, the Board of Directors shall determine the
number of shares available in such Offering; provided that not more than 62,500
shares shall be available in any Offering (plus shares available, but not
purchased during an earlier Offering).
During each Offering, the maximum number of shares which may be purchased
by a participating employee is determined on the first day of the offering
period pursuant to a formula under which 85% of the market value of a share of
Common Stock on the first day of the offering period is divided into an amount
equal to 11% of the employee's annualized base pay. An employee may elect to
have up to 10% deducted from his or her regular salary (as adjusted) for the
purchase of shares under the Plan. The price at which the employee may purchase
the stock is the lower of 85% of the composite closing price of the Common Stock
on the American Stock Exchange on the date that the Offering commences or on the
date that the Offering terminates.
All employees who are customarily employed for 20 or more hours per week
and more than five months in a calendar year are eligible to participate in the
Plan. The Plan is administered by the Compensation Committee of the Board of
Directors. In June 1992, the Board of Directors authorized the purchase of up to
250,000 shares of common stock on the open market for future issuance under the
Plan.
Federal Income Tax Consequences. The following is a summary of the United
States federal income tax consequences that generally will arise with respect to
participation in the Plan and with respect to the sale of Common Stock acquired
under the Plan. The Plan is intended to qualify as an "Employee Stock Purchase
Plan" within the meaning of Section 423 of the Code.
Tax Consequences to Participants. In general, a participant will not
recognize taxable income upon enrolling in the Plan or upon purchasing shares of
Common Stock at the end of an Offering. Instead, if a participant sells Common
Stock acquired under the Plan at a sale price that exceeds the price at which
the participant purchased the Common Stock, then the participant will recognize
taxable income. A portion of that taxable income will be ordinary income, and a
portion may be capital gain.
If the participant sells the Common Stock more than one year after
acquiring it and more than two years after the date on which the Offering
commenced (the "Grant Date"), then the participant will be taxed as follows. If
the sale price of the Common Stock is higher than the price at which the
participant purchased the Common Stock, then the participant will recognize
ordinary compensation income in an amount equal to the less of:
(i) the excess of the fair market value of the Common Stock on the
Grant Date over the price at which the participant purchased the Common
Stock; and
(ii) the excess of the sale price of the Common Stock over the price
at which the participant purchased the Common Stock.
Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
Common Stock over the sale price of the Common Stock.
15
<PAGE> 18
If the participant sells the Common Stock within one year after acquiring
it or within two years after the Grant Date (a "Disqualifying Disposition"),
then the participant will recognize ordinary compensation income in an amount
equal to the excess of the fair market value of the Common Stock on the date
that it was purchased over the price at which the participant purchased the
Common Stock. The participant will also recognize capital gain in an amount
equal to the excess of the sale price of the Common Stock over the fair market
value of the Common Stock on the date that it was purchased, or capital loss in
an amount equal to the excess of the fair market value of the Common Stock on
the date that it was purchased over the sale price of the Common Stock. This
capital gain or loss will be a long-term capital gain or loss if the participant
has held the Common Stock for more than one year prior to the date of the sale
and will be a short-term capital gain or loss if the participant has held the
Common Stock for a shorter period.
Tax Consequences to the Company. The offering of Common Stock under the
Plan will have no tax consequences to the Company. Moreover, in general, neither
the purchase nor the sale of Common Stock acquired under the Plan will have any
tax consequences to the Company except that the Company will be entitled to a
business-expense deduction with respect to any ordinary compensation income
recognized by a participant upon making a Disqualifying Disposition. Any such
deduction will be subject to the limitations of Section 162(m) of the Code.
Withholding. The amount that a participant elects to have deducted from
his or her base pay for the purchase of Common Stock under the Plan constitutes
taxable wages and is subject to withholding. Moreover, the Company will have a
withholding obligation with respect to ordinary compensation income recognized
by a participant upon making a Disqualifying Disposition. The Company will
require any affected participant to make arrangements to satisfy this
withholding obligation.
BOARD RECOMMENDATION
The Board of Directors of the Company believes that the Plan Amendment is
in the best interest of the Company and its stockholders and therefore
recommends that the stockholders vote FOR the approval of the Plan Amendment.
ITEM FOUR
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to ratification by the stockholders, the Board of Directors, on the
recommendation of its Audit Committee, has selected the firm of Coopers &
Lybrand as the Company's independent public accountants for the current year.
Coopers & Lybrand has served as the Company's independent public accountants
since 1990.
Representatives of Coopers & Lybrand are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
If the stockholders do not ratify the selection of Coopers & Lybrand as the
Company's independent public accountants, the selection of such accountants will
be reconsidered by the Board of Directors.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews and the Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. Brokers, custodians and
fiduciaries will be requested to forward proxy
16
<PAGE> 19
soliciting material to the owners of stock held in their names, and the Company
will reimburse them for their reasonable out-of-pocket expenses incurred in
connection with the distribution of proxy materials.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Woburn, Massachusetts not later than April 8, 1998, for inclusion in the
proxy statement for that meeting.
By Order of the Board of Directors,
/s/ ERIC G. WALTERS
ERIC G. WALTERS, Clerk
August 7, 1997
THE BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THIS MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
17
<PAGE> 20
Appendix 1
----------
POLYMEDICA INDUSTRIES, INC.
ANNUAL MEETING OF STOCKHOLDERS - SEPTEMBER 11, 1997
The undersigned, having received notice of the meeting and management's
Proxy Statement therefor, and revoking all prior proxies, hereby appoint(s)
Steven J. Lee, Arthur A. Siciliano and John K.P. Stone III, and each of them
(with full power of substitution), as proxies of the undersigned to attend the
Annual Meeting of Stockholders of PolyMedica Industries, Inc. (the "Company") to
be held on Thursday, September 11, 1997 and any adjourned sessions thereof, and
there to vote and act upon the following matters in respect of all shares of
Common Stock of the Company which the undersigned would be entitled to vote or
act upon, with all powers the undersigned would possess if personally present.
Attendance of the undersigned at the meeting or at any adjourned session
thereof will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate thereat the intention of the undersigned to vote said
shares in person. If the undersigned hold(s) any of the shares of the Company in
a fiduciary, custodial or joint capacity or capacities, this proxy is signed by
the undersigned in every such capacity as well as individually.
IN THEIR DISCRETION, THE NAMED PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY ADJOURNMENT
THEREOF.
1. To elect the following three individuals as Class III Directors of
the Company to serve for a three-year term ending at the 2000 Annual Meeting of
Stockholders: Steven J. Lee, Daniel S. Bernstein and Peter K. Hoffman
FOR [ ] WITHHOLD AUTHORITY [ ]
-----------------------------------------
-----------------------------------------
To withhold authority with respect to a
particular nominee, write his or her name
in the space provided above.
<PAGE> 21
2. To approve an amendment to the Company's Articles of Organization
for the purpose of changing the name of the Company from "PolyMedica Industries,
Inc." to "PolyMedica Corporation".
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To approve an amendment to the Company's 1992 Employee Stock
Purchase Plan (the "Plan"), extending the termination date of the Plan from May
1, 1998 to May 1, 2000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To ratify the selection of Coopers & Lybrand L.L.P. as the
Company's independent accountants for the fiscal year ended March 31, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY ELECTION TO OFFICE OR
ANY PROPOSAL SPECIFIED ABOVE, THIS PROXY WILL BE VOTED FOR SUCH ELECTION TO
OFFICE OR PROPOSAL.
This proxy is solicited on behalf of the Board of Directors of the Company.
-----------------------------------------
-----------------------------------------
Signature(s)
Dated:
----------------------------------
Please sign name(s) exactly as appearing hereon. When signing as attorney,
executor, administrator or other fiduciary, please give your full title as such.
Joint owners should each sign personally. If a corporation, sign in full
corporate name, by authorized officer. If a partnership, please sign in
partnership name, by authorized person.
<PAGE> 22
APPENDIX 2
----------
POLYMEDICA INDUSTRIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
(Adopted by the Board of Directors on January 10, 1992
Approved by the Stockholders on January 21, 1992)
I. PURPOSES.
The 1992 Employee Stock Purchase Plan of PolyMedica Industries, Inc. (the
"Plan") is intended to provide a method whereby employees of PolyMedica
Industries, Inc. and its subsidiary corporations (hereinafter collectively
referred to, unless the context otherwise requires, as "the Company") will have
an opportunity to acquire a proprietary interest in the Company through the
purchase of shares of the common stock of the Company. It is the intention of
the Company to have the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that Section
of the Code.
II. DEFINITIONS.
(a) "base pay" means regular straight-time earnings (as the same may be
adjusted from time to time) but excluding payments for overtime, shift
differentials, incentive compensation, sales commissions, bonuses and other
special payments.
(b) "employee" means any person who is customarily employed for 20 or more
hours per week and more than five months in a calendar year by the Company or by
a subsidiary corporation.
(c) "Offering Commencement Date" means the applicable date on which an
Offering under the Plan commences pursuant to Paragraph 4.
(d) "Offering Termination Date" means the applicable date on which an
Offering under the Plan terminates pursuant to Paragraph 4.
(e) "subsidiary corporation" means any present or future corporation which
(i) is a "subsidiary corporation" as that term is defined in Section 424 of the
Internal Revenue Code of 1986 and (ii) is designated as a participant in the
Plan by the Board of Directors or Committee described in Paragraph 13.
<PAGE> 23
III. ELIGIBILITY.
(a) Any employee on the Offering Commencement Date of Offering I described
in paragraph 4(a), and thereafter any employee who shall have completed six
months of service and shall be employed by the Company on the applicable
Offering Commencement Date, shall be eligible to participate in the Plan.
(b) Any provision of the Plan to the contrary notwithstanding, no employee
shall be granted an option to participate in the Plan:
(i) if, immediately after the grant, such employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5% or more of
the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company (for purposes of this Paragraph
this rules of Section 424(d) of the Code shall apply in determining stock
ownership of any employee); or
(ii) which permits his or her rights to purchase stock under all
employee stock purchase plans maintained by the Company and its
subsidiaries to accrue at a rate which exceeds $25,000 of the fair market
value of the stock (determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time.
IV. OFFERING DATES.
The Plan will be implemented by at least four offerings (referred to herein
collectively as "Offerings" and individually as an "Offering") of a maximum of
62,500 shares each (after adjustment to reflect the stock dividend declared on
January 23, 1992 but subject to further adjustment after the Effective Date of
the Plan as provided in Paragraphs 12(a) and 17) of the common stock of the
Company ("Common Stock"), as follows:
(a) Offering I shall commence upon the closing of the Company's initial
public offering, and terminate on October 31, 1992.
(b) Offering II shall commence on November 1, 1992, and terminate on April
30, 1993.
(c) Offering III shall commence on May 1, 1993, and terminate on October
31, 1993.
(d) Offering IV shall commence on November 1, 1993, and terminate on April
30, 1994.
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<PAGE> 24
The Company may in its discretion establish one or more additional consecutive
semi-annual Offerings (the first to commence on May 1, 1994) so long as any
shares remain available for purchase under the Plan. Participation in any one or
more Offerings under the Plan shall neither limit, nor require, participation in
any other Offering.
V. PARTICIPATION.
All eligible employees will become participants in an Offering on the
applicable Offering Commencement Date. Payroll deductions for a participant
shall commence on the applicable Offering Commencement Date of the Offering and
shall end on the Offering Termination Date of such Offering, unless sooner
terminated pursuant to Paragraph 10.
VI. PAYROLL DEDUCTIONS.
(a) Participants may elect to have amounts withheld from their base pay by
completing an authorization for a payroll deduction ("Authorization") on the
form provided by the Company and filing it with the Treasurer. At the time a
participant files his Authorization for a payroll deduction, the participant
shall elect to have deductions made from his or her pay on each payday during
the time he or she is a participant in an Offering at the rate of 0, 1, 2, 3, 4,
5, 6, 7, 8, 9 or 10% of his or her annualized base pay. If a participant has not
filed an Authorization for a previous Offering or for the applicable Offering at
least ten (10) days prior to the applicable Offering Commencement Date, he or
she shall be deemed to have filed an Authorization electing to withhold 0% of
his or her annualized base pay. Any Authorization filed by a participant for any
Offering shall automatically be considered as an Authorization for subsequent
Offerings, unless changed pursuant to paragraph 6(c).
(b) All payroll deductions made for a participant shall be credited to his
or her account maintained by the Company under the Plan. A participant may not
make any separate cash payment into such account. Any excess payroll deductions
in a participant's account will be carried forward into the next Offering.
(c) Except as provided in Paragraph 8(b) or 10, a participant may only make
changes to the rate of deductions from his or her annualized base pay, on not
more than one occasion during an Offering, by completing a new Authorization on
the form provided by the Company and filing it with the Treasurer as provided
herein. Such new Authorization shall be effective upon the commencement of the
first pay period subsequent to its filing. A participant may change his or her
Authorization only once during any Offering.
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<PAGE> 25
VII. GRANTING OF OPTION.
(a) For each of the Offerings, a participating employee shall be deemed to
have been granted an option (the "Option") on the applicable Offering
Commencement Date, to purchase a maximum number of shares of the Common Stock
equal to an amount determined as follows: 85% of the market value of a share of
the Company's Common Stock on the applicable Offering Commencement Date shall be
divided into an amount equal to 11% of the employee's estimated annualized base
pay as of such Offering Commencement Date. For all purposes of the Plan, the
market value of the Company's Common Stock shall be determined as provided in
clause (i) of subparagraph (b) below.
The annualized base pay of participating employees shall be determined as
follows: (i) in the case of a full-time employee normally paid on an hourly
rate, by multiplying his or her current hourly rate by 2080; (ii) in the case of
a part-time employee normally paid on an hourly rate, by multiplying his or her
normal hourly rate by the product of 52 times the number of hours in his or her
normal work week; (iii) in the case of an employee normally paid at a bi-weekly
rate, by multiplying his or her normal bi-weekly rate by 26; (iv) in the case of
a part-time employee normally paid at a weekly rate, by multiplying his or her
normal weekly rate by 52; and (v) in the case of an employee normally paid at a
monthly rate, by multiplying his or her normal monthly rate by 12.
(b) The purchase price of a share of Common Stock purchased with payroll
deductions made during each Offering (the "Option Exercise Price") shall be the
lower of:
(i) 85% of the last sale price of the Common Stock on the American
Stock Exchange, as reported in The Wall Street Journal, on the applicable
Offering Commencement Date (or on the next regular business date on which
shares of Common Stock shall be traded if no shares of Common Stock shall
have been traded on such Offering Commencement Date); or
(ii) 85% of the last sale price of Common Stock on the American Stock
Exchange, as reported in The Wall Street Journal, on the applicable
Offering Termination Date (or on the next regular business date on which
shares of Common Stock shall be traded if no shares of Common Stock shall
have been traded on such Offering Termination Date).
VIII. EXERCISE OF OPTION.
With respect to each Offering during the term of the Plan:
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<PAGE> 26
(a) Unless a participant gives written notice of withdrawal to the Company
as provided in Paragraphs 8(b) and 10, his or her Option will be deemed to have
been exercised automatically on the Offering Termination Date applicable to such
Offering, for the purchase of the number of full shares of Common Stock which
the accumulated payroll deductions in his or her account maintained by the
Company under the Plan at that time will purchase at the applicable Option
Exercise Price (but not in excess of the number of shares for which options have
been granted to the employee pursuant to Paragraph 7(a)). Any excess payroll
deductions in his or her account at the time will be carried forward in such
participant's account for application on the Offering Termination Date of the
next Offering.
(b) By written notice to the Treasurer of the Company at any time prior to
the Offering Termination Date applicable to any such Offering, a participant may
elect to withdraw all, but not less than all, of the accumulated payroll
deductions in his or her account at such time.
(c) Fractional shares will not be issued under the Plan and any accumulated
payroll deductions which would have been used to purchase fractional shares
shall be carried forward in such participant's account for application on the
Offering Termination Date of the next Offering. Any accumulate payroll
deductions which would have been used to purchase fractional shares in the final
Offering shall be returned to an employee promptly following the termination of
the final Offering.
IX. DELIVERY.
As promptly as practicable after the Offering Termination Date of each
Offering, the Company will deliver to each participant, as appropriate, the
certificate or certificates representing the shares of Common Stock purchased
upon the exercise of such participant's Option.
X. WITHDRAWAL.
(a) As indicated in Paragraph 8(b), a participant may withdraw payroll
deductions credited to his or her account with the Company under any Offering at
any time prior to the applicable Offering Termination Date by giving written
notice of withdrawal to the Treasurer. All of the participant's payroll
deductions credited to his or her account will be paid to the participant
promptly after receipt of such notice of withdrawal and no further payroll
deductions will be made from his or her pay during such Offering. The Company
may, at its option, treat any attempt by an employee to borrow on the security
of accumulated payroll deductions as an election, under Paragraph 8(b), to
withdraw such deductions.
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<PAGE> 27
(b) A participant's withdrawal from any Offering will not have any effect
upon his or her eligibility to participate in any succeeding Offering or in any
similar plan which may hereafter be adopted by the Company.
(c) Upon termination of the participant's employment for any reason,
including retirement but excluding death or disability while in the employ of
the Company, the payroll deductions credited to his or her account will be
returned to the participant, or, in the case of his or her death subsequent to
the termination of employment, to the person or persons entitled thereto under
Paragraph 14.
(d) Upon termination of the participant's employment because of disability
or death, the participant or his or her beneficiary (as defined in Paragraph 14)
shall have the right to elect, by written notice given to the Company's
Treasurer prior to the expiration of the period of 30 days commencing with the
date of the disability or death of the participant, either
(i) to withdraw all of the payroll deductions credited to the
participant's account under the Plan; or
(ii) to exercise the participant's Option on the Offering Termination
Date next following the date of the participant's disability or death for
the purchase of the number of full shares of Common Stock which the
accumulated payroll deductions in the participant's account at the date of
the participant's disability or death will purchase at the applicable
Option Exercise Price, and any excess in such account will be returned to
the participant or said beneficiary.
If no such written notice of election is received by the Treasurer, the
participant or beneficiary shall automatically be deemed to have elected to
withdraw the payroll deductions credited to the participant's account at the
date of the participant's disability or death and the same will be paid promptly
to the participant or said beneficiary.
XI. INTEREST.
No interest will be paid or allowed on any money paid into the Plan or
credited to the account of any participant employee.
XII. STOCK.
(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan during any Offering under the Plan shall be
62,500 shares, subject to adjustment upon changes in capitalization of the
Company as provided in Paragraph 17. If the total number of shares for which
Options are
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<PAGE> 28
exercised on any Offering Termination Date in accordance with Paragraph 8
exceeds 62,500, the Company shall make a pro rata allocation of the shares
available for delivery and distribution in as nearly a uniform manner as shall
be practicable and as it shall determine to be equitable, and the balance of
payroll deductions credited to the account of each participant under the Plan
shall be returned to him or her as promptly as possible. If less than 62,500
shares are purchased during an Offering, the amount not purchased may be carried
over to and made available during any subsequent Offering.
(b) The participant will have no interest in Common Stock covered by his or
her Option until such Option has been exercised.
(c) Common Stock to be delivered to a participant under the Plan will be
registered in the name of the participant, or, if the participant so directs, by
written notice to the Company prior to the Offering Termination Date applicable
thereto, in the names of the participant and one such other person as may be
designated by the participant, as joint tenants with rights of survivorship, to
the extent permitted by applicable law.
XIII. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee appointed by
the Board of Directors of the Company (the "Committee"). The officer of the
Company charged with day-to-day administration of the Plan shall, for matters
involving the Plan, be an ex-officio member of that Committee. The
interpretation and construction of any provision of the Plan and the adoption of
rules and regulations for administering the Plan shall be made by the Committee,
subject, however, at all times to the final approval of the Board of Directors
of the Company. Such rules may include, without limitation, restrictions on the
frequency of changes in withholding rates. Determinations made by the Committee
and approved by the Board of Directors of the Company with respect to any matter
or provision contained in the Plan shall be final, conclusive and binding upon
the Company and upon all participants, their heirs or legal representatives. Any
rule or regulation adopted by the Committee shall remain in full force and
effect unless and until altered, amended, or repealed by the Committee or the
Board of Directors of the Company.
XIV. DESIGNATION OF BENEFICIARY.
A participant may file a written designation of a beneficiary who is to
receive any shares of Common Stock and/or cash in the event of the death of the
participant prior to the delivery of such shares or cash to the participant.
Such designation of beneficiary may be changed by the participant at any time by
written notice to the Treasurer of the Company. Within 30 days after the
participant's death, the beneficiary may, as provided in Paragraph 10(d), elect
to exercise the participant's
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<PAGE> 29
Option when it becomes exercisable on the Offering Termination Date of the then
current Offering. Upon the death of a participant and upon receipt by the
Company of proof of the identity and existence at the participant's death of a
beneficiary validly designated by the participant under the Plan, and notice of
election of the beneficiary to exercise the participant's Option, the Company
shall deliver such stock and/or cash to such beneficiary. In the event of the
death of a participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such participant's death, the
Company shall deliver such cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company) the Company, in its discretion, may deliver
such cash to the spouse or to any one or more dependents of the participant as
the Company may determine. No beneficiary shall prior to the death of the
participant by whom he has been designated acquire any interest in the stock or
cash credited to the participant's account maintained by the Company under the
Plan.
XV. TRANSFERABILITY.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an Option or to receive stock under the
Plan may be assigned, transferred, pledged, or otherwise disposed of in any way
by the participant otherwise than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge, or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with Paragraph 8(b).
XVI. USE OF FUNDS.
All payroll deductions received or held by the Company under this Plan may
be used by the Company for any corporate purpose and the Company shall not be
obligated to segregate such payroll deductions.
XVII. EFFECT OF CHANGES OF COMMON STOCK.
In the event of any changes of outstanding shares of the Common Stock by
reason of stock dividends, subdivisions, combinations and exchanges of shares,
recapitalizations, mergers in which the Company is the surviving corporation,
consolidations, and the like, the aggregate number and class of shares available
under the Plan and the Option Exercise Price per share shall be appropriately
adjusted by the Board of Directors of the Company, whose determination shall be
conclusive. Any such adjustments may provide for the elimination of any
fractional shares which would otherwise become subject to any Options.
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<PAGE> 30
XVIII. AMENDMENT OR TERMINATION.
The Board of Directors of the Company may at any time terminate or amend
the Plan; PROVIDED, however, that this Plan shall terminate on May 1, 1998(1).
Except as hereinafter provided, no such termination may affect Options
previously granted, and no such amendment may make any change in Options
previously granted which would adversely affect the rights of any participant.
In addition, no amendment may be made to the Plan without prior approval of the
stockholders of the Company if such amendment would (a) materially increase the
benefits accruing to participants under the Plan, (b) materially increase the
number of shares which may be issued under the Plan, or (c) materially modify
the requirements as to eligibility for participation under the Plan.
XIX. NOTICES.
All notices or other communications by a participant to the Company under
or in connection with the Plan shall be deemed to have been duly given when
received by the Treasurer.
XX. MERGER OR CONSOLIDATION.
If the Company shall at any time merge into or consolidate with another
corporation and the Company is the surviving entity, the holder of each option
then outstanding will thereafter be entitled to receive at the next Offering
Termination Date upon the automatic exercise of such Option under Paragraph 8(a)
(unless previously withdrawn pursuant to Paragraph 10) for each share as to
which such Option shall be exercised the securities or property which a holder
of one share of the Common Stock was entitled to upon and at the time of such
merger or consolidation, and the Board of Directors of the Company shall take
such steps in connection with such merger or consolidation as the Board of
Directors shall deem necessary to assure that the provisions of Paragraph 17
shall thereafter be applicable, as nearly as reasonably may be, to such
securities or property. In the event of a merger or consolidation in which the
Company is not the surviving entity, or of a sale of assets in which the Company
is not the surviving entity, the Plan shall terminate, and all payroll
deductions credited to participants' accounts shall be returned to them, with
simple interest at the rate of 4% per annum.
_______________________
(1) If the Plan Amendment is approved, this date will be changed to May 1,
2000.
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<PAGE> 31
XXI. REGISTRATION AND QUALIFICATION OF THE PLAN UNDER APPLICABLE SECURITIES
LAWS.
No Option shall be granted under the Plan until such time as the Company
has qualified or registered the shares which are subject to the Options under
all applicable state and federal securities laws to the extent required by such
laws.
XXII. WITHDRAWAL BY OFFICERS.
Notwithstanding anything to the contrary in this Plan, any director or
officer (as defined for purposes of Section 16 of the Securities Exchange Act of
1934) who discontinues his participation in an Offering may not participate in
the subsequent Offering but may participate in any following Offerings under
this Plan.
XXIII. EFFECTIVE DATE OF PLAN.
This Plan shall become effective on January 24, 1992.
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