8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 25, 2006
 

POLYMEDICA CORPORATION

(Exact Name of Registrant as Specified in Charter)

Massachusetts	0-19842	04-3033368
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

701 Edgewater Road, Suite 360
Wakefield, Massachusetts	01880
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (781) 486-8111
 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Ex-10.1 Amendment to Employment Agreement

Item 1.01.      Entry into a Material Definitive Agreement

Amendment to Chief Executive Officer’s Employment Agreement

     On July 25, 2006, PolyMedica Corporation (the “Company”) amended the October 14, 2006 employment agreement of its Chief Executive Officer, Patrick T. Ryan. The amendment is attached to this report on Form 8-K as Exhibit 10.1, and is incorporated by reference into this report.

     Under the terms of his amended employment agreement, Mr. Ryan receives an annual base salary of $703,490 which is reviewed at least annually by the Compensation Committee. Mr. Ryan is also eligible to receive an annual bonus at the sole discretion of the Compensation Committee and is eligible to participate in all benefit programs the Company makes available to other employees and executives, including health insurance, life insurance, and stock based compensation.

     Mr. Ryan’s amended agreement has a four year term which automatically renews on a year to year basis thereafter unless the Company decides to terminate the agreement. The Company has the right to terminate the employment agreement with Mr. Ryan, at any time with or without cause, upon seven (7) days’ written notice. If at any time during the term of an employment agreement his employment is terminated without cause or he resigns for good reason, Mr. Ryan will receive a lump sum payment and he will be entitled to a continuation of all employee benefits during the 18-month period following employment termination. If the termination or resignation for good reason occurs in fiscal 2007, the lump sum payment will consist of any accrued compensation plus a payment equal to two times the sum of his highest base salary and 150% of his target 2007 cash bonus. If the termination or resignation for good reason occurs after March 31, 2007, the lump sum payment will consist of any accrued compensation plus a payment equal to two times the sum of his highest base salary and his average bonus during the prior three-year period.

     If Mr. Ryan’s employment is terminated by PolyMedica without cause or by Mr. Ryan for good reason within 24 months following a change in control, in addition to any other post-termination benefits which an officer is eligible to receive under any plan or program of PolyMedica, Mr. Ryan will receive a lump sum payment and a continuation of all employee benefits during the 18-month period following termination. If the event of termination or change of control occurs in fiscal 2007, the lump sum payment will consist of any accrued compensation plus a payment equal to 2.99 times the sum of his highest base salary and 150% of his target 2007 cash bonus. If the event of termination or change of control occurs after March 31, 2007, the lump sum payment will consist of any accrued compensation plus a payment equal to 2.99 times the sum of his highest base salary and his average bonus during the prior three-year period. If such a termination or resignation occurs within 24 months of a change in control at PolyMedica, the amount of severance benefits payable to Mr. Ryan will be reduced by an amount necessary to avoid triggering any penalty taxes under Section 280(g) of the Internal Revenue Code of 1996, as amended (the “Code”) if the severance benefits are less than 3.3 times the “base amount” under Section 280(g). If the severance benefits exceed 3.3 times such Section 280(g) “base amount” the Company will make an additional payment to Mr. Ryan equal to any additional taxes imposed by Section 4999 of the Code and any taxes owed on the additional payment.

     In addition, the amendment eliminates the Company’s obligation to grant Mr. Ryan on September 30, 2006, 2007 and 2008 options to purchase 100,000, 150,000, and 150,000 shares, respectively, of Company Common Stock at its then market price. In lieu of these options, on July 25, 2006, the Company granted Mr. Ryan 133,000 shares of restricted stock under the Company’s 2000 Stock Incentive Plan. The shares vest over a four year period beginning on that date when the Company’s common stock closes at a price of $50 per share. After its commencement, the vesting schedule provides that 25% of the shares will vest on the one year anniversary of such commencement and the remaining shares will vest in 12 equal quarterly installments thereafter.

PolyMedica Fiscal Year 2007 Bonus Plan

     On July 25, 2006, the Company’s Board of Directors (the “Board”), upon the recommendation of the Company’s Compensation Committee, approved the performance criteria constituting the Company’s Fiscal 2007 Bonus Plan (the “Plan”) for executive officers and other bonus-eligible employees.

     The Plan, which has not been formalized, contemplates the payment of a bonus equal to a portion of an employee’s or executive’s base salary upon completion of certain goals and objectives relative to the employee or executive, the overall financial performance of the Company and satisfaction of annual compliance standards relative to the Company’s status as a Medicare provider. The financial performance of the Company is measured by the Company’s earnings per share and overall growth.

     For senior executives of the Company, the Plan contemplates target bonus compensation ranging from 60% of base salary to 100% of base salary. In the event of exceptional Company financial performance, satisfaction of an executive’s personal goals and objectives and satisfaction of the Company’s annual compliance standards, an executive may earn as much as 130% to 200% of his or her target bonus.

     The Plan does not create a contractual right to any bonus payments. All bonus awards are subject to final approval by the Board, and the Board retains discretion to adjust bonus awards up or down based upon its business judgment.

Item 9.01.      Financial Statements and Exhibits.

Exhibit Number	Description
10.1	Amendment to Employment Agreement by and between the PolyMedica Corporation and Patrick T. Ryan dated July 25, 2006

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	POLYMEDICA CORPORATION
Date: July 31, 2006	By:	/s/ Devin J. Anderson
		Devin J. Anderson
		General Counsel and Secretary

EXHIBIT INDEX

Exhibit Number	Description
10.1	Amendment to Employment Agreement by and between the PolyMedica Corporation and Patrick T. Ryan dated July 25, 2006

EX-10.1

Exhibit 10.1
 

AMENDMENT TO EMPLOYMENT AGREEMENT
 

     This AMENDMENT TO EMPLOYMENT AGREEMENT (the “Amendment”) is made this 25th day of July, 2006 between Patrick T. Ryan (the “Executive”) and PolyMedica Corporation (the “Company”).

Recitals

     R-1. The Executive and the Company entered into an Employment Agreement dated October 14, 2005 which sets forth the terms of the Executive’s employment as CEO and President of the Company (the “Employment Agreement”); and

     R-2. The Company through its Compensation Committee and its Board of Directors has determined that it is in Company’s interest to modify certain terms of the Executive’s employment, and the Executive has agreed to those modifications.

     In consideration of the recitals set forth above, the mutual promises contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties, the Executive and the Company agree as follows:

     1. Base Salary. The parties acknowledge that pursuant to Section 3(a) of the Employment Agreement (providing for periodic increases in the Executive’s base salary), the Executive’s base salary was increased 3% (to $703,490.00 per annum).

     2. Equity Based Compensation. Section 3 (c) of the Employment Agreement is modified to render null and void and of no legal effect the Company’s obligation to grant the Executive options to purchase, 100,000, 150,000, and 150,000 shares of the Company’s stock on September 30, 2006, September 30, 2007 and September 30, 2008 respectively. In lieu thereof, the Executive shall be granted, effective upon execution of

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this Amendment, 133,000 shares of restricted Company stock (the “Shares”), the restrictions on which shall lapse (the lapsing of Shares being referred to as “vesting”) with the passage of time following the sustained achievement of a closing price of at least $50 per share for the Company’s common stock, as follows:

     (A) The Shares shall not become eligible for vesting until the first day following the first date following execution of this Amendment on which the shares of the Company’s common stock have a closing price per share of at least $50.00 on the NASDAQ National Market (the “Commencement Date”).

     (B) Following the Commencement Date, the restrictions shall lapse on a portion of the Shares in the percentages and on the dates shown below, provided that Executive is employed by the Company on each of the vesting dates:

Percentage of Shares as to
Which Restrictions Lapse	Date on which Restrictions Lapse
25%	First Anniversary of the Commencement Date (“First Vesting Date”)
6.25%	Every three (3) months following the First Vesting Date

     3. Calculation of the Executive’s Severance for Certain Terminations during Fiscal Year 2007. Solely in the event the Executive is terminated during the fiscal year of the Company ending March 31, 2007 (“Fiscal Year 2007”) either by the Company without Cause or by the Executive for Good Reason, any severance payment payable to the Executive pursuant to Section 7(b)(ii)(C) of the Employment Agreement shall be equal to two times the sum of (x) the Executive’s highest Base Salary during the period the Executive was employed by the Company and (y) 150% of Employee’s Target Bonus

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for Fiscal Year 2007, and any severance payment payable to the Executive pursuant to Section 7(b)(v)(C) of the Employment Agreement shall be equal to 2.99 times the sum of (x) and (y) as set forth in this paragraph 4 . After Fiscal Year 2007, severance, if any, shall be calculated as provided in the Employment Agreement.

     4. Lump Sum Payment of Severance. Notwithstanding Sections 7(b)(ii)(H) and 7(b)(v)(H) of the Employment Agreement (providing for the payment of severance in installments in certain circumstances) which paragraphs are null and void, any payments to which the Executive may become entitled under Sections 7 (b)(ii)(B), (C), D) and (E) or 7(b)(v)(B), (C), (D) and (E) shall be paid to the Executive in a lump sum on the earliest date required by applicable state law or within ten (10) business days after the Executive’s Termination Date, whichever period is shorter.

     5. Miscellaneous.

     A. Any capitalized term not expressly defined in this Amendment shall have the meaning ascribed to it in the Agreement.

     B. Except as expressly modified by this Amendment, all terms of the Executive’s Employment Agreement shall remain in full force and effect.

     IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer and the Executive has executed this Amendment to Employment Agreement as of the day and year first above written.

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PolyMedica Corporation
/s/ Thomas O. Pyle
Name:	Thomas O. Pyle
Title:	Chairman of the Board of Directors
Patrick T. Ryan
/s/ Patrick T. Ryan

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