SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Rochester Medical Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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 transactions 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:
16
<PAGE>
ROCHESTER MEDICAL CORPORATION
ONE ROCHESTER MEDICAL DRIVE
STEWARTVILLE, MINNESOTA 55976
TELEPHONE (507) 533-9600
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 2, 2000
------------------
The Annual Meeting of Shareholders of Rochester Medical Corporation (the
"Company") will be held Wednesday, February 2, 2000, at 3:30 o'clock p.m.
(Central Standard Time) in the Rochester Room, Minneapolis Hilton and Towers
Hotel, 1001 Marquette Avenue, Minneapolis, Minnesota 55403 to consider and take
action upon the following matters:
1. To elect seven directors to serve until the next Annual Meeting of
Shareholders.
2. To act upon any other business that may properly come before the
meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on December 10,
1999, as the record date for the determination of the shareholders entitled to
vote at the meeting or any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Anthony J. Conway
Anthony J. Conway
PRESIDENT AND SECRETARY
Dated: December 17, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, WHETHER OR NOT YOU
PLAN TO BE PERSONALLY PRESENT AT THE MEETING, PLEASE MARK, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU LATER
DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS EXERCISED.
<PAGE>
ROCHESTER MEDICAL CORPORATION
ONE ROCHESTER MEDICAL DRIVE
STEWARTVILLE, MINNESOTA 55976
TELEPHONE (507) 533-9600
------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 2, 2000
------------------
SOLICITATION AND REVOCABILITY OF PROXY
This Proxy Statement is furnished to the shareholders of Rochester Medical
Corporation (the "Company"), in connection with the solicitation by the
Company's Board of Directors of the enclosed proxy for use at the 2000 Annual
Meeting of Shareholders of the Company to be held on Wednesday, February 2,
2000, at 3:30 o'clock p.m. (Central Standard Time) in the Rochester Room,
Minneapolis Hilton and Towers Hotel, 1001 Marquette Avenue, Minneapolis,
Minnesota 55403, or at any adjournment(s) thereof (the "2000 Annual Meeting")
for the purposes set forth in the Notice of Annual Meeting of Shareholders. The
persons named as proxies in the enclosed form of proxy will vote the Common
Stock according to the instructions given therein or, if no instruction is
given, then according to their judgment. A person giving a proxy may revoke it
before it is exercised by delivering to the Secretary of the Company a written
notice terminating the proxy's authority or by duly executing a proxy bearing a
later date. A shareholder who attends the meeting need not revoke his or her
proxy and vote in person unless he or she wishes to do so.
The Company will pay expenses for solicitation of proxies. Proxies are
being solicited primarily by mail, but, in addition, directors, officers and
regular employees of the Company who will receive no extra compensation for
their services may solicit proxies personally, by telephone or by special
letter.
So far as the management of the Company is aware, only matters described in
this Proxy Statement will be acted upon at the meeting. If another matter
requiring a vote of shareholders properly comes before the meeting, the persons
named as proxies in the enclosed proxy form will vote on such matter according
to their judgment.
A copy of the Company's Annual Report on Form 10-K, including financial
statements, for the fiscal year ended September 30, 1999, is being furnished to
each shareholder with this Proxy Statement.
The principal executive offices of the Company are located at One Rochester
Medical Drive, Stewartville, Minnesota 55976. The approximate mailing date of
this Proxy Statement and the accompanying form of proxy is December 17, 1999.
1
<PAGE>
RECORD DATE AND VOTING OF SECURITIES
The Common Stock of the Company without par value is the only authorized
voting security of the Company. Only holders of the Company's Common Stock whose
names appear of record on the Company's books on December 10, 1999, are entitled
to receive notice of, and to vote at, the 2000 Annual Meeting. At the close of
business on December 10, 1999, a total of 5,349,500 shares of Common Stock were
outstanding, each entitled to one vote. Holders of Common Stock do not have
cumulative voting rights.
PROPOSAL 1: ELECTION OF DIRECTORS
NOMINEES
The Company's By-Laws provide that the Shareholders or the Board of
Directors may set the number of directors to constitute the Company's Board of
Directors. The Board of Directors has determined to set the number of directors
at seven. Each director is elected at the Annual Meeting of Shareholders to hold
office until the Annual Meeting of Shareholders next held after his or her
election.
It is intended that the persons named as proxies in the enclosed form of
proxy will vote the proxies received by them for the election as directors of
the nominees named in the table below except as specifically directed otherwise.
Each nominee has indicated a willingness to serve, but in case any nominee is
not a candidate at the meeting, for reasons not now known to the Company, the
proxies named in the enclosed form of proxy may vote for a substitute nominee in
their discretion. Information regarding these nominees is set forth in the table
below.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITION
- ------------------------- ----- --------- --------------------------------------------------
<S> <C> <C> <C>
Anthony J. Conway 55 1988 Chairman of the Board, Chief Executive
Officer, President, and Secretary
Brian J. Wierzbinski 41 1998 Director, Executive Vice President,
Chief Financial Officer and Treasurer
Philip J. Conway 43 1988 Director, Vice President, Production Technologies
Richard D. Fryar 52 1988 Director, Vice President, Research
and Development
Darnell L. Boehm 51 1995 Director
Peter R. Conway 45 1988 Director
Roger W. Schnobrich 69 1995 Director
</TABLE>
ANTHONY J. CONWAY, a founder of the Company, has served as Chairman of the
Board, Chief Executive Officer, President, and Secretary of the Company since
May 1988, and was its Treasurer until September 1997. In addition to his duties
as Chief Executive Officer, Mr. Anthony Conway actively contributes to the
Company's research and development and design activities. From 1979 to March
1988, he was President, Secretary and Treasurer of Arcon Corporation ("Arcon"),
a company that he co-founded in 1979 to develop, manufacture and sell
latex-based male external catheters and related medical devices. Prior to
founding Arcon, Mr. Anthony Conway worked for twelve years for International
Business Machines Corporation ("IBM") in various research and development
capacities. Mr. Anthony
2
<PAGE>
Conway is one of the named inventors on numerous patent applications that have
been assigned to the Company, of which to date 17 have resulted in issued United
States patents.
BRIAN J. WIERZBINSKI has served as the Company's Chief Financial Officer
since February 1996, as its Treasurer since September 1997, as a Director since
February 1998 and as its Executive Vice President since August 1999. Since
February 1996, Mr. Wierzbinski has had principal responsibility for management
of the Company's financial and administrative activities, and since August 1999,
Mr. Wierzbinski has also had primary functional responsibility for the Company's
sales and production activities. From 1986 until joining the Company in 1996,
Mr. Wierzbinski was employed in various financial and financial management
capacities by Ecolab, Inc., most recently as Asia Pacific Vice President,
planning and control. Prior to joining Ecolab, Mr. Wierzbinski was employed for
six years in various audit and audit management capacities by KPMG Peat Marwick.
Mr. Wierzbinski is a certified public accountant.
PHILIP J. CONWAY, a founder of the Company, has served as Vice President of
Production Technologies of the Company since August 1999 and as a Director of
the Company since May 1988. From 1988 to July 1999, Mr. Philip Conway served as
Vice President of Operations of the Company. Mr. Philip Conway is responsible
for plant design as well as new product and production processes, research,
design and development activities. From 1979 to March 1988, Mr. Philip Conway
served as Plant and Production Manager of Arcon, a company that he co-founded.
Prior to joining Arcon, Mr. Philip Conway was employed in a production
supervisory capacity by AFC Corp., a manufacturer and fabricator of fiberglass,
plastics and other composite materials. He is one of the named inventors on
numerous patent applications that have been assigned to the Company, of which to
date 17 have resulted in issued United States patents.
RICHARD D. FRYAR, a founder of the Company, has served as a Director and as
Vice President of Research and Development of the Company since May 1988. Mr.
Fryar is responsible for overseeing the Company's research and development and
regulatory affairs activities. From 1984 to March 1988, Mr. Fryar was employed
by Arcon, a company that he co-founded, in research and development capacities.
From 1969 to 1984, he was employed by IBM in various research and development
capacities. He is one of the named inventors on numerous patent applications
that have been assigned to the Company, of which to date 17 have resulted in
issued United States patents.
DARNELL L. BOEHM has served as a Director of the Company since October
1995. Since 1986, Mr. Boehm has served as a Director and the Chief Financial
Officer and Secretary of Aetrium, Inc., a manufacturer of electromechanical
equipment for handling and testing semiconductor devices. Since August 1999, Mr.
Boehm has served as a Director of ALPNET, Inc., a supplier of multilingual
information services including language translation, product localization and
other services. From October 1988 to March 1993, Mr. Boehm served as the Acting
President of Genesis Labs, Inc., a manufacturer of medical diagnostic products.
He is also the principal of Darnell L. Boehm & Associates, a management
consulting firm.
PETER R. CONWAY has served as a Director of the Company since May 1988. He
is a Director and the Chief Executive Officer of Halcon Corporation, a
manufacturer of quality custom office furniture of which he was a co-founder in
1978. From 1979 to 1985 Mr. Peter Conway served as a director of Arcon.
ROGER W. SCHNOBRICH has served as a director of the Company since October
1995. Mr. Schnobrich has been a partner with the law firm of Hinshaw &
Culbertson since 1997. Prior to joining Hinshaw & Culbertson, Mr. Schnobrich
was a partner in the law firm of Popham, Haik, Schnobrich and Kaufman Ltd. for
more than five years. Mr. Schnobrich serves as a director of Developed
Technology Resource Inc., a company that invests in business, technology and
infrastructure in the former Soviet Union.
3
<PAGE>
Messrs. Anthony J. Conway, Philip J. Conway and Peter R. Conway are
brothers.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
NOMINEES NAMED ABOVE AS DIRECTORS OF THE COMPANY FOR THE ENSUING YEAR.
BOARD MEETINGS
During the fiscal year ended September 30, 1999, the Board of Directors met
on 4 occasions and adopted resolutions by unanimous written consent on 8
additional occasions.
COMMITTEES
The Board of Directors has established a Compensation Committee and an
Audit Committee. The Audit Committee has oversight of the independent audit
process for the Company's internally prepared financial statements, and is
charged with reviewing any potential conflicts of interest. The Compensation
Committee has power and authority to recommend compensation for the Company's
executive officers. Messrs. Boehm and Schnobrich are members of each committee.
The Audit Committee met twice and the Compensation Committee met on one occasion
during the fiscal year ended September 30, 1999.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
No director of the Company attended fewer than 75% of all board and
committee meetings.
COMPENSATION OF DIRECTORS
No director who is also an employee of the Company receives any separate
compensation for services as a director. Non-employee directors currently
receive reimbursement of out-of-pocket expenses incurred with respect to their
duties as board or committee members.
Non-employee directors also each receive an automatic grant of options to
purchase 1,000 shares of the Company's common stock under the Company's 1991
Stock Option Plan (the "1991 Stock Option Plan"). Under the 1991 Stock Option
Plan, each director who is elected or reelected and who is not an employee of
the Company is entitled to an automatic grant of a non-qualified option for
1,000 shares of Common Stock ("Automatic Grant"). Each Automatic Grant has the
following terms: (1) the exercise price is equal to the fair market value (as
defined in the 1991 Stock Option Plan) of the Common Stock on the date of grant;
(2) the exercise price is payable upon exercise in cash or in Common Stock held
at least six months, (3) the term of the option is 10 years, (4) the option is
immediately exercisable and (5) the option expires if not exercised within
twelve months (i) after the optionee ceases to serve as a Director or (ii)
following the optionee's death.
Messrs. Darnell Boehm, Roger W. Schnobrich and Peter R. Conway are the only
non-employee Directors of the Company and therefore the only Directors eligible
to receive the compensation described above. Messrs. Boehm and Schnobrich were
initially elected to the board in October 1995, and each then received an
initial stock grant of 500 shares having a fair market value of $16.00 per
share. In February 1996, Messrs. Boehm, Peter Conway and Schnobrich each were
also granted an option to purchase 20,000 shares of the Company's Common Stock
at the exercise price of $13.00 per share. Each such option became fully vested
and exercisable on March 31, 1999. Each such option is exercisable at any time,
or from time to time, until the earliest of (i) twelve months after the director
ceases to be a director whether by resignation or failure to be re-elected as a
director of the Company, (ii) 12 months after his death or (iii) 5:00 o'clock
p.m. CST on September 30, 2006.
4
<PAGE>
EXECUTIVE OFFICERS
In addition to its executive officers who are also directors of the
Company, the Company employs the following executive officer:
NAME AGE POSITION
-------------------- ----- --------------------------
Dara Lynn Horner 41 Vice President, Marketing
DARA LYNN HORNER has served as Marketing Director for the Company's
FemSoft(R) Insert product line since November 1998, and as Vice President of
Marketing of the Company since November 1999. Ms. Horner has principal
responsibility for management of the Company's marketing activities. From 1990
until joining the Company in 1998, Ms. Horner was employed by Lake Region
Manufacturing, Inc., a medical device manufacturer, most recently as Marketing
Director. From 1980 to 1998, she was employed in various marketing and sales
capacities with, respectively, Medtronic, Inc., West Central Tribune, and Blue
Cross-Blue Shield of Minnesota.
The Company's executive officers are employed pursuant to annually renewing
employment agreements which continue until terminated by either the Company or
the employee. Under each respective agreement, employment continues unless
terminated by the employee or by the Company. Each such agreement contains
confidentiality and assignment of invention provisions benefiting the Company,
and the employment agreements with Messrs. Conways and Fryar also contain
non-competition provisions benefiting the Company.
CHANGE IN CONTROL AGREEMENTS
On December 1, 1998, the Compensation Committee of the Board authorized
change in control agreements with Philip J. Conway, Vice President of Production
Technologies, Richard D. Fryar, Vice President of Research and Development, and
Brian J. Wierzbinski, Executive Vice President, Chief Financial Officer and
Treasurer. The Compensation Committee and the Board believe that the
arrangements are appropriate to reinforce and encourage the continued attention
and dedication of members of the Company's management to their assigned duties
without distraction if a change in control of the Company is proposed. The
Compensation Committee and the Board believe that it is important, should the
Company or its shareholders receive a proposal for transfer of control of the
Company, that management be able to assess and advise the Board whether such
proposal would be in the best interests of the Company and its shareholders and
to take such other actions regarding such proposal as the Board might determine
to be appropriate, without being influenced by the uncertainties of management's
own personal situation.
The change in control agreements, which are substantially the same for each
individual, provide that each employee agrees to continue employment with the
Company following a Change in Control (as defined), unless such employment is
terminated because of death, disability or by the employee for Good Reason (as
defined). If a Change in Control occurs and the individual remains employed by
the Company for twelve months following such Change in Control, then the
individual will be entitled to receive a payment equal to 2.5 times such
individual's earned compensation (salary plus cash bonuses) during the 12 month
period. If an individual's employment is terminated within twelve months
following a Change in Control by the Company without Cause (as defined) or by
the individual for Good Reason, then the individual will be entitled to receive
a payment equal to 2.5 times such individual's earned compensation during the
one year period prior to the date of the Change in Control. In either case,
payments to an individual are subject to excess payment limitations, such that
the amounts payable under such individual's agreement shall be reduced until no
portion of the total payments by the Company to such individual as a result of
the change in control (including the value of accelerated
5
<PAGE>
vesting of stock options) will not be deductible solely as a result of Section
280G of the Internal Revenue Code of 1986, as amended.
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following
table sets forth, as of November 8, 1999, certain
information with respect to the beneficial ownership of the Common Stock of the
Company by (i) each person who, to the knowledge of the Company, owned
beneficially more than five percent of such stock, (ii) each director, (iii)
each executive officer named in the "Summary Compensation Table" below and (iv)
all directors and executive officers as a group. Unless otherwise noted, shares
are subject to the sole voting and investment power of the indicated person.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- --------------------------------------------------- ---------------------------- -----------------
<S> <C> <C>
Anthony J. Conway(2)(3)(4) 451,750 8.4%
Philip J. Conway(2)(3)(5) 254,200 4.7%
Peter R. Conway(3)(6) 205,200 3.8%
Richard D. Fryar(2)(7) 187,500 3.5%
Brian J. Wierzbinski(2)(8) 73,000 1.3%
Darnell L. Boehm(9) 41,350 *
Roger W. Schnobrich(10) 36,500 *
Randy C. Dennis(11) 20,000 *
Zesiger Capital Group LLC(12) 539,500 10.1%
Woodland Partners LLC(13) 346,200 6.5%
Vector Securities International, Inc.(14) 276,415 5.2%
All Officers and Directors
as a group (8 persons)(15) 1,269,500 22.8%
</TABLE>
- ------------------
*Less than 1%
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission, and includes general voting power and/or
investment power with respect to securities. Shares of Common Stock subject
to options or warrants currently exercisable or exercisable within 60 days
of November 8, 1999 are deemed to be outstanding for the purpose of
computing the percentage of the person holding such options or warrants, but
are not deemed outstanding for computing the percentage of any other person.
(2) The address of each executive officer of the Company is One Rochester
Medical Drive, Stewartville, Minnesota 55976.
(3) Messrs. Anthony J. Conway, Peter R. Conway and Philip J. Conway are
brothers.
(4) Includes 18,000 shares issuable upon exercise of currently exercisable
options at prices ranging from of $13.625 to $17.25 per share.
(5) Includes 13,000 shares issuable upon exercise of currently exercisable
options at prices ranging from $13.625 to $17.25 per share. Also includes
1,000 shares held in an IRA for the benefit of Mr. Philip J Conway, and
1,000 shares held in an IRA for the benefit of his wife, as to which he
disclaims beneficial ownership.
(6) Includes 27,000 shares issuable upon exercise of currently exercisable
options at prices ranging from $8.25 to $20.00 per share. Mr. Peter R.
Conway's address is 501 Old Territorial Road, Chatfield, Minnesota 55923.
(7) Includes 13,000 shares issuable upon exercise of currently exercisable
options at prices ranging from $13.625 to $17.25 per share.
(8) Includes 73,000 shares issuable upon exercise of currently exercisable
options at prices ranging from $13.625 to $17.25 per share.
6
<PAGE>
(9) Includes 24,000 shares issuable upon exercise of currently exercisable
options at prices ranging from $10.50 to $20.00 per share. Also includes
2,350 shares held for the benefit of a minor child. Mr. Boehm's address is
19330 Bardsley Place, Monument, Colorado 80132.
(10) Includes 24,000 issuable upon exercise of currently exercisable options at
prices ranging from $10.50 to $20.00 per share. Also includes 12,000 shares
held in an IRA for the benefit of Mr. Schnobrich. Mr. Schnobrich's address
is 3100 Piper Jaffray Tower, Minneapolis, Minnesota 55402.
(11) Includes 20,000 shares issuable upon exercise of currently exercisable
options at an exercise price of $13.625 per share. Mr. Dennis is no longer
an executive officer of the Company. Mr. Dennis departed the Company in
October 1999. Mr. Dennis' address is 5900 Weather Hills Road SW, Rochester,
MN 55902.
(12) This information is based on a Schedule 13G/A filed by Zesiger Capital
Group LLC ("Zesiger") with the SEC on March 10, 1999, reporting beneficial
ownership data as of March 2, 1999. Zesiger holds sole voting power with
respect to 283,500 shares of Common Stock and sole investment power with
respect to 539,500 shares. The Zesiger Schedule 13G/A further indicates
that Zesiger disclaims beneficial ownership of all of these securities.
Such securities are held in discretionary accounts which Zesiger manages.
Zesiger's address is 320 Park Ave., New York, NY 10222.
(13) This information is based on a Schedule 13G/A filed by Woodland Partners
LLC ("Woodland") with the SEC on February 12, 1999, reporting beneficial
ownership data as of February 8, 1999. Woodland holds sole voting power
with respect to 296,500 shares of Common Stock, shared voting power with
respect to 49,700 shares and sole investment power with respect to 346,200
shares. Woodland's address is 60 South Sixth Street, Suite 3750,
Minneapolis, MN 55402.
(14) This information is based on a Schedule 13G filed by Vector Securities
International, Inc. ("Vector") with the SEC on February 17, 1999, reporting
beneficial ownership data as of February 15, 1999. Vector holds shared
voting power and shared investment power with respect to 276,415 shares of
Common Stock. Vector's address is 1751 Lake Cook Road, Deerfield, IL 60015.
(15) Includes the total of 212,000 options exercisable at the times and for the
prices described in footnotes (4) through (11) inclusive.
7
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Executive compensation is determined by the Board of Directors based on the
recommendations of the Compensation Committee, which is composed entirely of
independent, outside directors. The following information sets forth the
compensation paid by the Company for services rendered during the three (3)
fiscal years ended September 30, 1999 for the Company's Chief Executive Officer
and for each of the other four (4) most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------
OTHER ANNUAL SECURITIES
FISCAL COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS/SAR'S(#) COMPENSATION
- ----------------------------- -------- ----------- -------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Anthony J. Conway 1999 $134,750 $ 40,132 12,000 --
Chief Executive Officer 1998 128,600 33,500 15,000 --
and President 1997 118,600 29,200 15,000 --
Brian Wierzbinski 1999 $124,385 $ 37,012 8,000 --
Executive Vice President, 1998 117,200 27,250 10,000 --
Chief Financial Officer 1997 106,800 26,300 12,000 --
and Treasurer
Philip J. Conway 1999 $108,837 $ 24,488 8,000 --
Vice President, 1998 103,600 24,000 10,000 --
Production Technologies 1997 95,200 23,400 12,000 --
Richard D. Fryar 1999 $108,837 $ 24,488 8,000 --
Vice President, 1998 103,600 24,000 10,000 --
Research and Development 1997 95,200 23,400 12,000 --
Randy C. Dennis(2) 1999 $127,284 $ 14,322 4,000 --
Vice President, 1998 26,442 43,125(3) 80,000 $ 55,000(4)
Sales and Marketing 1997 -- -- -- --
</TABLE>
- ------------------
(1) Annual bonus amounts are earned and accrued during the fiscal years
indicated, and paid subsequent to the end of the fiscal year.
(2) Mr. Dennis is no longer an executive officer of the Company. Mr. Dennis
joined the Company in July 1998 and departed the Company in October 1999.
(3) Includes annual and signing bonus.
(4) Includes relocation benefits.
8
<PAGE>
LONG TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
Stock options granted to the Company's executive officers during the fiscal
year ended September 30, 1999, are shown in the following table of Option
Grants.
OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
INDIVIDUAL GRANTEE ASSUMED ANNUAL
- ---------------------------------------------------------------------------------------------- RATES OF STOCK
PERCENT OF TOTAL PRICE APPRECIATION
OPTIONS OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(1)
GRANTED EMPLOYEES PRICE EXPIRATION ------------------------------
NAME (#) IN FISCAL YEAR ($/SH)(2) DATE(3) 5% 10%
- --------------------------- ------------ ------------------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Conway 12,000 (3) 6.9 % $ 13.625 9/30/08 $ 102,824 $ 260,577
Chief Executive Officer
and President
Brian J. Wierzbinski 8,000 (3) 4.6 % $ 13.625 9/30/08 $ 68,550 $ 173,718
Executive Vice President,
Chief Financial Officer
and Treasurer
Philip J. Conway 8,000 (3) 4.6 % $ 13.625 9/30/08 $ 68,550 $ 173,718
Vice President,
Production Technologies
Richard D. Fryar 8,000 (3) 4.6 % $ 13.625 9/30/08 $ 68,550 $ 173,718
Vice President,
Research and Development
Randy C. Dennis 4,000 (3) 2.3 % $ 13.625 9/30/08 (4) $ 2,725 $ 5,450
Vice President,
Marketing and Sales
</TABLE>
- ------------------
(1) Potential realizable value is based on an assumption that the market price
of the stock appreciates at the stated rate, compounded annually, from the
date of grant until the end of the ten year option term. These values are
calculated based on regulations promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
appreciation. There is no assurance that the actual stock price
appreciation over the ten year option term will be at the assumed 5% or 10%
levels, or at any other defined level.
(2) The exercise price of each option is equal to the market value of the
Common Stock on the date of grant. The exercise price is payable in cash,
or, at the discretion of the Stock Option Committee, in Common Stock of the
Company already owned by the optionee or by promissory note acceptable to
the Company.
(3) The option vests and becomes exercisable for the option shares in four
equal, successive annual installments, the first vesting on January 1,
2000. The option is subject to earlier termination in the event of
optionee's cessation of service with the Company.
(4) Mr. Dennis departed the Company in October 1999. Under the option's early
termination provisions, this option did not vest prior to Mr. Dennis's
departure and has therefore expired.
9
<PAGE>
OPTIONS EXERCISED DURING FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
(Fiscal year ended September 30, 1999)
The value of unexercised stock options held by the Company's executive
officers at fiscal year end is set forth in the following table. No stock
options were exercised by any of the Company's executive officers during the
past fiscal year.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES VALUE SEPTEMBER 30, 1999 SEPTEMBER 30, 1999(1)
ACQUIRED REALIZED ------------------------------- ---------------------------------
NAME AND PRINCIPAL POSITION ON EXERCISE $(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ------------- --------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Conway 0 0 11,250 30,750 (3) $0 $0
Chief Executive Officer
and President
Brian J. Wierzbinski 0 0 68,500 41,500 (5) $0 $0
Executive Vice President,
Chief Financial Officer
and Treasurer
Philip J. Conway 0 0 8,500 21,500 (4) $0 $0
Vice President,
Production Technologies
Richard D. Fryar 0 0 8,500 21,500 (4) $0 $0
Vice President,
Research and Development
Randy C. Dennis(7) 0 0 20,000 64,000 (6) $0 $0
Vice President,
Marketing and Sales
</TABLE>
- ------------------
(1) An in-the-money option is an option which has an exercise price for the
Common Stock which is lower than the fair market value of the Common Stock
on a specified date. The fair market value of the Company's Common Stock at
September 30, 1999 was $9.625 per share.
(2) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise minus the exercise price and does not
necessarily indicate that the optionee sold such stock.
(3) 15,000 granted February 14, 1997, 15,000 granted February 4, 1998, and
12,000 granted December 17, 1998 under the Company's 1991 Stock Option
Plan; exercisable at $17.25 per share, $15.375 per share and $13.625 per
share, respectively.
(4) 12,000 granted February 14, 1997, 10,000 granted February 4, 1998, and
8,000 granted December 17, 1998 under the Company's 1991 Stock Option Plan;
exercisable at $17.25 per share, $15.375 per share and $13.625 per share,
respectively.
(5) 80,000 granted February 1, 1996, 12,000 granted February 14, 1997, 10,000
granted February 4, 1998, and 8,000 granted December 17, 1998 under the
Company's 1991 Stock Option Plan; exercisable at $14.375 per share, $17.25
per share, 15.375 per share and $13.625 per share, respectively.
(6) 80,000 granted July 6, 1998 and 4,000 granted December 17, 1998 under the
Company's 1991 Stock Option Plan; exercisable at $13.625 per share and
$13.625 per share, respectively.
(7) Mr. Dennis departed the Company in October 1999. Under the terms of his
option agreements, options to purchase 20,000 shares expire on January 7,
2000, and the remaining 64,000 shares were unvested options, and therefore
have expired per the terms of the option agreements.
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") was established in
1995 and is composed entirely of independent, outside members of the Company's
Board of Directors. The Committee reviews and approves each of the elements of
the executive compensation program and assesses the effectiveness and
competitiveness of the overall program.
Rochester Medical's executive compensation program is designed to
accomplish several goals, including:
o To attract, retain, and motivate employees of outstanding ability.
o To link changes in employee compensation to individual and corporate
performance.
o To align the interests of management with the interests of the
Company's shareholders.
KEY PROVISIONS OF THE EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation program consists of three components:
base salary, annual incentive bonus, and long-term incentives in the form of
stock options. The program includes a strong link between pay and performance by
emphasizing variable components of the program through annual incentive bonus
and stock options. The annual incentive bonus is an integral part of the
program, providing a means for total executive compensation to adjust from the
low to middle range of compensation for comparable-sized manufacturing companies
as appropriate based on the individual's and the Company's performance. In the
past, the Company has typically paid a portion of the available annual incentive
bonus to each executive, which has generally resulted in total executive
compensation falling within the midrange of compensation at comparable
companies.
BASE SALARY
The Committee determines base salaries for executive officers on the basis
of a number of factors, including an assessment of competitive compensation
levels for similar-size publicly held manufacturing companies performed by an
independent consulting firm, the Company's financial condition, any changes in
job responsibilities, and the performance of each executive. Executive officer
base salaries generally are set to correspond to the midrange of base salaries
at comparable companies.
ANNUAL INCENTIVE BONUS
Executive officers are eligible to receive annual incentive compensation
equivalent to a specified percentage of their salaries under the Company's bonus
plan. At the beginning of each fiscal year, the Company establishes bonus payout
targets that are designed to bring the level of total annual cash compensation
(base salary plus annual incentive bonus) within the competitive ranges for
comparable positions at similar-size publicly held manufacturing companies. The
total potential bonus for each executive is based upon performance objectives as
appropriate for that executive's area of responsibility. These objectives
include financial performance of the Company and individual performance
objectives. The results from the respective areas of responsibility for each
executive are evaluated against financial and individual performance objectives,
to determine a payout level as a percentage of the annual incentive target. In
recent years, incentive payouts have generally averaged 15-25% of the
executives' base salary.
LONG-TERM INCENTIVE (STOCK OPTIONS)
Generally, the Company awards stock options to executive officers on an
annual basis. Each grant is designed to align the interests of executive officer
with those of the shareholders and provide each
11
<PAGE>
individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business. Awards to specific
employees, including the Chief Executive Officer, are made on the basis of each
employee's job responsibilities and recommendations of the executive officers of
the Company concerning the individual's contributions (both historical and
potential) to the success of the Company, without regard to prior awards of
stock option grants.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Conway is a founder of the Company and has served as its Chief
Executive Officer and Chairman of the Board since its incorporation in 1988. Mr.
Conway's base salary and annual incentive bonus are set by the Committee using
the same policies and criteria used for other executive officers. In setting Mr.
Conway's salary for fiscal 1998, the Committee considered competitive
information for similar sized manufacturing companies provided by an independent
compensation consultant and the Company's financial performance. Mr. Conway is
currently paid a base salary and bonus, which has been set by the Committee in
the low to midrange of comparable competitive compensation data. As a result of
the comparison of the Company's performance with its targeted performance in
fiscal 1999, Mr. Conway received a bonus equal to 85% of target bonus level.
TAX LIMITATION
As a result of federal tax legislation enacted in 1993, a publicly-held
company such as the Company will not be allowed a federal income tax deduction
for compensation paid to certain executive officers, to the extent that
compensation exceeds $1 million per officer in any year. It is not expected that
the compensation to be paid to the Company's executive officers for the 1999
fiscal year will exceed the $1 million limit per officer. Compensation which
qualifies as performance-based compensation will not have to be taken into
account for purposes of this limitation. The Company believes the total
compensation granted to its executives, including options, is less than the $1
million limit per officer and that, in any case, stock options granted to its
executives qualify for the performance-based exception to the deduction limit.
However, there can be no assurance that the options will so qualify. In
addition, future amendments to the Company's Option Plan may be necessary to
preserve such qualification in the future.
The cash compensation paid to the Company's executive officers for the
fiscal 1998 year did not exceed the $1 million dollar limit per officer, nor is
the cash compensation to be paid to the Company's executive officers for the
2000 fiscal year expected to reach that level. Because it is very unlikely that
the cash compensation payable to any of the Company's executive officers in the
foreseeable future will approach the $1 million dollar limitation, the
Compensation Committee has decided not to take action at this time to limit or
restructure the elements of cash compensation payable to the Company's executive
officers. The Compensation Committee will reconsider this decision should the
individual compensation of any executive officer ever approach the $1 million
dollar level.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
-- Roger W. Schnobrich
-- Darnell L. Boehm
12
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage changes in the
cumulative total shareholder return on the Company's Common Stock with the
cumulative total return on the Nasdaq Market Value Index and the Media General
Financial Services Medical Instruments and Supplies Index ("MG Index") during
the five fiscal years ended September 30, 1999. The comparison assumes $100 was
invested on September 30, 1994 in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends.
COMPARISON OF 5-YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
------------------------------------------------------------------------------------
COMPANY/INDEX/MARKET 9/30/1994 9/29/1995 9/30/1996 9/30/1997 9/30/1998 9/30/1999
<S> <C> <C> <C> <C> <C> <C>
Rochester Med 100.00 172.22 184.72 186.11 113.89 106.94
MG Index 100.00 144.51 180.43 203.43 212.43 242.60
NASDAQ Market Index 100.00 121.41 141.75 192.67 200.23 323.92
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this Proxy Statement,
in whole or in part, the preceding Compensation Committee Report on Executive
Compensation and the preceding Company Stock Performance Graph are not to be
incorporated by reference into any such filings; nor are such Report or Graph to
be incorporated by reference into any future filings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former officer or employee of
the Company or any of its subsidiaries.
13
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were properly met.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting must be received no
later than October 5, 2000, in order that they may be included in the proxy
statement and form of proxy relating to that meeting.
ADDITIONAL INFORMATION
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1999 as filed with the Securities and Exchange Commission is
furnished with this Proxy Statement. Copies of that Report are also available
without charge upon written request to Rochester Medical Corporation, One
Rochester Medical Drive, Stewartville, MN 55976, to the attention of Brian J.
Wierzbinski, Chief Financial Officer.
Please mark, sign, date and return promptly the enclosed proxy provided.
The signing of a proxy will not prevent you from attending the meeting in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Anthony. J Conway
Anthony. J Conway
PRESIDENT
Dated: December 17, 1999
14
<PAGE>
ROCHESTER MEDICAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, FEBRUARY 2, 2000
3:30 P.M. CST
ROCHESTER ROOM
MINNEAPOLIS HILTON AND TOWERS HOTEL
1001 MARQUETTE AVENUE
MINNEAPOLIS, MN 55403
ROCHESTER MEDICAL CORPORATION
ONE ROCHESTER MEDICAL DRIVE
STEWARTVILLE, MN 55976 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF THE COMPANY
The undersigned, having duly received the Notice of Annual Meeting and
Proxy Statement dated December 17, 1999, hereby appoints Anthony J. Conway and
Philip J. Conway as Proxies (each with the power to act alone and with the power
of substitution and revocation) to represent the undersigned and to vote, as
designated below, all Common Shares of Rochester Medical Corporation held of
record by the undersigned on December 10, 1999, at the meeting of shareholders
to be held Wednesday, February 2, 2000, in the Rochester Room, Minneapolis
Hilton and Towers Hotel, 1001 Marquette Avenue, Minneapolis, Minnesota 55403, at
3:30 o'clock p.m. CST, and any adjournment(s) thereof.
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
[ARROW] PLEASE DETACH HERE [ARROW]
<TABLE>
<S> <C> <C> <C> <C>
1. Election of 01 Darnell L. Boehm 05 Richard D. Fryar [ ] Vote FOR all nominees [ ] Vote WITHHELD
Directors: 02 Anthony J. Conway 06 Roger W. Schnobrich (except as marked from all nominees
03 Peter R. Conway 07 Brian J. Wierzbinski to the contrary)
04 Philip J. Conway
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, ----------------------------------------------------
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
----------------------------------------------------
2. In their discretion, the Proxies are authorized to vote upon other business of which the Board of Directors is presently
unaware and which may properly come before the meeting, and for the election of any person as a member of the Board of
Directors if a nominee named in the accompanying Proxy Statement is unable to serve or for good cause will not serve. In their
discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
GIVEN, THIS PROXY SHALL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Date
-----------------------------------------------
Address Change? Mark Box [ ] Indicate changes below:
----------------------------------------------------
----------------------------------------------------
Signature(s) in Box
PLEASE SIGN exactly as name appears at left. When
shares are held by joint tenants, both should sign.
If signing as attorney, executor, administrator or
guardian, please give full title as such. If a
corporation, please sign in full corporate name by
president or other authorized officer. If a
partnership, please sign in partnership name by an
authorized person.
</TABLE>
