<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))
Proteon, Inc.
(Name of Registrant as Specified In Its Charter)
Robert J. Connaughton, Jr.
(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
[PROTEON LOGO]
April 11, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
of Proteon, Inc. at 10:00 a.m. on Wednesday, May 21, 1997, at The First National
Bank of Boston, Blue Hills Office Park, 150 Royall Street, Canton,
Massachusetts.
At the Annual Meeting five members will be elected to the Board of
Directors. The Board of Directors recommends the election of the five nominees
named in the enclosed Proxy Statement.
Whether you plan to attend or not it is important that you promptly sign,
date and return the enclosed proxy card in accordance with the instructions
pertaining to the card. This will ensure your proper representation at the
Meeting.
Sincerely,
/s/ Daniel J. Capone, Jr.
DANIEL J. CAPONE, JR.
President and Chief
Executive Officer
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR PROXY PROMPTLY.
<PAGE> 3
PROTEON, INC.
9 TECHNOLOGY DRIVE
WESTBOROUGH, MA 01581
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 21, 1997
To Shareholders of Proteon, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of Proteon,
Inc. will be held at The First National Bank of Boston, Blue Hills Office Park,
150 Royall Street, Canton, Massachusetts, on Wednesday, May 21, 1997, at 10:00
a.m. local time for the following purposes:
1. To elect five Directors to hold office until the next Annual Meeting of
Shareholders and until their successors are chosen and qualified.
2. To transact such other business as may properly come before the
Meeting.
Only Shareholders of record at the close of business on March 28, 1997,
will receive notice of the Meeting and be entitled to vote at the Meeting or any
adjournment(s) thereof. The transfer books will not be closed.
You are cordially invited to attend the Meeting in person. Whether you plan
to attend the Meeting or not, please fill out, sign and date the enclosed Proxy
and return it in the envelope enclosed for this purpose. The Proxy is revocable
by the person giving it at any time prior to the exercise thereof by written
notice received by the Company, by delivery of a duly executed Proxy bearing a
later date, or by attending the Meeting and voting in person.
By Order of the Board of Directors,
/s/ Robert J. Connaughton, Jr.
ROBERT J. CONNAUGHTON, JR.
Clerk
<PAGE> 4
PROTEON, INC.
9 TECHNOLOGY DRIVE
WESTBOROUGH, MA 01581
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 21, 1997
PROXY STATEMENT
GENERAL INFORMATION
Date, Time and Place. This Proxy Statement is furnished in connection with
the solicitation by and on behalf of the Board of Directors of Proteon, Inc.
("Proteon" or the "Company") of Proxies for use at the Annual Meeting of
Shareholders of the Company to be held at The First National Bank of Boston,
Blue Hills Office Park, 150 Royall Street, Canton, Massachusetts, on Wednesday,
May 21, 1997, at 10:00 a.m. local time and at any adjournment(s) thereof and,
together with the enclosed form of Proxy and Annual Report to Shareholders for
the fiscal year ended December 31, 1996, is being mailed to the Shareholders on
or about April 11, 1997. The Annual Report does not constitute any part of this
Proxy Statement.
Revocability of Proxies. Any Proxy given pursuant to this solicitation may
be revoked by the person giving it at any time before its exercise by delivering
to the Company a written notice of revocation or a duly executed Proxy bearing a
later date, or by attending the Meeting and voting in person.
Cost of Solicitation. The entire cost of this solicitation will be paid by
the Company. In addition, the Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Solicitation of
proxies by mail may be supplemented by telephone, facsimile and personal
solicitation by directors, officers or employees of the Company. No additional
compensation will be paid for such solicitation.
Quorum and Voting. Only Shareholders of record of the Company's 15,276,296
shares of Common Stock, $.01 par value (the "Common Stock"), outstanding as of
the close of business on March 28, 1997 will be entitled to vote. Each share of
Common Stock is entitled to one vote at the Meeting or any adjournment(s)
thereof. The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Meeting.
Market Value of Common Stock. On February 14, 1997, the closing market
price of the Company's Common Stock was $2.375 as reported by the Nasdaq Stock
Market.
<PAGE> 5
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of February 14, 1997, (on which date 15,428,046
shares were outstanding) by (a) each person or entity known by the Company to be
the beneficial owner of more than five percent of the Common Stock, (b) each
current Director and nominee for Director of the Company, (c) each Named
Executive Officer (the Named Executive Officers can be found in the Summary
Compensation Table below), and (d) all current Executive Officers and Directors
of the Company as a group. Except as otherwise indicated, each shareholder has
sole voting and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED BENEFICIALLY OWNED
- ----------------------------------------------------- ------------------ --------------------
<S> <C> <C>
Howard C. Salwen(2).................................. 1,019,564 6.6%
130 Dudley Road
Newton, MA 02159
L.J. Sevin(3)........................................ 174,796 1.1%
Dr. David Clark(4)................................... 45,000 *
Julius L. Marcus(5).................................. 7,500 *
Daniel J. Capone, Jr.(6)............................. 318,569 2.1%
Steven J. Bielagus(7)................................ 49,625 *
William T. Greer(8).................................. 8,750 *
Robert J. Connaughton, Jr.(9)........................ 4,998 *
Joseph A. DiGiantommaso(10).......................... -- *
Jeffrey B. Low(11)................................... -- *
Robert M. Glorioso(12)............................... -- *
William R. Johnson(12)............................... -- *
All current Executive Officers and Directors as a
group (8 persons)(13).............................. 1,628,802 10.6%
</TABLE>
- ---------------
* Less than 1%
(1) Addresses are given only for beneficial owners of more than five percent of
the Common Stock. The stock ownership information has been furnished to the
Company by the named persons. Share ownership includes shares of Common
Stock issuable upon exercise of certain outstanding options as described in
the footnotes below.
(2) Includes 125,164 shares owned by trusts of which Mr. Salwen is a trustee
for the benefit of his adult children, David J. Salwen and Andrea G.
Salwen. Mr. Salwen disclaims beneficial ownership of the 125,164 shares
held in trust, as to which he has no investment power. Mr. Salwen is
Chairman of the Company's Board of Directors.
(3) Mr. Sevin is not standing for re-election as a Director at the Meeting.
(4) Includes 20,000 shares which Dr. Clark, a Director of the Company, may
acquire upon the exercise of options within sixty days after February 14,
1997.
(5) Includes 5,000 shares which Mr. Marcus, a Director of the Company, may
acquire upon the exercise of options within sixty days after February 14,
1997. Mr. Marcus is not standing for re-election as a Director at the
Meeting.
2
<PAGE> 6
(6) Includes 294,250 shares which Mr. Capone may acquire upon the exercise of
options within sixty days after February 14, 1997. Mr. Capone is a
Director, President and Chief Executive Officer of the Company.
(7) Includes 48,625 shares which Mr. Bielagus, Vice President of Engineering of
the Company, may acquire upon the exercise of options within sixty days
after February 14, 1997.
(8) Consists of 8,750 shares which Mr. Greer, Vice President of Worldwide Sales
of the Company, may acquire upon the exercise of options within sixty days
after February 14, 1997.
(9) Includes 3,750 shares which Mr. Connaughton, Vice President of Finance,
Chief Financial Officer, General Counsel, Treasurer and Clerk of the
Company, may acquire upon the exercise of options within sixty days after
February 14, 1997.
(10) Mr. DiGiantommaso is the Company's former Vice President of Finance, Chief
Financial Officer, Treasurer and Clerk of the Company.
(11) Mr. Low is the Company's former Vice President of Marketing of the Company.
(12) Messrs. Glorioso and Johnson are new nominees for election as Directors of
the Company.
(13) Includes an aggregate of 380,375 shares which may be acquired upon the
exercise of options within 60 days after February 14, 1997.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS' COMPENSATION
The Company paid Dr. Clark and Mr. Marcus, and will pay any future
non-employee Directors, including Messrs. Johnson and Glorioso, an annual fee of
$10,000 for their services as Directors of the Company. In addition, Dr. Clark,
Mr. Marcus and Mr. Salwen received, and any future non-employee Directors will
receive, $1,000 for each Board Meeting attended and $1,000 for each Committee
Meeting attended on a day other than when the Board of Directors meets. The
Company reimburses Directors who request it for the expense of attending
meetings, including airfare, hotel and auto/travel mileage.
Pursuant to the 1991 Restated Stock Option Plan, all non-employee Directors
who first become Directors on or after May 14, 1992, are automatically granted
an option to purchase 5,000 shares of the Company's Common Stock at the then
calculated fair market value. The options become exercisable over four years at
the rate of twenty-five percent per year and terminate ten years after the grant
date, so long as the individual remains a Director. The options terminate ninety
days after the individual ceases to be a Director, unless the Directorship is
terminated as a result of conviction of a felony or declaration of unsound mind
by a court, in which event the options terminate immediately. In the event of
the death or disability of the Director, the options which had become
exercisable through the last option vesting date, and an additional number,
prorated up to the date of death or disability, may be exercised by the Director
or the Director's survivors, as the case may be, in accordance with their
original terms up to one year after the death or disability of the Director.
In addition to his responsibility as Director, Mr. Salwen is employed as a
consultant by the Company. Mr. Salwen is currently performing management
consulting services for the Company and is remunerated at the rate of $1,200 per
day. Mr. Salwen's total remuneration for Director's fees, consulting fees and
travel reimbursement during fiscal year 1996 was $19,336. Dr. Clark's total
remuneration for Director's fees and travel reimbursement during fiscal year
1996 was $20,000. Mr. Marcus' total remuneration for Director's fees and travel
reimbursement during fiscal year 1996 was $20,149.
3
<PAGE> 7
SUMMARY COMPENSATION
EXECUTIVE COMPENSATION
The following table shows compensation paid by the Company for services
rendered during fiscal years 1996, 1995 and 1994 to the Chief Executive Officer;
Vice President, Worldwide Sales; Vice President, Engineering; Vice President,
Finance, Chief Financial Officer, General Counsel, Treasurer and Clerk; Former
Vice President, Finance, Chief Financial Officer, Treasurer and Clerk; and
Former Vice President, Marketing (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
--------------------------------- OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($)(A) BONUS($)(A) (#) ($)(B)
- --------------------------------------- ---- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Daniel J. Capone, Jr.(C)............... 1996 257,043 39,719 120,500 3,000
CEO and President 1995 237,058 75,556 50,000 3,000
1994 222,656 102,500 300,000 33,838
William T. Greer(C).................... 1996 144,570 8,456 35,000 46,369
Vice President, Worldwide Sales
Steven J. Bielagus(C).................. 1996 154,974 6,244 65,000 1,900
Vice President, Engineering 1995 140,673 31,405 25,000 2,189
1994 113,846 45,000 45,000 1,895
Robert J. Connaughton, Jr.(C).......... 1996 112,128 5,840 40,000 1,863
Vice President, Finance,
Chief Financial Officer, General
Counsel, Treasurer and Clerk
Joseph A. DiGiantommaso(C)(D).......... 1996 114,615 18,564 68,000 2,899
Former Vice President, Finance, 1995 129,809 28,269 25,000 3,000
Chief Financial Officer, Treasurer 1994 108,785 57,500 45,000 1,977
and Clerk
Jeffrey B. Low(E)...................... 1996 107,352 19,034 10,000 1,442
Former Vice President, Marketing 1995 126,154 41,285 75,000 768
</TABLE>
- ---------------
(A) Amounts shown include cash compensation earned and/or received by the Named
Executive Officers.
(B) The totals in this column reflect the aggregate value of the Company's
contributions under the 401(k) Retirement Benefit Plan.
(C) Securities underlying Options for 1996 include certain options that were
repriced which are more fully described in the Option Repricing Table.
(D) Mr. DiGiantommaso resigned his position as Vice President of Finance, Chief
Financial Officer, Treasurer and Clerk on October 18, 1996.
(E) Mr. Low resigned his position as Vice President of Marketing on August 16,
1996.
4
<PAGE> 8
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides information with respect to the Named
Executive Officers regarding the number of shares acquired upon exercise of
options during the last fiscal year, the value realized upon exercise of those
options, the number of shares covered by both exercisable and unexercisable
stock options as of December 31, 1996, and the value of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#) AT FY-END($)(A)
ACQUIRED ON VALUE --------------------------- --------------------------
NAME EXERCISE(#) REALIZED($)(B) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel J. Capone, Jr......... 4,500 10,688 247,750 172,750 0 0
William T. Greer............. -- -- 2,500 32,500 0 0
Steven J. Bielagus........... -- -- 46,125 43,875 0 0
Robert J. Connaughton, Jr.... -- -- -- 40,000 0 0
Joseph A. DiGiantommaso(C)... -- -- 48,250 -- 0 0
Jeffrey B. Low(D)............ -- -- -- -- 0 0
</TABLE>
- ---------------
(A) The potential unrealized value is the fair market value at fiscal year-end
($2.50 per share) less the option exercise price times the number of shares.
All options have an exercise price greater than $2.50 per share.
(B) The value realized is the fair market value on the date of exercise less the
option exercise price times the number of shares.
(C) Former Vice President of Finance, Chief Financial Officer, Treasurer and
Clerk.
(D) Former Vice President of Marketing.
OPTION GRANTS
The following table sets forth information regarding each stock option
granted to the Named Executive Officers during fiscal year 1996. Additionally,
in accordance with Securities and Exchange Commission rules, hypothetical gains
or "option spreads" that would exist for the respective options are also shown.
These gains are based on assumed rates of annual compounded stock price
appreciation of 5% and 10% from the date the options were granted to the option
expiration date. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on the future performance of the Common Stock and
overall market conditions.
5
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
% OF POTENTIAL REALIZABLE
TOTAL VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL
SECURITIES GRANTED RATES OF STOCK
UNDERLYING TO PRICE APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION ----------------------
NAME (#) YEAR ($/SH) DATE 5%($)(Y) 10%($)(Y)
- ------------------------------ ---------- --------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Daniel J. Capone, Jr.......... 18,837(A) 1.42 2.99 7/24/06 33,810 87,199
3,500(B) 0.26 3.63 9/16/06 7,979 20,221
5,250(C) 0.40 3.63 9/16/06 11,969 30,331
5,099(D) 0.38 3.63 9/16/06 11,624 29,459
15,014(E) 1.13 3.63 9/16/06 34,228 86,741
21,163(F) 1.59 2.99 7/24/06 37,985 97,966
7,000(G) 0.53 3.63 9/16/06 15,958 40,441
4,250(G) 0.32 3.63 9/16/06 9,689 24,554
4,901(G) 0.37 3.63 9/16/06 11,173 28,315
500(G) 0.38 3.63 9/16/06 1,140 2,889
34,986(H) 2.63 3.63 9/16/06 79,759 202,125
William T. Greer.............. 25,000(I)(X) 1.88 5.37 3/20/06 99,157 237,475
10,000(J) 0.75 3.63 9/16/06 22,797 57,773
25,000(K) 1.88 3.63 9/16/06 56,994 144,433
Steve J. Bielagus............. 10,000(L)(X) 0.75 6.63 2/7/06 39,578 102,293
1,000(M) 0.75 2.64 9/12/06 2,552 5,628
7,000(C) 0.53 3.63 9/16/06 15,958 40,441
2,000(N) 0.15 3.63 9/16/06 4,559 11,555
8,833(C) 0.67 3.63 9/16/06 20,137 51,031
10,000(O) 0.75 3.63 9/16/06 22,797 57,773
23,878(P) 1.80 3.63 9/16/06 54,436 137,951
1,122(G) 0.84 3.63 9/16/06 2,558 6,482
11,167(G) 0.84 3.63 9/16/06 25,458 64,515
Joseph A. DiGiantommaso....... 10,000(L)(X) 0.75 6.63 2/7/06 39,578 102,293
3,000(C) 0.23 3.63 9/16/06 6,839 17,332
5,000(Q) 0.38 3.63 9/16/06 11,399 28,887
2,000(R) 0.15 3.63 9/16/06 4,559 11,555
3,000(S) 0.23 3.63 9/16/06 6,839 17,332
6,576(C) 0.50 3.63 9/16/06 14,992 37,992
10,000(O) 0.75 3.63 9/16/06 22,797 57,773
23,510(T) 1.77 3.63 9/16/06 53,597 135,825
1,490(G) 0.11 3.63 9/16/06 3,397 8,608
13,424(G) 1.01 3.63 9/16/06 30,603 77,555
Jeffrey B. Low................ 6,864(U) 1.67 6.63 2/7/06 27,166 70,214
3,136(V) 0.76 6.63 2/7/06 12,412 32,079
Robert J. Connaughton, Jr..... 15,000(L)(X) 1.13 6.63 2/7/06 59,367 153,440
15,000(O) 1.13 3.63 9/16/06 34,196 86,660
25,000(W) 1.88 2.81 10/23/06 44,282 112,123
</TABLE>
- ---------------
(A) Incentive stock options were granted on July 24, 1996, at fair market value,
as defined by the Plan, and become exercisable at the rate of 1,337 shares
on October 24, 1996 and 2,500 shares quarterly beginning on January 24, 1999
with full vesting on July 24, 2000.
6
<PAGE> 10
(B) Incentive stock options were granted on September 16, 1996, at a price of
$3.63 per share, in exchange for options held with an exercise price
greater than $3.63 per share. These substitute options are exercisable for
2,625 shares on September 16, 1996 and 875 shares on January 21, 1997.
(C) Incentive stock options were granted on September 16, 1996, at a price of
$3.63 per share, in exchange for options held with an exercise price greater
than $3.63 per share. These substitute options are exercisable in full on
September 16, 1996.
(D) Incentive stock options were granted on September 16, 1996, at a price of
$3.63 per share, in exchange for options held with an exercise price greater
than $3.63 per share. These substitute options are exercisable for 2,599
shares on September 16, 1996 and 2,500 shares on October 9, 1996.
(E) Incentive stock options were granted on September 16, 1996 at a price of
$3.63 per share, in exchange for options held with an exercise price
greater than $3.63 per share. These substitute options are exercisable for
2,514 shares on August 23, 1998 and 3,125 shares quarterly beginning on
November 23, 1998 with full vesting on August 23, 1999.
(F) Non-Qualified stock options were granted on July 24, 1996, at fair market
value, as defined by the Plan, and become exercisable for 1,163 shares on
October 24, 1996 and 2,500 shares quarterly beginning on January 24, 1997
with full vesting on October 24, 1998.
(G) Non-Qualified stock options were granted on September 16, 1996, at a price
of $3.63 per share, in exchange for options held with an exercise price
greater than $3.63 per share. These substitute options are exercisable in
full on September 16, 1996.
(H) Non-Qualified stock options were granted on September 16, 1996, at a price
of $3.63 per share, in exchange for options held with an exercise price
greater than $3.63 per share. These substitute options are exercisable for
12,500 shares on September 16, 1996 and 3,125 shares quarterly beginning on
November 23, 1996 through May 23, 1998 and 611 shares become exercisable on
August 23, 1998.
(I) Incentive stock options were granted on March 20, 1996, at fair market
value, as defined by the Plan, and become exercisable at a rate of
twenty-five percent per year beginning on March 20, 1997 through March 20,
2000.
(J) Incentive stock options were granted on September 16, 1996, at a price of
$3.63 per share, in exchange for options held with an exercise price
greater than $3.63 per share. These substitute options are exercisable for
2,500 shares on September 16, 1996 and 2,500 shares each on July 26, 1997;
July 26, 1998; and July 26, 1999.
(K) Incentive stock options were granted on September 16, 1996, at a price of
$3.63 per share, in exchange for options held with an exercise price greater
than $3.63 per share. These substitute options are exercisable at a rate of
twenty-five percent per year beginning on March 20, 1997 through March 20,
2000.
(L) Incentive stock options were granted on February 7, 1996, at fair market
value, as defined by the Plan, and become exercisable at the rate of
twenty-five percent per year beginning on February 7, 1997 through February
7, 2000.
(M) Incentive stock options were granted on September 12, 1996, at fair market
value, as defined by the Plan, and become exercisable at the rate of
twenty-five percent per year beginning on September 12, 1997 through
September 12, 2000.
7
<PAGE> 11
(N) Incentive stock options were granted on September 16, 1996, at a price of
$3.63 per share, in exchange for options held with an exercise price greater
than $3.63 per share. These substitute options are exercisable for 1,500
shares on September 16, 1996 and 500 shares on July 21, 1997.
(O) Incentive stock options were granted on September 16, 1996, at a price of
$3.63 per share, in exchange for options held with an exercise price greater
than $3.63 per share. These substitute options are exercisable at the rate
of twenty-five percent per year beginning on February 7, 1997 through
February 7, 2000.
(P) Incentive stock options were granted on September 16, 1996, at a price of
$3.63 per share, in exchange for options held with an exercise price greater
than $3.63 per share. These substitute options are exercisable for 4,003
shares on September 16, 1996; 5,125 shares each on August 23, 1997; August
23, 1998; August 23, 1999 and 4,500 shares on August 23, 2002.
(Q) Incentive stock options were granted on September 16, 1996, at a price of
$3.63 per share, in exchange for options held with an exercise price greater
than $3.63 per share. These substitute options are exercisable for 3,750
shares on September 16, 1996 and 1,250 shares on October 22, 1996.
(R) Incentive stock options were granted on September 16, 1996 at a price of
$3.63 per share, in exchange for options held with an exercise price greater
than $3.63 per share. These substitute options are exercisable for 1,500
shares on September 16, 1996 and 500 shares on July 21, 1997.
(S) Incentive stock options were granted on September 16, 1996, at a price of
$3.63 per share, in exchange for options held with an exercise price greater
than $3.63 per share. These substitute options are exercisable for 1,500
shares on September 16, 1996 and 750 shares on September 29, 1996 and 750
shares on September 29, 1997.
(T) Incentive stock options were granted on September 16, 1996, at a price of
$3.63 per share, in exchange for options held with an exercise price greater
than $3.63 per share. These substitute options are exercisable for 3,760
shares on September 16, 1996 and 5,250 shares each on August 23, 1997;
August 23, 1998 August 23, 1999 and 4,000 shares on August 23, 2002.
(U) Incentive stock options were granted on February 7, 1996, at fair market
value as defined by the plan, and become exercisable for 932 shares each on
February 7, 1997 and February 7, 1998; and 2,500 shares each on February 7,
1999 and February 7, 2000.
(V) Non-Qualified stock options were granted on February 7, 1996, at fair market
value as defined by the plan, and become exercisable for 1,568 shares on
February 7, 1997 and 1,568 shares on February 7, 1998.
(W) Incentive stock options were granted on October 23, 1996, at fair market
value, as defined by the Plan, and become exercisable at a rate of
twenty-five percent per year beginning on October 23, 1997 through October
23, 2000.
(X) On September 16, 1996 this option was exchanged for a new option at an
exercise price of $3.63 per share.
(Y) Potential realizable value based on an assumption that the price of Common
Stock appreciates at the annual rate shown (compounded annually) from the
date of grant until the end of the option term. These numbers are calculated
based on the requirements of the Securities and Exchange Commission and do
not necessarily reflect the Company's estimate of future stock price.
8
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON OPTION REPRICING
As a result of the diminution in the market price of the Company's Common
Stock during the preceding three months and the consequently deep reduction in
the perceived value of stock options held by employees, the Compensation
Committee of the Board of Directors determined that many previously granted
stock options had lost much of their value in motivating employees to remain
with the Company and share in its overall financial goals. Consequently, the
Compensation Committee of the Board of Directors, in September 1996, pursuant to
the authority granted under the Company's 1991 Restated Stock Option Plan, voted
to allow employees of the Company holding options to purchase shares with an
option exercise price greater than $3.63 per share to exchange those options for
substitute options having an option exercise price of $3.63 per share. On
September 16, 1996 options for a total of 707,154 shares were surrendered by
employees and exchanged for new options at the new option exercise price.
L.J. Sevin
Julius L. Marcus
Howard C. Salwen
OPTION REPRICING
The following table sets forth information regarding all repricings of
options held by the Named Executive Officers during the last ten fiscal years.
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE EXERCISE ORIGINAL
UNDERLYING OF STOCK AT PRICE AT OPTION TERM
OPTIONS TIME OF TIME OF REMAINING
REPRICED REPRICING OR REPRICING OR NEW AT DATE OF
OR AMENDMENT AMENDMENT EXERCISE REPRICING OR
NAME DATE AMENDED(#) ($) ($) PRICE AMENDMENT
- ------------------------------ ------- ---------- ------------ ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel J. Capone, Jr.......... 9/16/96 7,000 3.63 11.80 3.63 5 yrs. 10 mo.
9/16/96 3,500 3.63 10.16 3.63 6 yrs. 4 mo.
9/16/96 5,250 3.63 6.00 3.63 6 yrs. 10 mo.
9/16/96 5,099 3.63 6.00 3.63 6 yrs. 10 mo.
9/16/96 4,250 3.63 12.05 3.63 4 yrs. 10 mo.
9/16/96 4,901 3.63 6.00 3.63 6 yrs. 10 mo.
9/16/96 500 3.63 12.05 3.63 4 yrs. 10 mo.
9/16/96 15,014 3.63 6.65 3.63 8 yrs. 11 mo.
9/16/96 34,986 3.63 6.65 3.63 8 yrs. 11 mo.
7/28/93 5,250 3.88 12.05 6.00 8 yrs.
7/28/93 10,000 3.88 15.68 6.00 8 yrs. 6 mo.
William T. Greer.............. 9/16/96 10,000 3.63 7.37 3.63 8 yrs. 7 mo.
9/16/96 25,000 3.63 5.37 3.63 9 yrs. 6 mo.
Steven J. Bielagus............ 9/16/96 7,000 3.63 6.00 3.63 6 yrs. 10 mo.
9/16/96 2,000 3.63 6.00 3.63 6 yrs. 10 mo.
9/16/96 8,833 3.63 6.50 3.63 7 yrs. 6 mo.
9/16/96 1,122 3.63 6.65 3.63 8 yrs. 11 mo.
9/16/96 23,878 3.63 6.65 3.63 8 yrs. 11 mo.
9/16/96 10,000 3.63 6.63 3.63 9 yrs. 5 mo.
9/16/96 11,167 3.63 6.50 3.63 7 yrs. 6 mo.
7/28/93 7,000 3.88 16.53 6.00 8 yrs. 6 mo.
7/28/93 2,000 3.88 10.16 6.00 9 yrs. 6 mo.
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE EXERCISE ORIGINAL
UNDERLYING OF STOCK AT PRICE AT OPTION TERM
OPTIONS TIME OF TIME OF REMAINING
REPRICED REPRICING OR REPRICING OR NEW AT DATE OF
OR AMENDMENT AMENDMENT EXERCISE REPRICING OR
NAME DATE AMENDED(#) ($) ($) PRICE AMENDMENT
- ------------------------------ ------- ---------- ------------ ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Connaughton, Jr. ... 9/16/96 15,000 3.63 6.63 3.63 9 yrs. 5 mo.
Joseph A. DiGiantommaso....... 9/16/96 3,000 3.63 6.00 3.63 6 yrs. 10 mo.
9/16/96 5,000 3.63 6.00 3.63 6 yrs. 10 mo.
9/16/96 2,000 3.63 6.00 3.63 6 yrs. 10 mo.
9/16/96 3,000 3.63 6.00 3.63 6 yrs. 10 mo.
9/16/96 6,576 3.63 6.50 3.63 7 yrs. 6 mo.
9/16/96 10,000 3.63 6.63 3.63 9 yrs. 5 mo.
9/16/96 23,510 3.63 6.50 3.63 7 yrs. 6 mo.
9/16/96 1,490 3.63 6.65 3.63 8 yrs. 11 mo.
9/16/96 13,424 3.63 6.50 3.63 7 yrs. 6 mo.
7/28/93 3,000 3.88 15.68 6.00 8 yrs. 6 mo.
7/28/93 5,000 3.88 13.56 6.00 8 yrs. 9 mo.
7/28/93 2,000 3.88 10.16 6.00 9 yrs. 6 mo.
7/28/93 3,000 3.88 6.83 6.00 9 yrs. 8 mo.
</TABLE>
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
In June 1994, the Company entered into an employment agreement with Daniel
J. Capone, Jr., appointing him President and Chief Executive Officer. Prior to
this date, Mr. Capone held the position of Vice President Operations and Quality
and General Manager of the Company's LAN Products Division. Mr. Capone's
employment agreement originally provided for a base salary of $225,000 per year
and quarterly bonuses aggregating to 45% of base salary based upon attainment of
goals jointly developed and agreed to between Mr. Capone and the Company's Board
of Directors. In 1994, Mr. Capone was guaranteed a minimum bonus level of
$32,500. In addition, Mr. Capone was granted options to purchase 300,000 shares
of Common Stock of the Company at fair market value on the date of grant with a
vesting schedule of 20,000 shares immediately vesting and the remaining 280,000
shares vesting in equal quarterly installments over the succeeding 3.5 years. In
June 1995, Mr. Capone's base salary was increased to $240,000 and the bonus
percentage to 50%. In addition, Mr. Capone was granted options to purchase
50,000 shares of Common Stock at fair market value on the date of grant with a
vesting schedule of 3,125 shares immediately vesting and the remaining 46,875
vesting in equal quarterly installments over the succeeding 15 quarters. In
1995, Mr. Capone was paid his base salary and, in addition, received a bonus of
$75,556. In 1996, Mr. Capone's base salary remained at $240,000. In January
1996, Mr. Capone's annual bonus percentage was increased to 55%, and Mr. Capone
was granted options to purchase 40,000 shares of Common Stock at fair market
value on the date of grant with a vesting schedule of 2,500 shares per quarter
over the succeeding 16 quarters. In 1996, Mr. Capone was paid his base salary
and, in addition, received a bonus of $39,719. In the event Mr. Capone's
employment is terminated by the Company for any reason other than "cause", he
will be entitled to receive his then current base compensation for an additional
twelve months.
On March 22, 1994, the Company appointed Steven J. Bielagus as Vice
President of Engineering of the Company. Mr. Bielagus had previously been the
Director of Engineering for the Company's Internetworking Systems Division. In
1996, Mr. Bielagus was eligible for a management bonus not to exceed 40% of
salary. In the event that Mr. Bielagus' employment is terminated by the Company
for any reason other than "cause", he will be entitled to receive his then
current base compensation for an additional nine months.
On March 11, 1996, the Company appointed William T. Greer as Vice President
Sales of the Americas. Mr. Greer had previously been Director of Eastern Sales
Operations of the Company. Under the terms of this
10
<PAGE> 14
appointment, Mr. Greer was granted an option to purchase 25,000 shares of Common
Stock. In addition, Mr. Greer is eligible for a management bonus not to exceed
40% of his annual base salary.
In October 1996, the Company appointed Robert J. Connaughton, Jr. as Vice
President, Finance, Chief Financial Officer, General Counsel, Treasurer and
Clerk for the Company. Mr. Connaughton had previously held the position of
General Counsel for the Company since January 1996. Under the terms of this
appointment, Mr. Connaughton was granted an option to purchase 25,000 shares of
Common Stock. In addition, as Vice President, Finance and CFO, Mr. Connaughton
is eligible for a management bonus of up to 40% of his annual base salary. In
his current position of Vice President, Finance and CFO if Mr. Connaughton's
employment is terminated for any reason other than "cause", he will be entitled
to receive his then current base compensation for an additional twelve months.
On October 11, 1995; October 18, 1995; March 11, 1996 and October 21, 1996,
the Company entered into agreements with Messrs. Capone, Bielagus, Greer and
Connaughton, respectively, whereby each will be paid severance payments if,
following a change in control of the Company, the Executive's employment is
terminated by the Company without cause, as defined, or the Executive terminates
his employment for good reason, as defined. Except for the identity of the
executives and the dates, the agreements are identical in all material respects.
Severance benefits payable, consist of one years' salary and continuation of
employee benefits and the acceleration of all unvested options. Each of the
agreements has a term from the date of the agreement to the earliest to occur of
(a) two years from the date of the agreement; (b) termination of the executive's
employment (i) by death or disability, (ii) for cause, or (iii) by the
executive, other than for good reason; or (c) one year after the date of a
change in control.
For purposes of the agreements, a "change in control" is defined as (i) a
person becoming the beneficial owner of 50% or more of the outstanding shares of
Common Stock of the Company; (ii) certain mergers or consolidations where the
Company is not the survivor or the shareholders of the Company prior to the
merger or consolidation are not the holders of at least a majority of the voting
power of the entity resulting from such merger or consolidation; (iii) sale of
all or substantially all of the assets of the Company; or (iv) changes in the
identity of the Directors of the Company within a two year period unless certain
conditions specified in the agreements are met.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 9, 1996 the Company entered into a Separation Agreement with
Bruce Lichorowic, Vice President of Sales of the Company. Under this Agreement,
Mr. Lichorowic was eligible to receive his current base salary commencing
February 8, 1996 and ending May 9, 1996. In addition, Mr. Lichorowic was
eligible to receive a budget for costs associated with relocation. The Company
paid Mr. Lichorowic $61,320 pursuant to this agreement in 1996.
INFORMATION ABOUT THE EXECUTIVE OFFICERS
The Executive Officers of the Company are elected annually by the Board of
Directors and serve until their respective successors are chosen and qualified
or until their earlier resignation or removal.
The current Executive Officers who are not Directors of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------- ---- ---------------------------------------------------
<S> <C> <C>
Steven J. Bielagus................. 45 Vice President, Engineering
Robert J. Connaughton, Jr.......... 49 Vice President, Finance, Chief Financial Officer,
General Counsel, Treasurer and Clerk
William T. Greer................... 46 Vice President, Worldwide Sales
</TABLE>
11
<PAGE> 15
From September 1988 to January 1990, Mr. Bielagus held the position of
Director, Hardware Development for the Company. Mr. Bielagus joined Coral
Networks, a manufacturer of high speed bridge routers, in January 1990, as
Director, Hardware Development, which position he held until December 1991. In
January 1992, Mr. Bielagus rejoined Proteon as Director, Strategic Relations. On
March 22, 1994, Mr. Bielagus became Vice President, Engineering of the Company.
Mr. Connaughton joined the Company in January 1996 as General Counsel. In
October 1996, Mr. Connaughton was appointed Vice President, Finance, Chief
Financial Officer, General Counsel, Treasurer and Clerk. Mr. Connaughton comes
to Proteon from ImmunoGen, Inc., a biotechnology company which develops
anti-cancer immuno-conjugates where he was General Counsel from 1994 to 1996.
Prior to holding this position, Mr. Connaughton was President of Bank
Ireland/First Financial, Inc., a corporate finance subsidiary of the Bank of
Ireland from 1987 to 1993. Before that, from 1978 to 1987, he was Managing
Attorney at EG&G, Inc.
From July 1995 to March 1996, Mr. Greer held the position of Director,
Eastern Sales Operations for the Company. In March 1996, Mr. Greer was appointed
Vice President Sales of the Americas. Prior to holding these positions, Mr.
Greer was Vice President of Sales, Support and Marketing for Cayman Systems
since January 1994. From September 1988 to January 1994, Mr. Greer held the
position of Director, Corporate Sales with Banyan Systems. Mr. Greer also served
as an officer for the U.S. Marine Corps from September 1968 to September 1988.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors determines the
remuneration and benefits for senior executives, reviews executive development
and succession, and acts in an advisory capacity to the Board of Directors as a
whole with regard to general compensation issues. The Compensation Committee is
comprised solely of outside directors.
The Compensation Committee's policies in compensating the Chief Executive
Officer and senior management are based on several principles: (i) the payment
of competitive salaries so as to attract and retain high quality personnel; (ii)
the providing of a cash bonus program which is structured to reward the
successful achievements of both overall Company financial goals, as measured
generally by profitability, market share and cost management, and technical and
market development goals; and (iii) the granting of stock options based upon the
competitive environment for recruiting and retaining personnel and designed to
strongly align management's interests with shareholders' interests so as to
motivate the employee to pursue overall Company success. The Committee continues
to manage the total compensation program so that it is straightforward and
easily communicated to and understood by employees and shareholders. The
compensation program is structured in such a manner that the achievement of
goals and performance can be understood and measured. Further, it is the
Company's philosophy that executives participate in the general benefit programs
offered to all employees.
Competitive base salaries are established through use of published industry
surveys and targeted peer company surveys examining, depending on the particular
position, competitive companies in the data communications market as well as
other technically oriented companies in the relevant geographic area which may
constitute competition to the Company in hiring or retaining strong performers.
Compensation surveys used are The Survey Group Report and the Radford Associates
Benchmark Salary Survey. The Compensation Committee, utilizing the survey data,
and applying the members' significant experience in hiring and managing in a
technical environment, seeks to set base salaries by taking into account, for
both new and existing management, not only competitive factors, but the breadth
of experience and recent individual performances of current or future employees.
It is not the Company's intent to establish a set percentile rank
12
<PAGE> 16
for its compensation in general or for specific positions, but rather to
establish levels dictated on a case by case basis as recommended by management
and determined by the Committee in the exercise of the members' best collective
judgment.
The process followed by the Compensation Committee in determining executive
bonus levels begins with the Board of Directors' review of management's annual
strategic and financial plan. The annual plan is presented to the Board of
Directors by the Chief Executive Officer in the fall of the preceding year and
is reviewed and accepted by the Board. If necessary, the plan is revised in the
spring for the remainder of the year. A review of the performance of the Company
against the agreed upon overall corporate financial goals, along with
recommendations, is presented to the Compensation Committee quarterly by the
Chief Executive Officer. The Committee reviews and considers the recommendations
and then, acting pursuant to its authorization from the Board of Directors,
establishes the bonus for the Chief Executive Officer and other executives.
The Company's Management Incentive Program generally allows for four
payments each year. Actual payments, some of which are subject to certain
guaranteed minimums, are otherwise based upon achievement of corporate goals.
The terms of the plan are geared to recognize several key aspects of the
Company's business environment. These include the constant introduction of new
products to address opportunities created by evolving technology and the
requirement for appropriate changes in the Company's business plans in response
to a highly dynamic and competitive marketplace. Payments are currently capped
at a maximum of 68.75% of base salary for the Chief Executive Officer, and
generally lower percentages of base salary for other executive officers. All
participants in the Company's Management Incentive Program receive bonuses based
on objectively measured parameters. These include revenue goals by product area,
gross margin goals, engineering and marketing expenditure goals and other
factors. The extent to which these goals are achieved, the relative position of
the individual in the Company and the individual's gross salary for each quarter
are used to determine the individual's quarterly bonus. Performance factors are
assigned to each goal based on the company's accomplishment toward that goal in
the quarter. If a performance factor of less than 75% is determined for a
particular goal, that goal does not contribute to the calculation of bonus.
Similarly, the performance factor is capped at 125% of any goal. In no case, on
an ongoing basis, may the total of all bonuses distributed exceed 15% of
corporate profits before taxes.
The Compensation Committee believes strongly that senior management's
compensation program should include stock option grants for a number of reasons,
including competitive practices, motivation for continued employment, and
alignment of management's interests with those of shareholders. In granting
options, the Compensation Committee in 1996 considered, among other factors, the
quality of performance, the competitive market for the employee, the aggregate
sizes of individual grants and the number of options outstanding as a whole.
Option grants have been awarded to all senior management personnel upon hire and
periodically thereafter based upon specific individual and/or corporate
achievements.
In 1996, stock option grants were made to certain of the executive officers
as an incentive to motivate them in their efforts to continue the strategic
repositioning of the Company. These options are issued with exercise prices
equal to the fair market value on the date of the grant and generally vest
annually over four years depending on the grant.
In considering compensation of the Company's executives, one of the factors
that the Committee takes into account is the anticipated tax treatment of
various components of compensation. In 1994, the Company's 1991 Stock Option
Plan was amended to preserve the deductibility of compensation expense under
Section 162(m) of the Internal Revenue Code. Section 162(m) eliminates the
deductibility by the Company of certain executive compensation in excess of $1
million per year per person. The amendment provided for a limit of 750,000
shares of common stock with respect to which stock options may be granted per
employee per
13
<PAGE> 17
year. The Committee has no present intentions of qualifying any other
compensation paid to its executive officers for deductibility under Section
162(m), but may consider doing so in the future.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
In June 1994, the Company entered into an employment agreement with Daniel
J. Capone, Jr. appointing him President and Chief Executive Officer. Prior to
that date, Mr. Capone was Vice President of the Company's LAN Products Division.
Under Mr. Capone's Employment Agreement, he was granted a compensation package
consisting of a base salary of $225,000 per year and an annual bonus of up to
40% of base salary based upon attainment of goals which were jointly developed
and agreed to between Mr. Capone and the Company's Board of Directors. In June
1995, Mr. Capone's base salary was increased to $240,000 and the bonus
percentage to 50%. In addition, Mr. Capone was granted options to purchase
50,000 shares of the Common Stock of the Company at fair market value on the
date of grant with a vesting schedule of 3,125 shares immediately vesting and
the remaining 46,875 vesting in equal quarterly installments over the succeeding
15 quarters. In January 1996, Mr. Capone's annual bonus percentage was increased
to 55% and Mr. Capone was granted options to purchase 40,000 shares of Common
Stock at fair market value on the date of grant with a vesting schedule of 2,500
shares per quarter over the succeeding 16 quarters. Additionally, Mr. Capone was
paid his base salary of $240,000 and received a bonus of $39,719 in accordance
with the Management Incentive Plan Program.
L.J. Sevin
Julius L. Marcus
Howard C. Salwen
14
<PAGE> 18
COMPARISON OF CUMULATIVE TOTAL RETURN SINCE INITIAL
PUBLIC OFFERING AMONG PROTEON, INC., NASDAQ STOCK
MARKET AND H & Q COMMUNICATION SECTOR INDEX
The following line graph compares the total return on investment, assuming
reinvestment of dividends, of the Company since the Company's initial public
offering on June 4, 1991, with that of the Nasdaq Stock Market (U.S. Companies)
as measured by the Center for Research in Securities Prices (CRSP) and a sub
index of Hambrecht & Quist's Technology Index entitled the Communications
Sector. The companies in Hambrecht & Quist's Communications Sector Index are:
3Com, Bay Networks, Cisco, Fore Systems, FTP Software, Gandalf, Madge NV,
Network General, Optical Data Systems, Shiva Corp., Standard Microsystems,
Xircom.
[PERFORMANCE CHART]
PROTEON
H&Q TECHNOLOGY INDEX
NASDAQ STOCK MARKET-U.S. INDEX
Measurement Period Nasdaq Stock
(Fiscal Year Covered) Proteon H&Q Technology Market U.S.
Dec 91 100 100 100
Dec 92 61.34 115.02 116.38
Dec 93 39.50 125.52 133.59
Dec 94 35.29 145.70 130.59
Dec 95 44.54 218.76 184.67
Dec 96 16.81 262.49 227.16
COMMITTEES OF BOARD OF DIRECTORS AND MEETING ATTENDANCE
Howard C. Salwen and Dr. David Clark currently serve on the Audit
Committee. The Audit Committee reviews the engagement of the Company's
independent accountants, reviews the annual financial statements, considers
matters relating to accounting policy and internal controls, and reviews the
scope of the annual audits.
Julius L. Marcus, Howard C. Salwen and L.J. Sevin, comprised the
Compensation Committee during fiscal year 1996. The Compensation Committee which
in 1997 will continue to be comprised of the then current outside directors
reviews, approves and makes recommendations on the Company's compensation
policies, practices and procedures to ensure that legal and fiduciary
responsibilities of the Board of Directors are met and that such policies,
practices and procedures contribute to the success of the Company.
15
<PAGE> 19
The Company does not have a standing Nominating Committee.
During the fiscal year ended December 31, 1996, there were 8 meetings of
the Board of Directors, 1 Audit Committee meeting and 8 meetings of the
Compensation Committee. In addition, from time to time, the members of the Board
of Directors and its committees act by unanimous written consent pursuant to
Massachusetts Law.
PROPOSAL 1: ELECTION OF DIRECTORS
At the Annual Meeting, five Directors will be elected until the next Annual
Meeting of Shareholders and until their successors have been elected and
qualified or until their earlier resignation or removal.
The enclosed Proxy, unless authority to vote is withheld, will be voted for
the election of the nominees named herein as Directors of the Company. The Board
of Directors has no reason to believe that any nominee will become unavailable.
However, in the event any one or more of such nominees shall unexpectedly become
unavailable for election, votes will be cast, pursuant to authority granted by
the enclosed Proxy, for such person or persons as may be designated by the Board
of Directors.
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AND AGE THE PAST FIVE YEARS; OTHER DIRECTORSHIPS
- ------------------------------------- ------------------------------------------------------
<S> <C>
Daniel J. Capone, Jr. (age 47)....... Mr. Capone joined the Company in 1987 and is currently
President and Chief Executive Officer. Prior to
becoming President in June 1994, Mr. Capone was Vice
President and General Manager of the LAN Products
Division. He has also held Vice President level
positions in Manufacturing, Strategic Relations and
Sales. Prior to joining Proteon, Mr. Capone was Vice
President, Sales and Marketing for Charles River Data
Systems in Framingham, Massachusetts.
Howard C. Salwen (age 60)............ Mr. Salwen founded the Company as a partnership in
1972 and served as its President until 1984. Since the
Company's incorporation in 1974 he has been Chairman
of the Company's Board of Directors. He served as
Chief Technical Officer from February 1984 to April
1991 and as Clerk and Treasurer from 1974 to April
1991. Mr. Salwen currently sits on the Board of
Directors of Marathon Technologies Corp., a company
which designs and manufactures fault-tolerant
computers. Mr. Salwen is on the Board of Directors of
the Mass Telecommunications Council and an Overseer of
the DeCordova Museum and the Computer Museum. He is
also Chairman of the Board of Ultranet Communication,
an Internet service provider.
Dr. David Clark (age 53)............. Dr. Clark has been a member of the Company's Board of
Directors since 1984. He has been employed since 1973
at Massachusetts Institute of Technology Laboratory
for Computer Science, where he is a Senior Research
Scientist.
</TABLE>
16
<PAGE> 20
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AND AGE THE PAST FIVE YEARS; OTHER DIRECTORSHIPS
- ------------------------------------- ------------------------------------------------------
<S> <C>
William R. Johnson (age 54).......... Mr. Johnson is a new nominee for election as Director
of the Company. Mr. Johnson is a Principal in J & J
Consulting since October 1996. He previously served as
President and CEO of CrossComm Corporation from March
1996 to October 1996. Prior to that Mr. Johnson was
General Manager of IBM's Networking Hardware Division
from November 1993 to March 1996. Mr. Johnson also
held the position of Vice President of Digital's
Networking/Telecommunications Business from February
1973 to July 1993.
Robert M. Glorioso (age 56).......... Mr. Glorioso, is a new nominee for election as
Director of the Company. Since April 1993, Mr.
Glorioso has held the position of President and CEO of
Marathon Technologies Corp., a company which designs
and manufactures fault-tolerant computers. Mr.
Glorioso currently sits on the Board of Directors of
Ultranet Communications, Inc., an Internet service
provider. He previously held several senior executive
positions while a corporate Vice President at Digital
Equipment Corporation including Vice President of
Information Systems Business and Vice President of
Executive Consulting from January 1976 to December
1992.
</TABLE>
No nominee for Director or Executive Officer has any family relationship
with any other nominee or with any other Executive Officer.
A plurality of the votes cast at the Meeting is required to elect each
nominee as a Director.
THE BOARD OF DIRECTORS RECOMMENDS ELECTION OF THE NOMINEES AS DIRECTORS.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., independent accountants, audited the Company's
financial statements for the fiscal year ended December 31, 1996. The Company
has selected Coopers & Lybrand L.L.P. to audit the Company's financial
statements for the fiscal year ending December 31, 1997. The Company expects
that representatives of Coopers & Lybrand L.L.P. will be present at the Meeting,
with the opportunity to make a statement if they so desire, and will be
available to respond to appropriate questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Officers, and persons who own more than ten percent of the
Company's Common Stock, to file with the Securities and Exchange Commission (the
"SEC") 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 a review of reports furnished
to the Company and written representations that no other reports were required
during the 1996 fiscal year, all Section 16(a) filing requirements were
satisfied.
17
<PAGE> 21
SHAREHOLDER PROPOSALS AND OTHER MATTERS
In order to be considered for inclusion in the Proxy Statement distributed
to shareholders prior to the Annual Meeting in 1998, a shareholder proposal must
be received by the Company no later than December 12, 1997. Proposals should be
delivered in writing to Proteon, Inc., 9 Technology Drive, Westborough,
Massachusetts 01581.
The Board of Directors does not know of any other matters which will be
brought before the Meeting. If other business is properly presented for
consideration at the Meeting, it is intended that the shares represented by the
enclosed Proxy will be voted by the persons voting the proxies in accordance
with their judgment on such matters.
In order that your shares may be represented, if you do not plan to attend
the Meeting, and in order to assure the required quorum, please fill out, sign,
date and return your Proxy promptly.
By Order of the Board of Directors,
/s/ Robert J. Connaughton, Jr.
ROBERT J. CONNAUGHTON, JR.
Clerk
Dated: April 11, 1997
18
<PAGE> 22
1062-PS97
<PAGE> 23
DETACH HERE
PROTEON, INC.
THIS PROXY IS BEING SOLICITED BY PROTEON, INC.'S BOARD OF DIRECTORS
P
The undersigned, revoking previous proxies relating to these shares,
R hereby acknowledges receipt of the Notice and Proxy Statement dated April
11, 1997, in connection with the Annual Meeting to be held at 10:00 a.m. on
O May 21, 1997, at The First National Bank of Boston, Blue Hills Office Park,
150 Royall Street, Canton, Massachusetts and hereby appoints Robert J.
X Connaughton, Jr. and Daniel J. Capone, Jr., and each of them (with full
power to act alone), the attorneys and proxies of the undersigned, with
Y power of substitution to each, to vote all shares of the Common Stock of
Proteon, Inc. registered in the name provided herein which the undersigned
is entitled to vote at the 1997 Annual Meeting of Shareholders, and at any
adjournment or adjournments thereof, with all the powers the undersigned
would have if personally present. Without limiting the general
authorization hereby given, said proxies are, and each of them is,
instructed to vote or act as follows on the proposal as set forth in said
Proxy.
Election of all 5 Directors (or if any nominee is not
available for re-election, such substitute as the Board of
Directors may designate):
NOMINEES: D. Capone, D. Clark, R. Glorioso, W. Johnson and H. Salwen
SEE REVERSE SIDE FOR PROPOSAL. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD
OF DIRECTORS' RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE. YOU NEED NOT MARK
ANY BOXES.
-------------
SEE REVERSE
SIDE
-------------
[X] Please mark
vote as in
this example.
This Proxy when executed will be voted in the manner directed herein. If no
direction is made this Proxy will be voted FOR the election of Directors.
In their discretion the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments
thereof.
The Board of Directors recommends a vote FOR Proposal 1.
FOR WITHHELD
1. Election of
Directors [ ] [ ]
(See reverse).
-------------------------------------------
For all nominees except as noted above
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
Please sign exactly as name(s) appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
