<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Urologix, Inc.
- --------------------------------------------------------------------------------
(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 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:
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(4) Date Filed:
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<PAGE>
Urologix, Inc.
14405 Twenty-First Avenue North
Minneapolis, Minnesota 55447
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 14, 1999
Notice is hereby given that the Annual Meeting of Shareholders of Urologix,
Inc. will be held at the Marquette Hotel, 710 Marquette Avenue, Minneapolis,
Minnesota, on Thursday, January 14, 1999 at 10:00 a.m., local time, for the
following purposes:
1. To elect three directors to hold office for a term of three years or
until their respective successors have been elected.
2. To amend the Company's Amended and Restated 1991 Stock Option Plan to
increase the number of shares authorized for issuance under the Plan and
to modify the award made to non-employee directors as compensation for
their services.
3. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed November 16, 1998 as the record date for
the determination of shareholders entitled to notice of and to vote at the
meeting.
By Order of the Board of Directors,
/s/ Wesley E. Johnson, Jr.,
Wesley E. Johnson, Jr., Secretary
Minneapolis, Minnesota
December 9, 1998
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND
RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO
ATTEND IN PERSON. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES
AND VOTE IN PERSON IF THEY SO DESIRE. THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY.
<PAGE>
Urologix, Inc.
14405 Twenty-First Avenue North
Minneapolis, Minnesota 55447
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Urologix, Inc. (the
"Company") in connection with the solicitation of proxies by the Board of
Directors of the Company to be voted at the Annual Meeting of Shareholders to
be held on January 14, 1999 or any adjournment or adjournments thereof. The
cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, officers, directors and employees of the Company may
solicit proxies by telephone, telegraph or in person. The Company may also
request banks and brokers to solicit their customers who have a beneficial
interest in the Company's common stock registered in the names of nominees and
will reimburse such banks and brokers for their reasonable out-of-pocket
expenses.
Any proxy may be revoked at any time before it is voted by receipt of a
proxy properly signed and dated subsequent to an earlier proxy, or by
revocation of a written proxy by request in person at the Annual Meeting. If
not so revoked, the shares represented by such proxy will be voted. The
Company's principal offices are located at 14405 Twenty-First Avenue North,
Minneapolis, Minnesota 55447, and its telephone number is (612) 475-1400. The
mailing of this proxy statement to shareholders of the Company commenced on or
about December 11, 1998.
The total number of shares outstanding and entitled to vote at the meeting
as of November 16, 1998 consisted of 11,356,850 shares of common stock, $.01
par value. Each share of common stock is entitled to one vote. Only
shareholders of record at the close of business on November 16, 1998 will be
entitled to vote at the meeting. A quorum, consisting of a majority of the
shares of common stock entitled to vote at the Annual Meeting, must be present
in person or by proxy before action may be taken at the Annual Meeting. If an
executed proxy is returned and the shareholder has abstained from voting on
any matter, the shares represented by such proxy will be considered present at
the meeting for purposes of determining a quorum and for purposes of
calculating the vote, but will not be considered to have been voted in favor
of such matter. If an executed proxy is returned by a broker holding shares in
"street name" indicating that the broker does not have discretionary authority
as to certain shares to vote on one or more matters, such shares will be
considered present at the meeting for purposes of determining a quorum, but
will not be considered to be represented at the meeting for purposes of
calculating the vote with respect to such matters.
1
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT
The following table includes information as of November 16, 1998 concerning
the beneficial ownership of common stock of the Company by (i) the only
shareholders known to the Company to hold more than five percent of the common
stock of the Company, (ii) each of the nominees and directors of the Company,
(iii) each of the Named Executive Officers of the Company, and (iv) all
nominees, directors and executive officers of the Company as a group. Unless
otherwise indicated, all beneficial owners have sole voting and investment
power over the shares held.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED
------------------- --------------------- ------------------
<S> <C> <C>
Wellington Management Company... 993,500 8.7%
75 State Street
Boston, MA 02109
John Reid....................... 600,087 5.3%
195 Bunker Hill Avenue
Stratham, NH 03885
Boston Scientific Corporation... 587,500 5.2%
One Boston Scientific Place
Natick, MA 01670
Buzz Benson..................... 8,207 *
Mitchell Dann................... 516,357(2) 4.5%
Janet G. Effland................ 17,721 *
Bobby I. Griffin................ 0 *
Paul A. LaViolette.............. 592,500(3) 5.2%
Jack E. Meyer................... 231,179 2.0%
Robert R. Momsen................ 21,227(4) *
Michael M. Selzer, Jr........... 10,000 *
David C. Utz, M.D............... 33,550 *
John P. Costello................ 10,936 *
Wesley E. Johnson, Jr........... 55,367 *
Jonathan R. McGrath............. 101,265 *
David W. Powell................. 6,803 *
W. Allen Putnam................. 62,372 *
All nominees, directors and
executive officers as a group
(14 persons)................... 1,667,484 14.5%
</TABLE>
- --------
*Indicates ownership of less than one percent.
(1) Includes options to purchase the following number of shares, which are or
will become exercisable within 60 days of November 16, 1998: Mr. Benson,
5,000 shares; Mr. Dann, 5,000 shares; Ms. Effland, 5,000 shares; Mr.
LaViolette, 5,000 shares; Mr. Meyer, 23,750 shares; Mr. Momsen, 5,000
shares; Dr. Utz, 29,050 shares; Mr. Costello, 10,936 shares; Mr. Johnson
44,117 shares, Mr. Powell, 4,303 shares; Mr. Putnam 5,267 shares; and all
nominees, directors and executive officers as a group, 142,423 shares.
(2) Includes 15,358 shares owned by M. Dann & Co. Profit Sharing Trust.
(3) Includes 587,500 shares owned by Boston Scientific Corporation. Mr.
LaViolette is Senior Vice President and Group President of Boston
Scientific Corporation. Mr. LaViolette disclaims beneficial ownership of
shares held by Boston Scientific Corporation.
(4) Includes 16,227 shares owned by the Momsen Living Trust, of which Mr.
Momsen is a trustee.
2
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Pursuant to the terms of the Amended and Restated Articles of Incorporation
of the Company, directors are divided into three classes, with the term of one
class expiring each year. As the term of each class expires, the successors to
the directors in that class will be elected for a term of three years. The
terms of Messrs. Griffin, Momsen and Selzer expire at the Annual Meeting of
Shareholders following fiscal 1998, the terms of Messrs. Meyer and Dann and
Dr. Utz expire at the Annual Meeting of Shareholders following fiscal 1999 and
the terms of Messrs. Benson and LaViolette expire at the Annual Meeting of
Shareholders following fiscal year 2000. Vacancies on the Board of Directors
and newly created directorships can be filled by vote of a majority of the
directors then in office.
Michael R. Henson, who has served as a director since September 1991 and
whose term as a director was to expire at this Annual Meeting of Shareholders,
chose not to stand for re-election and resigned as a director. Janet Effland,
who has served as a director since July 1994, has also chosen not to stand for
re-election. The Company wishes to express its gratitude to Mr. Henson and
Ms. Effland for their service to the Company.
Three directors will be elected at the Annual Meeting to serve until the
Annual Meeting of Shareholders following fiscal year 2001 or until their
successors are elected. The Board of Directors has nominated for election
Bobby I. Griffin, Robert R. Momsen, and Michael M. Selzer, Jr. Mr. Momsen is
currently serving as a director and was previously elected by the
shareholders. Mr. Griffin was elected by the current directors to fill the
vacancy created by Mr. Henson's resignation. Mr. Selzer was elected by the
current directors to serve as a member of the Board of Directors, beginning on
the first date of his employment, which is expected to occur prior to the
Annual Meeting of Shareholders.
It is intended that proxies will be voted for the named nominees. Unless
otherwise indicated, each nominee and each continuing director has been
engaged in his present occupation as set forth below, or has been an officer
with the organization indicated, for more than five years. The Board of
Directors believes that the nominees named below will be able to serve, but
should any nominee be unable to serve as a director, the persons named in the
proxies have advised that they will vote for the election of such substitute
nominee as the Board of Directors may propose.
The names and biographical information concerning each nominee and the other
directors filling unexpired terms are set forth below, based upon information
furnished to the Company by the nominee and directors.
NAME AND AGE PRINCIPAL OCCUPATIONAND OTHER DIRECTORSHIPS
- --------- ----------------
Nominees proposed for election for term expiring at the Annual Meeting
following fiscal 2001:
Bobby I. Griffin (61).... Mr. Griffin was elected to the Board of Directors
of the Company on November 17, 1998. From 1973 to
1998, Mr. Griffin held various positions with
Medtronic Inc., a medical device manufacturer, and
from 1991 to 1998 served as Executive Vice
President of Medtronic Inc. and President of the
Medtronic Pacing Business. Mr. Griffin is also a
director of MTS Systems Corporation, a manufacturer
of testing and simulation equipment, and Lutheran
Brotherhood Corporation, a fraternal life insurance
and investment products company.
Robert R. Momsen (51)....
Mr. Momsen has served as a director of the Company
since December 1992. Since 1981, Mr. Momsen has
been a general partner of InterWest Partners, a
venture capital firm. Mr. Momsen is
3
<PAGE>
also a director of COR Therapeutics, Inc., Coulter
Pharmaceutical, Inc., and Progenitor, Inc., each of
which is a biopharmaceutical company, Innovasive
Devices, Inc., a tissue repair system company,
Integ Incorporated, a medical diagnostic company,
ArthroCare Corporation, a manufacturer of
arthroscopic surgical equipment, and several
privately-held medical companies.
Michael M. Selzer, Jr. Mr. Selzer has been elected to serve on the Board
(46)..................... of Directors beginning on the date of his
employment with the Company, which is expected to
occur in early January 1999. Since 1994, Mr. Selzer
has served as Vice President and General Manager of
the Neurostimulation Business of Medtronic, Inc., a
medical device manufacturer. From 1992 to 1994, Mr.
Selzer served as the Vice President of Medtronic's
Components and Research Group, which included the
micro electronics subsidiary and Medtronic's
battery operation, biomaterials development group
and animal research facility.
Directors serving continuing terms:
Buzz Benson (44)......... Mr. Benson has served as a director of the Company
since August 1992. Mr. Benson has been the Managing
Director of Piper Jaffray Ventures since November
1992 and is a Partner in the Piper Jaffray
Healthcare Funds, a series of venture capital funds
focused on investments in emerging companies in the
healthcare industry. From November 1988 to November
1992, Mr. Benson was a Managing Director in the
investment banking department of Piper Jaffray Inc.
Mr. Benson is also a director of Exogen, Inc., a
medical device company, and several privately-held
medical companies.
Mitchell Dann (38)....... Mr. Dann was a co-founder of the Company, has
served as a director since its inception in 1991
and served as acting President from June 1993 to
January 1994. He became Chairman of the Board in
March 1993. Mr. Dann is currently President of M.
Dann & Co., Inc., a venture capital advisory firm.
Prior to M. Dann & Co., Mr. Dann co-founded and
held the position of Managing Partner at IAI
Venture Capital Group, the venture capital division
of Investment Advisers, Inc.
Paul A. LaViolette (41).. Mr. LaViolette has served as a director of the
Company since April 1996. Mr. LaViolette is a
Senior Vice President and President-International
of Boston Scientific Corporation. He joined Boston
Scientific Corporation in 1994 as President of
Boston Scientific International and in 1995 became
Group President for the Nonvascular Businesses,
which includes Microvasive Endoscopy and
Microvasive Urology. Previously, Mr. LaViolette was
with C. R. Bard for ten years, where he served as
President of Bard's USCI Division from 1993 to 1994
and its USCI Angioplasty Division from 1991 to
1993. Before that time, he held several other
marketing positions at Bard.
Jack E. Meyer (55)....... Mr. Meyer has served as a director of Urologix
since January 1994 and served as the President and
Chief Executive Officer of Urologix from January
1994 until October 16, 1998. Prior to joining
Urologix, Mr. Meyer served as President and Chief
Executive Officer of FiberOptic Sensor
Technologies, Inc., a medical device company,
4
<PAGE>
from March 1993 to January 1994. From January 1992
to March 1993, Mr. Meyer was President and Chief
Executive Officer of Carelink, Inc., a medical
device company. From December 1982 to August 1991,
Mr. Meyer held the positions of Chief Operating
Officer and Executive Vice President at Quest
Medical, Inc., a medical device company. Mr. Meyer
is a director of Bestway Rental, Inc., a rental
company.
David C. Utz, M.D. (74).. Dr. Utz has been a director of the Company since
September 1994. He is an emeritus consultant, Mayo
Clinic. Dr. Utz was Professor of Urology, Mayo
Medical School, and a consultant in urology from
1957 to 1988. He holds an M.D. degree from St.
Louis University School of Medicine and a M.S.
degree in Urology from the University of Minnesota.
Dr. Utz has served in many medical and professional
urological associations and received numerous
prestigious awards in the field of urology. He has
been the author of over 145 publications and 28
abstracts and editorials.
Meetings. The Board of Directors met fourteen times during fiscal year 1998.
Each current director who served as a director in fiscal 1998 attended at
least seventy-five percent of the meetings of the Board of Directors and Board
committees on which the director served.
Board Committee Meetings. The Compensation Committee, which is currently
comprised of Messrs. LaViolette and Momsen, is responsible for management of
compensation matters, including recommendations to the Board of Directors on
compensation arrangements for officers and incentive compensation for
employees of the Company. The Compensation Committee met three times in fiscal
1998.
The Audit Committee supervises the financial affairs of the Company and
generally reviews the scope and results of the audit and other services
provided by the Company's independent accountants and reports the results of
their review to the full Board and to management. The Audit Committee, which
was comprised of Messrs. Benson and LaViolette and Ms. Effland in fiscal 1998,
met twice during that year.
The Company does not have a nominating committee. However, the Company's
Bylaws provide that a notice of proposed shareholder nominations for the
election of directors must be timely given in writing to the Secretary of the
Company prior to the meeting at which directors are to be elected. To be
timely, the notice must be given by such shareholder to the Secretary of the
Company not less than 60 days nor more than 90 days prior to a meeting date
corresponding to the previous year's Annual Meeting. The notice to the Company
from a shareholder who intends to nominate a person at the meeting for
election as a director must contain certain information about such shareholder
and the person(s) nominated by such shareholder, including, among other
things, the name and address of record of such shareholder, a representation
that the shareholder is entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting, the name, age, business and residence
addresses and principal occupation of each nominee, such other information as
would be required to be included in a proxy statement soliciting proxies for
the election of the proposed nominee(s), and the consent of each nominee to
serve as a director if so elected. The Company may also require any proposed
nominee to furnish other information reasonably required by the Company to
determine the proposed nominee's eligibility to serve as director. If the
presiding officer of a meeting of shareholders determines that a person was
not nominated in accordance with the foregoing procedure, such person will not
be eligible for election as a director.
5
<PAGE>
Vote Required. The affirmative vote of a majority of the shares of common
stock represented at the meeting in person or by proxy is required for the
election of the two nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES.
EXECUTIVE OFFICERS AND OTHER MEMBERS OF MANAGEMENT OF THE COMPANY
The executive officers and other members of management of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Michael M. Selzer, Jr... 46 President, Chief Executive Officer and Director
John P. Costello........ 41 Executive Vice President, Sales and Marketing
Wesley E. Johnson, Jr... 41 Vice President, Finance and Treasurer and Secretary
David W. Powell......... 41 Vice President, Operations
W. Allen Putnam......... 51 Vice President, Regulatory and Quality
Rob J. ten Hoedt........ 38 Vice President, Europe
Eric N. Rudie........... 36 Director, Research and Technology
William M. Sutton....... 35 Director, Research and Development
</TABLE>
The Company has announced the appointment of Michael M. Selzer, Jr. as
President, Chief Executive Officer and Director of Urologix effective upon the
commencement of his employment with the Company in early January 1999.
Biographical information about Mr. Selzer is included under the heading,
"Proposal One--Election of Directors." Mitchell Dann, the Company's Chairman
of the Board, assumed the responsibilities of Chief Executive Officer while
the Company was conducting the search for the new Chief Executive Officer. The
following is a brief summary of the business experience of the Company's other
executive officers and other members of management.
Mr. Costello has served as Executive Vice President of Sales and Marketing
for the Company since February 1997. Prior to joining Urologix, Mr. Costello
had served as Vice President of Sales and Marketing for FemRX, Inc. and
Cardiovascular Imaging Systems, Inc. for the four previous years. In addition,
Mr. Costello previously served as Vice President of Sales for the Critical
Care/Angioplasty division of Baxter Healthcare.
Mr. Johnson has served as Vice President of Finance and Chief Financial
Officer of Urologix since September 1995. He was also elected Secretary in
March 1996 and elected Treasurer in December 1996. Prior to joining Urologix,
Mr. Johnson served as Vice President, Finance and Chief Financial Officer of
Orthofix Inc., formerly American Medical Electronics, Inc., from December 1986
to September 1995.
Mr. Powell has served as Vice President of Operations for the Company since
September 1996. From 1991 through May 1996, Mr. Powell served in a variety of
positions of increasing responsibility with Gymania Corporation and certain
related companies including Playpal Inc. and Playpal Sales Corporation. Each
of the latter two companies was engaged in the business of international
sales, design and technical service of large commercial creative play
structures. During this time, Mr. Powell was asked to serve as President of
Playpal Inc., a financially troubled Florida corporation. Mr. Powell became
President of Playpal in approximately March 1995 and continued as its
President until Paypal filed a petition for Chapter 11 protection in
approximately May 1996. Subsequent to Mr. Powell's resignation, Playpal filed
a petition for bankruptcy under Chapter 7 in late 1996. From 1988 to 1991, Mr.
Powell was Vice President, Operations for Vitaphore Corporation, a medical
device company.
Mr. Putnam has served as Vice President of Regulatory and Quality for the
Company since October 1994 and was Vice President of Operations from December
1993 to October 1994. Before joining
6
<PAGE>
Urologix, Mr. Putnam served as President and Chief Operating Officer of
Uroplasty, Inc. from June 1992 to November 1993. Uroplasty was a wholly-owned
subsidiary of Bioplasty, Inc., a breast implant company. Mr. Putnam also held
the position of Vice President of Quality Assurance and Regulatory Affairs at
St. Jude Medical, Inc. from December 1989 to June 1992. In addition, Mr.
Putnam has held various positions at Bio-Vascular, Inc., Minnetonka, Inc.,
Hollister Corporation, and Baxter-Travenol Laboratories.
Mr. ten Hoedt has served as Vice President of Europe for Urologix since
February 6, 1998. Prior to joining Urologix, Mr. ten Hoedt was employed by
Medtronic Interstim, serving as World-Wide Business Director and General
Manager from 1996 to 1998 and Business Director, Europe from 1994 to 1996. Mr.
ten Hoedt also served as Marketing Manager Europe for Medtronic H.Q. Brussels
from 1991 to 1994.
Mr. Rudie has provided technology leadership since the Company's inception
in May of 1991. During this time he has performed roles of increasing
responsibility, including Principal Engineer (1991-1993), Director of
Microwave Technology (1993-1998), and Director of Research and Technology
since October 1998. Mr. Rudie is an inventor of 11 Urologix patents, including
those covering Urologix' core competencies (the antenna and preferential
heating). Mr. Rudie holds a Master of Science Degree in Electrical Engineering
and formerly was in Development Engineering at E.F. Johnson, a two-way radio
communications company.
Mr. Sutton was promoted to Director of Research & Development in October
1998 after serving as Manager of Research and Development since joining
Urologix in May 1997. Prior to that time, Mr. Sutton served as Manager,
Research and Development of Vas-Cath, Inc., a division of C.R. Bard
specializing in dialysis and angioplasty catheters, from February 1995 to May
1997. Previously, Mr. Sutton held research and development and program
management positions at C.R. Bard and Abbott Laboratories.
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending June 30, 1998, 1997
and 1996, the cash compensation paid by the Company, as well as certain other
compensation paid or accrued to those years, to Jack E. Meyer, the Company's
former President and Chief Executive Officer, and to each of the five other
most highly compensated executive officers of the Company in office during
fiscal year 1998, whose total cash compensation exceeded $100,000 during
fiscal year 1998 (together with Mr. Meyer, the "Named Executive Officers") in
all capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
------------------------------ ------------
SECURITIES
UNDERLYING
NAME AND FISCAL OTHER ANNUAL OPTIONS
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (# SHARES)
------------------ ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Jack E. Meyer(2)............ 1998 $180,019 $ 22,500 -- --
President and Chief 1997 175,000 22,096 -- 25,000
Executive Officer 1996 157,500 13,452 -- 50,000
John P. Costello(3)......... 1998 149,667 41,931 -- 175,000(7)
Executive Vice President, 1997 62,500 -- $135,000 125,000
Sales and Marketing
Wesley E. Johnson, Jr.(4)... 1998 127,025 13,496 -- 32,000
Vice President, Finance, 1997 118,334 18,194 -- --
Chief Financial Officer, 1996 83,417 -- 42,224 73,930
Treasurer and Secretary
Jonathan R. McGrath(5)...... 1998 156,496 11,266 -- 8,000
Vice President, Research and 1997 145,198 13,044 -- --
Development 1996 135,000 2,654 -- --
David W. Powell(6).......... 1998 131,730 12,423 -- 68,900(7)
Vice President, Operations 1997 105,414 18,777 -- 50,000
W. Allen Putnam............. 1998 116,151 9,945 -- 8,000
Vice President, Regulatory 1997 112,919 12,949 -- --
and Quality 1996 107,661 10,747 -- 24,290
</TABLE>
- --------
(1) None of the Named Executive Officers received an aggregate amount of
perquisites and other personal benefits exceeding $50,000 or 10% of the
officer's total annual salary and bonus for the fiscal year.
(2) Mr. Meyer resigned his position as President and Chief Executive Officer
in October 1998.
(3) Mr. Costello began employment with the Company in February 1997. The
fiscal 1997 Other Annual Compensation to Mr. Costello consisted of
reimbursement of relocation expenses.
(4) Mr. Johnson began employment with the Company in September 1995. The
fiscal 1996 Other Annual Compensation to Mr. Johnson consisted of
reimbursement of relocation expenses.
(5) Mr. McGrath left employment with the Company in June 1998.
(6) Mr. Powell began employment with the Company in September 1996.
(7) The number of options includes 125,000 shares for Mr. Costello and 46,900
shares for Mr. Powell that were granted prior to fiscal 1998 and were
amended in fiscal 1998. See "Report on Option Repricing."
8
<PAGE>
Option Grants
The following table contains information concerning the grant of stock
options under the Amended and Restated Urologix, Inc. 1991 Stock Option Plan
to the Named Executive Officers during the fiscal year ended June 30, 1998:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ---------------------------------------------------------------------------- ---------------------
% OF TOTAL
OPTIONS
GRANTED TO MARKET
EMPLOYEES EXERCISE PRICE
OPTIONS IN FISCAL PRICE ON DATE EXPIRATION
NAME GRANTED YEAR PER SHARE OF GRANT DATE 5% 10%
- ---- ------- ---------- --------- -------- ---------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John P. Costello........ 125,000(1) 20.6% $ 8.813 $ 8.813 02/03/07 $ 607,357 $ 1,495,949
50,000 8.2% 8.1875 8.1875 05/15/08 225,700 555,910
12,000 2.0% 18.00 18.00 07/14/07 135,841 344,248
Wesley E. Johnson, Jr... 20,000 3.3% 8.1875 8.1875 05/15/08 102,981 260,975
Jonathan R. McGrath..... 8,000 1.3% 18.00 18.00 07/14/08 90,561 229,499
12,000 2.0% 18.00 18.00 07/14/07 135,841 344,248
10,000 1.7% 8.1875 8.1875 05/15/08 51,491 130,488
David W. Powell......... 46,900(1) 7.7% 8.813 8.813 07/19/06 197,347 472,679
W. Allen Putnam......... 8,000 1.3% 18.00 18.00 07/14/07 90,561 229,499
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
- --------
(1) Reflects options that were granted prior to fiscal 1998 and were amended
in fiscal 1998. See "Report on Option Repricing."
Option Exercises and Year-End Values
Stock options were exercised by the Named Executive Officers during the
fiscal year ended June 30, 1998. The following table sets forth certain
information regarding exercised and unexercised options held by each of the
Named Executive Officers at the end of the fiscal year ended June 30, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUES AT FISCAL YEAR END
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT JUNE 30, 1998 AT JUNE 30, 1998(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack E. Meyer........... 10,000 $196,000 116,406 78,126 $727,736 $240,473
John P. Costello........ -- -- 26,562 148,438 0 15,625
Wesley E. Johnson, Jr... -- -- 39,307 60,373 265,377 185,248
Jonathan R. McGrath..... 85,000 632,438 27,290 0 0 0
David W. Powell......... -- -- 18,775 50,125 0 3,125
W. Allen Putnam......... -- -- 27,583 23,395 125,048 26,325
</TABLE>
- --------
(1) Represents the difference between the fair market value of the shares on
the date of exercise and the exercise price multiplied by the number of
option shares exercised.
(2) Represents only options that were "in-the-money" on June 30, 1998. The
value of unexercised options is calculated by determining the difference
between the fair market value of the shares underlying the options at June
30, 1998 and the exercise price of the options, times the number of
options outstanding. Fair market value was determined based on a per share
price of $8.50, which is the last sale price for the Company's common
stock on June 30, 1998, the last trading day in the Company's fiscal year.
9
<PAGE>
REPORT ON OPTION REPRICING
Over its history, the Company has believed that the granting of stock
options to employees has provided a significant incentive to the Company's
employees to align their interest with those of the Company's shareholders.
Substantially all the Company's employees have received options in the past.
The Company's policy has been to grant options to key employees when they are
initially hired and grant additional options to substantially all employees
based upon performance. On March 19, 1998, when the fair market value of the
Company's common stock was $8.813 per share, the Company's Compensation
Committee reviewed the Company's outstanding options and determined that the
Company had outstanding options at prices significantly above market.
The Committee believed that because of the significant difference between
the price of the Company's stock and the exercise price of these options, it
was unlikely that these options would provide significant incentive for
employees. Accordingly, on March 19, 1998, the Company amended 122 option
grants to three officers and certain other employees to establish a new
exercise price of $8.813 per share. The Committee believed that it was in the
best interests of the Company to amend these options to reflect the new
exercise price because the re-priced options would provide an additional
incentive for these employees to remain with the Company and thereby result in
increased shareholder value. Other than price, all terms of these stock
options were unchanged.
The table below provides information with respect to such repricing.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERLYING MARKET PRICE EXERCISE LENGTH OF ORIGINAL
OPTIONS OF STOCK AT PRICE AT OPTION TERM
REPRICED TIME OF TIME OF NEW REMAINING AT DATE
OR REPRICING OR REPRICING OR EXERCISE OF REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDMENT
- ---- -------- ---------- ------------ ------------ -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
John P. Costello........ 03/19/98 125,000 $8.813 $ 17.50 $8.813 8 years, 11 months
David W. Powell......... 03/19/98 46,900 $8.813 $ 13.375 $8.813 8 years, 6 months
Rob J. ten Hoedt........ 03/19/98 50,000 $8.813 $13.5625 $8.813 9 years, 11 months
</TABLE>
Subsequent to the Company's fiscal year end on June 30, 1998, the fair
market value of the Company's common stock further declined. The last sale
price on October 13, 1998 was $3.625. Accordingly, the Compensation Committee
determined that it was in the best interest of the Company to offer employees,
a consultant and members of the Medical Advisory Board the ability to
surrender their unexercised outstanding options for new options to purchase
the same number of shares at an exercise price of $3.625 per share. All
employee options issued upon surrender are subject to a new vesting period,
with 1/48 of the shares vesting on the 13th day of each month following
October 1998. Any new options granted to the consultant and the Medical
Advisory Board members contain the same vesting provisions as the original
surrendered options. As a result, 56 option holders surrendered options
representing 547,921 shares for the new option program. Members of the Board
of Directors were not given the right to surrender their outstanding director
options for new options. See "Certain Transactions."
BOARD COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for administering the Company's compensation program with respect
to the Company's executive officers. This report shall not be deemed
incorporated by reference to any filing under the Securities Act of 1933 or to
the Securities Exchange Act of 1934 and shall not otherwise be deemed to be
filed under either Act.
Compensation Philosophy
The compensation philosophy of the Company is to provide competitive levels
of compensation that are consistent with the Company's annual and long-term
performance goals, recognize individual initiative and achievements and assist
the Company in attracting and retaining qualified executives.
10
<PAGE>
In establishing compensation for executive officers, the Company examines a
variety of factors, including salaries for executives holding comparable
positions in similarly situated companies, including companies in the medical
device industry. The Company also seeks to establish an executive compensation
program that provides incentives that will reward officers for pursuing the
actions necessary to improve the Company's performance and increase long-term
shareholder value.
There are three elements to the Company's executive compensation program:
base salary, cash bonuses and long-term stock-based incentives. The Company
believes that there should be a strong relationship between executive
compensation and achievement of corporate goals.
Base Salary
Executive base salaries have been based upon past performance, experience,
responsibility and salary levels for persons holding similar positions in
similarly situated companies.
Cash Bonuses
Bonuses are awarded to executive officers in consideration of contributions
to the Company and the Company's overall performance and upon achievement of
specific established goals.
Stock Options
Stock options are generally granted to executive officers in connection with
their initial employment and periodically upon review of compensation levels
and past performance. The Committee believes that stock ownership by
management and stock-based performance compensation arrangements are
beneficial in aligning management and shareholder's interest in enhancing
shareholder value. Stock options have been awarded at an exercise price equal
to the fair market on the date of grant and therefore have value only if the
price of the Company's stock appreciates from the price on the date on which
the stock options are granted. In this way, the Company's executive officers
and shareholders benefit equally from such stock price appreciation. Stock
options are awarded in a manner consistent with the Company's objective to
provide a long-term equity interest in the Company and to provide an
opportunity for a greater financial reward if long-term performance is
sustained. To encourage a long-term perspective, options generally vest over a
four to five-year period.
Chief Executive Officer Compensation
On January 26, 1994, the Company entered into an employment agreement with
Jack Meyer under which Mr. Meyer agreed to serve as the Chief Executive
Officer and President of the Company at a salary of $150,000 per year, with
salary increases subject to the discretion of the Company's Board of
Directors. Mr. Meyer's salary was set at $180,000 for fiscal 1998. The
important elements used by the Company in establishing Mr. Meyer's
compensation for fiscal 1998, including the payment of a $22,500 bonus,
included the competitive marketplace for executives and the Company's success
in (i) building its relationship with Boston Scientific Corporation and
commencement of sales of the Targis(TM) System in Europe; (ii) obtaining,
through Nihon Kohden, its distribution partner in Japan, approval from Japan's
Ministry of Health and Welfare to market the Company's Targis(TM) System in
Japan; (iii) filing its pre-market approval ("PMA") application for the
Targis(TM) System in April 1997 which resulted in the subsequent approval of
the PMA by the United States Food and Drug Administration in August 1997; (iv)
the Company's recruitment of additional executives and managers to position
the Company for United States marketing; (v) commencement of product marketing
in the United States; and (vi) the completion of a $33.8 million secondary
public offering in November 1997.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ROBERT R. MOMSEN PAUL A. LA VIOLETTE
11
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
common stock of the Company from May 30, 1996, the first day of trading after
the Company's initial public offering, to June 30, 1998, the end of the
Company's fiscal year, with the cumulative total return of the Nasdaq Stock
Market and the Hambrecht--Quist Healthcare (excluding biotechnology) Index over
the same period (assuming the investment of $100 on May 30, 1996, the first day
of trading after the Company's initial public offering, and the reinvestment of
all dividends).
COMPARISON OF 25 MONTH CUMULATIVE TOTAL RETURN*
AMONG UROLOGIX, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST HEALTHCARE (EXCLUDING BIOTECHNOLOGY) INDEX
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
--------------------------------
5/30/96 6/96 6/97 6/98
<S> <C> <C> <C> <C>
UROLOGIX, INC. 100.00 96.43 121.43 60.71
NASDAQ STOCK MARKET (U.S.) 100.00 96.27 117.06 154.51
HAMBRECHT & QUIST HEALTHCARE (EXCLUDING BIOTECHNOLOGY) 100.00 95.61 120.06 145.76
</TABLE>
* $100 INVESTED ON 5/30/96 IN STOCK OR INDEX--INCLUDING REINVESTMENT OF
DIVIDENDS.
FISCAL YEAR ENDING JUNE 30, 1998
12
<PAGE>
COMPENSATION OF DIRECTORS
Under the current terms of the Company's 1991 Stock Option Plan, persons
first elected as non-employee directors receive options to purchase 10,000
shares at a price equal to fair market value on the date of grant. The options
vest over four years and expire ten years from the date of grant, subject to
earlier termination one year after the person ceases to be a director of the
Company. Each director is also reimbursed for expenses associated with
attending Board of Directors meetings. Non-employee directors are also paid
$1,000 per board meeting and $500 per committee meeting. See Proposal Two.
EMPLOYMENT AGREEMENTS
On January 26, 1994, the Company entered into an employment agreement with
Jack Meyer under which Mr. Meyer agreed to serve as the Chief Executive
Officer and President of the Company at a salary of $150,000 per year, with
salary increases subject to the discretion of the Company's Board of
Directors. Mr. Meyer's salary was set at $180,000 for fiscal year 1998. Mr.
Meyer resigned as President and Chief Executive Officer effective October 16,
1998. In connection with his resignation, Mr. Meyer entered into a severance
agreement with the Company. Under the severance agreement, Mr. Meyer's monthly
salary of $15,416 and certain employee insurance benefits will be continued
for up to nine months or until the date he secures other employment, if
earlier. In addition, the Board of Directors waived the service requirement
with respect to 23,750 option shares and extended the exercise period for
those options for 60 days.
The Company entered into a severance agreement with Jonathon R. McGrath in
connection with the termination of his employment in June 1998. Under the
agreement, Mr. McGrath's monthly salary of $12,518 and certain employee
insurance benefits will be continued until March 1, 1999 or until the date he
secures other employment, if earlier. In addition, the Board of Directors
waived the service requirement with respect to the unvested portion of 100,000
option shares.
The Company also has in place letter severance agreements with the other
Named Executive Officers. Under the terms of their respective agreements, the
Company has agreed that, if the employment of the Named Executive Officer is
terminated without cause, the Company will pay the officer's salary for a
period of six or twelve months or until such person has secured alternative
employment, whichever occurs first.
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 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. These insiders are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file, including Forms 3, 4 and 5. During the fiscal year ended June 30, 1998,
all reports required by insiders were filed in a timely manner.
13
<PAGE>
PROPOSAL TWO
APPROVAL OF AMENDMENTS TO THE COMPANY'S
AMENDED AND RESTATED 1991 STOCK OPTION PLAN
GENERAL INFORMATION
On August 1, 1991, the Company's Board of Directors adopted the Urologix,
Inc. 1991 Stock Option Plan (the "Stock Plan"). The purpose of the Stock Plan
is to attract and retain executives and other key employees, directors and
consultants, as well as to reward such persons who contribute to the
achievement of the Company's success, by giving them a proprietary interest in
the Company. The Stock Plan authorizes the granting of stock options, stock
appreciation rights ("SARs"), restricted stock and deferred stock awards.
AMENDMENTS TO THE STOCK PLAN
The Company is submitting for shareholder approval an amendment to the Stock
Plan to increase the number of shares of common stock reserved for issuance
under the Stock Plan by 500,000 shares and to modify the stock option award
made to directors who are not employees of the Company.
The Board of Directors has amended the Stock Plan, subject to shareholder
approval, to increase the total number of shares of common stock available for
awards under the Stock Plan by 500,000 shares, which would result in 583,834
shares being available for future grant and 1,161,523 shares being reserved
for issuance pursuant to outstanding options. The remaining option shares
under the Stock Plan have previously been issued upon the exercise of stock
options by various optionees from time-to-time. At present, only 83,834 shares
remain available for future grants under the Stock Plan. The Board of
Directors has deemed it prudent to increase the number of shares available for
grants under the Stock Plan to facilitate any further awards under the Stock
Plan. The Board of Directors believes the Company's stock option program is a
key element in providing competitive compensation to attract and retain
qualified employees, directors and consultants. In connection with Mr.
Selzer's employment, the Company granted him an option outside of the Stock
Plan to purchase 400,000 shares of common stock and granted him 25,000 shares
of restricted stock outside of the Stock Plan.
The amendment would also modify the Stock Plan provision for grants to
members of the Board of Directors who are not employees of the Company. Since
April 1996, each such director has received an option grant to purchase 10,000
shares of common stock upon his or her initial election to the Board. These
options have been granted at the fair market value on the date of grant and
vest over a four-year period. The Board desires to amend the Stock Plan to
provide an annual grant of 5,000 shares to directors who are not employees of
the Company as of the date of the Company's annual shareholder meeting. The
Board of Directors believes that this new formula will better align director
compensation with interests of the shareholders on an annual basis. Further,
the Board believes that it will be required to recruit new directors to
replace retiring directors who joined the Board as part of the Company's
earlier venture financing transactions. The Board believes that the new
formula will allow the Company to attract qualified, independent directors in
the competitive marketplace. If Proposal Two is approved by the shareholders,
the first new grants will be made in connection with the meeting on January
14, 1999. All unvested director options previously granted to the directors
who continue to serve after that meeting will be terminated.
The Stock Plan is summarized below:
Eligibility. Officers, other key employees of the Company and any
subsidiaries, members of the Board of Directors and consultants are eligible
to be granted stock options, SARs, restricted stock or deferred stock under
the Stock Plan. Currently, approximately 100 employees as well as all of the
Company's non-employee directors are eligible to participate in the Stock
Plan. The Board of Directors, or the Compensation Committee (the "Committee"),
selects optionees and participants and determines the number of shares, the
price, the term and the vesting provisions for each award.
14
<PAGE>
Stock Options. The Stock Plan permits the granting of two types of options:
(i) Incentive Stock Options, that are intended to qualify under Section 422 of
the Internal Revenue Code, and (ii) Non-Qualified Stock Options. No Incentive
Stock Option may be granted under the Stock Plan after August 1, 2004. If
Proposal Two is approved, the termination date will become January 14, 2009.
The option price of an Incentive Stock Option may not be less than 100% of the
fair market value of the Company's common stock on the date of grant, and the
exercise price of a Non-Qualified Option may not be less than 85% of the fair
market value on the date of grant. If an employee owns more than 10% of the
combined voting power of the Company's outstanding voting stock, the option
price shall be no less than 110% of the fair market value on the date of
grant. The last sale price of the Company's common stock on the Nasdaq Stock
Market on December 4, 1998 was $4.375.
The term of each option is established by the Committee, but shall not
exceed 10 years (five years in the event of an optionee who owns more than 10%
of the combined voting power of the Company's outstanding voting stock). Each
option will become exercisable at such time and on such conditions as are
determined by the Committee. In the event of Change of Control (as defined in
the Stock Plan), each outstanding Stock Option will, except under certain
limited circumstances, automatically become exercisable in full without regard
to any installment exercise or vesting provisions.
Under the current formula, each member of the Board of Directors who is not
an employee of the Company is automatically granted, on the date such director
is first elected to the Board, a Non-Qualified Option to purchase 10,000
shares of common stock at an option price equal to the fair market value of
the stock on the date of grant. The term of each such option is ten years and
the options become exercisable as to 25% of the total shares after each
consecutive year following the date of grant. If Proposal Two is approved by
the shareholders of the Company, each such director will receive a Non-
Qualified Stock Option to purchase 5,000 shares at the fair market value on
the date of the Company's annual shareholder meeting. The options will be
exercisable in full immediately after grant. The unvested portion of the
original 10,000 share grants will be canceled.
Stock Appreciation Rights. A stock appreciation right ("SAR") is a right
given to a person in conjunction with a stock option. The SAR enables the
option holder to elect to receive the difference between the option exercise
price and the market price of the stock in cash or stock, or a combination of
both. The option holder surrenders the option to the Company and receives the
"gain" in cash or stock. As of the date of this Proxy, no SARs have been
granted under the Stock Plan.
Restricted Stock. The Board of Directors (or the Committee) may issue shares
of restricted stock to participants in the Stock Plan which are conditioned
upon the achievement of specified performance goals. The recipient of an award
of restricted stock has no rights with respect to the stock unless and until
the recipient has achieved those goals. As of the date of this Proxy, no
restricted stock has been issued under the Stock Plan.
Deferred Stock. Similar to restricted stock, deferred stock awards may be
issued under the Stock Plan which are conditioned upon the attainment of
specified performance goals. The provisions of deferred stock awards and
restricted stock awards need not be the same with respect to each recipient.
As of the date of this Proxy, no deferred stock has been issued under the
Stock Plan.
Individual Limit. The Stock Plan provides that no person may, during any
fiscal year of the Company, receive grants of stock options and SARs under the
Stock Plan which, in the aggregate, exceed 500,000 shares. This limitation is
intended to qualify such awards as performance-based compensation which are
exempt under the limitations imposed by Internal Revenue Code Section 162(m).
15
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
An optionee will not realize taxable income upon either the granting or
exercise of an Incentive Stock Option. However, upon exercise of the Incentive
Stock Option, the amount by which the fair market value of any shares
exercised exceeds the option price is an item of tax preference for purposes
of the alternative minimum tax. Upon the sale of such stock, the optionee
generally will recognize capital gain or loss if the stock has been held for
at least two years from the date of the option grant and at least one year
after the stock was purchased. Such capital gain or loss will be treated as
long-term capital gain or loss and taxed at a maximum rate of 20% if the stock
was held for at least 18 months, and will be treated as mid-term capital gain
or loss and taxed at a maximum rate of 28% if the stock was held for more than
12 months but less than 18 months. If the applicable holding periods are not
satisfied, then any gain realized in connection with the disposition of such
stock will generally be taxable as compensation income in the year in which
the disposition occurred, to the extent of the difference between the fair
market value of such stock on the date of exercise and the option exercise
price. The balance of any gain will be characterized as capital gain. The
Company is entitled to a tax deduction to the extent, and at the time, that
the participant realizes compensation income.
An optionee also will not realize taxable compensation income upon the grant
of a Non-Qualified Stock Option. When an optionee exercises a Non-Qualified
Stock Option, he or she realizes taxable compensation income at that time
equal to the difference between the aggregate option price and the fair market
value of the stock on the date of exercise. Upon the disposal of stock
acquired pursuant to a Non-Qualified Option, the optionee's basis for
determining taxable gain or loss will be the sum of the option price paid for
the stock plus any related compensation income recognized by the optionee, and
such gain or loss will be long-term or short-term capital gain or loss
depending on whether the optionee has held the shares for more than one year.
The grant of restricted stock and deferred stock will not result in
immediate income for the participant or a deduction for the Company for
federal income tax purposes, assuming the shares are not transferable and
subject to restrictions creating a "substantial risk of forfeiture," as
intended by the Company. If the shares are transferable or there are no such
restrictions or deferral periods, the participant will generally realize
compensation income upon receipt of the award. Otherwise, any participant
generally will realize taxable compensation income when any such restriction
or deferral period lapses. The amount of such income will be the value of the
common stock on that date, less any amount paid for the shares. Dividends paid
on the common stock and received by the participant during the restricted
period or deferral period would also be taxable compensation income to the
participant. In any event, the Company will be entitled to a tax deduction to
the extent, and at the time, that the participant realizes compensation
income. A participant may elect, under Section 83(b) of the Internal Revenue
Code, to be taxed on the value of the stock at the time of award. If this
election is made, the fair market value of the stock at the time of the award
is taxable to the participant as compensation income and the Company is
entitled to a corresponding deduction.
REGISTRATION WITH SEC
The Company has previously filed Registration Statements covering the
offering of the shares under the Stock Plan with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. If Proposal Two
is adopted, the Company intends to file a similar Registration Statement
covering the 500,000 additional shares available for issuance under the Stock
Plan.
VOTE REQUIRED
Shareholder approval of the amendment to the Stock Plan requires the
affirmative vote of the holders of a majority of the shares of common stock
represented at the Annual Meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT AS SET FORTH IN PROPOSAL TWO.
16
<PAGE>
CERTAIN TRANSACTIONS
In 1996, the Company entered into an international distribution agreement
with Boston Scientific Corporation ("Boston Scientific"). Under the agreement,
Boston Scientific was granted exclusive distribution rights for the Company's
Targis System in all countries outside the United States and Japan for a
period of five years ending in 2001. Prior to entering into this distribution
agreement, Boston Scientific made an equity investment in the Company and
currently holds approximately 5.2% of the Company's common stock. During the
year ended June 30, 1998, the Company sold approximately $5,395,000 of product
to Boston Scientific. In October 1998, the Company also entered into a two-
year Co-Marketing Agreement with Boston Scientific, under which the sales
force associated with the Boston Scientific Microvasive Urology Division will
work in conjunction with the Urologix sales force to actively promote and
market the sale of the Urologix Targis(TM) System in the United States. Paul
A. LaViolette, a Senior Vice President and President--International of Boston
Scientific, is a director of the Company.
M. Dann & Co., Inc., a company owned by Mitchell Dann, the Company's
chairman, currently provides consulting services to the Company. These
consulting services include, without limitation, assessing overall strategic
direction, developing and monitoring patent strategy, and maintaining
relationships with key physicians and the financial community. For these
services, the Company paid M. Dann & Co., Inc. an aggregate of $90,000 plus
expenses in the amount of $17,325 during fiscal 1998. The Consulting Agreement
commenced as of September 1, 1996 and has been renewed on an annual basis
thereafter.
Since September 1, 1993, the Company has had a Consulting Agreement with Dr.
David C. Utz, a director of the Company. The agreement has a one-year term,
which has been annually extended to August 31, 1999. Dr. Utz provides
consulting services to the Company in connection with the Medical Advisory
Board, as well as general consultation in the Company's products and clinical
evaluation of those products. In exchange for his services, Dr. Utz is paid
$24,000 per year, and at November 16, 1998 had received non-qualified stock
options to purchase an aggregate of 26,550 shares of the Company's common
stock under the Consulting Agreement and as a Scientific Advisory Board
member. In connection with the October 13, 1998 re-pricing of employee and
Medical Advisory Board stock options and the stock options granted to Dr. Utz
under his Consulting Agreement, Dr. Utz surrendered 12,000 options and
received replacement options to purchase the same number of shares at an
exercise price of $3.625 per share.
SHAREHOLDER PROPOSALS
The proxy rules of the Securities and Exchange Commission permit
shareholders of a company, after timely notice to the company, to present
proposals for shareholder action in the company's proxy statement where such
proposals are consistent with applicable law, pertain to matters appropriate
for shareholder action and are not properly omitted by company action in
accordance with the proxy rules. The Urologix, Inc. 1999 Annual Meeting of
Shareholders is expected to be held on or about November 17, 1999, and proxy
materials in connection with that meeting are expected to be mailed on or
about October 13, 1999. Shareholder proposals prepared in accordance with the
proxy rules must be received by the Company on or before June 16, 1999.
ANNUAL REPORT
An Annual Report of the Company setting forth the Company's activities and
containing financial statements of the Company for the fiscal year ended June
30, 1998 accompanies this Notice of Annual Meeting and proxy solicitation
material.
17
<PAGE>
The accounting firm of Arthur Andersen, LLP has served as independent public
accountants for the Company for the year ended June 30, 1998. The Company has
selected Arthur Andersen, LLP to serve as independent public accountants for
the Company for the fiscal year ended June 30, 1999. The Company expects that
a representative from Arthur Andersen, LLP will attend the Annual Meeting and
be available to respond to appropriate shareholder questions.
GENERAL
The Company's Annual Report to Shareholders for the fiscal year ended June
30, 1998 is being mailed to shareholders with this Proxy Statement.
Shareholders may receive without charge a copy of the Company's Annual Report
on Form 10-K, including financial statements schedules and amendments thereto,
as filed with the Securities and Exchange Commission, by writing to: Urologix,
Inc., 14405 21st Avenue North, Minneapolis, Minnesota 55447, Attention: Wesley
E. Johnson, Jr. or by calling the Company at (612) 475-1400.
By the Order of the Board of
Directors
/s/ Wesley E. Johnson, Jr.
Wesley E. Johnson, Jr., Secretary
18
<PAGE>
- --------------------------------------------------------------------------------
UROLOGIX, INC.
14405 TWENTY-FIRST AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55447
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of Annual Meeting and Proxy
Statement dated December 9, 1998, hereby appoints Mitchell Dann and Wesley E.
Johnson, or either of them, proxies (each with full power to act alone and
with the power of substitution and revocation), to represent the undersigned
and to vote in their discretion cumulatively, all shares of Common Stock of
Urologix, Inc. held of record in the name of the undersigned at the close of
business on November 16, 1998, at the Annual Meeting of Shareholders to be
held on January 14, 1999, or at any adjournment or adjournments, hereby
revoking all former proxies.
------------------
SEE REVERSE SIDE
------------------
- -------------------------------------------------------------------------------
<PAGE>
UROLOGIX, INC.
ANNUAL MEETING
Marquette Hotel
701 Marquette Avenue
Minneapolis, Minnesota 55402
JANUARY 14, 1999
10 A.M. LOCAL TIME
- Please detach here -
- --------------------------------------------------------------------------------
UROLOGIX, INC.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE
ENCLOSED ENVELOPE.
- Please detach here -
- --------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS. [_] FOR all nominees (except as [_] WITHHOLD
01 Bobby I. Griffin marked to the contrary below) AUTHORITY
02 Robert R. Momsen
03 Michael M. Selzer, Jr.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN
INDIVIDUAL NOMINEE, WRITE THE NUMBER(S) OF THE
NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) [_____________________]
2. PROPOSAL TO APPROVE CERTAIN AMENDMENTS TO
THE UROLOGIX, INC. AMENDED AND RESTATED
1991 STOCK OPTION PLAN. [_] FOR [_] AGAINST [_] ABSTAIN
3. THE PROXIES ARE AUTHORIZED TO VOTE IN
THEIR DISCRETION UPON ANY OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING.
UNLESS YOU INDICATE OTHERWISE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
BOARD OF DIRECTORS' RECOMMENDATIONS.
Dated: ______________, 199_
[_] I plan to attend the meeting.
________________________________
| |
| |
|______________________________|
Signature(s) in Box
THIS PROXY CARD MUST BE SIGNED
EXACTLY AS NAME APPEARS THEREON.
When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee 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
authorized person.
