<PAGE>
As filed with the Securities and Exchange Commission on August 10, 1999
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
UROLOGIX, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1697237
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14405 21st Avenue North
Minneapolis, MN 55447
----------------------------------------------------
(Address of Principal Executive Offices and zip code)
---------------------------
AMENDED AND RESTATED UROLOGIX, INC.
1991 STOCK OPTION PLAN
RESTRICTED STOCK AGREEMENT
STOCK OPTION AGREEMENT
(Full title of the Plans)
---------------------------
Christopher Geyen
Vice President, Finance and Administration
Urologix, Inc.
14405 21st Avenue North
Minneapolis, MN 55447
(612) 475-1400
(Name, address, including zip code and telephone number of agent for service)
Copy to:
Thomas G. Lovett IV, Esq.
Dawn M. Szymborski, Esq.
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
(612) 371-3211
---------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum Amount of
Title of Securities Amount to be Offering Price Aggregate Registration
to be Registered Registered Per Share Offering Price Fee
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock to be 500,000 shares (1) $2.6875 (2) $1,343,750 $373.66
issued pursuant to
Amended and Restated
Urologix, Inc. 1991
Stock Option Plan
- -----------------------------------------------------------------------------------------------------
Common Stock issued 25,000 shares $2.6875 (2) $ 67,186 $ 18.68
pursuant to Restricted
Stock Agreement of
Michael M. Selzer, Jr.
- -----------------------------------------------------------------------------------------------------
Options to purchase 400,000 shares $3.875 $1,550,000 $430.90
Common Stock issued
pursuant to Stock
Option Agreement of
Michael M. Selzer, Jr.
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) 1,550,910 shares under the 1991 Stock Option Plan were previously
registered on Form S-8 (File No. 333-11981) on September 13, 1996. 400,000
additional shares were registered under the 1991 Stock Option Plan on Form
S-8 (File No. 333-41385) on December 3, 1997.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) and (h) and based upon the last reported sale price
for our Common Stock on the Nasdaq Stock Market's National Market on August
4, 1999.
- --------------------------------------------------------------------------------
2
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information specified in the instructions to
Part I of the Registration Statement on Form S-8 will be sent or given to
participants of the Plan as required by Rule 428(b)(1) of the Securities Act of
1933, as amended. As permitted by the instructions to Part I of the
Registration Statement on Form S-8, these documents are not filed with this
Registration Statement.
EXPLANATORY NOTES
Included on the immediately following pages is a "reoffer prospectus." The
selling shareholder can use this document in connection with the reoffer and
resale of restricted securities.
3
<PAGE>
PROSPECTUS 25,000 SHARES
UROLOGIX, INC.
COMMON STOCK
-------------
This prospectus relates to reoffers and resales by Michael M. Selzer, Jr.,
the selling shareholder, of up to 25,000 shares of our common stock that have
been issued as restricted common stock. The number of shares offered may be
adjusted as a result of a stock split, stock dividend or similar transactions.
All net proceeds from the shares of common stock offered by this prospectus will
go to the selling shareholder. We will not receive any proceeds from the sale of
the shares.
The selling shareholder may offer his shares of common stock through public
or private transactions, in the over-the-counter markets, on any exchanges on
which our common stock is traded at the time of sale, at prevailing market
prices or at privately negotiated prices. The selling shareholder may engage
brokers or dealers who may receive commissions or discounts from the selling
shareholder. We will pay substantially all of the expenses related to the
registration of these shares, except for the selling commissions.
Our common stock is listed on the Nasdaq Stock Market's National Market
under the ticker symbol "ULGX." The closing price of our common stock on August
4, 1999, was $2.6875 per share.
------------------------
See "risk factors" at page 5 of this prospectus for a discussion of
material factors which you should consider before investing in the common stock
offered by this prospectus.
Neither the securities and exchange commission nor any state securities
commission has approved or disapproved of these securities or has determined if
this prospectus is adequate or accurate. Any representation to the contrary is a
criminal offense.
------------------------
The date of this prospectus is August 10, 1999.
You should rely only on the information contained in this document or that
which we have referred you to. We have not authorized anyone to provide you with
information that is different. We are not offering to sell the common stock
offered in this document to any person unauthorized to or prohibited from
purchasing the common stock. No information contained in this document is
correct as of any time after the date of this prospectus.
4
<PAGE>
TABLE OF CONTENTS
-----------------
AVAILABLE INFORMATION............................................... 2
INCORPORATION OF DOCUMENTS BY REFERENCE............................. 3
INFORMATION ABOUT UROLOGIX, INC..................................... 4
RISK FACTORS........................................................ 5
USE OF PROCEEDS..................................................... 13
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES...................... 13
SELLING SHAREHOLDER................................................. 13
PLAN OF DISTRIBUTION................................................ 14
OFFER AND SALE OF SHARES............................................ 14
BROKERS AND DEALERS................................................. 15
LEGAL MATTERS....................................................... 16
5
<PAGE>
AVAILABLE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the Securities and Exchange Commission's public
reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the Securities and Exchange Commission at 1-800-732-0330 for further
information on the operation of this public reference room. You also can request
copies of these documents, upon payment of a duplicating fee, by writing to the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 or obtain copies of these documents from the Securities and Exchange
Commission's web site at http://www.sec.gov.
We have filed a registration statement (of which this prospectus is a part)
under the Securities Act of 1933, as amended, with the Securities and Exchange
Commission, with respect to the securities being offered. This prospectus does
not contain all of the information set forth in the registration statement. We
have omitted information as permitted by the rules and regulations of the
Securities and Exchange Commission. Statements contained in this prospectus as
to the contents of any contract or other document are not necessarily complete,
and in each instance we refer you to the copy of this contract or other document
filed as an exhibit to the registration statement. Each statement made in this
prospectus is qualified in all respects by the contents of the exhibits and
schedules to the registration statement. For further information regarding our
company and the securities being offered, please read the registration statement
and the exhibits and schedules which may be obtained from the Securities and
Exchange Commission at its principal office in Washington, D.C. upon payment of
the fees prescribed by the Securities and Exchange Commission.
6
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information we incorporate by reference below is considered to be part of this
prospectus and information that we file with the Securities and Exchange
Commission after the filing of the registration statement will automatically
update and supersede the information set forth below. We incorporate by
reference the documents listed below and any future filings we make with the
Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended:
(a) Our Annual Report on Form 10-K for the fiscal year ended June 30,
1998.
(b) Amendment No. 1 to our Annual Report on Form 10K/A dated October 28,
1998.
(c) Our Quarterly Reports on Form 10-Q for the three months ended
September 30, 1998, the three months ended December 31, 1998 and the
three months ended March 31, 1999.
(d) Our Definitive Proxy Statement dated December 10, 1998 for the Annual
Meeting of Shareholders held on January 14, 1999.
(e) The description of our common stock contained in our registration
statement on Form S-3, dated November 10, 1997 (Registration No. 333-
38053), including any amendment or report filed for the purpose of
updating the description.
You may request a copy of these filings (including exhibits to these
filings that we have specifically incorporated by reference in these filings),
at no cost, by writing or telephoning our executive offices at the following
address:
Urologix, Inc.
Attention: Vice President,
Finance and Administration
14405 21st Avenue North
Minneapolis, MN 55447
(612) 475-1400
7
<PAGE>
INFORMATION ABOUT UROLOGIX, INC.
We, Urologix, Inc., develop, manufacture and market minimally invasive
medical devices for the treatment of urological diseases. Our initial product,
the Targis System, is designed to treat benign prostatic hyperplasia, commonly
known as "enlarged prostate." Enlarged prostate dramatically affects the
quality of life of millions of men often by causing adverse changes in urinary
voiding patterns. The Targis System has been approved for marketing in the
United States, the 15 European Union countries, Japan and Canada. We are
currently selling the Targis System outside the United States through
distributors and in the United States through our direct sales force.
The Targis procedure is a non-surgical, catheter-based therapy that uses a
proprietary microwave technology that preferentially heats diseased areas of the
prostate to a temperature sufficient to cause cell death, while simultaneously
cooling and protecting the pain-sensitive urethral tissue. Because the urethra
is protected from heat and is not punctured or penetrated, the Targis procedure
can be performed without general or regional anesthesia or intravenous sedation.
Accordingly, the procedure can be performed in a low-cost setting like a
physician's office or an outpatient clinic. We believe that the Targis System
provides an effective, safe and cost-efficient procedure for the treatment of
enlarged prostate without the complications and side effects inherent in most
current treatments. As a result, the Targis System is well positioned to
address the needs of physicians, patients and payors.
Our clinical studies demonstrated that most patients who received the
Targis therapy experienced a significant improvement in the symptoms of enlarged
prostate and urine flow rates, minimal complications and post-treatment
discomfort, and were able to return to normal activities within a few days. As
of September 15, 1998, more than 800 patients affected with enlarged prostate
have been treated with the Targis System in controlled clinical studies,
including 98 patients with three-year follow-up data and 23 patients with four-
year follow-up data. We submitted results of our clinical studies to the United
States Food and Drug Administration (the "FDA") in our premarket approval
application in February 1997 and received FDA approval to market the Targis
System in August 1997.
We, are a Minnesota corporation with our principal executive offices at
14405 21st Avenue North Minneapolis, Minnesota 55447. Our telephone number is
(612) 475-1400.
The shares offered by this Prospectus have been issued as restricted stock
to the selling shareholder.
8
<PAGE>
RISK FACTORS
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed.
In addition to the other information in this prospectus, the following factors
should be considered carefully in evaluating an investment in the shares of
common stock offered by this prospectus. New factors emerge from time to time,
and it is not possible for us to predict all factors. Further, we cannot assess
the impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any statements contained in this prospectus. We are not obligated
to revise or update these forward-looking statements to reflect new events or
circumstances.
Uncertainty of Market Acceptance
The Targis procedure represents a new therapy for enlarged prostate, and
there can be no assurance that the Targis System will gain any significant
degree of market acceptance among physicians, health care payors or patients.
Physicians may elect not to perform the procedure unless adequate reimbursement
from health care payors is available. Health care payor acceptance of the Targis
procedure will require, among other things, evidence of the cost effectiveness
of the Targis procedure as compared to other enlarged prostate therapies.
Patient acceptance of the procedure will depend in part on physician
recommendations, as well as other factors, including the degree of invasiveness,
the rate and severity of complications and other side effects associated with
the procedure, as compared to other therapies. There can be no assurance as to
whether and, if so, how frequently patients receiving the Targis procedure will
require retreatment and whether any retreatment would be effective or would have
a negative impact on patient, physician and payor acceptance of the Targis
procedure. Failure of the Targis System to achieve significant market acceptance
among physicians, health care payors and patients would have a material adverse
effect on our business, financial condition and results of operations.
Uncertainty Relating to Third-Party Reimbursement
Our success will be largely dependent upon the extent to which third party
reimbursement is obtained for the costs of the Targis System and the performance
of the Targis procedure by physicians. In the United States, third party
reimbursement for the Targis procedure depends on decisions made by the
Health Care Financing Administration for Medicare reimbursement as well as by
individual health maintenance organizations, private insurers and other payors.
Medicare reimbursement is particularly critical for widespread market acceptance
of the Targis System in the United States because of the age of patients using
it. Recently, the Health Care Financing Administration has proposed changes
which, if implemented, may affect Medicare coverage of the procedures performed
using the Targis System.
Reimbursement systems in international markets vary significantly by
country. Many international markets have governmentally managed health care
systems that govern reimbursement for new devices and procedures. In most
markets, there are private insurance systems as well as governmentally managed
systems. Failure to obtain sufficient third-party reimbursement or adverse
changes in governmental and private
9
<PAGE>
third-party payors' policies toward reimbursement for enlarged prostate
procedures could have a material adverse effect on our business, financial
condition and results of operations.
Dependence on Patents and Proprietary Rights
Our success depends in part on our ability to protect the Targis System and
technology under United States and international patent laws and other
intellectual property laws and to operate without infringing upon the
proprietary rights of third parties. We aggressively pursue protection of our
intellectual property and have been issued a number of United States patents.
We also have patent applications pending in the United States and in a number of
foreign jurisdictions and intend to file additional patent applications in the
future.
The United States patents issued to us claim methods and devices which we
believe are critical to providing a safe and efficacious treatment for enlarged
prostate. Several of the claims under these patents relate to devices and
methods for preferentially limiting the amount of microwave energy directed
toward the rectum. Because cell death is a function of time and temperature and
because the rectum is in close proximity to the prostate, we believe
preferential heating is critical to treating enlarged prostate while not
endangering the rectum.
We also have several issued patents and pending applications relating to
our gamma-matched, helical-dipole microwave antenna. For a microwave antenna to
radiate energy efficiently, it must be impedance matched to its environment.
Further, the antenna design controls the evenness of the heating and the area to
be heated. We have been issued patents covering various designs and methods of
our helical microwave antenna with impedance matching.
There can be no assurance that these patents, or any patents that may be
issued as a result of existing or future applications, will offer any degree of
protection from competitors or that any of our patents or applications will not
be challenged, invalidated or circumvented in the future. In addition, there can
be no assurance that competitors, many of which have substantial resources and
have made substantial investments in competing technologies, will not seek to
apply for and obtain patents that will prevent, limit or interfere with our
ability to manufacture or market the Targis System in the United States or in
international markets. Further, there can be no assurance the Targis System does
not infringe upon the patent rights or other intellectual property rights of
other companies, that we will not be required to seek licenses from other
companies or that other companies will not pursue claims of infringement against
us.
Other companies have developed or are in the process of developing medical
methods and devices to transurethrally treat enlarged prostate with microwave
energy. Several companies have applied for, and in some cases received, patents
related to these medical methods and devices. One company, BSD Medical
Corporation ("BSD"), initiated a patent infringement lawsuit against us in 1992.
We chose to settle that lawsuit in March 1994 by entering into a settlement
agreement with BSD under which BSD granted us a license for the patent at issue,
as
10
<PAGE>
well as several other patents. In May 1998 we entered into a settlement
agreement with BSD and Thermatrix, Inc. which resolved a dispute about the
original settlement agreement. Under the terms of the settlement agreement
entered into in 1998, we paid a total of $5.0 million and now hold a fully-paid,
non-cancellable, non-exclusive, worldwide license from BSD and Thermatrix, Inc.
with respect to patents relating to the microwave treatment of enlarged prostate
and other urological diseases.
In August 1996, we entered into a non-exclusive, worldwide patent license
agreement with EDAP TMS S.A., a French corporation, and its subsidiary, EDAP
Technomed, Inc. (collectively referred to as "EDAP") for various EDAP patents
relating to the microwave treatment of enlarged prostate.
We also rely on trade secrets and proprietary know-how, which we seek to
protect, in part, through proprietary information agreements with employees,
consultants and other parties. Our proprietary information agreements with our
employees and most of our consultants contain industry standard provisions
requiring these individuals to assign to us, without additional consideration,
any inventions conceived or reduced to practice while retained by us, subject to
customary exceptions. Our officers and other key employees also agree not to
compete with us for a period following termination. There can be no assurance
that proprietary information or non-compete agreements with employees,
consultants and others will not be breached, that we would have adequate
remedies for any breach, or that third parties will not gain access to our
technology.
Reliance on Single Product
The Targis System is our sole product. Our future success is entirely
reliant upon our ability to market the Targis System commercially in the United
States and elsewhere. If we are unable to commercialize the Targis System
successfully, our business, financial condition and results of operations would
be materially adversely affected.
Limited Manufacturing Experience
We have only limited experience in manufacturing the Targis System in large
quantities. Our facilities and the facilities of some of our contract
manufacturers will need to comply with applicable regulations including the
FDA's quality system regulation which includes the FDA's current good
manufacturing practice requirements, and with ISO 9001 certification
requirements and other regulations. Any failure to comply with applicable
requirements and regulations by us or our contract manufacturers could interrupt
or delay manufacturing of the Targis System, which could have a material adverse
effect on our business, financial condition and results of operations.
11
<PAGE>
Dependence on Third Party Distributors
Boston Scientific has exclusive distribution rights for the Targis System
in all countries outside the United States, except Japan, and Nihon Kohden has
exclusive distribution rights in Japan. If either Boston Scientific or Nihon
Kohden breached or terminated their agreement with us or encountered financial
difficulties, it could have a material adverse effect on our business, financial
condition and results of operations. Further, the failure of either of these
companies to effectively market the Targis System could have an adverse effect
on our ability to achieve penetration of these markets and establish long-term
acceptance of the Targis System.
Contract Manufacturing; Dependence Upon Key Suppliers
The control unit for the Targis System is assembled by a contract
manufacturer pursuant to a supply agreement. If for any reason the contract
manufacturer is unable or unwilling to manufacture the control unit for us in
the future, we could incur significant delays in obtaining a substitute contract
manufacturer. In addition, we purchase additional components used in the Targis
System from various suppliers and rely on single sources for several components.
One component is obtained from a source that has a patent for the technology.
Delays could be caused if supply of this component or other components were
interrupted. These delays could be extended in some situations where a
substitute contract manufacturer or a component substitution would require
approval by the FDA of a premarket approval application supplement.
We expect to be dependent upon these manufacturers and subcontractors for
the foreseeable future. Failure to obtain components from these sources or
delays associated with any future component shortages could have a material
adverse effect on our business, financial condition and results of operations.
Intense Competition and Frequent Technological Advances
Competition in the market for treatment of enlarged prostate is intense and
is expected to increase. We believe our principal competition will come from
existing surgical therapies and non-surgical alternatives, including drug
therapy and watchful waiting. We face and expect increasing competition from
numerous other companies developing drugs and laser, radio frequency, microwave
and other procedures for the treatment of enlarged prostate. Many of our
competitors have significantly greater financial, technical, research,
marketing, sales, distribution and other resources than us. In addition, our
competitors may succeed in developing or marketing technologies and products
that are more effective or commercially attractive than the Targis System. In
addition, some of our competitors introduced commercially marketable competitive
products prior to us. There can be no assurance that we will be able to compete
successfully against any competitors.
12
<PAGE>
Need to Comply with Government Regulation
Government regulation in the United States and other countries is a
significant factor in the development and marketing of the Targis System and in
our ongoing manufacturing and research and development activities. We are
regulated in the United States by the FDA with respect to preclinical and
clinical testing, manufacturing, labeling, distribution, sales, marketing,
advertising and promotion of the Targis System. In order to market and sell the
Targis System, we were required to obtain marketing approval from the FDA. In
August 1997, we received approval of our premarket approval application from the
FDA. In July of 1998, the FDA approved expanded claims for the product allowing
treatment for obstruction of the urethra caused by enlarged prostate. The FDA
made the Targis System a restricted device which means that its labeling
specifies requirements for the training of physicians who may use the device and
that the FDA has greater control over advertising for the Targis System. The FDA
also imposed a post-approval study requirement. Our failure to comply with these
and other post-approval requirements could cause the FDA to withdraw its
approval of the premarket approval application for the Targis System. We intend
to comply with all post-approval requirements. The FDA's regulations require
agency approval of a premarket approval application supplement which affects the
safety and effectiveness of the device prior to marketing the device. These
changes include, but are not limited to:
. New indications for use;
. The use of a different facility or establishment to manufacture,
process or package the device;
. Changes in manufacturing methods or quality control systems;
. Changes in vendors used to supply components of the device;
. Changes in performance or design specifications;
. Some labeling changes.
When clinical data are required to obtain FDA approval of a premarket approval
application supplement, as in the event of a change in the indication for use of
the Targis System, we will be required to obtain an investigational device
exemption to gather the data. Approval of an investigational device exemption
could not be assured on a timely basis, or at all. There can be no assurance
that the required approvals of premarket approval application supplements for
any changes to the Targis System will be granted on a timely basis or at all,
and delays in receipt of, or failure to receive approvals, or the loss of the
approval of the premarket approval application for the Targis System, would have
a material adverse effect on our business, financial condition and results of
operations. The FDA also imposes post-marketing controls on us and our
products, including medical device reporting and other requirements. Failure to
meet these extensive FDA requirements or the receipt of adverse FDA
determinations regarding our preclinical studies or clinical trials could
subject us and/or our employees to injunction, fines, recall or seizure of
products, total or partial suspension of production, distribution, sales and
marketing, suspension or withdrawal of existing product approvals or clearances,
refusals to approve or clear new applications or notices and criminal
prosecution.
13
<PAGE>
Sales of medical devices outside the United States are subject to United
States export requirements and foreign regulatory requirements. Legal
restrictions on the sale of imported medical devices vary from country to
country. The time and requirements to obtain approval by a foreign country may
differ substantially from those required for FDA approval. There can be no
assurance that we will be able to obtain regulatory approvals or clearances for
our products in foreign countries.
Product Liability Risk; Limited Insurance Coverage
The manufacture and sale of medical products entail significant risk of
product liability claims. We maintain product liability insurance coverage of
$1.0 million per occurrence and an annual aggregate maximum of $2.0 million. We
also carry a $15.0 million umbrella insurance policy. There can be no assurance
that our existing insurance coverage limits are adequate to protect us from any
liabilities we might incur in connection with the clinical trials or future
sales of the Targis System. In addition, we may require increased product
liability coverage in the future. This insurance is expensive and in the future
may not be available on acceptable terms, if at all. A product liability claim
or series of claims brought against us with respect to uninsured liabilities or
in excess of our insurance coverage could have a material adverse effect on our
business, financial condition and results of operations. In addition, failure to
comply with the FDA's good manufacturing practice regulations could have a
material adverse effect on our ability to defend against product liability
lawsuits.
Need For Additional Future Capital
Our capital requirements have been and will continue to be significant. To
date, we have been dependent primarily on the net proceeds of sales of our
equity securities. We do not currently have committed sources of, or other
arrangements with respect to, additional financing. There can be no assurance
that our existing capital resources will be sufficient to fund our future
operations. Our capital requirements will depend on numerous factors, including
the expense of the commercialization of the Targis System, the cost involved in
protecting our proprietary rights of, the cost involved in maintaining
regulatory approval for the Targis System, the time and cost involved in
expanding manufacturing capacity, the cost of establishing marketing,
distribution, training and technical support networks and the effectiveness of
these and other commercialization activities. Financing production of the Targis
System in quantities necessary for commercialization will require significant
working capital. This need for working capital is likely to increase to the
extent that demand for the Targis System increases. In addition, should we
choose to lease Targis System control units to customers, substantial capital
could be required to finance the lease arrangements. Although we may finance
part or all of the capital requirements associated with these leasing
arrangements through equipment financing with a
14
<PAGE>
commercial lender, we have not yet obtained a commitment for equipment
financing. If we require additional funding, there is no assurance that funding
will be available on acceptable terms, if at all.
Dependence Upon Key Employees
We are dependent upon a number of key management and technical personnel.
Our ability to manage the transition from the development stage to a commercial
entity will depend in large part on the efforts of these individuals. Our
success will also depend on our ability to attract and retain additional highly
qualified management, marketing and sales, and technical personnel. We face
intense competition for qualified personnel, and there can be no assurance that
we will be able to attract and retain qualified personnel. The loss of the
services of one or more members of management or the inability to hire
additional personnel as needed could have a material adverse effect on our
business, financial condition and results of operations.
Possible Issuances of Undesignated Shares; Anti-Takeover Provisions
Our Board of Directors is authorized to issue up to 5,000,000
undesignated shares of capital stock and to fix the rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any further vote or action by our shareholders. The rights of the holders of
common stock will be subject to, and may be adversely affected by, the rights of
the holders of any undesignated shares that may be issued in the future. The
issuance of undesignated shares could have the effect of delaying, deferring or
preventing a change in control, which could deprive our shareholders of
opportunities to sell their shares of common stock at a premium. Our Board of
Directors is divided into three classes serving staggered three-year terms. The
staggered terms of directors may limit the shareholders' ability to effect a
change in control even if a change in control were in the shareholders'
interest. Additionally, we have in place a shareholder rights plan, which could
have the effect of discouraging tender offers or other transactions which could
result in shareholders receiving a premium over the market price of common
stock. We are also subject to provisions of the Minnesota Business Combination
Act and the Minnesota Control Share Acquisition Act that can make business
combinations more difficult.
Possible Volatility of Stock Price
There have been significant fluctuations in the market price for our common
stock. Announcements of variations in revenues or earnings or achievements of
regulatory milestones by us or our competitors could cause the market price of
the common stock to fluctuate substantially. In addition, the stock market has
experienced price and volume fluctuations that have particularly affected
companies in the health care market, resulting in changes in the market price of
the stock of many companies which may not have been directly related to the
operating performance of those companies. Broad market fluctuations may
adversely affect the market price of the common stock.
15
<PAGE>
Year 2000 Issue Risks
We are evaluating the potential impact of what is commonly referred to as
the Year 2000 issue, concerning the inability of certain information systems to
properly recognize and process dates containing the year 2000 and beyond. We
have established a dedicated Year 2000 team working with operational areas
throughout our company, and this team has worked with management to commence the
following steps: (i) implementing a Year 2000 Assessment and Testing Plan for
all internal information systems and other systems that contain microcontrollers
that may be affected by the Year 2000 date change; (ii) implementing a Year 2000
Assessment and Testing Plan for all our products, (iii) communicating with third
parties that supply product to us to ensure they are addressing the Year 2000
issue; and (iv) contingency and disaster recovery planning to ensure Year 2000
problem resolution.
We have completed testing with respect to all of our current products. In
addition, we are working with our material vendors and suppliers to gain
certification that their products and systems are Year 2000 compliant. We will
require our vendors and suppliers to certify the Year 2000 compliance of any
equipment or upgrade received by us in the future. Regardless of the Year 2000
compliance of our systems and products, there can be no assurance that we will
not be adversely affected by the failure of others to become Year 2000
compliant.
We estimate that our direct costs for Year 2000 compliance will consist
of costs related to the staff time devoted to Year 2000 compliance. We do not
expect capital expenditures will be necessary related to Year 2000 compliance.
Costs and capital expenditures in these areas have not been material for
historical periods.
Statements in this section that are not historical or current facts are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, including statements regarding
the timetable for Year 2000 compliance, our costs and capital expenditures, the
success of our efforts and others' efforts to achieve compliance, and the
effects of the Year 2000 issue on our future financial condition and results of
operations. These statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical results and
those presently anticipated or projected. The following important factors, among
others, could affect the accuracy of these statements: (i) the inherent
uncertainty of the costs and timing of achieving compliance on the wide variety
of systems used by us, (ii) the reliance on the efforts of vendors, customers,
government agencies and other third parties to achieve adequate compliance and
avoid disruption of our business in early 2000 and (iii) the uncertainty of the
ultimate costs and consequences of any unanticipated disruption in our business
resulting from the failure of one of our applications or of a third party's
systems. The foregoing list is not exhaustive, and we disclaim any obligation to
revise any forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
16
<PAGE>
No Dividends
We have never paid any cash dividends on our common stock and do not
anticipate paying dividends for the foreseeable future.
USE OF PROCEEDS
We are registering the shares of common stock offered by this prospectus
for the account of the selling shareholder identified in the section of this
prospectus entitled "Selling Shareholder." When the selling shareholder offers
and sells his shares of common stock, all of the net proceeds from the sale of
the common stock will go to the shareholder. We will not receive any part of the
proceeds from the sale of the shares.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Bylaws and the statutes of the State of Minnesota require us to
indemnify any director, officer, employee or agent who was or is a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, against particular liabilities and
expenses incurred in connection with the action, suit or proceeding, except
where these people have not acted in good faith or did not reasonably believe
that the conduct was in our best interests.
Insofar as indemnification to our directors, officers or other persons
controlling our company for liabilities arising under the Securities Act of
1933, as amended, may be permitted under the provisions of our Bylaws and the
statutes of the State of Minnesota, we have been informed by the Securities and
Exchange Commission, that this type of indemnification is against public policy
and is therefore unenforceable.
SELLING SHAREHOLDER
The selling shareholder is the person listed in the table below who has
been issued restricted common stock offered by this prospectus. The selling
shareholder will receive all of the net proceeds from the sale of his shares of
common stock offered by this prospectus.
The following table sets forth, as of the date of this prospectus,
information regarding the selling shareholder's ownership of our common stock.
This offering will not affect (i) the number of shares of common stock or common
stock equivalents outstanding or (ii) the number of shares of common stock or
percentage of ownership which persons, other than the selling shareholder,
beneficially own. Because the selling shareholder may sell all or part of his
shares of common stock pursuant to this prospectus and this offering is not
being underwritten on a firm commitment basis
17
<PAGE>
we cannot estimate the number and percentage of shares of common stock that the
selling shareholder will hold at the end of the offering covered by this
prospectus.
NUMBER OF SHARES
NAME AND POSITION OWNED PRIOR TO THE NUMBER OF SHARES
WITH US OFFERING BEING REGISTERED
----------------- ------------------ ----------------
Michael M. Selzer, Jr. 60,000 (1) 25,000
President, Chief Executive
Officer and Director
(1) Includes 25,000 shares of restricted stock issued to Mr. Selzer on
January 4, 1999.
Information regarding the selling shareholder's current relationship with
us or our predecessors and affiliates and any similar relationships within the
past three years is described below.
Michael M. Selzer, Jr. is our President and Chief Executive Officer and
serves as a member of the Board of Directors. Mr. Selzer has served as our
President and Chief Executive Officer since December of 1998. Prior to his
election to the offices of President and Chief Executive Officer and his
election to serve on the Board of Directors, Mr. Selzer did not have any
relationship, other than that of a shareholder, with us, our predecessors or our
affiliates.
PLAN OF DISTRIBUTION
We issued 25,000 shares of restricted common stock to the selling
shareholder on January 4, 1999. The selling shareholder may from time to time
offer and sell his shares of common stock offered by this prospectus. We have
registered his shares for resale to provide him with freely tradable securities.
However, registration does not necessarily mean that he will offer and sell any
of his shares.
OFFER AND SALE OF SHARES
The selling shareholder, or his pledgees, donees, transferees or other
successors in interest, may offer and sell his shares of common stock in the
following manner:
. on the Nasdaq Stock Market's National Market or other exchanges on
which our common stock is traded at the time of sale;
. in the over-the-counter market or otherwise at prices and at terms
then prevailing or at prices related to the then current market price;
18
<PAGE>
. a block trade in which a broker or dealer will attempt to sell the
shares as agent, but may position and resell a portion of the block as
principal to facilitate the transaction;
. a broker or dealer may purchase as principal and resell the shares for
its own account pursuant to this prospectus;
. an exchange distribution in accordance with the rules of the exchange;
and
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
The selling shareholder may accept and, together with any agent of the
selling shareholder, reject in whole or in part any proposed purchase of the
shares of common stock offered by this prospectus.
BROKERS AND DEALERS
Selling Through Brokers and Dealers
The selling shareholder may select brokers or dealers to sell his shares of
common stock. Brokers or dealers that are chosen by the selling shareholder may
arrange for other brokers or dealers to participate in selling the shares. The
selling shareholder may give brokers or dealers commissions or discounts in
amounts to be negotiated immediately before any sale. In connection with sales,
these brokers or dealers, any other participating brokers or dealers, and
pledgees, donees, transferees and other successors in interest, may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act of
1933. In addition, any securities covered by this prospectus that qualify for
sale pursuant to Rule 144 of the Securities Act of 1933 may be sold under that
rule rather than under the rules set out in this document.
Supplemental Prospectus Regarding Material Arrangements
If and when the selling shareholder notifies us that he has entered into a
material arrangement with a broker or dealer for the sale of his shares of
common stock offered by this prospectus through a block trade, special offering,
exchange or secondary distribution or a purchase by a broker or dealer, we will
file a supplemental prospectus, if required, pursuant to Rule 424(c) under the
Securities Act of 1933. The supplemental prospectus will provide: (1) the name
of the selling shareholder and of the participating broker-dealer(s); (2) the
number of shares of common stock involved; (3) the price at which the shares
were sold; (4) the commissions paid or discounts or concessions allowed to
broker-dealer(s), where applicable; (5) that broker-dealer(s) did not conduct
any investigation to verify the information set out or incorporated by reference
in this prospectus; and (6) other facts material to the transaction.
19
<PAGE>
Commissions
The selling shareholder will pay any sales commissions or other seller's
compensation applicable to these transactions.
Compliance with State Securities Laws
We have not registered or qualified the shares of common stock offered by
this prospectus under the laws of any country, other than the United States. In
some states, the selling shareholder may not offer or sell his shares of common
stock unless (1) we have registered or qualified the shares for sale in the
states; or (2) we have complied with an available exemption from registration or
qualification. Also, to comply with the securities laws of some states, the
selling shareholder can offer and sell his shares of common stock only through
registered or licensed brokers or dealers.
Limitations Imposed by Exchange Act Rules and Regulations
Provisions of the Exchange Act of 1934, as amended, and the related rules
and regulations will apply to the selling shareholder and any other person
engaged in a distribution of shares of the common stock. These provisions may
(1) limit the timing of purchases and sales of any of the shares of common stock
by the selling shareholder or another person; (2) affect the marketability of
the stock; and (3) affect the brokers' and dealers' market-making activities
with respect to the stock.
Payment of Incidental Expenses
We will pay substantially all of the expenses related to the registration
of the shares of common stock offered by this prospectus. We estimate the
expenses to be approximately $8,000.
LEGAL MATTERS
Our counsel, Lindquist & Vennum, P.L.L.P., Minneapolis, Minnesota will
issue an opinion to us regarding specific legal matters in connection with this
offering, including the validity of the issuance of the common stock offered by
this prospectus.
You should rely only on the information contained in this document or that
which we have referred you to. We have not authorized anyone to provide you
with information that is different. We are not offering to sell or to buy the
common stock offered in this document to any person unauthorized or prohibited
to do so. You should not think that the delivery of this prospectus nor any
sale made in connection with this common stock, under any circumstances, implies
that the information contained in this document is correct as of any time after
the date of this prospectus.
20
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
- ------------------------------------------------
The following documents filed with the Securities and Exchange Commission
are hereby incorporated by reference herein:
(a) Our Annual Report on Form 10-K for the fiscal year ended June 30,
1998.
(b) Amendment No. 1 to our Annual Report on Form 10K/A dated October 28,
1998.
(c) Our Quarterly Reports on Form 10-Q for the three months ended
September 30, 1998 and the three months ended December 31, 1998.
(d) Our Definitive Proxy Statement dated December 10, 1998 for the Annual
Meeting of Shareholders held on January 14, 1999.
(e) The description of our common stock contained in our registration
statement on Form S-3, dated November 10, 1997 (Registration No. 333-
38053), including any amendment or report filed for the purpose of
updating the description.
All documents subsequently filed by us pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Securities Exchange Act of 1934, prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this Registration Statement and to be a part
hereof from the date of filing of these documents.
Item 4. Description of Securities.
- ----------------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
- -----------------------------------------------
Not applicable.
21
<PAGE>
Item 6. Indemnification of Directors and Officers.
- --------------------------------------------------
Our Bylaws and the statutes of the State of Minnesota require us to
indemnify any director, officer, employee or agent who was or is a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, against particular liabilities and
expenses incurred in connection with the action, suit or proceeding, except
where these people have not acted in good faith or did not reasonably believe
that the conduct was in our best interests.
Insofar as indemnification to our directors, officers or other persons
controlling our company for liabilities arising under the Securities Act of
1933, as amended, may be permitted under the provisions of our Bylaws and the
statutes of the State of Minnesota, we have been informed by the Securities and
Exchange Commission, that this type of indemnification is against public policy
and is therefore unenforceable.
Item 7. Exemption from Registration Claimed.
- --------------------------------------------
No exemption is claimed with respect to the shares registered pursuant to
the Plan because we have not granted options to purchase shares. The issuance
of the options pursuant to the Stock Option Agreement of Michael M. Selzer, Jr.
and the issuance of the restricted stock pursuant to the Restricted Stock
Agreement of Michael M. Selzer, Jr. were exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.
Item 8. Exhibits.
- -----------------
4.1 Amended and Restated Urologix, Inc. 1991 Stock Option Plan
4.2 Restricted Stock Agreement
4.3 Stock Option Agreement
5.1 Opinion and Consent of Lindquist & Vennum P.L.L.P.
23.1 Consent of Lindquist & Vennum (included in Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP, independent public accountants
Item 9. Undertakings.
- ---------------------
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
22
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to the information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of securities at
that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification to directors, officers, and controlling persons
of the registrant for liabilities arising under the Securities Act of 1933 may
be permitted pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
this type of indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against these liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or
23
<PAGE>
controlling person of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by a director, officer, or controlling person
connected with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether the
indemnification by us is against public policy as expressed in the Act and will
be governed by the final adjudication of the issue.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we certify that
we have reasonable grounds to believe that we meet all of the requirements for
filing on Form S-8 and we have authorized the undersigned to sign this
registration statement on our behalf, in the City of Minneapolis, State of
Minnesota, on July 22, 1999.
UROLOGIX, INC.
By /s/ Michael M. Selzer, Jr.
----------------------------------------
Michael M. Selzer, Jr., President and
Chief Executive Officer
POWER OF ATTORNEY
The undersigned officers and directors of Urologix, Inc., hereby constitute
and appoint Michael M. Selzer, Jr. and Christopher Geyen, or either of them,
with power to act one without the other, our true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for us and in our
stead, in any and all capacities to sign any and all amendments (including post-
effective amendments) to this Registration Statement and all documents relating
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing necessary or advisable to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his or her substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below on July 22, 1999 by the
following persons in the capacities indicated.
25
<PAGE>
Signature Title
- --------- -----
/s/ Mitchell Dann Chairman of the Board
- --------------------------
Mitchell Dann
/s/ Michael M. Selzer, Jr. Director, President and Chief
- -------------------------- Executive Officer (principal
Michael M. Selzer, Jr. executive officer)
/s/ Christopher Geyen Vice President, Finance and
- -------------------------- Administration
Christopher Geyen (principal accounting officer)
/s/ Buzz Benson Director
- --------------------------
Buzz Benson
/s/ Paul A. Laviolette Director
- --------------------------
Paul A. LaViolette
/s/ Robert Momsen Director
- --------------------------
Robert Momsen
/s/ David C. Utz, M.D. Director
- --------------------------
David C. Utz, M.D.
/s/ Bobby I. Griffin Director
- --------------------------
Bobby I. Griffin
/s/ Susan Bartlett Foote Director
- --------------------------
Susan Bartlett Foote
26
<PAGE>
Exhibit 4.1
AMENDED AND RESTATED UROLOGIX, INC.
1991 STOCK OPTION PLAN
<PAGE>
SECTION CONTENTS PAGE
- ------- -------- ----
1. General Purpose of Plan; Definitions 1
2. Administration 3
3. Stock Subject to Plan 5
4. Eligibility 5
5. Stock Options 6
6. Stock Appreciation Rights 11
7. Restricted Stock 12
8. Deferred Stock Awards 14
9. Transfer, Leave of Absence, etc. 16
10. Amendments and Termination 16
11. Unfunded Status of Plan 17
12. General Provisions 16
<PAGE>
AMENDED AND RESTATED UROLOGIX, INC.
1991 STOCK OPTION PLAN
SECTION 1. General Purpose of Plan; Definitions.
------------------------------------
The name of this plan is the Amended and Restated Urologix, Inc. 1991 Stock
Option Plan (the "Plan"). The purpose of the Plan is to enable Urologix, Inc.
(the "Company") to retain and attract executives and other key employees,
directors and consultants who contribute to the Company's success by their
ability, ingenuity and industry, and to enable such individuals to participate
in the long-term success and growth of the Company by giving them a proprietary
interest in the Company.
For purposes of the Plan, the following terms shall be defined as set forth
below:
a. "Board" means the Board of Directors of the Company as it may be
-----
comprised from time to time.
b. "Cause" means a felony conviction of a participant or the failure of a
-----
participant to contest prosecution for a felony, willful misconduct,
dishonesty or intentional violation of a statute, rule or regulation,
any of which, in the judgment of the Company, is harmful to the business
or reputation of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, or any successor statute.
d. "Committee" means the Committee referred to in Section 2 of the Plan.
---------
e. "Consultant" means any person, including an advisor, engaged by the
----------
Company or a Parent Corporation or Subsidiary of the Company to render
services and who is compensated for such services and who is not an
employee of the Company or any Parent Corporation or Subsidiary of the
Company. A Non-Employee Director may serve as a Consultant.
f. "Company" means Urologix, Inc., a corporation organized under the laws
-------
of the State of Minnesota (or any successor corporation).
g. "Deferred Stock" means an award made pursuant to Section 8 below of the
--------------
right to receive stock at the end of a specified deferral period.
h. "Disability" means permanent and total disability as determined by the
----------
Committee.
<PAGE>
i. "Early Retirement" means retirement, with consent of the Committee at
----------------
the time of retirement, from active employment with the Company and any
Subsidiary or Parent Corporation of the Company.
j. "Fair Market Value" of Stock on any given date shall be determined by
-----------------
the Committee as follows: (a) if the Stock is listed for trading on one
of more national securities exchanges, or is traded on the Nasdaq Stock
Market, the last reported sales price on the principal such exchange or
the Nasdaq Stock Market on the date in question, or if such Stock shall
not have been traded on such principal exchange on such date, the last
reported sales price on such principal exchange or the Nasdaq Stock
Market on the first day prior thereto on which such Stock was so traded;
or (b) if the Stock is not listed for trading on a national securities
exchange or the Nasdaq Stock Market, but is traded in the over-the-
counter market, including the Nasdaq Small Cap Market, the closing bid
price for such Stock on the date in question, or if there is no such bid
price for such Stock on such date, the closing bid price on the first
day prior thereto on which such price existed; or (c) if neither (a) or
(b) is applicable, by any means fair and reasonable by the Committee,
which determination shall be final and binding on all parties.
k. "Incentive Stock Option" means any Stock Option intended to be and
----------------------
designated as an "Incentive Stock Option" within the meaning of Section
422 of the Code.
l. "Non-Employee Director" means a "Non-Employee Director" within the
---------------------
meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of 1934.
m. "Non-Qualified Stock Option" means any Stock Option that is not an
--------------------------
Incentive Stock Option, and is intended to be and is designated as a
"Non-Qualified Stock Option."
n. "Normal Retirement" means retirement from active employment with the
-----------------
Company and any Subsidiary or Parent Corporation of the Company on or
after age 65.
o. "Outside Director" means a member of the Board of Directors who: (a)
----------------
is not a current employee of the Company or any member of an affiliated
group which includes the Company; (b) is not a former employee of the
Company who receives compensation for prior services (other than
benefits under a tax-qualified retirement plan) during the taxable year;
(c) has not been an officer of the Company; and (d) does not receive
remuneration from the Company, either directly or indirectly, in any
capacity other than as a director, except as otherwise permitted under
Code Section 162(m) and regulations thereunder. For this purpose,
remuneration includes any payment in exchange for goods or services.
This definition shall be further governed by the provisions of Code
Section 162(m) and regulations promulgated thereunder.
2
<PAGE>
p. "Parent Corporation" means any corporation (other than the Company) in
------------------
an unbroken chain of corporations ending with the Company if each of the
corporations (other than the Company) owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the
other corporations in the chain.
q. "Restricted Stock" means an award of shares of Stock that are subject to
----------------
restrictions under Section 7 below.
r. "Retirement" means Normal Retirement or Early Retirement.
----------
s. "Stock" means the Common Stock of the Company.
-----
t. "Stock Appreciation Right" means the right pursuant to an award granted
------------------------
under Section 6 below to surrender to the Company all or a portion of a
Stock Option in exchange for an amount equal to the difference between
(i) Fair Market Value, as of the date such Stock Option or such portion
thereof is surrendered, of the shares of Stock covered by such Stock
Option or such portion thereof, and (ii) the aggregate exercise price of
such Stock Option or such portion thereof.
u. "Stock Option" means any option to purchase shares of Stock granted
------------
pursuant to Section 5 below.
v. "Subsidiary" means any corporation (other than the Company) in an
----------
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain)
owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain.
SECTION 2. Administration.
--------------
The Plan shall be administered by the Board of Directors or by a committee,
consisting of not less than two members of the Board of Directors, all of whom
shall be Outside Directors and Non-Employee Directors and who shall serve at the
pleasure of the Board (the "Committee"). Any or all of the functions of the
Committee specified in the Plan may be exercised by the Board, unless the Plan
specifically states otherwise.
The Committee shall have the power and authority to grant to eligible
employees, members of the Board of Directors or Consultants, pursuant to the
terms of the Plan: (i) Stock Options, (ii) Stock Appreciation Rights, (iii)
Restricted Stock, or (iv) Deferred Stock awards.
In particular, the Committee shall have the authority:
3
<PAGE>
(i) to select the officers and other key employees of the Company and its
Subsidiaries and other eligible persons to whom Stock Options, Stock
Appreciation Rights, Restricted Stock and Deferred Stock awards may
from time to time be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock Options, Non-
Qualified Stock Options, Stock Appreciation Rights, Restricted Stock
and Deferred Stock awards, or a combination of the foregoing, are to
be granted hereunder;
(iii) to determine the number of shares to be covered by each such award
granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not
limited to, any restriction on any Stock Option or other award and/or
the shares of Stock relating thereto); provided, however, that in the
event of a merger or asset sale or other form of change of control,
the applicable provisions of Sections 5(c) and 7(c) of the Plan shall
govern the acceleration of the vesting of any Stock option or awards;
(v) to determine whether, to what extent and under what circumstances
Stock and other amounts payable with respect to an award under this
Plan shall be deferred either automatically or at the election of the
participant.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate to executive officers of the Company the authority to exercise the
powers specified in (i), (ii), (iii), (iv) and (v) above with respect to persons
who are not executive officers of the Company.
All decisions made by the Committee pursuant to the provisions of the Plan
shall be final and binding on all persons, including the Company and Plan
participants.
SECTION 3. Stock Subject to Plan.
---------------------
The total number of shares of Stock reserved and available for distribution
under the Plan shall be 2,450,910/1/. Such shares may consist, in whole or in
part, of authorized and unissued shares.
- -------------
/1/ History: This Plan originally reserved 970,912 shares for issuance. The
Board of Directors approved an increase from 970,912 shares to 1,250,912 on
January 19, 1994, and an increase from 1,250,912 shares to 1,601,820 shares on
August 19, 1994. The shareholders approved the increase to 1,601,820 shares at a
special meeting on December 21, 1994. The Board of Directors approved an
increase from 1,601,820 shares to 2,101,820 shares on July 26, 1995, which was
approved by the Shareholders at a special meeting on November 27, 1995. The
number of
4
<PAGE>
Subject to paragraph (b)(iv) of Section 6 below, if any shares that have
been optioned cease to be subject to Stock Options, or if any shares subject to
any Restricted Stock or Deferred Stock award granted hereunder are forfeited or
such award otherwise terminates without a payment being made to the participant,
such shares shall again be available for distribution in connection with future
awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding options granted under the Plan, and in the number of
shares subject to Restricted Stock or Deferred Stock awards granted under the
Plan as may be determined to be appropriate by the Committee, in its sole
discretion, provided that the number of shares subject to any award shall always
be a whole number. Such adjusted option price shall also be used to determine
the amount payable by the Company upon the exercise of any Stock Appreciation
Right associated with any Option.
SECTION 4. Eligibility.
-----------
Officers, other key employees of the Company and Subsidiaries, members of
the Board of Directors, and Consultants who are responsible for or contribute to
the management, growth and profitability of the business of the Company and its
Subsidiaries are eligible to be granted Stock Options, Stock Appreciation
Rights, Restricted Stock or Deferred Stock awards under the Plan. The optionees
and participants under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible, and the Committee
shall determine, in its sole discretion, the number of shares covered by each
award.
Notwithstanding the foregoing, no person may, during any fiscal year of the
Company, receive grants of Stock Options and Stock Appreciation Rights under
this Plan which, in the aggregate, exceed 500,000 shares.
SECTION 5. Stock Options.
-------------
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
- -------------
shares reserved under the Plan was again increased from 2,101,820 to 3,101,820
by the Board of Directors on April 3, 1996 and such increase was approved by the
Shareholders at a special meeting on April 30, 1996. Simultaneously on April 30,
1996, the Company effected a 1-for-2 Reverse Stock Split, thereby converting the
number of shares reserved to 1,550,910 as of April 30, 1996. Following the
Reverse Stock Split, the Board of Directors increased the number of shares
reserved to 1,950,910 on September 17, 1997 and the increase was approved by the
shareholders on November 19, 1997. On November 17, 1998, the Board of Directors
authorized an increase in the number of shares reserved to 2,450,910, which
increase was approved by the shareholders on January 14, 1999.
5
<PAGE>
The Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock Options
shall be granted under the Plan after August 1, 2004.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options (in each
case with or without Stock Appreciation Rights). To the extent that any option
does not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify either the Plan or any Incentive Stock Option under Section 422
of the Code. The preceding sentence shall not preclude any modification or
amendment to an outstanding Incentive Stock Option, whether or not such
modification or amendment results in disqualification of such Option as an
Incentive Stock Option, provided the optionee consents in writing to the
modification or amendment.
No changes that result from the restatement of this Plan shall effect any
change in any outstanding incentive stock option that would cause such option to
be modified, extended or renewed to the extent that such change will constitute
the grant of a new option as specified in Section 424(h) of the Code.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock purchasable under a
------------
Stock Option shall be determined by the Committee at the time of grant. In no
event shall the option price per share of Stock purchasable under an Incentive
Stock Option be less than 100% of such Fair Market Value. If an employee owns or
is deemed to own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation or Subsidiary and an Incentive
Stock Option is granted to such employee, the option price shall be no less than
110% of the Fair Market Value of the Stock on the date the option is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the
-----------
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
6
<PAGE>
(c) Exercisability. Stock Options shall be exercisable at such time or
--------------
times as determined by the Committee at or after grant. If the Committee
provides, in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time. Notwithstanding anything contained in the Plan to the contrary, the
Committee may, in its discretion, extend or vary the term of any Stock Option or
any installment thereof, whether or not the optionee is then employed by the
Company, if such action is deemed to be in the best interests of the Company;
provided, however, that in the event of a merger or sale of assets, or of a
Change of Control, the provisions of this section 5(c) shall govern vesting
acceleration.
(i) In the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option shall be assumed or an equivalent
option or right shall be substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that
the successor corporation does not agree to assume the Option or to
substitute an equivalent option or right, the Committee shall, in lieu
of such assumption or substitution, provide for the Optionee to have
the right to exercise the Option as to all of the Optioned Stock,
including shares as to which it would not otherwise be exercisable. If
the Committee makes an Option fully exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the
Committee shall notify the Optionee that the Option shall be fully
exercisable for a period of fifteen (15) days from the date of such
notice, and the Option will terminate upon the expiration of such
period. For the purposes of this paragraph, the Option shall be
considered assumed if, following the merger or sale of assets, the
option or right confers the right to purchase, for each Share of
Optioned Stock subject to the Option immediately prior to the merger
or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of
consideration, the type of consideration chose by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets was not solely
common stock of the successor corporation or its Parent, the Committee
may, with consent of the successor corporation and the participant,
provide for the consideration to be received upon the exercise of the
Option, for each Share of Optioned Stock subject to the Option, to be
solely common stock of the successor corporation or its Parent equal
in Fair Market Value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
(ii) Upon a Change of Control, each outstanding Stock Option shall become
exercisable in full as to all of the shares covered thereby without
regard to any installment exercise or vesting provisions. In the event
that at any time prior to August 13, 1999, a Change of Control or
other business combination of the Company occurs as to which the
Company desires that pooling accounting treatment be utilized, the
Board may, in its sole discretion, declare that the provisions of this
Section 5(c)(ii), and the related provisions
7
<PAGE>
of all then outstanding Stock Options shall be of no force and effect
whatsoever and the treatment of any Stock Options outstanding at that
time shall then instead be governed solely by the provisions of
Section 5(c)(i). After August 13, 1999, the provisions of Section
5(c)(i) shall be of no further force or effect. This Section 5(c)(ii)
will apply to all Stock Options which are outstanding on August 13,
1997, as well as all Stock Options which are granted on or after that
date. For purposes of this Section 5(c), the term "Change of Control"
means any of the following:
(A) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becomes a "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined
voting power of the Company's then outstanding securities and is
required to file a Schedule 13D under the Exchange Act; or
(B) the Incumbent Directors cease for any reason to constitute at
least a majority of the Board of Directors. The term, "Incumbent
Directors," shall mean those individuals who are members of the
Board of Directors on August 13, 1997 and any individual who
subsequently becomes a member of the Board of Directors whose
election or nomination for election by the Company's shareholders
was approved by a vote of at least a majority of the then
Incumbent Directors; or
(C) all or substantially all of the assets of the Company are sold,
leased, exchanged or otherwise transferred and immediately
thereafter, there is no substantial continuity of ownership with
respect to the Company and the entity to which such assets have
been transferred.
8
<PAGE>
(iii) The grant of an option pursuant to the Plan shall not limit in any
way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure or to merge, exchange or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business
or assets.
(d) Method of Exercise. Stock Options may be exercised in whole or in part
------------------
at any time during the option period by giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price, either by check, or by any
other form of legal consideration deemed sufficient by the Committee and
consistent with the Plan's purpose and applicable law, including promissory
notes or a properly executed exercise notice together with irrevocable
instructions to a broker acceptable to the Company to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price. As
determined by the Committee at the time of grant or exercise, in its sole
discretion, payment in full or in part may also be made in the form of Stock
already owned by the optionee (which in the case of Stock acquired upon exercise
of an option have been owned for more than six months on the date of surrender)
or, in the case of the exercise of a Non-Qualified Stock Option, by delivery of
Restricted Stock or Deferred Stock subject to an award hereunder (based, in each
case, on the Fair Market Value of the Stock on the date the option is exercised,
as determined by the Committee), provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of already owned
shares may be authorized only at the time the option is granted, and provided
further that in the event payment is made in the form of shares of Restricted
Stock or a Deferred Stock award, the optionee will receive a portion of the
option shares in the form of, and in an amount equal to, the Restricted Stock or
Deferred Stock award tendered as payment by the optionee. If the terms of an
option so permit, an optionee may elect to pay all or part of the option
exercise price by having the Company withhold from the shares of Stock that
would otherwise be issued upon exercise that number of shares of Stock having a
Fair Market Value equal to the aggregate option exercise price for the shares
with respect to which such election is made. No shares of Stock shall be issued
until full payment therefor has been made. An optionee shall generally have the
rights to dividends and other rights of a shareholder with respect to shares
subject to the option when the optionee has given written notice of exercise,
has paid in full for such shares, and, if requested, has given the
representation described in paragraph (a) of Section 12.
(e) Non-transferability of Options. No Stock Option shall be transferable
------------------------------
by the optionee otherwise than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee.
(f) Termination by Death. If an optionee's employment by the Company and
--------------------
any Subsidiary or Parent Corporation terminates by reason of death, the Stock
Option may thereafter be immediately exercised, to the extent then exercisable,
by the legal representative of the estate or by the legatee of the optionee
under the will of the optionee, for a period of twelve months from the date of
such death or until the expiration of the stated term of the option, whichever
period is shorter.
9
<PAGE>
(g) Termination by Reason of Disability. If an optionee's employment by the
-----------------------------------
Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability,
but may not be exercised after twelve months from the date of such termination
of employment or the expiration of the stated term of the option, whichever
period is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionee's employment by the
-----------------------------------
Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement and the terms of the Stock Option so provide, any Stock Option held
by such optionee may thereafter be exercised to the extent it was exercisable at
the time of such Retirement, but may not be exercised after twelve months from
the date of such termination of employment or the expiration of the stated term
of the option, whichever period is the shorter. In the event of termination of
employment by reason of Retirement, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, the option will thereafter be treated as a Non-Qualified Stock
Option.
(i) Other Termination. In the event an Optionee's continuous status as an
-----------------
Employee or Consultant terminates (other than upon the Optionee's death or
Disability), the Optionee may exercise his or her Option, but only within such
period of time as is determined by the Committee, and only to the extent that
the Optionee was entitled to exercise it at the date of termination (but in no
event later than the expiration of the term of such Option as set forth in the
Notice of Grant). In the case of an Incentive Stock Option, the Committee shall
determine such period of time (in no event to exceed ninety (90) days from the
date of termination) when the Option is granted.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
---------------------------------------
Value (determined as of the time the Stock Option is granted) of the Common
Stock with respect to which an Incentive Stock Option under this Plan or any
other plan of the Company and any Subsidiary or Parent Corporation is
exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000.
(k) Directors Who Are Not Employees. Each year on the date of the annual
-------------------------------
meeting of shareholders, each person who is not an employee of the Company, any
Parent Corporation or Subsidiary and is serving as a member of the Board of
Directors of the Company immediately following such annual meeting, will
automatically, without any Committee action, be granted a Non-Qualified Stock
Option to purchase 5,000 shares of the Company's Common Stock at an option price
per share equal to 100% of the Fair Market Value of a share of Stock on such
date. All such Options shall be designated as Non-Qualified Stock Options and
shall be subject to the same terms and provisions as are then in effect with
respect to the grant of Non-Qualified Stock Options to
10
<PAGE>
employees of the Company, except that (i) the term of each such Option shall be
equal to ten years; and (ii) the Option shall immediately become exercisable in
full at the time of grant. Upon termination of a person's service as a Director
of the Company, such Director will be allowed to exercise such Option for a
period of one year after the date on which such person ceased to be a Director,
after which date the Option, if not exercised, shall terminate. The Committee
may elect to grant a similar Non-Qualified Stock Option, consisting of such
number of shares as the Committee deems appropriate under the circumstances, to
any person who is elected to the Board of Directors between annual meetings of
shareholders. Subject to the foregoing, all provisions of this Plan not
inconsistent with the foregoing shall apply to Options granted pursuant to this
Section 5(k).
SECTION 6. Stock Appreciation Rights.
-------------------------
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
------------------
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of the option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that a
Stock Appreciation Right granted with respect to less than the full number of
shares covered by a related stock Option shall not be reduced until the exercise
or termination of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in accordance
with paragraph (b) of this Section 6, by surrendering the applicable portion of
the related Stock Option. Upon such exercise and surrender, the optionee shall
be entitled to receive an amount determined in the manner prescribed in
paragraph (b) of this Section 6. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
--------------------
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate shall
be exercisable in accordance with the provisions of Section 5 and this
Section 6 of the Plan.
11
<PAGE>
(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall
be entitled to receive up to, but not more than, an amount in cash or
shares of Stock equal in value to the excess of the Fair Market Value of
one share of Stock over the option price per share specified in the related
option multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only when and to
the extent that the underlying Stock Option would be transferable under
Section 5 of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option
or part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set forth
in Section 3 of the Plan on the number of shares of Stock to be issued
under the Plan, but only to the extent of the number of shares issued or
issuable under the Stock Appreciation Right at the time of exercise based
on the value of the Stock Appreciation Right at such time.
(v) A Stock Appreciation Right granted in connection with an Incentive
Stock Option may be exercised only if and when the market price of the
Stock subject to the Incentive Stock Option exceeds the exercise price of
such Option.
SECTION 7. Restricted Stock.
----------------
(a) Administration. Shares of Restricted Stock may be issued either alone
--------------
or in addition to other awards granted under the Plan. The Committee shall
determine the officers, key employees and Consultants of the Company and
Subsidiaries to whom, and the time or times at which, grants of Restricted Stock
will be made, the number of shares to be awarded, the time or times within which
such awards may be subject to forfeiture, and all other conditions of the
awards. The Committee may also condition the grant of Restricted Stock upon the
attainment of specified performance goals. The provisions of Restricted Stock
awards need not be the same with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of an award of
-----------------------
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
(i) Each participant shall be issued a stock certificate in respect of
shares of Restricted Stock awarded under the Plan. Such certificate shall
be registered in the name of the
12
<PAGE>
participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially in the
following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Amended and Restated Urologix, Inc. 1991 Stock Plan
and an Agreement entered into between the registered owner and
Urologix, Inc. Copies of such Plan and Agreement are on file in the
offices of Urologix, Inc., 14405 21st Avenue North, Minneapolis, MN
55447."
(ii) The Committee shall require that the stock certificates evidencing
such shares be held in custody by the Company until the restrictions
thereon shall have lapsed, and that, as a condition of any Restricted Stock
award, the participant shall have delivered a stock power, endorsed in
blank, relating to the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
---------------------------
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award agreement,
during a period set by the Committee commencing with the date of such award
(the "Restriction Period"), the participant shall not be permitted to sell,
transfer, pledge or assign shares of Restricted Stock awarded under the
Plan. In no event shall the Restriction Period be less than one (1) year.
Within these limits, the Committee may provide for the lapse of such
restrictions in installments where deemed appropriate.
(ii) Except as provided in paragraph (c)(i) of this Section 7, the
participant shall have, with respect to the shares of Restricted Stock, all
of the rights of a shareholder of the Company, including the right to vote
the shares and the right to receive any cash dividends. The Committee, in
its sole discretion, may permit or require the payment of cash dividends to
be deferred and, if the Committee so determines, reinvested in additional
shares of Restricted Stock (to the extent shares are available under
Section 3 and subject to paragraph (f) of Section 12). Certificates for
shares of unrestricted Stock shall be delivered to the grantee promptly
after, and only after, the period of forfeiture shall have expired without
forfeiture in respect of such shares of Restricted Stock.
(iii) Subject to the provisions of the award agreement and paragraph
(c)(iv) of this Section 7, upon termination of employment for any reason
during the Restriction Period, all shares still subject to restriction
shall be forfeited by the participant.
13
<PAGE>
(iv) In the event of special hardship circumstances of a participant
whose employment is terminated (other than for Cause), including death,
Disability or Retirement, or in the event of an unforeseeable emergency of
a participant still in service, the Committee may, in its sole discretion,
when it finds that a waiver would be in the best interest of the Company,
waive in whole or in part any or all remaining restrictions with respect to
such participant's shares of Restricted Stock.
(v) Notwithstanding the foregoing, in the event of the sale by the
Company of substantially all of its assets and the consequent
discontinuance of its business, or in the event of a merger, exchange,
consolidation or liquidation of the Company, the Board shall, in its sole
discretion, in connection with the Board's adoption of the plan for sale,
merger, exchange, consolidation or liquidation, provide for one or more of
the following with respect to Restricted Stock Awards that are, on such
date, still subject to a Restriction Period: (i) the removal of the
restrictions on any or all outstanding Restricted Stock Awards; (ii) the
complete termination of this Plan and forfeiture of outstanding Restricted
Stock Awards prior to a date specified by the Board; and (iii) the
continuance of the Plan with respect to the Restricted Stock Award which
were outstanding as of the date of adoption by the Board of such plan for
sale, merger, exchange, consolidation or liquidation and provide to
participants holding Restricted Stock Awards the right to an equivalent
number of restricted shares of stock of the corporation succeeding the
Company by reason of such sale, merger, exchange, consolidation or
liquidation. The grant of a Restricted Stock Award pursuant to the Plan
shall not limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge, exchange or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.
SECTION 8. Deferred Stock Awards.
---------------------
(a) Administration. Deferred Stock may be awarded either alone or in
--------------
addition to other awards granted under the Plan. The Committee shall determine
the officers, key employees, members of the Board of Directors and Consultants
of the Company and Subsidiaries to whom and the time or times at which Deferred
Stock shall be awarded, the number of Shares of Deferred Stock to be awarded to
any participant or group of participants, the duration of the period (the
"Deferral Period") during which, and the conditions under which, receipt of the
Stock will be deferred, and the terms and conditions of the award in addition to
those contained in paragraph (b) of this Section 8. The Committee may also
condition the grant of Deferred Stock upon the attainment of specified
performance goals. The provisions of Deferred Stock awards need not be the same
with respect to each recipient.
14
<PAGE>
(b) Terms and Conditions.
--------------------
(i) Subject to the provisions of this Plan and the award agreement,
Deferred Stock awards may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Deferral Period. In no event shall the
Deferral Period be less than one (1) year. At the expiration of the
Deferral Period (or Elective Deferral Period, where applicable), share
certificates shall be delivered to the participant, or his legal
representative, in a number equal to the shares covered by the Deferred
Stock award.
(ii) Amounts equal to any dividends declared during the Deferral Period
with respect to the number of shares covered by a Deferred Stock award will
be paid to the participant currently or deferred and deemed to be
reinvested in additional Deferred Stock or otherwise reinvested, all as
determined at the time of the award by the Committee, in its sole
discretion.
(iii) Subject to the provisions of the award agreement and paragraph
(b)(iv) of this Section 8, upon termination of employment for any reason
during the Deferral Period for a given award, the Deferred Stock in
question shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a participant
whose employment is terminated (other than for Cause) including death,
Disability or Retirement, or in the event of an unforeseeable emergency of
a participant still in service, the Committee may, in its sole discretion,
when it finds that a waiver would be in the best interest of the Company,
waive in whole or in part any or all of the remaining deferral limitations
imposed hereunder with respect to any or all of the participant's Deferred
Stock.
(v) A participant may elect to further defer receipt of the award for a
specified period or until a specified event (the "Elective Deferral
Period"), subject in each case to the Committee's approval and to such
terms as are determined by the Committee, all in its sole discretion.
Subject to any exceptions adopted by the Committee, such election must
generally be made prior to completion of one half of the Deferral Period
for a Deferred Stock award (or for an installment of such an award).
(vi) Each award shall be confirmed by, and subject to the terms of, a
Deferred Stock agreement executed by the Company and the participant.
SECTION 9. Transfer, Leave of Absence, etc.
-------------------------------
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
15
<PAGE>
(a) a transfer of an employee from the Company to a Parent Corporation or
Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or from
one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee, for military
service or sickness, or for any other purpose approved by the Company if the
period of such leave does not exceed ninety (90) days (or such longer period as
the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved in writing
by the Committee, but only if the employee's right to reemployment is guaranteed
either by a statute or by contract, and provided that, in the case of any leave
of absence, the employee returns to work within 30 days after the end of such
leave.
SECTION 10. Amendments and Termination.
--------------------------
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option, Restricted Stock or other
Stock-based award theretofore granted, without the optionee's or participant's
consent, or (ii) which without the approval of the stockholders of the Company
would cause the Plan to no longer comply with Rule 16b-3 under the Securities
Exchange Act of 1934, Section 422 of the Code or any other regulatory
requirements.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively to the extent such amendment is
consistent with the terms of this Plan, but no such amendment shall impair the
rights of any holder without his or her consent except to the extent authorized
under the Plan. The Committee may also substitute new Stock Options for
previously granted options, including previously granted options having higher
option prices.
SECTION 11. Unfunded Status of Plan.
-----------------------
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
16
<PAGE>
SECTION 12. General Provisions.
------------------
(a) The Committee may require each person purchasing shares pursuant to a
Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan pursuant to
any Restricted Stock, Deferred Stock or other Stock-based awards shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Subject to paragraph (d) below, recipients of Restricted Stock,
Deferred Stock and other Stock-based awards under the Plan (other than Stock
Options) are not required to make any payment or provide consideration other
than the rendering of services.
(c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any Subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.
(d) Each participant shall, no later than the date as of which any part of
the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a participant
may elect by written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i) authorizing the
Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 12(d). Any such
17
<PAGE>
election shall be in accordance with, and subject to, applicable tax and
securities laws, regulations and rulings.
(e) At the time of grant, the Committee may provide in connection with any
grant made under this Plan that the shares of Stock received as a result of such
grant shall be subject to a repurchase right in favor of the Company, pursuant
to which the participant shall be required to offer to the Company upon
termination of employment for any reason any shares that the participant
acquired under the Plan, with the price being the then Fair Market Value of the
Stock or, in the case of a termination for Cause, an amount equal to the cash
consideration paid for the Stock, subject to such other terms and conditions as
the Committee may specify at the time of grant. The Committee may, at the time
of the grant of an award under the Plan, provide the Company with the right to
repurchase, or require the forfeiture of, shares of Stock acquired pursuant to
the Plan by any participant who, at any time within two years after termination
of employment with the Company, directly or indirectly competes with, or is
employed by a competitor of, the Company.
(f) The reinvestment of dividends in additional Restricted Stock (or in
Deferred Stock or other types of Plan awards) at the time of any dividend
payment shall only be permissible if the Committee (or the Company's chief
financial officer) certifies in writing that under Section 3 sufficient shares
are available for such reinvestment (taking into account then outstanding Stock
Options and other Plan awards).
18
<PAGE>
Exhibit 4.2
UROLOGIX, INC.
RESTRICTED STOCK AGREEMENT
This Restricted Stock Agreement ("Agreement") is made as of the 4/th/ day
of January, 1999, between Urologix, Inc. (the "Company"), a Minnesota
corporation, and Michael M. Selzer, Jr., an employee of the Company
("Employee").
WHEREAS, the Company desires to grant a restricted stock award to Employee.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
set forth below, and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Company and Employee agree as
follows:
1. Issuance of Restricted Stock. Subject to the terms and conditions set
----------------------------
forth in this Agreement, the Company grants, assigns, transfers, and delivers to
the Employee, and Employee accepts from the Company, a total of 25,000 shares of
the Company's $.01 par value Common Stock (the "Shares"), for no cash
consideration. The Shares are subject to certain restrictions enumerated in
Section 2 of this Agreement for the duration of the period commencing on the
date hereof and terminating on January 4, 2000 (the "Restricted Period"). The
Shares will be evidenced by a certificate or certificates registered in the name
of Employee and bearing an appropriate legend referring to the restrictions set
forth in this Agreement. The Shares are being issued directly from the
authorized but unissued stock of the Company and are not being issued pursuant
to any existing stock plan of the Company.
This Restricted Stock Agreement will be administered by the Compensation
Committee of the Company's Board of Directors (the "Committee"). Any or all
functions of the Committee specified in this Agreement may be exercised by the
Board of Directors, unless this Agreement specifically states otherwise. The
Committee has the authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the Shares as it may, from time-to-
time, deem advisable; to interpret the terms and provisions of this Restricted
Stock Agreement, and to otherwise supervise the administration of the Agreement.
Except as set forth in this Agreement, the Committee may not amend, alter or
terminate this Agreement without the written consent of Optionee. All decisions
made by the Committee pursuant to this Agreement will be final and binding on
all persons, including the Company and Employee.
2. Restricted Period. The restrictions to which the Shares shall be
-----------------
subject during the Restricted Period are as follows:
<PAGE>
(a) During the Restricted Period, none of the Shares may be sold,
exchanged, transferred, pledged, hypothecated, or otherwise disposed
of, whether voluntarily, involuntarily, or by operation of law.
(b) If employment of Employee by the Company or any parent corporation or
subsidiary terminates for any reason, except death or Disability (as
defined below), at any time prior to the end of the Restricted Period,
Employee shall forfeit to the Company, for no consideration, all
Shares for which the Restricted Period has not lapsed.
(c) If employment of the Employee by the Company or any parent corporation
or subsidiary terminates for the reason of death or Disability (defined
as permanent and total disability as determined by the Committee) at
any time prior to the end of the Restricted Period, the restrictions
for all Shares subject to this Agreement shall lapse with respect to
the number of Shares determined by multiplying the total number of
Shares by a fraction; the numerator of which is the number of complete
months served as an employee of the Company, and the denominator of
which is twelve. Any fractional Share will be rounded to the nearest
whole number. All remaining Shares for which the Restricted Period has
not lapsed will be forfeited to the Company.
(d) If Employee remains an employee of the Company or any parent
corporation or subsidiary on January 4, 2000, the Restricted Period for
all of the Shares granted pursuant to this Agreement shall lapse and
Employee will own the Shares free of all restrictions otherwise imposed
by this Agreement.
(e) Upon a Change of Control prior to the conclusion of the Restricted
Period, the restrictions for all Shares subject to this Agreement shall
lapse. For purposes of this Section 2(e), the term "Change of Control"
means any of the following:
(A) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becomes a "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined
voting power of the Company's then outstanding securities and is
required to file a Schedule 13D under the Exchange Act; or
(B) the Incumbent Directors cease for any reason to constitute at least
a majority of the Board of Directors. The term, "Incumbent
Directors," shall mean those individuals who are members of the
Board of Directors on August 13, 1997 and any individual who
subsequently becomes a member of the Board
2
<PAGE>
of Directors whose election or nomination for election by the
Company's shareholders was approved by a vote of at least a
majority of the then Incumbent Directors; or
(C) all or substantially all of the assets of the Company are sold,
leased, exchanged or otherwise transferred and immediately
thereafter, there is no substantial continuity of ownership with
respect to the Company and the entity to which such assets have
been transferred.
3. Deposit of Certificates. Employee agrees that he will deposit with
-----------------------
the Company the certificate or certificates representing the Shares, together
with stock powers or other instruments of transfer appropriately endorsed in
blank by him. This deposit will remain in effect with respect to the Shares
until the Restricted Period has lapsed with respect to such Shares pursuant to
Section 2 of this Agreement.
4. Payment of Taxes and Withholding of Shares. Employee shall, no later
------------------------------------------
than the date as of which any part of the value of the Shares first becomes
includible as compensation in the gross income of Employee for Federal income
tax purposes, pay to the Company, or make arrangements satisfactory to the
Company regarding payment of, any Federal, state, or local taxes of any kind
required by law to be withheld with respect to the award. The obligations of
the Company under this award shall be conditional on such payment or
arrangements and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to
Employee. Employee may elect by written notice to the Company to satisfy part
or all of the withholding tax requirements associated with the award by (i)
authorizing the Company to retain from the number of Shares that would otherwise
be deliverable to the Employee, or (ii) delivering to the Company from shares
already owned by the Employee, that number of shares having an aggregate Fair
Market Value equal to part or all of the tax payable by the Employee under this
paragraph. Any such election shall be in accordance with, and subject to,
applicable tax and securities laws, regulations and rulings.
For purposes of this Section 4, "Fair Market Value" of a Share on any given
date shall be determined by the Committee as follows: (i) if the Company's
Common Stock is listed for trading on one of more national securities exchanges,
or is traded on the Nasdaq Stock Market, the last reported sales price on the
principal such exchange or the Nasdaq Stock Market on the date in question, or
if such stock shall not have been traded on such principal exchange on such
date, the last reported sales price on such principal exchange or the Nasdaq
Stock Market on the first day prior thereto on which such stock was so traded;
or (ii) if the stock is not listed for trading on a national securities exchange
or the Nasdaq Stock Market, but is traded in the over-the-counter market,
including the Nasdaq Small Cap Market, the closing bid price for such stock on
the date in question, or if there is no such bid price for such stock on such
date, the closing bid price on the first day prior
3
<PAGE>
thereto on which such price existed; or (iii) if neither (i) or (ii) is
applicable, by any means fair and reasonable by the Committee, which
determination shall be final and binding on all parties.
5. Employment of Employee. Nothing in this Agreement shall be construed
----------------------
as constituting a commitment, guaranty, agreement, or understanding of any kind
or nature that the Company or any parent corporation or subsidiary shall
continue to employ Employee, and this Agreement shall not affect in any way the
right of the Company or any parent corporation or subsidiary to terminate the
employment of Employee at any time for any reason.
6. Changes in Capital Structure of the Corporation. The grant of the
-----------------------------------------------
Restricted Stock shall not limit in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge, exchange or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets. The
number of Shares held by Employee for which the Restricted Period has not lapsed
shall be adjusted equitably by the Company, as if the Restricted Period had
lapsed with respect to such Shares, in the event of (i) a subdivision or
combination of the shares of capital stock of the Company, (ii) a dividend
payable in shares of capital stock of the Company (iii) a reclassification of
any shares of capital stock of Company, or (iv) any other change in the capital
structure of the Company. Except as provided in Section 2(e), any additional
Shares issued to the Employee as a result of any of the foregoing events shall
continue to be subject to the terms of this Agreement to the same extent as the
Shares giving rise to the right to receive such additional Shares.
7. Rights of Shareholder. Subject to the terms and provisions of this
---------------------
Agreement, the Employee shall have all the rights of a shareholder of the
Company with respect to the Shares during the Restricted Period, including the
right to vote the Shares and to receive all dividends or other distributions
paid or made with respect to the Shares; provided, however, that Employee will
not be entitled to vote the Shares or receive dividends with respect to record
dates for such rights arising prior to the date of this Agreement or with
respect to record dates occurring on or after the date, if any, on which
Employee has forfeited the Shares.
8. Registration. As promptly as practicable, the Company shall prepare,
------------
file and maintain with the Securities and Exchange Commission, an effective
registration statement on Form S-8 (or, in the Company's sole discretion, on any
appropriate comparable form under the Securities Act of 1933, as amended, as may
then be available to the Company) relating to the resale of the Shares granted
hereunder.
9. Burden and Benefit. The terms and provisions of this Agreement shall
------------------
be binding upon, and inure to the benefit of, the Employee and the Employee's
executors or administrators, heirs, and personal and legal representatives.
4
<PAGE>
10. Modifications. Any change in, or modification of this Agreement shall
-------------
be valid only in writing and signed by the parties to this Agreement.
11. Entire Agreement; Governing Law; Notices. This Agreement constitutes
----------------------------------------
the entire agreement of the parties with respect to the subject matter of this
Restricted Stock Agreement and supersedes in its entirety all prior undertakings
and agreements of the Company and Employee with respect to such subject matter,
and may not be modified adversely to the Employee's interest except by means of
a writing signed by the Company and Employee. This Agreement is governed by the
internal substantive laws but not the choice of law rules of Minnesota. Notices
required hereunder shall be given in person or by first class mail to the
address of Employee shown on the records of the Company and to the Company at
its executive office.
12. Invalid or Unenforceable Provisions. The invalidity or
-----------------------------------
unenforceability of any particular provision of this Agreement shall not affect
the other provisions of this Agreement, and this Agreement shall be construed in
all respects as if that invalid or unenforceable provision were omitted.
IN WITNESS WHEREOF, the Company and Employee have executed this Agreement
as of the day and year first above written.
UROLOGIX, INC. (the "Company")
By:________________________________________
Its:_________________________________
/s/ Michael M. Selzer, Jr.
-------------------------------------------
Michael M. Selzer, Jr. ("Employee")
5
<PAGE>
Exhibit 4.3
UROLOGIX, INC.
STOCK OPTION AGREEMENT
This option is being issued pursuant to the terms and conditions set forth
in this Option Agreement and is not issued pursuant to any existing stock option
plan of the Company.
XI. NOTICE OF STOCK OPTION GRANT
----------------------------
Michael M. Selzer, Jr. 2355 Brockton Lane
Plymouth, MN 55447
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of this Option Agreement, as follows:
Date of Grant December 8, 1998
Vesting Commencement Date December 8, 1998
Exercise Price per Share $3.875
Total Number of Shares Granted 400,000
Total Exercise Price $1,550,000
Type of Option: Incentive Stock Option
---
X Nonstatutory Stock Option
---
Term/Expiration Date: December 8, 2008
Exercise and Vesting Schedule:
-----------------------------
This Option shall be exercisable in whole or in part, and shall vest
according to the following vesting schedule:
1
<PAGE>
The first 200,000 shares will vest over the period commencing on the
Vesting Commencement Date and ending on January 4, 2003, with 50,000 shares
vesting on January 4, 2000, and 1/36th of the remaining 150,000 shares vesting
on the 4th of each of the 36 months following January 4, 2000.
The next 100,000 shares will vest over a period of four years beginning on
January 4, 2000, with 25,000 shares vesting on January 4, 2001 and 1/36th of the
remaining 75,000 shares vesting on the 4th of each of the 36 months following
January 4, 2001.
The remaining 100,000 shares will vest over a period of four years
commencing on January 4, 2001, with 25,000 shares vesting on January 4, 2002 and
the 1/36th of the remaining 75,000 shares vesting on the 4th of each of the 36
months following January 4, 2002.
A fraction of a share shall not vest until a sufficient number of
fractional shares have vested constituting one whole share.
Termination Period:
------------------
This Option may be exercised, to the extent it is then vested, for 30 days
after termination of employment by the Company, or a parent company or
subsidiary. Upon death or Disability of the Optionee, defined as permanent and
total disability as determined by the Compensation Committee of the Board of
Directors), this Option may be exercised, to the extent it is then vested, for a
period of twelve months after Optionee's termination of employment. In no event
shall this Option be exercised later than the Term/Expiration Date as provided
above.
XII AGREEMENT
---------
1. Grant of Option. The Company hereby grants to the Optionee named in
---------------
the Notice of Grant (the "Optionee"), an option (the "Option") to purchase the
number of Shares set forth above, at the exercise price per Share set forth
above (the "Exercise Price"), subject to the terms and conditions set forth in
this Option Agreement. The Shares will be issued directly from the authorized
but unissued stock of the Company and are not issued pursuant to any existing
stock option plan of the Company.
The Option will be administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"). Any or all functions of the
Committee specified in this Agreement may be exercised by the Board of
Directors, unless this Agreement specifically states otherwise. The Committee
has the authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Option as it may, from time-to-time, deem
advisable; to interpret the terms and provisions of this Option Agreement and to
otherwise supervise the
2
<PAGE>
administration of the Option. The Committee may not amend, alter or terminate
the Option without the written consent of Optionee. All decisions made by the
Committee pursuant to this Agreement will be final and binding on all persons,
including the Company and Optionee.
2. Exercise of Option. This Option shall be exercisable during its term
------------------
as follows:
(a) Right to Exercise.
-----------------
(i) Subject to subsections 2(a)(ii) through 2(a)(iv) below, this
Option shall be exercisable according to the vesting schedule set forth above.
Alternatively, at the election of the Optionee, this Option may be exercised, in
whole or in part at any time, as to Shares which have not yet vested. Vested
Shares shall not be subject to the Company's repurchase right (as set forth in
the Restricted Stock Purchase Agreement, attached as Exhibit B-1).
-----------
(ii) As a condition to exercising this Option for unvested
Shares, the Optionee shall execute the Restricted Stock Purchase Agreement.
(iii) This Option may not be exercised for a fraction of a Share.
(iv) Upon a Change of Control, the Option shall become
exercisable in full as to all of the shares covered thereby without regard to
any installment exercise or vesting provisions. For purposes of this Section
2(a)(iv), the term "Change of Control" means any of the following:
(A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-
3 under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities and is required to file a Schedule 13D under the Exchange
Act; or
(B) the Incumbent Directors cease for any reason to
constitute at least a majority of the Board of Directors. The term, "Incumbent
Directors," shall mean those individuals who are members of the Board of
Directors on August 13, 1997 and any individual who subsequently becomes a
member of the Board of Directors whose election or nomination for election by
the Company's shareholders was approved by a vote of at least a majority of the
then Incumbent Directors; or
3
<PAGE>
(C) all or substantially all of the assets of the Company are
sold, leased, exchanged or otherwise transferred and immediately thereafter,
there is no substantial continuity of ownership with respect to the Company and
the entity to which such assets have been transferred.
(v) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Shares or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the number and option price of
Shares subject to this Option, as may be determined to be appropriate by the
Committee, in its sole discretion, provided that the number of Shares subject to
any award shall always be a whole number. The grant of the Option shall not
limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, exchange or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice in the form attached as Exhibit A (the "Exercise Notice") which
---------
must state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company.
The Exercise Notice shall be accompanied by payment of the aggregate exercise
price as to all Exercised Shares. This Option will be deemed to be exercised
upon receipt by the Company of such fully executed Exercise Notice accompanied
by the aggregate exercise price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares are then listed.
Assuming such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check;
(c) surrender of other Shares owned by the Optionee and acceptable to
the Committee, which, (i) in the case of Shares acquired upon exercise of an
option, have been owned by the Optionee for more than six (6) months on the date
of surrender, and (ii) have a Fair
4
<PAGE>
Market Value on the date of surrender equal to the aggregate Exercise Price of
the Exercised Shares.
4. Transferability of Option. This Option may not be transferred in any
-------------------------
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by Optionee. However, the
Optionee, with the approval of the Committee, may transfer the Option for no
consideration to or for the benefit of the Optionee's Immediate Family
(including, without limitation, to a trust for the benefit of the Optionee's
Immediate Family or to a partnership or a limited liability company for one or
more members of the Optionee's Immediate Family), subject to such limits as the
Committee may establish, and the transferee shall continue to be subject to all
of the terms and conditions as were applicable to the Option immediately prior
to such transfer. The foregoing right to transfer the Option shall apply to the
right to consent to amendments to this Agreement. The term "Immediate Family"
shall mean the Optionee's spouse, parents, children, step children, adoptive
relationships, sisters, brothers and grandchildren (and, for this purpose, shall
also include the Optionee). The terms of this Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.
5. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Option Agreement.
6. Registration. As promptly as practicable, the Company shall prepare,
------------
file and maintain with the Securities and Exchange Commission, an effective
registration statement on Form S-8 (or, in the Company's sole discretion, on any
appropriate comparable form under the Securities Act of 1933, as amended, as may
then be available to the Company) relating to the resale of the Shares issued
pursuant to exercise of the Option granted hereunder.
7. Tax Withholding. Optionee shall, no later than the date as of which
---------------
any part of the value of the Option first becomes includible as compensation in
the gross income of Optionee for Federal income tax purposes, pay to the
Company, or make arrangements satisfactory to the Committee regarding payment
of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to the Option. The obligations of the Company under this
Option shall be conditional on such payment or arrangements and the Company
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to Optionee. Subject to such rules
and limitations as may be established by the Committee from time to time,
Optionee may elect by written notice to the Company to satisfy part or all of
the withholding tax requirements associated with the award by (i) authorizing
the Company to retain from the number of Shares that would otherwise be
deliverable to the Employee, or (ii) delivering to the Company from Shares
already owned by the Employee, that number of shares
5
<PAGE>
having an aggregate Fair Market Value equal to part or all of the tax payable by
the Employee under this paragraph. Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.
For purposes of this Agreement, "Fair Market Value" of a Share on any given
date shall be determined by the Committee as follows: (i) if the Company's
Common Stock is listed for trading on one of more national securities exchanges,
or is traded on the Nasdaq Stock Market, the last reported sales price on the
principal such exchange or the Nasdaq Stock Market on the date in question, or
if such stock shall not have been traded on such principal exchange on such
date, the last reported sales price on such principal exchange or the Nasdaq
Stock Market on the first day prior thereto on which such stock were so traded;
or (ii) if the Company's Common Stock is not listed for trading on a national
securities exchange or the Nasdaq Stock Market, but is traded in the over-the-
counter market, including the Nasdaq Small Cap Market, the closing bid price for
such stock on the date in question, or if there is no such bid price for such
stock on such date, the closing bid price on the first day prior thereto on
which such price existed; or (iii) if neither (i) or (ii) is applicable, by any
means fair and reasonable by the Committee, which determination shall be final
and binding on all parties.
8. Section 83(b) Election for Unvested Shares Purchased Pursuant to
----------------------------------------------------------------
Option. With respect to the exercise of the Option for unvested Shares, an
- ------
election (the "Election") may be filed by Optionee with the Internal Revenue
Service, within 30 days of the purchase of the Shares, electing pursuant to
--------------
Section 83(b) of the Code to be taxed currently on any difference between the
purchase price of the Shares and their fair market value on the date of
purchase. In the case of an Non-Statutory Stock Option, this will result in a
recognition of taxable income to the Optionee on the date of exercise, measured
by the excess, if any, of the fair market value of the Exercised Shares, at the
time the Option is exercised over the purchase price for the Exercised Shares.
Absent such an election, taxable income will be measured and recognized by
Optionee at the time or times on which the Company's Repurchase Option lapses.
Optionee is strongly encouraged to seek the advice of his or her own tax
consultants in connection with the purchase of the Shares and the advisability
of filing of the Election under Section 83(b) of the Code.
OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY AND NOT
THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF OPTIONEE
REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON OPTIONEE'S
BEHALF.
9. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE OPTION IS EARNED ONLY BY CONTINUING
EMPLOYMENT AT THE WILL OF THE COMPANY (NOT
6
<PAGE>
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED EMPLOYMENT BY THE
COMPANY AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT
CAUSE.
10. Entire Agreement; Governing Law; Notice. This Option Agreement,
---------------------------------------
together with Exhibits A and B, constitute the entire agreement of the parties
with respect to the subject matter of this Option Agreement and supersedes in
its entirety all prior undertakings and agreements of the Company and Optionee
with respect to the subject matter hereof, and may not be modified adversely to
the Optionee's interest except by means of a writing signed by the Company and
Optionee. This Option Agreement is governed by the internal substantive laws
but not the choice of law rules of Minnesota. Notices required hereunder shall
be given in person or by first class mail to the address of Optionee shown on
the records of the Company and to the Company at its executive office.
Optionee hereby accepts this Option subject to all of its terms and
provisions. Optionee has reviewed this Option Agreement in its entirety, has
had an opportunity to obtain the advice of
7
<PAGE>
counsel prior to executing this Option and fully understands all provisions of
the Option. Optionee further agrees to notify the Company upon any change in the
residence address indicated above.
OPTIONEE: UROLOGIX, INC.
/s/ Michael, M. Selzer, Jr.
- ------------------------------ -------------------------
Signature By
Michael M. Selzer, Jr.
- ------------------------------ -------------------------
Print Name Title
- ------------------------------
Social Security Number
8
<PAGE>
Exhibit 5.1
August 6, 1999
Urologix, Inc.
14405 21st Avenue North
Minneapolis, MN 55447
Re: Opinion of Counsel as to Legality of Shares of Common Stock to be
Registered Under the Securities Act of 1933
Ladies and Gentlemen:
This opinion is furnished in connection with the registration under the
Securities Act of 1933 on Form S-8 of (i) 500,000 shares of Common Stock, $.01
par value, of Urologix, Inc. (the "Company") offered to officers, directors,
employees and consultants of the Company pursuant to the Amended and Restated
Urologix, Inc. 1991 Stock Option Plan (the "Plan"), (ii) 25,000 shares of Common
Stock, $.01 par value, of the Company issued pursuant to the Restricted Stock
Agreement between the Company and Michael M. Selzer, Jr., and (iii) 400,000
shares of Common Stock, $.01 par value, of the Company to be issued pursuant to
the Stock Option Agreement between the Company and Michael M. Selzer, Jr.
As counsel for the Company, we advise you that it is our opinion, based on
our familiarity with the affairs of the Company and upon our examination of
pertinent documents, that (i) the 500,000 shares of Common Stock to be offered
to officers, directors, employees and consultants by the Company under the Plan,
(ii) the 25,000 shares of Common Stock issued pursuant to the Restricted Stock
Agreement between the Company and Michael M. Selzer, Jr., and (iii) the 400,000
shares of Common Stock to be issued pursuant to the Stock Option Agreement
between the Company and Michael M. Selzer, Jr. will, when paid for and issued,
be validly issued and lawfully outstanding, fully paid and nonassessable shares
of Common Stock of the Company.
The undersigned hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an Exhibit to the Registration Statement
with respect to said shares of Common Stock under the Securities Act of 1933.
Very truly yours,
LINDQUIST & VENNUM P.L.L.P.
/s/ Lindquist & Vennum P.L.L.P
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated August 31, 1998
included in the Urologix, Inc. Annual Report on Form 10-K for the fiscal year
ended June 30, 1998, and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Minneapolis, Minnesota
August 6, 1999
