<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Integ Incorporated
-----------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
_______________________
(2) Aggregate number of securities to which transaction applies:
_______________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
_______________________
(4) Proposed maximum aggregate value of transaction: _____________________
(5) Total fee paid: ________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(6) Amount Previously Paid: ________________________
(7) Form, Schedule or Registration Statement No.: _______________________
(8) Filing Party: ________________________
(9) Date Filed: ________________________
<PAGE>
INTEG INCORPORATED
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
June 22, 2000
TO THE SHAREHOLDERS OF INTEG INCORPORATED:
Notice is hereby given that the Annual Meeting of Shareholders of Integ
Incorporated will be held at 10:00 a.m. on Thursday, June 22, 2000, at the
Minneapolis Hilton, 1001 Marquette Avenue, Minneapolis, Minnesota, for the
following purposes:
1. To elect two directors to serve on the Board of Directors for three
year terms.
2. To ratify the selection of Ernst & Young LLP as the independent
auditors of Integ Incorporated for the fiscal year ending December 31,
2000.
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on April 24, 2000 as
the record date for the determination of shareholders entitled to receive notice
of and vote at the meeting.
We encourage you to take part in the affairs of your Company either in
person or by executing and returning the enclosed proxy.
By Order of the Board of Directors,
/s/ Susan L. Critzer
Susan L. Critzer
President and Chief Executive Officer
Dated: May 12, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE MARK, DATE AND SIGN
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU LATER
DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS EXERCISED.
<PAGE>
INTEG INCORPORATED
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
June 22, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Integ Incorporated (the "Company") for use
at the Annual Meeting of Shareholders of the Company to be held at 10:00 a.m. on
Thursday, June 22, 2000, at the Minneapolis Hilton, 1001 Marquette Avenue,
Minneapolis, Minnesota, and at any adjournment thereof. A shareholder giving the
enclosed proxy may revoke it at any time before the vote is cast at the annual
meeting by delivering to an officer of the Company either a written notice
terminating the proxy's authority or a proxy bearing a later date, or by
appearing in person and voting at the meeting. Shares of the Company's common
stock, $.01 par value (the "Common Stock"), represented by a proxy will be voted
in the manner directed by a shareholder. If no direction is made, the proxy will
be voted for the election of the nominees for director named in this Proxy
Statement and for the other proposals set forth in this Proxy Statement. This
Proxy Statement and the accompanying form of proxy are being sent or given to
shareholders beginning on or about May 12, 2000, along with the Company's Annual
Report to Shareholders for the year ended December 31, 1999.
Only shareholders of record at the close of business on April 24, 2000 are
entitled to receive notice of and vote at the meeting or at any adjournment
thereof. On April 24, 2000, there were 9,834,078 shares of Common Stock of the
Company outstanding. Each share is entitled to one vote. Cumulative voting is
not permitted. Shares voted as abstentions on any matter (or a "withhold vote
for" as to a director) will be counted as shares that are present and entitled
to vote for purposes of determining the presence of a quorum at the meeting and
as unvoted, although present and entitled to vote, for purposes of determining
the approval of each matter as to which the shareholder has abstained. If a
broker submits a proxy that indicates the broker does not have discretionary
authority as to certain shares to vote on one or more matters, those shares will
be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum at the meeting, but will not be considered
as present and entitled to vote with respect to such matters.
The Board of Directors knows of no matters other than those that are
described in this Proxy Statement that may be brought before the meeting.
However, if any other matters are properly brought before the meeting, persons
named in the enclosed proxy or their substitutes will vote in accordance with
their best judgment on such matters.
All expenses in connection with the solicitation of proxies will be paid by
the Company. In addition to solicitation by mail, officers, directors and
regular employees of the Company, who will receive no extra compensation for
their services, may solicit proxies by telephone, facsimile or personal calls.
The Company's principal executive offices are located at 2800 Patton Road,
St. Paul, Minnesota 55113.
<PAGE>
ELECTION OF DIRECTORS
(Proposal #1)
The Bylaws of the Company provide that directors of the Company shall be
divided into three classes, as nearly equal in number as reasonably possible.
The term of office of the first class of directors will expire at this Annual
Meeting of Shareholders, the term of the second class of directors will expire
at the meeting of shareholders in 2001 and the term of the third class of
directors will expire at the meeting of shareholders in 2002. Directors elected
at each annual meeting of shareholders will be of the same class as the
directors whose terms expire at such annual meeting of shareholders, and shall
be elected to hold office for a term expiring at the third succeeding annual
meeting of shareholders or until their successors are elected and shall qualify.
Vacancies and newly created directorships resulting from an increase in the
number of directors may be filled by the vote of a majority of the directors
then in office. The directors so chosen will hold office until the next election
of the class for which such directors shall have been chosen.
At the Annual Meeting of Shareholders to be held on June 22, 2000, the
terms of office of Mark B. Knudson, Ph.D. and Susan L. Critzer will expire. Each
of Dr. Knudson and Ms. Critzer has been nominated to be elected to the Board of
Directors for an additional three year term that will expire at the annual
meeting of shareholders in 2003. The Board of Directors recommends that the
shareholders elect Dr. Knudson and Ms. Critzer as directors of the Company for
the ensuing three year period. The person named as proxy in the enclosed form of
proxy intends to vote the proxies received by the Company for the election of
Dr. Knudson and Ms. Critzer, unless otherwise directed. Each of Dr. Knudson and
Ms. Critzer has indicated a willingness to serve. If, however, either of Dr.
Knudson or Ms. Critzer is not a candidate at the meeting, which is not presently
anticipated, the proxy named in the enclosed form of proxy may vote for a
substitute nominee in his or her discretion.
The affirmative vote of the holders of a majority of the shares of Common
Stock represented at the meeting is required for the election of each of Dr.
Knudson and Ms. Critzer. The Board of Directors recommends a vote FOR each of
Dr. Knudson and Ms. Critzer.
Information regarding the directors of the Company is set forth below:
Name Age Expiration of Term
- ---- --- ------------------
Mark B. Knudson, Ph.D. (1)(3) 51 2000
Frank B. Bennett (1)(2) 43 2001
Susan L. Critzer 44 2000
Robert S. Nickoloff (2) 71 2002
Walter L. Sembrowich, Ph.D. (2)(3) 57 2001
Winston R. Wallin (1) 74 2002
(1) Member of the Compensation Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
(3) Member of the Nominating Committee of the Board of Directors.
Mark B. Knudson, Ph.D., the Company's founder, served as the President of
the Company from its inception in April 1990 through December 1990, and as Chief
Executive Officer from the Company's inception through November 1991. Dr.
Knudson has also served as Chairman of the Company's Board of Directors since
its inception. Dr. Knudson is Chairman and Chief Executive Officer of Venturi
Group, LLC, a venture capital medical device incubator and, since November 1996,
has been the Chairman and founder of HeartStent, a private company developing
products for coronary revascularization. Dr. Knudson is a partner of Medical
Innovation Partners (MIP) and a General Partner of Medical Innovation Partners
II (MIP II). Dr. Knudson serves as a director of Diametrics Medical, Inc., a
manufacturer of point of care blood chemistry testing systems, and several
private companies.
2
<PAGE>
Frank B. Bennett has been a director of the Company since 1992. Mr. Bennett
is the founder of Artesian Capital Management, Inc. ("Artesian") and Artesian
Management, Inc. ("Artesian Management") and has served as the President of each
of these entities since their inception in 1989 and 1995, respectively. Artesian
is the general partner of Artesian Capital Limited Partnership ("Artesian
Capital"), and Artesian Management is the general partner of Artesian Capital
Limited Partnership II ("Artesian Capital II"), which are seed and start-up
venture investment funds.
Susan L. Critzer has been a director of the Company since April 1999 when
she was appointed by the Board of Directors to fill a vacancy created by the
resignation of Terrance G. McGuire. Ms. Critzer joined the Company in January
1995 as Vice President, Operations, assumed the role of interim President and
interim Chief Financial Officer in June 1998 and became President and Chief
Executive Officer in April 1999 and acting Chief Financial Officer in December
1999. Before joining the Company, Ms. Critzer spent six years with American
Cyanamid Corporation's Davis and Geck (D&G) Division, where she held a number of
management positions, including Director of Engineering for D&G's start-up
endosurgery division. From 1986 to 1989, Ms. Critzer was with Becton-Dickinson
Corporation where she held management positions in manufacturing, engineering
and quality assurance. Prior to her employment with Becton-Dickinson, Ms.
Critzer held a variety of management, information systems, quality assurance and
engineering positions with General Motors Corporation.
Robert S. Nickoloff has been a director of the Company since its inception.
Mr. Nickoloff is a General Partner of MIP and MIP II, where he has been active
in the formation and financing of start-up medical device and service companies
since 1987. Mr. Nickoloff has also been Vice-President and counsel of Range
Television Cable Co., Inc. since 1965 and General Counsel of Venturi Group, LLC
since 1999. He has been Chairman of Medical Innovation Capital Inc. since 1986
and Chairman of KMN Inc. since 1993. He has served as Chairman of the Board of
Governors of the University of Minnesota Hospital and Clinic and is a director
of Conseco, Inc.
Walter L. Sembrowich, Ph.D., has been a director of the Company since its
inception. He is currently Chief Executive Officer and Chairman of Birch Point
Medical, Inc., an early stage drug delivery system company which he co-founded.
Dr. Sembrowich is President and founder of Aviex, Inc., a provider of investment
and management services to start-up and early stage medical companies. He is a
founder of and has held various management positions at Diametrics Medical, Inc.
through December 1995, including Chief Executive Officer from 1990 through
January 1993, Co-Chairman of the Board from January 1993 to March 1995 and
Executive Vice President of New Business Development from March 1995 through
December 1995. Dr. Sembrowich serves as a director of St. Jude Medical, Inc., a
developer and marketer of heart valves and other cardiovascular devices. Dr.
Sembrowich also serves as Chairman of the Board of Opticon Medical, Inc., an
early-stage medical product and service company. He has also been a director for
Minnesota Project Innovation and has served as Chairman and review board member
for the National Institutes of Health Small Business Innovative Research
program.
Winston R. Wallin has been a director of the Company since September 1996.
Mr. Wallin also serves as Chairman Emeritus of Medtronic, Inc. He joined
Medtronic as President and Chief Executive Officer in June 1985 and was elected
Chairman of the Board and Chief Executive Officer in January 1986. Mr. Wallin
retired as Chief Executive Officer of Medtronic in April 1991 and continued as
Chairman of the Board until August 28, 1996, at which time he was conferred the
title of Chairman Emeritus. Mr. Wallin serves on the Board of Trustees of
Carleton College and the Caux Roundtable in Caux, Switzerland, and on the
Minneapolis Foundation and the Board of Overseers of the Carlson School of
Management at the University of Minnesota. Mr. Wallin is also a director of
GalaGen, Inc.
Mr. Bennett was elected to the Board of Directors as designee of preferred
stockholders pursuant to agreements with the Company which terminated upon the
closing of the Company's initial public offering.
Meetings of the Board of Directors and Certain Committees
During the fiscal year ended December 31, 1999, the Board of Directors met
12 times. All incumbent directors attended at least 75% of the aggregate of
those meetings of the Board of Directors and meetings of the committees on which
they served that were held while they were serving on the Board or on such
committee, except Mr. Bennett who was unable to attend one of the committee
meetings.
3
<PAGE>
The Board of Directors of the Company has Compensation, Audit and
Nominating Committees, which have a current membership as indicated in the
footnotes to the table on page 2 of this Proxy Statement. The Compensation
Committee makes recommendations concerning executive salaries and incentive
compensation for employees of the Company, and administers the Company's 1990
Incentive and Stock Option Plan (the "1990 Option Plan"), the 1991 Incentive and
Stock Option Plan (the "1991 Option Plan"), the 1994 Long-Term Incentive and
Stock Option Plan (as amended, the "1994 Option Plan" and together with the 1990
and 1991 Option Plans, the "Stock Option Plans") and the Company's 1996
Directors' Stock Option Plan (as amended, the "Directors' Plan"). The
Compensation Committee has delegated authority to the Chief Executive Officer
and Chairman of the Board to grant options in such director's or officer's
discretion to employees who are not executive officers in amounts not exceeding
an aggregate of 10,000 shares of Common Stock per individual in any period of 12
consecutive months pursuant to the Stock Option Plans. During 1999, the
Compensation Committee held two meetings and also acted by written consent in
lieu of meetings.
The Audit Committee reviews the results and scope of the audit and other
services provided by the Company's independent auditors, as well as the
Company's accounting principles and its system of internal controls, and reports
the results of its review to the full Board of Directors and to management.
During 1999, the Audit Committee held one meeting.
The Nominating Committee makes recommendations regarding director and
officer nominations. During 1999, the Nominating Committee held no meetings. The
Nominating Committee will consider shareholder recommendations for nominees made
in accordance with the Company's bylaws.
4
<PAGE>
Compensation of Directors
The Company pays outside directors $3,000 per quarter, $1,000 per meeting
attended in person ($500 if attended by telephone) and $500 per committee
meeting attended, up to a maximum of $20,000 per year. The Company also
reimburses directors for expenses actually incurred in attending meetings of the
Board of Directors and its committees. In addition, the Company has granted to
all of the current non-employee directors options to purchase Common Stock under
the Directors' Plan, which provides for an automatic grant of nonqualified stock
options to purchase 20,000 options to non-employee directors on the date that
such individuals become directors of the Company and an additional 6,000 options
on each subsequent annual shareholder meeting date, subject to certain
limitations. Initial options become vested and exercisable with respect to 6,666
shares on the 12 month anniversary date of such grants and with respect to 6,667
shares on each of the 24 month and 36 month anniversary dates of such grants.
Annual options would become vested and exercisable with respect to 2,000 shares
on each of the 12, 24 and 36 month anniversary dates of such grants. In addition
in April 1999, the Company granted to all of the current non-employee directors
options to purchase 6,000 shares of Common Stock under the 1994 Plan. These
options will become vested and exercisable with respect to 1,500 shares on each
of the 12 month, 24 month, 36 month and 48 month anniversary dates of such
grant. In November 1999, the Company also granted to all of the non-employee
directors options to purchase 10,000 shares of common stock under the 1994 Plan.
These options will become vested and exercisable with respect to 2,500 shares on
each of the 12 month, 24 month, 36 month and 48 month anniversary dates of such
grant.
The Company has reserved 300,000 shares of Common Stock for issuance under
the Directors' Plan. The option price for directors is equal to the fair market
value of one share of Common Stock on the date of grant.
Directors who are employees of the Company do not receive any additional
compensation for serving on the Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors and persons who beneficially own more than ten percent
(10%) of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC"). Executive officers, directors, and greater than ten percent (10%)
beneficial owners are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers, directors and 10% shareholders were complied with in
1999.
5
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock, as of March 1, 2000, by: (i) each person who is
known by the Company to beneficially own more than 5% of the Common Stock, (ii)
each of the Company's directors, (iii) each of the Named Executive Officers and
(iv) all directors and executive officers of the Company as a group. Unless
otherwise noted below, the address of each of the following shareholders is the
same as the Company.
Shares Percentage of
Beneficially Outstanding
Name and Address Owned (1) Shares Owned (1)
---------------- ------------ ----------------
MIF and MIF II (2) 1,498,074 15.0%
6450 City West Parkway
Suite 508
Eden Prairie, MN 55344
InterWest Partners V, L.P. ("IWP") (3) 725,263 7.5%
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, CA 94025
Frank B. Bennett (4)(5) 83,656 *
Mark B. Knudson, Ph.D. (5)(6) 307,637 3.1%
Robert S. Nickoloff (5)(7) 77,996 *
Walter L. Sembrowich, Ph.D. (5)(8) 66,834 *
Winston R. Wallin (5) 71,834 *
Susan L. Critzer (5) 194,977 2.0%
Richard F. Mussmann (5)(9) 169,709 1.7%
All current executive officers and
directors as a group (7 persons) (10) 972,643 9.6%
* Less than 1%.
(1) Beneficial ownership is determined in accordance with rules of the
SEC, and includes voting power and/or investment power with respect to
securities. Shares of Common Stock subject to options or warrants
currently exercisable or exercisable within 60 days of March 1, 2000
are deemed outstanding for computing the percentage of the person
holding such options but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote, the
Company believes that the persons named in this table, based on
information provided by such persons, have sole voting and investment
power with respect to the shares of Common Stock indicated.
(2) Includes 732,927 shares of Common Stock held by MIF and 486,161 shares
of Common Stock held by MIF II. Also includes 278,986 shares of Common
Stock issuable upon the exercise of outstanding options and warrants
held by MIF and MIF II. Does not include 1,750 shares held by MIP, the
general partner of MIF, and does not include 1,500 shares held by MIP
II, the general partner of MIF II.
(3) Disclosure is made in reliance upon a Schedule 13G/A filed with the
SEC by IWP on February 14, 2000. Such Schedule 13G indicates that (i)
IWP and InterWest Management Partners V, L.P. ("IMP"), the general
partner of IWP, have sole voting and investment power with respect to
725,263 of such shares (ii) Alan W. Crites, Philip T. Gianos, Wallace
R. Hawley, W. Scott Hedrick, W. Stephen Holmes, Robert R. Momsen and
Arnold L. Oronsky each have shared voting and investment power with
respect to 729,824 of such shares. Excludes vested options to purchase
23,667 shares with respect to which Robert R. Momsen has sole voting
and investment power, as
6
<PAGE>
confirmed in a letter dated April 3, 2000 from the Company to Robert
R. Momsen, and 4,561 shares of Common Stock with respect to which
Messrs. Crites, Hawley, Hedrick, Holmes, and Momsen hold shared voting
and investment power through their general partner interests in
InterWest Investors V ("IWI"), an affiliate of IWP.
(4) Includes 15,837 shares of Common Stock held by Mr. Bennett's wife, for
which shares Mr. Bennett disclaims beneficial ownership. Does not
include (i) 2,717 shares of Common Stock held by Artesian Capital
Management, (ii) 865 shares held by Artesian Management Inc. and (iii)
49,382 shares of Common Stock issuable upon the exercise of
outstanding warrants held by Artesian Capital II. Mr. Bennett serves
as the President of Artesian, the general partner of Artesian Capital,
and as the President of Artesian Management, the general partner of
Artesian Capital II. Mr. Bennett disclaims beneficial ownership of
such shares, except to the extent of his proportionate pecuniary
interest in such partnership.
(5) Includes the following number of shares of Common Stock issuable upon
the exercise of outstanding options: Dr. Knudson: 60,167 shares; Mr.
Bennett: 26,834 shares; Mr. Nickoloff: 26,834 shares; Dr. Sembrowich:
46,834 shares; Mr. Wallin: 21,834 shares; Ms. Critzer: 143,917 shares;
and Mr. Mussmann: 109,376 shares.
(6) Includes 25,000 shares of Common Stock held by Dr. Knudson's wife,
54,000 shares held by Knudson Family L.P., and 1,500 shares held by
Dr. Knudson's daughter, for which shares Dr. Knudson disclaims
beneficial ownership. Does not include shares of Common Stock held by
MIF II or MIP II or shares of Common Stock issuable upon the exercise
of outstanding options and warrants held by MIF II. Dr. Knudson is a
general partner of MIP II, the general partner of MIF II. Dr. Knudson
disclaims beneficial ownership of the shares held by MIF II and MIP
II, except to the extent of his proportionate pecuniary interest in
MIP II.
(7) Includes 50,635 shares held in an IRA of Mr. Nickoloff. Does not
include shares of Common Stock held by MIF, MIF II, MIP or MIP II or
shares of Common Stock issuable upon the exercise of outstanding
options and warrants held by MIF and MIF II. Mr. Nickoloff is a
general partner of MIP and of MIP II, the general partners of MIF and
MIF II, respectively. Mr. Nickoloff disclaims beneficial ownership of
such shares, except to the extent of his proportionate pecuniary
interest in such partnerships.
(8) Does not include shares held by MIF or MIP which Dr. Sembrowich may be
deemed to hold based on his partnership interest in MIP. Dr.
Sembrowich disclaims beneficial ownership of such shares, except to
the extent of his proportionate pecuniary interest in such
partnership.
(9) Includes 32,000 shares of Common Stock held by Mr. Mussmann's
daughters, for which shares Mr. Mussmann disclaims beneficial
ownership.
(10) See Notes 4, 5, 6, 7, 8, and 9 above.
7
<PAGE>
EXECUTIVE COMPENSATION
Executive Compensation
Summary Compensation. The following table sets forth the cash and noncash
compensation for fiscal years 1999, 1998 and 1997 earned by or awarded to the
Chief Executive Officer and Chief Technical Officer of the Company (the "Named
Executive Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
Fiscal ------------------------ Long-Term Compensation All Other
Name and Principal Position Year Salary Bonus Options (# Shares) Compensation
- ----------------------------- ------ ------------ ----------- ---------------------- ------------
<S> <C> <C> <C> <C> <C>
Susan L. Critzer 1999 $204,951 $101,562(1) 75,000 $ --
President and Chief 1998 $169,642 $120,000(2) 211,999(3) $ --
Executive Officer 1997 $161,525 $ -- 75,000 $ --
Richard F. Mussmann 1999 $196,560 $ 38,000 60,000 $ --
Executive Vice President 1998 $186,009 $102,728(5) 280,000(6) $ --
and Chief Technical 1997 $ 90,298 $ 15,000 165,000 $113,604(7)
Officer (4)
</TABLE>
- --------------
(1) Represents 25,000 shares of the Company's Common Stock paid to Ms. Critzer
as a bonus on March 24, 2000.
(2) Includes $50,000 which represents 40,000 shares of the Company's Common
Stock which was paid to Ms. Critzer as bonus on February 17, 1999.
(3) Includes options to purchase 146,999 shares of Common Stock which were
cancelled in connection with a repricing of certain stock options of the
Company on September 22, 1998 (the "Repricing").
(4) Mr. Mussmann joined the Company June 30, 1997 as Vice President, Research
and Development and became Executive Vice President and Chief Technical
Officer in April 1999.
(5) Includes $41,364 which represents 33,091 shares of the Company's Common
Stock which was paid to Mr. Mussmann as a bonus on February 17, 1999.
(6) Includes options to purchase 8,750 shares of Common Stock which were
granted to Mr. Mussmann in connection with a surrender of options to
purchase 8,750 shares of Common Stock granted in 1997 and options to
purchase 215,000 shares of Common Stock which were cancelled in connection
with the Repricing.
(7) Constitutes relocation expense.
8
<PAGE>
Option Grants. The following table summarizes options granted during the
year ended December 31, 1999 to the Named Executive Officers:
Option Grants In Year Ended December 31, 1999
<TABLE>
<CAPTION>
Potential Realizable
% of Total Value at Assumed Annual
Options Rates of Stock Price
Granted to Exercise Appreciation for Option
Options Employees Price Per Expiration Term(1)
Granted(2) in 1999 (3) Share(4) Date 5% 10%
----------- --------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Susan L. Critzer 75,000(5) 11.1% $2.00 10/20/09 $ 94,350 $ 239,100
Richard F. Mussmann 10,000(5) 1.72% $1.72 4/30/09 $ 10,810 $ 27,394
50,000(5) 7.4% $2.00 10/20/09 $ 62,900 $ 159,400
</TABLE>
- ---------------
(1) The compounding assumes a ten year exercise period for all option grants.
The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the SEC and do not represent the Company's
estimate or projection of the Company's future Common Stock prices. These
amounts represent certain assumed rates of appreciation only. Actual gains,
if any, on stock option exercises are dependent on the future performance
of the Common Stock and overall stock market conditions. The amounts
reflected in this table may not necessarily be achieved.
(2) Each option represents the right to purchase one share of Common Stock. The
options shown in this column were granted pursuant to the 1994 Option Plan.
To the extent not already exercisable, the options become exercisable in
the event of a "change in control" (as defined in the stock option
agreement) involving the Company.
(3) In 1999, the Company granted employees options to purchase an aggregate of
677,240 shares of Common Stock.
(4) The exercise price may be paid in cash, in shares of Common Stock with a
market value as of the date of exercise equal to the option price or a
combination of cash and shares of Common Stock.
(5) Options become exercisable with respect to 25% of the shares on the
anniversary date of such grant for each of the four years following such
grant.
Option Values. The following table summarizes the value of options held at
December 31, 1999 by the Named Executive Officers. No options held by such
executive officers were exercised during 1999.
Aggregated Option Values At December 31, 1999
Value of Unexercised
Number of Unexercised Options In-the-Money Options
at December 31, 1999 at December 31, 1999 (1)
----------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Susan L. Critzer 143,917 181,081 $183,193 $115,079
Richard F. Mussmann 106,876 183,124 $136,966 $154,509
- -------------
(1) Value based on the difference between the last sale price of the Common
Stock as reported by the Nasdaq National Market on December 31, 1999 and
the option exercise price per share, multiplied by the number of shares
subject to the in-the-money options.
9
<PAGE>
Report of Compensation Committee on Executive Compensation
Under rules established by the SEC, the Company is required to provide
certain data and information in regard to the compensation and benefits provided
to the Company's Chief Executive Officer and other executive officers
(collectively, the "Executive Officers"). The SEC rules require the Compensation
Committee of the Board of Directors to issue a report explaining the rationale
and considerations that led to fundamental executive compensation decisions
affecting the Executive Officers. In fulfillment of this requirement, the
Compensation Committee of the Board of Directors (the "Committee"), at the
direction of the Board of Directors, has furnished the following report on
executive compensation:
The Committee is responsible for setting salaries for officers and for
granting incentive awards and stock-based compensation to the Company's
executive officers, including the Chief Executive Officer, on behalf of the
Board of Directors and the shareholders. The Committee also oversees the
operation of the Company's executive compensation benefits.
The Committee consists entirely of outside directors of the Company. During
1999, Dr. Knudson and Mr. Bennett and Mr. Wallin served on the Committee. Dr.
Knudson is Chairman of the Committee.
Compensation Policies
- ---------------------
The Company is committed to attracting, hiring and retaining an experienced
management team that can successfully develop the Company's products, penetrate
target markets, and obtain and maintain required regulatory approvals worldwide.
With these goals in mind, the Committee closely aligns its compensation plan for
executive management to the milestones achieved and the influence that each
executive has as the Company grows and matures. The Committee annually reviews
and evaluates the Company's corporate performance, compensation levels and
equity ownership of its executive officers. The Committee strives to establish
competitive levels of compensation that are consistent with the Company's annual
and long-term performance goals, are appropriate for each officer's scale of
responsibility and performance, recognize individual initiative and
achievements, will attract and retain the highest quality personnel possible
consistent with the Company's resources, and provide an incentive to such
executives to focus on the Company's long-term strategic goals by aligning their
financial interests closely with long-term shareholder interests. The Committee
intends to make the executive compensation program competitive with the
marketplace while emphasizing compensation in the form of equity ownership, the
value of which is contingent on the Company's long-term market performance. It
is intended that, in judging appropriate levels of compensation, the Committee
will take into account internally set performance goals and comparisons with the
performance of a self-selected group of development stage companies with similar
business characteristics and strategies.
Because the Company has yet to begin commercial production and full-scale
marketing of its product, it is difficult to select objective criteria by which
to measure individual and Company performance. As a result, the Committee's
efforts to tie compensation to performance involve a subjective element and take
into account each officer's performance during the past year based on
qualitative standards and the achievement of nonfinancial goals such as reaching
certain milestones in the development of the Company's LifeGuide(TM) System and
progress towards clinical trials of the Company's LifeGuide System. In
evaluating compensation relative to Company performance, the Committee also
considers the Company's stock performance. Factors that the Committee
anticipates that it will consider include maintaining the compensation of the
Company's officers at industry levels, as reflected in surveys of compensation
practices in corporations of comparable size and technology.
The Company's compensation program has three primary components: base
salary, short-term incentives and long-term incentives. The ultimate composition
of executive compensation reflects the Company's goals of attracting and
retaining highly qualified personnel and supporting a performance-oriented
environment that rewards both corporate and personal performance over the long
term. In general, stock option grants are used to enhance the competitiveness of
compensation packages, to reward exceptional performance and provide incentive
for reaching further performance goals. The Compensation Committee also believes
that the use of stock options is important to align the interests of the
officers with the interests of the shareholders.
10
<PAGE>
Base Salaries
- -------------
The Committee establishes annual base salaries after an analysis of each
executive officer's individual performance during the prior year, the overall
performance of the Company during the prior year and historical compensation
levels within the executive officer group. The Committee believes that executive
salaries must be sufficiently competitive to attract and retain key individuals.
In this regard, salaries for officers are based on experience levels and are
intended to be competitive with median salaries paid to comparable executives in
similar positions at other development stage medical device companies.
Development stage companies continue to be used for comparison purposes because,
in 1999, the Company's products remained in development, and commercial
production of the LifeGuide System had not yet begun. In the absence of revenue
and profitable operations, the Company does not have the financial resources to
match salaries offered by larger or profitable medical device companies. By
augmenting base salary with equity-based compensation, the Company seeks to
continue to attract and retain quality management personnel despite limited
financial resources. Annual increases in base salaries for existing officers are
generally consistent with the merit increase formula used throughout the
Company. The Company grants annual merit increases to all employees in the range
of 0-10% based on performance. Larger increases are given, as appropriate, to
reflect changes in job responsibility and authority or to internally balance the
salary structure among the executive officer group.
Short-Term Incentives
- ---------------------
The Committee believes that executive compensation should be based in part
on the achievement of milestones that are important to the short-term success of
the Company. Accordingly, the Committee periodically sets short-term milestones
and then compares the Company's progress against these targets. Members of the
executive team, along with all Company employees, are periodically granted
options to purchase shares of the Common Stock with vesting tied to the
achievement of specified operating and personal objectives. The number of
options granted with these vesting provisions is determined based on the
individual's experience and position within the Company.
Long-Term Incentives
- --------------------
The Committee believes that long-term shareholder interests and executive
compensation should be closely aligned. The Committee believes that stock
ownership by management and stock-based performance compensation arrangements
are beneficial in aligning management's and shareholders' interests in enhancing
shareholder value. Stock options are generally granted to executive officers at
the time they are elected. In determining the number of options to be granted at
such time, the Committee takes into consideration job responsibilities,
experience and contributions of the individual and recommendations of the
President. The stock options give the holder the right to purchase shares of the
Common Stock over a ten-year period. Because the options are granted at the fair
market value on the date of grant, they will provide value only when the price
of the Common Stock increases above the share price on the date of the grant.
Options are also subject to vesting provisions designed to encourage executives
to remain employed by the Company. Additional options are granted from time to
time based on individual performance, increased job responsibilities and the
prior level of grants.
CEO Compensation
- ----------------
The determination of the Chief Executive Officer's salary, bonus and grants
of stock options followed the policies set forth above for all executives'
compensation.
The Committee believes that stock options granted to Ms. Critzer to date
provide a significant and appropriate tie between overall compensation and the
performance of the Company over the long term.
11
<PAGE>
Compensation Limitations
- ------------------------
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally limits the corporate deduction for compensation paid to
executive officers to $1.0 million, unless the compensation qualifies as
"performance-based compensation" under the Code. Section 162(m) did not affect
the deductibility of compensation paid to the Company's executive officers in
1999 and will not affect the deductibility of such compensation expected to be
paid in 2000. The Committee will continue to monitor this matter and may propose
changes to the executive compensation program if warranted.
SUBMITTED BY THE COMPENSATION COMMITTEE:
Mark B. Knudson, Chairman
Frank B. Bennett
Winston R. Wallin
12
<PAGE>
Stock Performance
The graph below sets forth a comparison of the cumulative shareholder
return of the Common Stock with the cumulative total return of the Nasdaq Stock
Market - U.S. Index and the Standard & Poor's Health Care (Medical Products and
Supplies) Index from June 26, 1996 (the date of the initial public offering of
the Common Stock) to December 31, 1999. The graph assumes the investment of $100
in the Common Stock on June 26, 1996, and in each of the designated indices on
May 31, 1996, and that dividends, if any, were reinvested.
[PERFORMANCE GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
6/26/96 6/96 9/96 12/96 3/97 6/97 9/97 12/97
INTEG INCORPORATED 100 101 109 103 63 82 61 42
NASDAQ STOCK MARKET (U.S.) 100 95 99 104 98 116 136 127
S & P HEALTH CARE (MEDICAL
PRODUCTS & SUPPLIES) 100 101 112 113 112 134 139 141
- --------------------------------------------------------------------------------
3/98 6/98 9/98 12/98 3/99 6/99 9/99 12/99
INTEG INCORPORATED 46 28 13 12 14 17 20 22
NASDAQ STOCK MARKET (U.S.) 149 153 139 179 200 219 224 324
S & P HEALTH CARE (MEDICAL
PRODUCTS & SUPPLIES) 162 179 168 203 213 213 188 188
13
<PAGE>
Employment Contracts and Termination of Employment and Change-in-Control
Agreements
Except as described below, the Company does not have any employment
agreements with its Named Executive Officers.
Ms. Critzer and Mr. Mussmann have agreements with the Company under which
each such officer is entitled to receive severance pay equal to 12 times his or
her total monthly compensation (including salary and bonus, determined in
accordance with such agreement) if, after a change in control (as defined in
such agreement) of the Company, the Company terminates the officer's employment
without cause, or the officer terminates his or her employment for good reason
(as such terms are defined in such agreement). These agreements also contain
covenants by each such officer not to compete and not to solicit the Company's
customers or employees during the term of each such officer's employment and for
12 months following the termination of his or her employment for any reason.
In addition, the exercisability of options granted to executive officers is
accelerated in the event of a "change in control" over the Company (as such term
is defined in the stock option agreements entered into by the executive
officers).
Compensation Committee Interlocks and Insider Participation
Dr. Knudson, Mr. Bennett and Mr. Wallin served as members of the Company's
Compensation Committee during 1999. Dr. Knudson, who also served as the
Company's President in 1990 and as the Chief Executive Officer from 1990 to
1991, is a limited partner of MIP and a general partner of MIP II. MIP and MIP
II are the general partners of MIF and MIF II, respectively, which entities
engaged in certain transactions with the Company, as described below. Dr.
Knudson is also Chairman and Chief Executive Officer of Venturi Group, LLC,
which has engaged in certain transactions with the Company as described below.
Laboratory and office furniture and equipment used by the Company with an
original cost of approximately $801,000 as of December 31, 1999 are leased under
sublease arrangements with FIM, Inc. and FIM II, Inc., entities related to the
Company through MIF and MIF II. Under the lease arrangements, MIF and MIF II
have guaranteed the lease payments owing to an unrelated third party. The
liability for future lease payments under these guarantees was $12,760 as of
December 31, 1999. In consideration of such guarantees, the Company issued
options to purchase an aggregate of 42,993 shares of Common Stock at an exercise
price of $0.84 per share to MIF and warrants to purchase shares of Series D
Preferred Stock, convertible into 87,845 shares of Common Stock at an as
converted exercise price of $4.125 per share, to MIF II. Options to purchase
30,523 shares of Common Stock will expire in May 2001. The balance of the Common
Stock options (12,470 shares) will expire in April 2003. The Series D Preferred
Stock warrants expire at various times between December 2004 and January 2005.
Beginning in April 1992, the Company entered into a series of annual
consulting agreements with Dr. Knudson. In March 1997, the Company entered into
a three-year consulting agreement with Dr. Knudson, which agreement runs through
April 3, 2000 which was renewed until April 2, 2003. Under this agreement, Dr.
Knudson acts as consultant for the Company in the area of technical expertise
and advisory services, for which he is paid $6,750 per month. During 1999, Dr.
Knudson received an aggregate of $81,000 for such consulting services.
Beginning in September 1999, the Company subleased office space and
provided certain administrative services to Venturi Group, LLC and received
$66,000 from Venturi Group, LLC for the sublease and provision of services.
CERTAIN TRANSACTIONS
Dr. Knudson is a general partner of MIP II and Chairman and Chief Executive
Officer of Venturi Group, LLC, and Mr. Nickoloff is a general partner of both
MIP and MIP II and general counsel to Venturi Group, LLC. For a discussion of
certain Company transactions with Dr. Knudson, MIF and MIF II and Venturi Group,
LLC, see "Executive Compensation--Compensation Committee Interlocks and Insider
Participation."
14
<PAGE>
RATIFICATION OF INDEPENDENT AUDITORS
(Proposal #2)
The Board of Directors has appointed Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 2000 and recommends that
the shareholders ratify that appointment. Ernst & Young LLP has no relationship
with the Company other than that arising from its employment as independent
auditors. Representatives of Ernst & Young LLP will be present at the 2000
Annual Meeting. They will have an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions from
shareholders.
The affirmative vote of a majority of the outstanding shares of the Common
Stock represented at the 2000 Annual Meeting is required to ratify the
appointment of Ernst & Young LLP as the Company's independent auditors. The
Board of Directors recommends that you vote FOR this proposal.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any proposal by a shareholder to be presented at the next annual meeting
must be received at the Company's principal executive offices, 2800 Patton Road,
St. Paul, Minnesota 55113, not later than February 23, 2001.
By Order of the Board of Directors,
/s/ Kenneth L. Cutler
Kenneth L. Cutler
Secretary
Dated: May 12, 2000
15
<PAGE>
INTEG INCORPORATED
ANNUAL MEETING
Thursday, June 22, 2000
10:00 a.m. Central Time
Minneapolis Hilton
1001 Marquette Avenue
Minneapolis, Minnesota
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INTEG INCORPORATED
2800 Patton Road, St. Paul, MN 55113 Proxy
- --------------------------------------------------------------------------------
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Susan L. Critzer and Richard F. Mussmann, and
each of them, with full power to appoint a substitute, to vote all shares the
undersigned is entitled to vote at the Annual Meeting of Shareholders of Integ
Incorporated to be held on June 22, 2000, and at all adjournments thereof, as
specified below on the matters referred to, and, in their discretion, upon any
other matters which may be brought before the meeting:
If no choice is specified, the proxy will be voted "FOR" each item.
See reverse for voting instructions.
<PAGE>
Please mark, sign and date your proxy card and return it in the postage-paid
envelope provided.
\|/ Please detach here \|/
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Board of Directors Recommends a Vote FOR Items 1 and 2.
1. Election of directors:
01 Mark B. Knudson, Ph.D.
02 Susan L. Critzer
[_] Vote FOR [_] Vote WITHHELD
all nominees from all nominees
- ------------------------------------------------------
- ------------------------------------------------------
(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominee(s) in the box provided to the right.)
2. Proposal to ratify Ernst & Young LLP as the Company's independent auditors
for the year ending December 31, 2000.
[_] For [_] Against [_] Abstain
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting of Shareholders.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR EACH ITEM.
Address Change? Mark Box [_] Indicate changes below:
Date__________________________________
--------------------------------------
--------------------------------------
Signature(s) in Box
Please sign exactly as your name(s)
appear on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc., should
include title and authority.
Corporations should provide full name
of corporation and title of authorized
officer signing the Proxy.
