SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
SurModics, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
SURMODICS, INC.
-----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-----------
The Annual Meeting of Shareholders of SurModics, Inc. will be held on
January 22, 2001, at 4:00 p.m. (Minneapolis time), at the Hotel Sofitel, 5601
West 78th Street, Bloomington, Minnesota, for the following purposes:
1. To set the number of directors at eight (8).
2. To elect Class II directors.
3. To consider and act upon such other matters as may properly
come before the meeting and any adjournments thereof.
Only shareholders of record at the close of business on December 8,
2000, are entitled to notice of and to vote at the meeting or any adjournment
thereof.
Your vote is important. We ask that you complete, sign, date and return
the enclosed proxy in the envelope provided for your convenience. The prompt
return of proxies will save the Company the expense of further requests for
proxies.
BY ORDER OF THE BOARD OF DIRECTORS
Dale R. Olseth
Chairman and Chief Executive Officer
Eden Prairie, Minnesota
December 15, 2000
<PAGE>
SURMODICS, INC.
Annual Meeting of Shareholders
January 22, 2001
PROXY STATEMENT
INTRODUCTION
Your Proxy is solicited by the Board of Directors of SurModics, Inc.
("the Company") for use at the Annual Meeting of Shareholders to be held on
January 22, 2001, at the location and for the purposes set forth in the notice
of meeting, and at any adjournment thereof.
The cost of soliciting proxies, including the preparation, assembly and
mailing of the proxies and soliciting material, as well as the cost of
forwarding such material to beneficial owners of stock, will be borne by the
Company. Directors, officers and regular employees of the Company may, without
compensation other than their regular remuneration, solicit proxies personally
or by telephone.
Any shareholder giving a proxy may revoke it at any time prior to its
use at the meeting by giving written notice of such revocation to the Secretary
of the Company. Proxies not revoked will be voted in accordance with the choice
specified by shareholders by means of the ballot provided on the Proxy for that
purpose. Proxies which are signed but which lack any such specification will,
subject to the following, be voted in favor of the proposals set forth in the
Notice of Meeting and in favor of the slate of directors proposed by the Board
of Directors and listed herein. If a shareholder abstains from voting as to any
matter, then the shares held by such shareholder shall be deemed present at the
meeting for purposes of determining a quorum and for purposes of calculating the
vote with respect to such matter, but shall not be deemed to have been voted in
favor of such matter. Abstentions, therefore, as to any proposal will have the
same effect as votes against such proposal. If a broker returns a "non-vote"
proxy, indicating a lack of voting instructions by the beneficial holder of the
shares and a lack of discretionary authority on the part of the broker to vote
on a particular matter, then the shares covered by such non-vote proxy shall be
deemed present at the meeting for purposes of determining a quorum but shall not
be deemed to be represented at the meeting for purposes of calculating the vote
required for approval of such matter.
The mailing address of the principal executive office of the Company is
9924 West 74th Street, Eden Prairie, Minnesota 55344. The Company expects that
this Proxy Statement, the related proxy and notice of meeting will first be
mailed to shareholders on or about December 15, 2000.
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed December 8, 2000, as
the record date for determining shareholders entitled to vote at the Annual
Meeting. Persons who were not shareholders on such date will not be allowed to
vote at the Annual Meeting. At the close of business on December 8, 2000,
16,618,736 shares of the Company's Common Stock were issued and outstanding. The
Common Stock is the only outstanding class of capital stock of the Company
entitled to vote at the meeting. Each share of Common Stock is entitled to one
vote on each matter to be voted upon at the meeting. Holders of Common Stock are
not entitled to cumulative voting rights.
PRINCIPAL SHAREHOLDERS
The following table provides information concerning persons known to
the Company to be the beneficial owners of more than 5% of the Company's
outstanding Common Stock as of December 8, 2000. Unless otherwise indicated, the
shareholders listed in the table have sole voting and investment powers with
respect to the shares indicated.
Name and Address of Number of Shares Percent of
Beneficial Owner Beneficially Owned Class (1)
----------------------- ------------------ ----------
Dale R. Olseth 1,271,000 (2) 7.6%
9924 West 74th Street
Eden Prairie, MN 55344
David A. Koch 1,062,580 (3) 6.4%
9924 West 74th Street
Eden Prairie, MN 55344
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person to acquire them as of December 8, 2000, or within
sixty days of such date are treated as outstanding only when
determining the percent owned by such individual and when determining
the percent owned by a group.
(2) Includes 5,000 shares held by Mr. Olseth's wife and 142,000 shares
which may be acquired upon exercise of stock options which are
exercisable as of December 8, 2000 or within 60 days of such date.
(3) Includes 44,000 shares which may be acquired upon exercise of stock
options which are exercisable as of December 8, 2000 or within 60 days
of such date, 50,000 shares held by the Greycoach Foundation, over
which Mr. Koch has shared voting and investment power, and 142,000
shares held by a Trust for the benefit of Mr. Koch's wife and children.
Mr. Koch is one of the Trustees of such Trust and has shared voting and
dispositive powers over the shares held by the Trust.
<PAGE>
MANAGEMENT SHAREHOLDINGS
The following table sets forth the number of shares of Common Stock
beneficially owned as of December 8, 2000, by each executive officer of the
Company named in the Summary Compensation table, by each current director and
nominee for director of the Company and by all directors and executive officers
(including the named individuals) as a group. Unless otherwise indicated, the
shareholders listed in the table have sole voting and investment powers with
respect to the shares indicated.
Name of Beneficial Number of Shares Percent of
Owner or Identity of Group Beneficially Owned Class (1)
--------------------------- ------------------ ----------
Dale R. Olseth 1,271,000 (2) 7.6%
David A. Koch 1,062,580 (3) 6.4%
Patrick E. Guire, Ph.D. 386,714 (4) 2.3%
Kendrick B. Melrose 301,204 (5) 1.8%
James C. Powell 165,038 (6) *
James J. Grierson 158,772 (5) *
Stephen C. Hathaway 125,200 (7) *
Walter H. Diers, Jr. 95,200 (8) *
Donald S. Fredrickson, M.D. 55,400 (9) *
Kenneth H. Keller, Ph.D. 34,800 (10) *
John A. Meslow 30,400 (11) *
All officers and directors
as a group (12 persons) 3,763,308 (12) 21.9%
* Less than 1%
(1) See footnote (1) to preceding table.
(2) See footnote (2) to preceding table.
(3) See footnote (3) to preceding table.
(4) Includes 68,000 shares which may be acquired upon exercise of stock
options which are exercisable as of December 8, 2000 or within 60 days
of such date.
(5) Includes 44,000 shares which may be acquired upon exercise of stock
options which are exercisable as of December 8, 2000 or within 60 days
of such date.
(6) Includes 500 shares held by Mr. Powell's wife and 43,800 shares which
may be purchased upon exercise of options which are exercisable as of
December 8, 2000 or within 60 days of such date.
(7) Includes 113,200 shares which may be acquired upon exercise of stock
options which are exercisable as of December 8, 2000 or within 60 days
of such date.
(8) Includes 13,200 shares which may be purchased upon exercise of options
which are exercisable as of December 8, 2000 or within 60 days of such
date.
(9) Includes 400 shares which may be purchased upon exercise of options
which are exercisable as of December 8, 2000 or within 60 days of such
date.
(10) Includes 30,800 shares which may be purchased upon exercise of options
which are exercisable as of December 8, 2000 or within 60 days of such
date.
(11) Includes 2,400 shares which may be purchased upon exercise of options
which are exercisable as of December 8, 2000 or within 60 days of such
date.
(12) Includes 591,000 shares which may be purchased upon exercise of options
which are exercisable as of December 8, 2000 or within 60 days of such
date.
<PAGE>
ELECTION OF DIRECTORS
(Proposals #1 and #2)
General Information
The Bylaws of the Company provide that the number of directors, which
shall not be less than three, shall be determined by the shareholders. The Board
of Directors recommends that the number of directors be set at eight. The Bylaws
also provide for the election of three classes of directors with terms staggered
so as to require the election of only one class of directors each year. Only
directors who are members of Class II will be elected at the Annual Meeting. The
Class II directors will be elected to a three-year term and, therefore, will
hold office until the Company's 2004 Annual Meeting of Shareholders and until
their successors have been duly elected and qualified. The terms of Class III
and I directors continue until 2002 and 2003, respectively.
The Board of Directors nominates James J. Grierson and Kendrick B.
Melrose for re-election as Class II directors. Each Proxy will be voted for each
of such nominees unless the Proxy withholds a vote for one or both nominees. If,
prior to the meeting, it should become known that either of the nominees will be
unable to serve as a director after the meeting by reason of death, incapacity
or other unexpected occurrence, the proxies will be voted for such substitute
nominee as is selected by the Board of Directors or, alternatively, not voted
for any nominee. The Board of Directors has no reason to believe that any
nominee will be unable to serve. Under applicable Minnesota law, approval of the
proposal to set the number of directors at eight, as well as the election of
each Class II nominee, requires the affirmative vote of the holders of a
majority of the voting power of the shares represented in person or by proxy at
the Annual Meeting with authority to vote on such matter, but not less than the
affirmative vote of 4,154,685 shares.
The following information is provided with respect to each director
nominee as well as each director whose term continues after the Annual Meeting:
Name Age Position with Company
---- --- ---------------------
Dale R. Olseth 70 Chairman and Chief Executive
Officer
Patrick E. Guire, Ph.D. 64 Senior Vice President and Chief
Scientific Officer and Director
Donald S. Fredrickson, M.D. (1) 76 Director
James J. Grierson (2) 58 Director
Kenneth H. Keller, Ph.D. (1)(2) 66 Director
David A. Koch (1)(2) 70 Director
Kendrick B. Melrose (1)(2) 60 Director
John A. Meslow (1) 61 Director
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
<PAGE>
Dale R. Olseth (Class III) joined the Company in 1986 as its President
(which position he held until 1998), Chief Executive Officer and a director, and
has served as Chairman of the Board since 1988. Mr. Olseth also serves on the
Board of Directors of The Toro Company. He served as Chairman or President and
Chief Executive Officer of Medtronic, Inc. from 1976 to 1986. From 1971 to 1976,
Mr. Olseth served as President and Chief Executive Officer of Tonka Corporation.
Patrick E. Guire, Ph.D. (Class I) is a co-founder of the Company and
has served as Senior Vice President and Chief Scientific Officer and a director
since 1980. Dr. Guire is responsible for the research affairs of the Company.
Prior to founding SurModics, Dr. Guire was employed by Kallestad Laboratories,
Inc. as a senior scientist from 1978 to 1979 and was a researcher at the Midwest
Research Institute, Inc. in Kansas City, Missouri from 1972 to 1978.
Donald S. Fredrickson, M.D. (Class I) was elected a director of the
Company in 1991. He has served as President and Chief Executive Officer of D.S.
Fredrickson Associates, Inc., an international medical research and biomedical
consulting firm since 1987. Dr. Fredrickson served as Vice President, President
and Chief Executive Officer during his tenure at the Howard Hughes Medical
Institute in Washington D.C. from 1983 to 1987. During 1982 and 1983, he served
as a scholar-in-residence at the National Academy of Sciences of the United
States of America. From 1975 to 1981, he served as the Director of the National
Institutes of Health.
James J. Grierson (Class II) was elected a director of the Company in
1988. He served as Vice President of Business Development for Honeywell, Inc.
from 1992 until his retirement in 1996. He was Vice President of Finance for
Honeywell from 1987 to 1992 and its Vice President and Treasurer from 1982 to
1987.
Kenneth H. Keller, Ph.D. (Class III) was elected a director of the
Company in 1997. He has served as Professor of Science and Technology Policy in
the Hubert H. Humphrey Institute of Public Affairs at the University of
Minnesota since 1996. Dr. Keller was a Senior Fellow at the Council on Foreign
Relations from 1989 to 1997. Dr. Keller joined the Chemical Engineering and
Materials Science faculty of the University of Minnesota in 1964, and through
the years assumed increasing administrative responsibilities, including serving
as the twelfth President of the University in 1985, a position he held until
1988, when he moved to Princeton University as a Visiting Fellow.
David A. Koch (Class III) was elected a director of the Company in
1988. He has served as the Chairman of Graco Inc. since 1985, as its Chief
Executive Officer from 1985 to 1996 and as its President and Chief Executive
Officer from 1962 to 1985.
Kendrick B. Melrose (Class II) was elected a director of the Company in
1988. He has served as Chairman of the Board and Chief Executive Officer of The
Toro Company since 1987, and served as its Chief Executive Officer from 1983 to
1987 and as its President from 1981 to 1983. Mr. Melrose is also a director of
Donaldson Company, Inc. and Valspar Corporation.
John A. Meslow (Class I) was elected a director of the Company in 2000.
He served as Senior Vice President and President - Neurological Business of
Medtronic, Inc. from 1985 until his retirement in 2000.
<PAGE>
Committee and Board Meetings
The Company's Board of Directors has two standing committees, the Audit
Committee and the Compensation Committee. The Audit Committee is responsible for
reviewing the Company's internal control procedures, the quarterly and annual
financial statements of the Company, and reviewing with the Company's
independent public accountants the results of the annual audit. The Audit
Committee met twice during fiscal 2000. The Compensation Committee recommends to
the Board of Directors from time to time the salaries and incentive compensation
to be paid to executive officers of the Company and administers the Company's
employee stock plans. The Compensation Committee met once during the year.
During fiscal 2000, the Board of Directors held eight formal meetings.
Each incumbent director attended 75% or more of the total number of meetings of
the Board and of committee(s) of which he was a member.
Directors Fees
Directors are not currently paid fees for attending Board or Committee
meetings. Non-employee directors are generally compensated with non-qualified
stock options as determined by the Board of Directors from time to time. The
non-employee directors currently hold non-qualified stock options to purchase an
aggregate of 216,400 shares of Common Stock, including options to purchase an
aggregate of 12,000 shares granted during fiscal 2000. All such options have an
exercise price equal to the fair market value of a share of Common Stock on the
date of grant and expire five to ten years after the date of grant. Such options
vest over five year periods commencing on the date of grant. In addition,
Messrs. Grierson and Fredrickson are reimbursed for their travel-related
expenses incurred in attending meetings of the Board of Directors.
CERTAIN TRANSACTIONS
In August 1997, the Company adopted a plan pursuant to which an
employee of the Company could borrow amounts from the Company to fund stock
option exercises. No further loans are being granted under this program. Any
loan made pursuant to this plan was required to provide for: a five-year term,
subject to automatic acceleration to three months after termination of
employment; interest payable annually at the prime rate in effect at the time of
the loan; principal payable at maturity; and a pledge of the shares of Common
Stock acquired with the proceeds of the loan as security. Under the terms of
this loan program, (i) Walter H. Diers, Jr., Vice President of Corporate
Development for the Company, borrowed an aggregate of $80,000 on September 19,
1997, at an interest rate of 8.5%, to exercise an option to purchase an
aggregate of 20,000 shares of Common Stock at $4.00 per share and (ii) James C.
Powell, President and Chief Operating Officer, borrowed an aggregate of $56,000
on September 19, 1997, at an interest rate of 8.5% to exercise an option to
purchase an aggregate of 14,000 shares of Common Stock at $4.00 per share. Mr.
Powell's loan was paid in full during fiscal 1999 and Mr.
Diers' loan was paid in full during fiscal 2000.
<PAGE>
AUDIT COMMITTEE REPORT
The Board of Directors maintains an Audit Committee comprised of four
of the Company's outside directors. The Board of Directors and the Audit
Committee believe that the Audit Committee's current member composition
satisfies the rule of the National Association of Securities Dealers, Inc.
("NASD") that governs audit committee composition, Rule 4310(c)(26)(B)(i),
including the requirement that audit committee members all be "independent
directors" as that term is defined by NASD Rule 4200(a)(15).
In accordance with its written charter adopted by the Board of
Directors (set forth in Exhibit A), the Audit Committee assists the Board of
Directors with fulfilling its oversight responsibility regarding the quality and
integrity of the accounting, auditing and financial reporting practices of the
Company. In discharging its oversight responsibilities regarding the audit
process, the Audit Committee:
(1) reviewed and discussed the audited financial statements with
management;
(2) discussed with the independent auditors the material required
to be discussed by Statement on Auditing Standards No. 61; and
(3) reviewed the written disclosures and the letter from the
independent auditors required by the Independence Standards
Board's Standard No. 1, and discussed with the independent
auditors any relationships that may impact their objectivity
and independence.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 2000, as filed with the Securities and Exchange
Commission.
Members of the Audit Committee:
James J. Grierson, Chairman
Kenneth H. Keller, Ph.D.
David A. Koch
Kendrick B. Melrose
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Compensation Committee Report on Executive Compensation
Compensation Committee Interlocks and Insider Participation
The Compensation Committee ("Committee") of the Board of Directors of
the Company is currently composed of five of the Company's outside directors.
None of the members of the Committee is an employee or executive officer of the
Company. During the fiscal year ended September 30, 2000, Dale R. Olseth, the
Company's Chief Executive Officer, served as the chairman of the compensation
committee of The Toro Company. Kendrick B. Melrose, a member of the Committee,
serves as the Chief Executive Officer of The Toro Company.
Compensation Philosophy
The Committee's executive compensation policies are designed to enhance
the financial performance of the Company, and thus shareholder value, by
aligning the financial interests of executive officers and employees with those
of shareholders. The executive compensation program is viewed in total
considering all of the component parts: base salary, annual performance
incentives, benefits and long-term incentive opportunities in the form of stock
options, restricted stock grants and stock ownership. The Committee's position
is that stock ownership by executive officers and employees is beneficial in
aligning management's and shareholders' interests in the enhancement of
shareholder value.
Base Salary
Base salaries for executive officers of the Company are reviewed by the
Committee on an annual basis. Each year, the Committee assesses the executive
officer's level of responsibility, experience, individual performance, and
accountabilities relative to other Company executive officers and external
market practices. The Company's annual base salaries for its executive officers
are generally conservative when compared to base salaries offered by comparable
companies. However, the Committee believes that executive officers' base
salaries, when combined with incentive plans based on the Company's financial
performance, are generally competitive with compensation levels at comparable
companies. The Company's pay-for-performance philosophy places a substantial
portion of executive officers' total compensation "at risk" while providing
compensation opportunities which are comparable to the market levels.
Incentives
The Company may grant some executive officers long-term awards,
including performance awards, stock options, and restricted stock. The purposes
of the awards are to:
(i) focus executives on the achievement of performance objectives that
enhance shareholder value;
(ii) emphasize the importance of balancing present business needs and
long-term goals critical to the future success of the Company; and
<PAGE>
(iii) attract and retain executives officers of superior ability.
Annual Incentive Plan. The Company has adopted a cash bonus plan that
enables the Company's employees, including its executive officers, to earn an
additional percentage of their annual base salary based on the achievement of
certain financial goals by the Company. Pursuant to this plan, executive
officers may earn up to an additional 32% of their respective annual base
salaries if the goals are met. The actual percentage award for all employees is
determined based on the achievement of certain revenue and operating income
goals for the fiscal year.
1997 Incentive Stock Option Plan. Under the Company's 1997 Incentive
Stock Option Plan, 1.2 million shares of Common Stock were reserved for issuance
to executive officers and employees. The 1997 Plan requires that the option
price per share must be at least 100% of the fair market value of the Common
Stock on the date of the option grant. Options typically expire seven years from
the date of grant or upon termination of employment, and are exercisable at a
rate of 20% per year commencing one year after the date of grant.
Nonqualified Stock Option Plan. Under the Company's Nonqualified Stock
Option Plan, 1,944,480 shares of Common Stock were reserved for issuance to
outside directors, executive officers and employees. The options are granted at
100% of the fair market value. Options expire seven to ten years from the date
of grant, and are exercisable at a rate of 20% per year from the date of grant
or 20% per year commencing two years after the date of grant.
Restricted Stock Plan. Under the Company's Restricted Stock Plan,
200,000 shares of Common Stock were reserved for issuance to executive officers
and key employees. Under the Restricted Stock Plan, grants of restricted stock
vest in full five years from the date of grant.
General
The Company provides medical and insurance benefits to its executive
officers which are generally available to all Company employees. The Company
also maintains a 401(k) savings plan in which all qualified employees, including
the executive officers, may participate. The Company provides matching
contributions to the savings plan for all participating employees, allowing such
employees to earn up to an additional 3% of their annual base salary. In
addition, the Company maintains a Stock Purchase Plan that permits qualified
employees, including executive officers, to purchase stock of the Company at
favorable prices. The amount of perquisites allowed to executive officers, as
determined in accordance with rules of the Securities and Exchange Commission,
did not exceed 10% of salary in fiscal 2000.
Chief Executive Officer Compensation
Dale R. Olseth served as the Company's Chief Executive Officer in
fiscal 2000. His annual base salary and eligibility for annual incentives, set
forth in the following tables, were determined in accordance with the policies
described above as applicable to all executive officers.
Other
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the deductibility of certain compensation paid to the chief
executive officer and each of the four other most highly compensated executives
of a publicly-held corporation to $1,000,000. In fiscal 2000, the Company did
not pay "compensation" within the meaning of Section 162(m) to such executive
officers in excess of $1 million and does not believe it will do so in the near
future. Therefore, the Company does not have a policy at this time regarding
qualifying compensation paid to its executive officers for deductibility under
Section 162(m), but will formulate such a policy if compensation levels ever
approach $1 million.
Members of the Compensation Committee:
David A. Koch, Chairman
Donald S. Fredrickson, M.D.
Kenneth H. Keller, Ph.D.
Kendrick B. Melrose
John A. Meslow
<PAGE>
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid during each of the Company's last three fiscal years to the
Chief Executive Officer and each other executive officer of the Company (the
"Named Executive Officers") who received total salary and bonus compensation in
excess of $100,000 for 2000.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-term
Annual Compensation Compensation
--------------------------------- Securities
Name and Principal Fiscal Salary Bonus Underlying Options All Other
Position Year ($) ($)(1) (# of shares) Compensation (2)
<S> <C> <C> <C> <C> <C>
Dale R. Olseth, 2000 $ 150,724 $ 46,440 20,000 $ 3,203
Chairman and Chief Executive Officer 1999 $ 132,088 $ 27,596 15,000 $ 6,148
1998 $ 114,944 $ 22,663 10,000 $ 3,938
James C. Powell, 2000 $ 135,655 $ 41,796 20,000 $ 3,292
President and Chief Operating Officer 1999 $ 122,500 $ 28,800 15,000 $ 5,871
1998 $ 104,755 $ 20,602 10,000 $ 3,479
Stephen C. Hathaway, 2000 $ 113,052 $ 34,830 12,000 $ 3,392
Vice President and Chief Financial 1999 $ 107,082 $ 25,200 8,000 $ 5,488
Officer 1998 $ 95,771 $ 19,573 5,000 $ 3,225
Patrick E. Guire, Ph.D., 2000 $ 97,480 $ 30,034 0 $ 2,803
Senior Vice President and Chief 1999 $ 93,344 $ 20,880 0 $ 4,781
Scientific Officer 1998 $ 87,326 $ 17,922 5,000 $ 3,100
Walter H. Diers, Jr., 2000 $ 95,479 $ 44,417 12,000 $ 2,865
Vice President of Corporate Development 1999 $ 89,676 $ 20,644 8,000 $ 4,641
1998 $ 85,157 $ 16,997 5,000 $ 2,894
</TABLE>
(1) Represents amounts earned under a bonus plan for the Company's officers
enabling them to receive a payout of up to 32% of their base salary.
The amount of the bonus is determined based on the achievement of
certain revenue and profit goals for the year. The plan was reviewed
and approved by the Board of Directors. Mr. Diers' bonus in fiscal 2000
included an additional discretionary payment related to the completion
of a specific licensing milestone.
(2) Represents contributions made by the Company under its 401(k) plan.
<PAGE>
Option/SAR Grants During 2000 Fiscal Year
The following table sets forth information regarding stock options
granted to the Named Executive Officers during the fiscal year ended September
30, 2000. The Company has not granted stock appreciation rights.
<TABLE>
<CAPTION>
Number of Potential Realizable
Securities % of Total Value At Assumed
Underlying Options/SARs Annual Rates Of Stock
Options/SARs Granted to Exercise or Price Appreciation
Granted Employees in Base Price Expiration For Option Term
Name (#)(1) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
------------- ------------ ------------ ----------- ---------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dale R. Olseth 20,000 8.1% $25.094 9/18/07 $706,196 $978,022
James C. Powell 20,000 8.1% $25.094 9/18/07 $706,196 $978,022
Stephen C. Hathaway 12,000 4.8% $25.094 9/18/07 $423,717 $586,813
Patrick E. Guire, Ph.D. 0 N/A N/A N/A N/A N/A
Walter H. Diers, Jr. 12,000 4.8% $25.094 9/18/07 $423,717 $586,813
-------------
</TABLE>
(1) Such options are exercisable annually as to 20% of the total number of
shares commencing September 18, 2001.
Aggregated Option/SAR Exercises During 2000 Fiscal Year
and Fiscal Year End Option/SAR Values
The following table provides information related to the exercise of
stock options during fiscal 2000 by the Named Executive Officers and the number
and value of options held at fiscal year end by such persons:
<TABLE>
<CAPTION>
Number of Unexercised
Securities Underlying Value of Unexercised In-the-
Options at 9/30/00 Money Options at 9/30/00(1)
Shares ---------------------------- -----------------------------
Acquired on Value
Name Exercise Realized(2) Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dale R. Olseth N/A N/A 142,000 88,000 $3,487,875 $1,587,120
James C. Powell 40,800 $505,750 46,800 74,400 $1,125,275 $1,248,820
Stephen C. Hathaway 12,000 $139,500 83,600 84,400 $2,056,250 $1,748,872
Patrick E. Guire, Ph.D. 24,000 $307,500 60,000 26,000 $1,487,000 $ 638,500
Walter H. Diers, Jr. 24,000 $244,500 19,200 42,800 $ 454,300 $ 714,072
</TABLE>
(1) Value of exercisable/unexercisable in-the-money options is equal to the
difference between the market price of the Common Stock at fiscal year
end and the option exercise price per share multiplied by the number of
shares subject to options. The closing sale price as of September 29,
2000 on the Nasdaq National Market was $27.375.
(2) Value is equal to the difference between the closing price as quoted on
the Nasdaq National Market on the date of exercise and the option
exercise price per share multiplied by the number of shares to which the
exercise relates.
<PAGE>
Stock Performance Chart
The following chart compares the cumulative total shareholder return on
the Company's Common Stock with the cumulative total return on the Nasdaq Stock
Market and the Nasdaq Medical Industry Index (Medical Devices, Instruments and
Supplies). The comparison assumes $100 was invested on March 3, 1998 (the date
of the Company's initial public offering) and assumes reinvestment of dividends.
Comparison of Cumulative Total Return Among SurModics,
the Nasdaq Stock Market (U.S.) and the Nasdaq Medical Industry Index
(Medical Devices, Instruments and Supplies)
[CHART OMITTED]
<TABLE>
<CAPTION>
March 3, 1998 September 30, 1998 September 30, 1999 September 29, 2000
<S> <C> <C> <C> <C>
SurModics 100.000 102.507 198.333 730.000
Nasdaq US 100.000 96.904 158.312 210.177
Nasdaq Medical 100.000 84.844 121.453 169.487
</TABLE>
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who own more than 10 percent
of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders ("Insiders") are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based on a review of the copies of such
reports furnished to the Company, during the fiscal year ended September 30,
2000, all Section 16(a) filing requirements applicable to Insiders were complied
with, except that Walter F. Diers, Jr. was late filing two forms, each reporting
one transaction, Patrick E. Guire was late filing a form reporting two gift
transactions, and Marie J. Versen and Messrs. Diers, Fredrickson, Grierson,
Hathaway, Keller, Koch, Melrose, Meslow, Olseth and Powell were each late filing
a form reporting an option grant.
INDEPENDENT PUBLIC ACCOUNTANT
Arthur Andersen LLP acted as the Company's independent public
accountant for fiscal 2000. Representatives of Arthur Andersen LLP are expected
to be present at the meeting, will be given an opportunity to make a statement
regarding financial and accounting matters of the Company if they so desire, and
will be available at the meeting to respond to appropriate questions from the
Company's shareholders.
OTHER BUSINESS
Management knows of no other matters to be presented at the meeting. If
any other matter properly comes before the meeting, the appointees named in the
proxies will vote the proxies in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 2002 annual meeting of shareholders must be
received by the Company by August 14, 2001, to be considered for inclusion in
the Company's proxy statement and related proxy for the 2002 annual meeting.
Also, if a shareholder proposal intended to be presented at the 2002
annual meeting but not included in the Company's proxy statement and proxy is
received by the Company after October 27, 2001, then management named in the
Company's proxy form for the 2001 annual meeting will have discretionary
authority to vote shares represented by such proxies on the shareholder
proposal, if presented at the meeting, without including information about the
proposal in the Company's proxy materials.
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended September 30, 2000, accompanies this notice of meeting and Proxy
Statement. No part of the Annual Report is incorporated herein and no part
thereof is to be considered proxy soliciting material.
FORM 10-K
The Company will furnish without charge to each person whose proxy is
being solicited, upon written request of any such person, a copy of the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
2000, as filed with the Securities and Exchange Commission, including the
financial statements and the financial statement schedules thereto. The Company
will furnish to any such person any exhibit described in the list accompanying
the Form 10-K, upon the payment, in advance, of reasonable fees related to the
Company's furnishing such exhibit(s). Requests for copies of such report and/or
exhibits(s) should be directed to Mr. Stephen C. Hathaway, Vice President and
Chief Financial Officer, at the Company's principal address.
BY ORDER OF THE BOARD OF DIRECTORS
Dale R. Olseth
Chairman and Chief Executive Officer
Dated: December 15, 2000
Eden Prairie, Minnesota
<PAGE>
EXHIBIT A
SurModics, Inc.
Audit Committee Charter
Organization
The Board of Directors of SurModics, Inc. has established an Audit
Committee. The Committee shall be comprised of three or more directors who are
independent of the management of the Company as defined by the Nasdaq Stock
Market. Each of the directors must be able to read and understand fundamental
financial statements. In addition, at least one member of the Audit Committee,
preferably the Chairman, must have past experience in finance or accounting,
requisite professional certification in accounting, or other comparable
experience which results in the individual's financial sophistication.
Statement of Policy
The Audit Committee shall provide assistance to the corporate directors
in fulfilling their responsibility to shareholders, potential shareholders, and
the investment community relating to accounting, reporting practices, and the
quality and integrity of the financial reports of the Company. In so doing, it
is the responsibility of the Audit Committee to maintain free and open means of
communication between the directors, independent public accountants, internal
auditors (if any), outside legal counsel, and financial management of the
Company.
Responsibilities
The Audit Committee's duties and responsibilities include:
With respect to the Annual Financial Statements:
o Meet with the independent public accountants and financial management of
the Company to review the proposed scope, fees, and procedures to be
utilized in the audit of the financial statements for the current fiscal
year.
o At the conclusion of the audit, review the results thereof, including any
comments or recommendations of the independent public accountants.
o Inquire of the independent public accountants if there were any significant
financial reporting issues or judgements made during the accounting period
and, if so, how they were resolved.
o Review any changes in accounting principles that occurred during the
period.
o Inquire about the existence and substance of any significant accounting
accruals, reserves, contingencies and estimates made by management that
have a material impact on the financial statements and determine the
independent public accountants' opinions regarding the quality of all such
items.
<PAGE>
o Review with management and the independent public accountants the financial
statements contained in the annual report to shareholders to determine that
the independent public accountants are satisfied with the disclosure and
content of the financial statements.
o Discuss with financial management and the independent public accountants
any changes in accounting standards or rules promulgated by the Financial
Accounting Standards Board, Securities and Exchange Commission or other
regulatory bodies, that are expected to have an impact on the financial
statements.
o Based on the foregoing, indicate to the Board whether the Committee
recommends that the audited financial statements be included in the
Company's Annual Report on Form 10-K.
o Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
With respect to the Quarterly Financial Statements:
o Review with management and the independent public accountants the Company's
quarterly financial statements prior to the filing of its Form 10-Q. This
review may be conducted through a designated representative member of the
Committee.
With respect to the relationship with the Independent Public Accountants:
o With management, review the performance of the independent public
accountants. On an annual basis, select the independent public accountants
to audit the financial statements of the Company.
o Annually ensure the receipt from the independent public accountants of a
formal written statement delineating all relationships between the
independent public accountants and the Company, as required by Independence
Standards Board 1.
o Provide sufficient opportunity for the internal auditor (if any) and
independent public accountants to meet with members of the Audit Committee
without members of management present.
o Review all fees paid by the Company to the independent public accountants.
Other:
o Review with the independent public accountants, internal auditors (if any),
and financial and accounting personnel, the adequacy and effectiveness of
the accounting and financial controls of the Company. Elicit any
recommendations for the improvement of such internal control procedures or
particular areas where new or more detailed controls or procedures are
desirable.
o Meet, as necessary, with the outside legal counsel to discuss any legal
matters that may have a material impact on the financial statements.
<PAGE>
o Review the following items on a periodic basis:
o the corporation's risk management program;
o the corporation's investor relations program;
o the status of the corporation's information systems hardware,
software, processing procedures, and controls;
o the CEO's expenses and perquisites;
o any non-audit services performed for the corporation by the
independent public accountants;
o any other area deemed to be significant to the corporation's financial
statements (i.e. investments).
o Investigate any matter brought to the Committee's attention within the
scope of its responsibilities, with the power to retain outside legal
counsel, accounting or other consultants for this purpose if, in the
Committee's judgement, that is appropriate.
o Submit the minutes of all meetings of the Audit Committee to, or discuss
the matters discussed at each Committee meeting with, the full Board of
Directors.
o The review and reassessment of the adequacy of this formal, written charter
on at least an annual basis.
Meetings
The Audit Committee shall meet at least twice annually, or more
frequently as circumstances dictate. A majority of members will constitute a
quorum and will be able to conduct the business of the Committee. As necessary,
the Committee may request that members of management and representatives of the
independent public accountants or outside legal counsel be present at meetings
of the Committee. Minutes of all meetings shall be recorded and maintained by
the Committee.
<PAGE>
SURMODICS, INC.
PROXY FOR ANNUAL MEETING
Of Shareholders To Be Held
January 22, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints DALE R. OLSETH and STEPHEN C. HATHAWAY,
and each of them, with full power of substitution, as Proxies to represent and
vote, as designated below, all shares of Common Stock of SurModics, Inc.
registered in the name of the undersigned at the Annual Meeting of Shareholders
of the Company to be held at the Hotel Sofitel, 5601 West 78th Street,
Bloomington, Minnesota, at 4:00 p.m. (Minneapolis time) on January 22, 2001, and
at any adjournment thereof, and the undersigned hereby revokes all proxies
previously given with respect to the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
SURMODICS, INC. 2001 ANNUAL MEETING
The Board of Directors recommends that you vote FOR each proposal below.
<TABLE>
<S><C>
1. Set the number of directors at eight (8) [ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Elect Class II directors: 1 - James J. Grierson [ ] FOR all nomi- [ ] WITHHOLD AUTHORITY
2 - Kendrick B. Melrose nees listed to the to vote for all nominees
left (except as listed to the left.
(Instructions: To withhold authority to vote for any indicated nominee, Specified below).
write the name of the nominee(s) in the box provided to the right).
[------------------------------------------]
3. In their discretion, upon such other business as may properly come before
the Meeting or any adjournment thereof.
Check appropriate box.
Indicate changes below:
Address Change? [ ] Name Change? [ ] Date____________ NO. OF SHARES
Attending Meeting? [ ] [-------------------------------------]
Signature(s) in Box
PLEASE DATE AND SIGN ABOVE
exactly as name appears at the left indi-
cating, where appropriate, official position
or representative capacity. For stock held in
joint tenancy, each joint tenantshould sign.
</TABLE>
