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:
[X] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] 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.:
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4) Date Filed:
SURMODICS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of SurModics, Inc. will be held on
January 25, 1999, at 3:30 p.m. (Minneapolis time), at the Hotel Sofitel, 5601
West 78th Street, Bloomington, Minnesota, for the following purposes:
1. To consider and act upon a proposal to adopt amendments to the
Bylaws to provide for staggered election of directors and to
restrict the removal of directors.
2. To set the number of directors at seven (7).
3. To elect directors.
4. 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 4,
1998, 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, 1998
SURMODICS, INC.
Annual Meeting of Shareholders
January 25, 1999
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 25, 1999, 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, 1998.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed December 4, 1998, 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 4, 1998,
___________ 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 4, 1998. 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 595,500(2) 8.0%
9924 West 74th Street
Eden Prairie, MN 55344
David A. Koch 495,400(3) 6.8%
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 4, 1998, 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 1,500 shares held by Mr. Olseth's wife and 192,000 shares
which may be acquired upon exercise of stock options which are
exercisable as of December 4, 1998 or within 60 days of such date.
(3) Includes 36,000 shares which may be acquired upon exercise of stock
options which are exercisable as of December 4, 1998 or within 60 days
of such date and 66,000 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.
MANAGEMENT SHAREHOLDINGS
The following table sets forth the number of shares of Common Stock
beneficially owned as of December 4, 1998, 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 595,500 (2) 8.0%
David A. Koch 495,400 (3) 6.8%
Patrick E. Guire, Ph.D. 225,167 (4) 3.1%
Kendrick B. Melrose 146,000 (5) 2.0%
James C. Powell 106,650 (6) 1.5%
James J. Grierson 79,000 (5) 1.1%
Donald S. Fredrickson, M.D. 56,000 (7) *
Andrew B. Summerville 49,600 (7) *
Stephen C. Hathaway 32,400 (7) *
Kenneth H. Keller, Ph.D. 8,000 (7) *
All officers and directors
as a group (12 persons) 1,892,757 (8) 24.2%
* 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 48,000 shares which may be acquired upon exercise of stock
options which are exercisable as of December 4, 1998 or within 60 days
of such date.
(5) Includes 36,000 shares which may be acquired upon exercise of stock
options which are exercisable as of December 4, 1998 or within 60 days
of such date.
(6) Includes 250 shares held by Mr. Powell's wife and 66,400 shares which
may be purchased upon exercise of options which are exercisable as of
December 4, 1998 or within 60 days of such date.
(7) Such shares are not outstanding but may be purchased upon exercise of
options which are exercisable as of December 4, 1998 or within 60 days
of such date.
(8) Includes 612,240 shares which may be purchased upon exercise of
options which are exercisable as of December 4, 1998 or within 60
days of such date.
AMENDMENT TO BYLAWS
(Proposal #1
Text attached as Appendix A)
Staggered Election of Directors. Directors are currently elected to the
Company's Board of Directors annually for a term of one year and until a
successor is elected and qualified. Section 3.2 of the Bylaws of the Company
provides that the number of directors shall not be less than the minimum
required by law, which is one, and that such number shall be determined at each
annual meeting by the shareholders. Like the current Bylaws, proposed Section
3.2 also provides that the shareholders shall determine the number of directors
at each annual meeting, but restricts the number of directors to not less than
three and provides that the Board shall be divided into three classes of
directors. As proposed, an amendment to Section 3.2 will require the affirmative
vote of the holders of not less than two-thirds of the voting power of the
shares entitled to vote.
If the proposed Bylaw amendments are adopted, the Company's directors
will be divided into three classes; two directors will be elected to serve for a
term of one year expiring at the 2000 annual meeting of shareholders (Class I);
two directors will be elected to serve for a term of two years expiring at the
2001 annual meeting of shareholders (Class II); and three directors will be
elected to serve for a term of three years expiring at the 2002 annual meeting
of shareholders (Class III), and in all cases until their respective successors
are duly elected and qualified. See Proposals #2 and #3, "Election of
Directors," as to the composition of each class of directors if this proposal is
adopted. Starting with the 2000 annual meeting of shareholders, one class of
directors will be elected each year for a three-year term. If these amendments
are not adopted, it is anticipated that the seven directors nominated by the
Board of Directors and identified in Proposals #2 and #3 below will be elected
for a term of one year and until their successors have been duly elected and
qualified.
Number of Directors; Removal of Directors. The proposed amendments seek
to limit the manner in which changes in the size of the Board may be made and
directors removed. As under the Bylaws currently in effect, proposed Section 3.2
provides that between annual meetings the authorized number of directors may be
increased by the Board of Directors. However, proposed Section 3.2 would require
that any increase or decrease, whether instituted by the directors or by the
shareholders at an annual meeting, be apportioned among the classes so as to
maintain, as nearly as possible, an equal number of directors in each class and
that no decrease may shorten the term of an incumbent director except as
provided in Section 3.11.
Proposed Section 3.11 of the Bylaws provides that directors may be
removed only for cause by vote of the shareholders or by vote of a majority of
the entire Board of Directors. Currently, Minnesota law provides that unless
modified by the articles of incorporation, bylaws or a shareholder agreement,
directors named by the Board to fill a vacancy may be removed at any time, with
or without cause, by a majority of the remaining directors, and all directors
may be removed at any time, with or without cause, by the affirmative vote of
the holders of voting power sufficient to elect such directors.
Proposed Sections 3.2 and 3.11 of the Bylaws include a prohibition on
any amendment to such sections unless the amendment receives the affirmative
vote of the holders of not less than two-thirds of the voting power of all
shares of stock of the corporation entitled to vote. An amendment to Section 9.1
of the Bylaws, which governs amendments to the Bylaws, is proposed so as to
reference the larger vote required to amend proposed Sections 3.2 and 3.11.
Reasons and Effects; Possible Advantages and Disadvantages. The
proposed amendments to the Bylaws are designed to ensure continuity of the Board
and orderly changes in control of the Board. The classification of directors
will have the effect of making it more difficult to change the composition of
the Board of Directors. The proposed amendments may also operate to discourage
or prevent takeovers, including mergers, tender offers or proxy contests, or
changes in management of the Company which are proposed to be effected without
approval of the Company's Board, whether or not such takeover or changes are
detrimental to the Company and its shareholders. The classification of the Board
pursuant to the proposed amendments will apply to every election of directors,
whether or not a change in control of the Company has occurred or the holders of
a majority of the voting power of the Company desire to change the Board. In
addition, the proposed amendments would delay shareholders who are not in
agreement with the policies of the Board of Directors from removing a majority
of the Board for two years, unless they could show cause to justify such removal
prior to the time of election at an annual meeting of shareholders. However,
particularly in view of the current environment of increasing stock
accumulations and proxy contests facing public companies, the Board believes it
prudent and in the interests of the shareholders generally to provide the
advantage of greater assurance of continuity of the Board composition and
policies which will result from the adoption of the proposed amendments to the
Bylaws described in this Proposal #1 and set forth in Appendix A to this Proxy
Statement.
Vote Required. The Company's Board of Directors has determined that the
amendments to the Company's Bylaws described above are advisable and has voting
unanimously to propose and recommend that the Company's Bylaws be amended as set
forth in Appendix A to this Proxy Statement. Under applicable Minnesota law,
adoption of the amendments to the Bylaws requires the affirmative vote of the
holders of the greater of (1) 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 or (2) a majority of the voting power of the minimum number of
shares that would constitute a quorum for the transaction of business at the
Annual Meeting.
ELECTION OF DIRECTORS
(Proposals #2 and #3)
General Information
The Board of Directors recommends that the Bylaws of the Company be
amended to provide for the election of three classes of directors with
staggered terms. This proposed amendment and its effect as a protective measure
against possible takeover attempts is described above at Proposal #1. The Board
recommends that the number of directors be set at seven and that seven directors
be elected, three directors for a term of three years as Class III, two
directors for a term of two years as Class II, and two directors for a term of
one year as Class I. All directors so elected will hold office until their
successors have been duly elected and qualify. If Proposal #1 relating to the
classification of the Board of Directors is not approved, seven directors will
be elected at the meeting to hold office until the next annual meeting of
shareholders and until their successors have been duly elected and qualified.
Under applicable Minnesota law, approval of the proposal to set the number of
directors at seven, as well as the election of each nominee, requires the
affirmative vote of the holders of the greater of (1) 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 or (2) a majority of the voting power of the
minimum number of shares that would constitute a quorum for the transaction of
business at the Annual Meeting.
In the absence of other instructions, each proxy will be voted for each
of the nominees listed below who have been nominated by the Board of Directors
into the classes and for the terms indicated following each nominee's name in
the biographical section below. If Proposal #1 relating to the classification of
the Board of Directors is not adopted, the proxies solicited hereby will, unless
authority is withheld, be voted for the election as directors of the seven
individuals named below for a term of one year until the next annual meeting of
shareholders and until their successors have been duly elected and qualify.
All of the nominees are members of the present Board of Directors. If,
prior to the meeting, it should become known that any 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.
The names and ages of all of the director nominees and the positions
held by each with the Company are as follows:
Name Age Position with Company
Dale R. Olseth 67 Chairman and Chief Executive Officer
Patrick E. Guire, Ph.D. 62 Senior Vice President and Chief
Scientific Officer and Director
Donald S. Fredrickson, M.D. (1) 74 Director
James J. Grierson (2) 56 Director
Kenneth H. Keller, Ph.D. (1)(2) 64 Director
David A. Koch (1)(2) 68 Director
Kendrick B. Melrose (1)(2) 58 Director
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Dale R. Olseth (Class III, three-year term) 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 and Graco, Inc. 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, one-year term) 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, one-year term) was elected a
director of the Company in February 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, two-year term) 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 of Honeywell from 1987 to 1992 and its Vice President and Treasurer from
1982 to 1987.
Kenneth H. Keller, Ph.D. (Class III, three-year term) 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, three-year term) 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 1962 to 1996 and as its President and Chief
Executive Officer from 1962 to 1985. Mr. Koch is also a director of ReliaStar
Financial Corporation and is Chair of the Federal Reserve Bank of Minneapolis.
Kendrick B. Melrose (Class II, two-year term) 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, 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., Valspar Corporation and Jostens, Inc.
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 was established during fiscal 1998 and met once during the year. 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 also met once during the year.
During fiscal 1998, the Board of Directors held seven 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
options as determined by the Board of Directors from time to time. The
non-employee directors currently hold non-qualified options to purchase an
aggregate of 200,000 shares of Common Stock. 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 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, paid
annually; 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. The
entire principal amount of each such loan was outstanding as of December 1,
1998.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid during each of the Company's last two 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 $100,000 for 1998.
Summary Compensation Table
Long-term
Annual Compensation Compensation
------------------------------------- ------------------
Securities All
Name and Principal Fiscal Salary Bonus Underlying Options Other
Position Year ($) ($)(1) (# of shares) Compensation(2)
--------------------- ------ ------ ------------- ------------------ ---------------
Dale R. Olseth, 1998 $114,944 $ 22,663 10,000 $ 3,938
Chairman and Chief Executive Officer 1997 $109,598 $ 20,408 0 $ 2,100
James C. Powell, 1998 $104,755 $ 20,602 10,000 $ 3,479
President and Chief Operating 1997 $ 96,246 $ 18,463 0 $ 1,830
Officer
Stephen C. Hathaway, 1998 $ 95,771 $ 19,573 5,000 $ 3,225
Vice President and Chief Financial 1997 $ 90,000 $ 22,493 74,000 $ 618
Officer
Patrick E. Guire, Ph.D., 1998 $ 87,326 $ 17,922 5,000 $ 3,100
Senior Vice President and Chief 1997 $ 86,250 $ 16,327 20,000 $ 1,680
Scientific Officer
Andrew B. Summerville, 1998 $ 93,998 $ 18,540 5,000 $ 3,171
Vice President of Sales and Marketing 1997 $ 89,160 $ 16,523 16,000 $ 1,675
(1) Represents amounts earned under a bonus plan established in fiscal 1997
for the Company's officers enabling them to receive a payout of up to
24% 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.
Hathaway's bonus for fiscal 1997 includes an additional bonus paid upon
commencement of employment with the Company.
(2) Represents contributions made by the Company under its 401(k) plan.
Option/SAR Grants During 1998 Fiscal Year
The following table sets forth information regarding stock options
granted to the Named Executive Officers during the fiscal year ended September
30, 1998. The Company has not granted stock appreciation rights.
Number of
Securities % of Total
Underlying Options/SARs
Options/SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) (1) Fiscal Year ($/Sh) Date
----------- ---------- ----------- -------- ----
Dale R. Olseth 10,000 7.3% $7.75 9/21/05
James C. Powell 10,000 7.3% $7.75 9/21/05
Stephen C. Hathaway 5,000 3.6% $7.75 9/21/05
Patrick E. Guire 5,000 3.6% $7.75 9/21/05
Andrew B. Summerville 5,000 3.6% $7.75 9/21/05
- ------------------------
(1) Such options are exercisable annually as to 20% of the total number of
shares commencing September 21, 1999.
Aggregated Option/SAR Exercises During 1998 Fiscal Year
and Fiscal Year End Option/SAR Values
No options were exercised by the Named Executive Officers during fiscal
1998. The following table provides information related to the number and value
of options held at fiscal year end by the Named Executive Officers:
Number of Unexercised
Securities Underlying Value of Unexercised In-the-
Options at 9/30/98 Money Options at 9/30/98(1)
---------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Dale R. Olseth 160,000 90,000 $558,000 $247,000
James C. Powell 56,800 47,200 $191,050 $109,575
Stephen C. Hathaway 17,600 61,400 $47,300 $151,575
Patrick E. Guire, Ph.D. 39,200 39,800 $124,550 $98,325
Andrew B. Summerville 46,400 32,600 $124,700 $74,175
(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 30,
1998 on the Nasdaq National Market was $7.6875.
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,
1998, all Section 16(a) filing requirements applicable to Insiders were complied
with.
INDEPENDENT PUBLIC ACCOUNTANT
Arthur Andersen LLP acted as the Company's independent public
accountant for fiscal 1998. 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 2000 annual meeting of shareholders must be
received by the Company by August 17, 1999, to be includable in the Company's
proxy statement and related proxy for the 2000 annual meeting. Shareholder
proposals intended to be presented at the 2000 annual meeting but not included
in the Company's proxy statement and proxy will be considered untimely if
received by the Company after October 30, 1999.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended September 30, 1998, 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-KSB
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-KSB for the fiscal year ended September 30,
1998, 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-KSB, 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, 1998
Eden Prairie, Minnesota
APPENDIX A
PROPOSED
AMENDMENT OF BYLAWS
RESOLVED, that the Bylaws of SurModics, Inc. currently in effect be
amended by amending and restating in their entirety Sections 3.2 and 9.1 and by
adding Section 2.11, all of which shall read as follows:
3.2) Number, Term, Election and Qualifications. At each annual meeting
the shareholders shall determine the number of directors, which shall be not
less than three; provided, that between annual meetings the authorized number of
shareholders may be increased by the shareholders or Board of Directors or
decreased by the shareholders. However, notwithstanding the foregoing no
increase or decrease in the number of directors may be effected except according
to the further provisions contained in this Section 3.2. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as possible, of one-third of the total number of
directors constituting the entire Board of Directors. At the 1999 Annual Meeting
of Shareholders, Class I directors shall be elected for a one-year term, Class
II directors for a two-year term and Class III directors for a three-year term.
At each succeeding annual meeting of the shareholders beginning in 2000,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. A director shall hold office until the
annual meeting for the year in which his or her term expires and until his or
her successor shall be elected and shall qualify, or until his or her
resignation or removal from office. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain,
as nearly as possible, an equal number of directors in each class. In the event
an increase or decrease makes it impossible to maintain an equal number of
directors in each class, increases shall be allocated to the class or classes
with the longest remaining term, and decreases shall be allocated to the class
with the shortest remaining term. Any director elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class. In no event will a decrease in
the number of directors result in the elimination of an entire class of
directors, cause any class to contain a number of directors two or more greater
than any other class, or shorten the term of any incumbent director. Any
director elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same remaining term as that of his or her
predecessor. No amendment to these Bylaws shall alter, change or repeal any of
the provisions of this Section 3.2 unless the amendment effecting such
alteration, change or repeal shall receive the affirmative vote of the holders
of two-thirds (2/3) of all shares of stock of the corporation entitled to vote
on all matters that may come before each meeting of shareholders.
3.11) Removal. Directors may be removed only for cause by vote of the
shareholders or for cause by vote of a majority of the entire Board of
Directors. No amendment to these Bylaws shall alter, change or repeal any of the
provisions of this Section 3.2 unless the amendment effecting such alteration,
change or repeal shall receive the affirmative vote of the holders of two-thirds
(2/3) of all shares of stock of the corporation entitled to vote on all matters
that may come before each meeting of shareholders.
9.1) Amendments. Except as otherwise provided in specific provisions of
these Bylaws, these Bylaws may be altered, amended, added to or repealed by the
affirmative vote of a majority of the members of the Board of Directors at any
regular meeting of the Board or at any special meeting of the Board called for
that purpose, subject to the power of the shareholders to change or repeal such
Bylaws and subject to any other limitations on such authority of the Board
provided by the Minnesota Business Corporation Act.
SURMODICS, INC.
PROXY FOR ANNUAL MEETING
Of Shareholders To Be Held
January 25, 1999
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 3:30 p.m. (Minneapolis time) on January 25, 1999, and
at any adjournment thereof, and the undersigned hereby revokes all proxies
previously given with respect to the meeting.
The Board of Directors recommends that you vote FOR each proposal
below.
1. Amend the Bylaws to provide staggered terms for directors and to restrict
removal of directors:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Set the number of directors at seven (7):
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Elect directors: [Nominees: Donald S. Fredrickson, M.D. and Patrick E.
Guire Ph.D. (Class I - one-yer term); James J. Grierson and Kendrick B.
Melrose (Class II - two-year term); and Dale R. Olseth, Kenneth H. Keller,
Ph.D. and David A. Koch (Class III - three-year term)]
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY to vote
(except those whose names have for all nominees listed above
been written in below)
To withhold authority to vote for any individual nominee
write that nominee's name on the line below
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4. OTHER MATTERS. In their discretion, the Proxies are . . .
[ ] AUTHORIZED [ ] NOT AUTHORIZED
to vote upon such other business as may properly come before 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,
AND WILL BE DEEMED TO GRANT AUTHORITY UNDER PROPOSAL NUMBER 4.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Date:______________________, 199__
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PLEASE DATE AND SIGN ABOVE exactly as name
appears at the left, indicating, where
appropriate, official position or
representative capacity. For stock held in
joint tenancy, each joint owner should
sign.
