Urologix, Inc.
14405 21st Avenue North
Minneapolis, Minnesota 55447
_______________________
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
November 6, 2014
_______________________
TO THE SHAREHOLDERS OF UROLOGIX, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting
of Shareholders of Urologix, Inc. will be held at the Sheraton Minneapolis West, 12201 Ridgedale Drive, Minnetonka, Minnesota 55305,
on Thursday, November 6, 2014 at 4:00 p.m., local time, for the following purposes:
| 1. | To elect two (2) directors to hold office for a term of three years each, or until their successors
are duly elected and shall have qualified; |
| 2. | Advisory vote to approve named executive officer compensation; |
| 3. | To ratify and approve the appointment of Baker Tilly Virchow Krause LLP as the independent registered
public accounting firm for Urologix, Inc. for the fiscal year ending June 30, 2015. |
The Board of Directors has fixed September 18,
2014 as the record date for the determination of shareholders entitled to notice of, and to vote at, the meeting.
By Order of the Board of Directors,
Mitchell Dann, Chairman
Minneapolis, Minnesota
September 26, 2014
Regardless of whether
you expect to attend the Annual Meeting in person, please vote your shares
in one of the ways described in the proxy statement
as promptly as possible.
IMPORTANT NOTICE REGARDING AVAILABILITY
OF PROXY MATERIALS FOR THE
2014 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, NOVEMBER 6, 2014
Under rules promulgated by the Securities and Exchange Commission,
we are making our proxy materials available electronically via the Internet.
The Notice of 2014 Annual Meeting of Shareholders and Proxy Statement
and our Annual Report on Form 10-K for the fiscal year ended June 30, 2014 are available at https://materials.proxyvote.com/917273.
On or about September 26, 2014, we mailed to some of our shareholders
a Notice of Internet Availability containing instructions on how to access our proxy materials, including our proxy statement and
our annual report. The Notice of Internet Availability includes instructions to access your proxy card to vote via the Internet,
as well as how to request paper or e-mail copies of our proxy materials. Other shareholders received an e-mail notification that
provided instructions on how to access our proxy materials and vote via the Internet, or were mailed paper copies of our proxy
materials and a proxy card that provides instructions for voting via the Internet, by telephone or by mail.
If you received the Notice of Internet Availability and would prefer
to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have
previously elected to receive our proxy materials electronically, you will continue to receive e-mails with instructions to access
these materials via the Internet unless you elect otherwise.
TABLE OF CONTENTS
Urologix, Inc.
14405 21st Avenue North
Minneapolis, Minnesota 55447
__________________
PROXY
STATEMENT
__________________
Solicitation of Proxies
This proxy statement is furnished to the shareholders
of Urologix, Inc. (“we” or “Urologix”) in connection with the Annual Meeting of Shareholders to be held
on November 6, 2014 or any adjournment(s) or postponement(s) thereof. The mailing of this proxy statement to our shareholders commenced
on or about September 26, 2014.
Cost
and Method of Solicitation
This solicitation of proxies to be voted at this
2014 Annual Meeting of Shareholders is being made by our Board of Directors. The cost of this solicitation of proxies will be borne
by Urologix. In addition to solicitation by mail, our officers, directors and employees may solicit proxies by telephone or in
person. We may also request banks and brokers to solicit their customers who have a beneficial interest in our common stock registered
in the names of nominees and we will reimburse such banks and brokers for their reasonable out-of-pocket expenses.
Voting
The total number of shares outstanding and entitled
to vote at the meeting as of September 18, 2014 consisted of 21,665,906 shares of common stock, $.01 par value. Each share of common
stock is entitled to one vote. Only shareholders of record at the close of business on September 18, 2014 will be entitled to vote
at this Annual Meeting.
All shareholders are cordially invited to attend
the meeting in person. Whether or not you expect to attend the meeting, please complete, date, sign and return the enclosed proxy
as promptly as possible (or follow instructions to grant a proxy to vote by means of telephone or internet) in order to ensure
your representation at the meeting. A return envelope (which is postage prepaid if mailed in the United States) is enclosed for
that purpose. Even if you have given your proxy, you may vote in person if you attend the Annual Meeting. Please note, however,
that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must
bring to the meeting a letter from the broker, bank or other nominee confirming your beneficial ownership of the shares. Additionally,
in order to vote at the Annual Meeting, you must obtain from the record holder a proxy issued in your name.
If you sign and
return the proxy card on time, the individuals named on the proxy card will vote your shares as you have directed. If you just
sign and submit your proxy card without voting instructions, your shares will be voted “FOR” each director nominee
and “FOR” each of the other proposals if you are a record holder. If
you are a street name holder and do not provide voting instructions to your broker, this is a “broker non-vote”
and accordingly, no votes will be cast on your behalf on:
| · | Proposal 1: Election of Two Directors for Three Year Terms, or |
| · | Proposal 2: Advisory Vote on Named Executive Officer Compensation. |
However, your broker will be entitled to vote
in its discretion on the ratification of Baker Tilly Virchow Krause LLP as our independent registered public accounting firm for
fiscal year 2015, which is Proposal 3. Shareholders of Urologix who own shares of common stock through a bank or brokerage are
sometimes called “street name” holders. Street name holders should review the additional information below under “Casting
Your Vote as a Street Name Holder.”
Quorum
and Voting Requirements
A quorum, consisting of a majority of the shares
of common stock entitled to vote at this 2014 Annual Meeting of Shareholders, must be present, in person or by proxy, before action
may be taken at the Annual Meeting. Shares held by brokers who do not have discretionary authority to vote on a particular matter
and who have not received voting instructions from their customers are not counted or deemed to be present or represented for the
purpose of determining whether shareholders have approved that matter, but they are counted as present for the purpose of determining
a quorum at the Annual Meeting.
Proposal 1 relates to the election of directors.
A director nominee identified in Proposal 1 will be elected if approved by the affirmative vote of the holders of a plurality of
the voting power of the shares present, in person or by proxy, and entitled to vote for the election of directors. You may either
vote “FOR” or “WITHHOLD” authority to vote for each nominee for the Board of Directors. If you withhold
authority to vote for the election of a nominee, it has the same effect as a vote against that nominee.
Proposals 2 and 3 will be proved by the affirmative
vote of a majority of the shares of our common stock present in person or by proxy and entitled to vote on that proposal at this
Annual Meeting. You may vote “FOR,” “AGAINST” or “ABSTAIN” on each of Proposals 2 and 3. Abstentions
are counted as present and entitled to vote for the purposes of determining a quorum, but are not counted for the purposes of determining
whether shareholders have approved that matter. Therefore, if you abstain from voting on Proposals 2 or 3, it has the same effect
as a vote against that proposal.
Casting
Your Vote as a Street Name Holder
If you hold your shares through a broker (that
is, in “street name”) and do not provide voting instructions to your broker, your shares will not be voted on any proposal
on which your broker does not have discretionary authority to vote. As of January 1, 2010, brokers no longer have discretionary
authority to vote their customers’ shares in an election of directors unless those customers give the brokers instructions
on how to vote. As a result, if you hold your shares in street name and do not provide voting instructions to your broker, no votes
will be cast on your behalf on the following proposals being presented at this Annual Meeting:
| · | Proposal 1: Election of Directors, or |
| · | Proposal 2: Advisory Vote on Named Executive Officer Compensation. |
Because of this change in broker voting rules,
all street name holders are urged to provide instructions to their brokers on how to vote their shares in the election of directors
at the Annual Meeting and on Proposal 2.
Make your vote count!
Instruct your broker how to cast your vote on each of Proposals 1 through 3!
If you hold your shares in street name, your
broker will continue to have discretion to vote any uninstructed shares on Proposal 3: Ratification of Appointment of Independent
Registered Public Accounting Firm.
Revoking
a Proxy
You may change your vote and revoke your proxy
at any time before it is voted by:
| · | Sending a written statement to that effect to the Chief Executive Officer of Urologix. |
| · | Submitting a properly signed proxy card with a later date. |
| · | If you voted by telephone or through the Internet, by voting again either by telephone or through
the Internet prior to the close of the voting facility. |
| · | Voting in person at the Annual Meeting. |
All shares represented by valid, unrevoked proxies
will be voted at the Annual Meeting and any adjournment(s) or postponement(s) thereof. Our principal offices are located at 14405
21st Avenue North, Minneapolis, Minnesota 55447, and our telephone number is (763) 475-1400.
Annual Meeting and Special Meetings;
Bylaw Amendments
This 2014 Annual Meeting of Shareholders is a
regular meeting of our shareholders and has been called by our Board of Directors in accordance with our bylaws. Under our bylaws,
special meetings of our shareholders may be held at any time for any purpose and may be called by the Chairman of our Board, our
chief executive officer, our chief financial officer, two or more directors or by a shareholder or shareholders holding 10% or
more of the voting power of all shares entitled to vote on the matters to be presented to the meeting, except that a special meeting
for the purpose of considering any action to directly or indirectly facilitate or affect a business combination, including any
action to change or otherwise affect the composition of the Board of Directors for that purpose, must be called by 25% or more
of the voting power of all shares entitled to vote. The business transacted at a special meeting is limited to the purposes as
stated in the notice of the meeting. For business to be properly brought before a regular meeting of shareholders, a written notice
containing the required information must be timely submitted. For more information, please review our bylaws and the section of
this proxy statement entitled “Shareholder Proposals and Shareholder Nominees for 2015 Annual Meeting.”
Our bylaws may be amended or altered by a vote
of the majority of the whole Board at any meeting. The authority of the Board is subject to the power of our shareholders, exercisable
in the manner provided by Minnesota law, to adopt, amend, or repeal bylaws adopted, amended, or repealed by the Board. Additionally,
the Board may not make or alter any bylaws fixing a quorum for meetings of shareholders, prescribing procedures for removing directors
or filling vacancies in the Board of Directors, or fixing the number of directors or their classifications, qualifications, or
terms of office, except that the Board may adopt or amend any bylaw to increase their number.
OWNERSHIP
OF VOTING SECURITIES BY
PRINCIPAL HOLDERS AND MANAGEMENT
The following table includes information as of
September 18, 2014, except as noted, concerning the beneficial ownership of our common stock by (i) the only shareholders known
to us to hold five percent or more of our common stock, (ii) each of our directors and the nominee to our Board of Directors, (iii)
each of the named executive officers and (iv) all current directors and executive officers of Urologix as a group. Unless otherwise
indicated, all beneficial owners have sole voting and investment power over the shares held. Except as indicated below, the business
address of each individual set forth below is 14405 21st Avenue North, Minneapolis, MN 55447.
Name and Address of
of Beneficial Owner |
Number of
Shares
Beneficially Owned (1) |
Percentage
Beneficially Owned |
Perkins Capital Management, Inc. (2)
730 East Lake Street
Wayzata, MN 55391 |
6,003,550 |
27.7% |
|
|
|
T Rowe Price Associates, Inc. (3)
110 E Pratt Street
Baltimore, MD 21202 |
748,858 |
3.5% |
|
|
|
Gregory J. Fluet (4)(5) |
481,454 |
2.2% |
|
|
|
Mitchell Dann (4)(6) |
626,933 |
2.9% |
|
|
|
Christopher R. Barys (4) |
139,802 |
* |
|
|
|
Sidney W. Emery, Jr. (4)(7)(8) |
306,579 |
1.4% |
|
|
|
Patrick D. Spangler (4)(7) |
139,802 |
* |
|
|
|
Lisa A. Ackermann (5) |
205,744 |
* |
|
|
|
Brian J. Smrdel (9) |
|
* |
|
|
|
All current directors and executive officers as a group (6 persons) |
1,900,314 |
8.5% |
______________________________
* Indicates ownership of less than one percent.
| (1) | Includes options to purchase or restricted stock for the following number of shares, which are or will become exercisable or
unrestricted within 60 days of September 18, 2014: Mr. Fluet, 252,080 shares; Mr. Dann, 120,000 shares; Mr. Barys, 80,000 shares;
Mr. Emery, 130,000 shares; Mr. Spangler, 80,000 shares; Ms. Ackermann, 110,414 shares; and all current directors and executive
officers as a group, 772,494 shares. |
| (2) | Based upon the Amendment No. 4 to Schedule 13D filed by the shareholder with the Securities and Exchange Commission on April
9, 2014. In the Amendment No. 4, the shareholder states that the shareholder, an investment advisor, has sole voting power over
5,100,250 shares and sole dispositive power over 6,003,550 shares of our common stock held by the shareholder’s investment
advisory clients as of March 31, 2014. |
| (3) | Based upon the Amendment No. 3 to Schedule 13G filed by the shareholder with the Securities and Exchange Commission on February
14, 2014. In the Schedule, the shareholder states that the shareholder, an investment advisor, has sole voting power over 198,249
shares and sole dispositive power over 748,858 shares of our common stock held by the shareholder’s investment advisory clients
as of December 31, 2013. |
| (5) | Named executive officer. |
| (6) | Includes 10,358 shares owned by an IRA rollover
for the benefit of Mitchell Dann and 61,684 shares held by the Glory Bowl Trust of which Mr. Dann’s child is the
beneficiary and Mr. Dann is the sole trustee. |
| (7) | Nominee for election as a director. |
| (8) | Includes 71,247 shares held in a trust for the benefit of Mr. Emery’s spouse, of which Mr. Emery and his spouse are trustees. |
| (9) | As of August 13, 2014, Mr. Smrdel no longer serves as the Company’s Chief Financial Officer. |
ELECTION
OF DIRECTORS
Pursuant to the terms of our current articles
of incorporation, directors are divided into three classes, with the term of one class expiring each year. As the term of each
class expires, the successors to the directors in that class will be elected for a term of three years. Vacancies on the Board
of Directors and newly created directorships can be filled by vote of a majority of the directors then in office.
The terms of Sidney W. Emery, Jr. and Patrick
D. Spangler expire at this Annual Meeting of Shareholders, which follows our fiscal year 2014. The terms of Mitchell Dann and Gregory
J. Fluet expire at the Annual Meeting of Shareholders following our fiscal year 2015. The term of Christopher R. Barys expires
at the Annual Meeting of Shareholders following our fiscal year 2016.
A total of two directors will be elected at
this Annual Meeting. Both directors will be elected at this Annual Meeting to serve until the Annual Meeting of Shareholders following
our fiscal year 2017 or until their successors are elected and shall qualify, which is Proposal 1. Upon recommendation of the Governance/Nominating
Committee, the Board of Directors has nominated for election Mr. Emery and Mr. Spangler to serve as directors until the Annual
Meeting following fiscal year 2017.
Set forth below are the biographies of the
nominees and the directors serving continuing terms, as well as a discussion of the specific experience, qualifications, attributes
and skills that led to the conclusion that the nominee or director should serve as a director of Urologix at this time.
Directors
Serving Continuing Terms
Term Expiring at the Annual Meeting Following Fiscal 2015:
Mitchell Dann, age 54, has served as
a director and as our Chairman since February 25, 2008. Mr. Dann also served as our Interim Chief Executive Officer from February
25, 2008 until the appointment of Mr. Warren as the Chief Executive Officer on June 24, 2008. Mr. Dann is a co-founder of Urologix
and served as a director from its inception in 1991 until 2005. In 2000, Mr. Dann founded Sapient Capital. Mr. Dann is currently
the managing member of Sapient Capital Management, L.L.C., the general partner of the general partner of Sapient Capital, L.P.,
a venture capital firm specializing in the medical device industry. Mr. Dann has over 25 years of experience working with medical
device companies as an investor, entrepreneur, executive, adviser and board member. From September 2000 to June 2011, Mr. Dann
served as a member of the Board of Directors of TranS1 Inc., a publicly-held medical device company (Nasdaq: TSON). Mr. Dann
received a Bachelor of Science degree in engineering from the University of Vermont.
Mr. Dann is qualified to serve on the Urologix
Board because of his broad strategic perspective of the medical device industry. In addition, Mr. Dann brings to the Board an exceptional
and deep understanding of the particular challenges and opportunities facing Urologix, gained through his role as the
co-founder of Urologix, as a director of Urologix for fourteen years prior to his current service, and through
his service as our interim Chief Executive Officer on three prior occasions, most recently from February to June
2008.
Gregory J. Fluet, age 45, has served as
a director and as our Chief Executive Officer since January 25, 2013. He was appointed our interim Chief Financial Officer on August
13, 2014. From November 30, 2012 to January 25, 2013, Mr. Fluet served as our interim Chief Executive Officer. Prior to that time,
he served as our Executive Vice President and Chief Operating Officer since July 14, 2008. Mr. Fluet initially joined
Urologix as a consultant in February 2008 to provide strategic analysis and tactical support. Prior to joining Urologix, Mr. Fluet
was an Associate at Sapient Capital Management, LLC, a venture capital firm focused on early stage investing in the healthcare
industry, primarily minimally invasive therapeutic medical devices. While at Sapient Capital, he worked with portfolio companies
that raised multiple rounds of private financing, completed initial public offerings and were acquired. He was also actively involved
in all aspects of early stage medical device company development including being a Board observer, product development, intellectual
property development, regulatory analysis, financial modeling, milestone based budgeting, clinical research and strategic market
assessment for portfolio companies or potential investments. Mr. Fluet graduated from Stanford University with a Bachelor
of Science degree in mechanical engineering.
Mr. Fluet is qualified to serve on the Urologix Board
because he brings an in-depth knowledge of our business and operations gleaned from his years of service as our Chief Operating
Officer prior to being appointed as our Chief Executive Officer. Mr. Fluet also has a strong and broad base of experience in a
variety of areas important to Urologix’s business, including fund raising, product development, intellectual property development,
financial modeling, milestone based budgeting, clinical research and strategic market assessment.
Term Expiring at the Annual Meeting Following Fiscal 2016:
Christopher R. Barys, age 48, has served
as a director since August 6, 2010. Since March of 2014, Mr. Barys has served as Vice President and General Manager of Covidien
Interventional Lung Solutions, a division of Covidien plc (NYSE: COV), a global developer and manufacturer of clinical and home
healthcare products. The Interventional Lung Solutions Division develops and markets minimally-invasive lung navigation products
designed to access difficult to reach areas in the lungs. From May 2011 until February of 2014, Mr. Barys served as a General Manager
of the I-Flow Division of Kimberly-Clark Healthcare, an operating segment of Kimberly-Clark Corporation (NYSE: KMB), a global health
and personal care products company. The I-Flow Division develops and markets drug delivery systems and products for post-surgical
pain relief and surgical site care. From June 2010 to April 2011, Mr. Barys consulted for a variety of medical device companies
globally. From July 2009 to June 2010, Mr. Barys served as the Chief Operating Officer of FlowCardia, Inc., a privately held developer
of endovascular products for the treatment of chronic total occlusions that was acquired by C. R. Bard, Inc. in April 2010. From
November 2007 to July 2009, he served as FlowCardia’s Executive Vice President, Sales and Marketing. From November 2005 to
November 2007, Mr. Barys served as the Vice President, Sales and Marketing, Peripheral Vascular Systems for Edwards Lifesciences
Corporation, a publicly-held medical device company with products and technologies designed to treat advanced cardiovascular disease
(NYSE: EW). Mr. Barys received a Bachelor of Science degree in marketing from Northern Illinois University.
Mr. Barys is qualified to serve as a director
of Urologix because of his significant sales and marketing and general management expertise developed through executive positions
in medical device companies. We believe that Mr. Barys will provide our Board with insight into sales and marketing strategy development,
campaign development and execution, implementing programs to improve sales force effectiveness and operational efficiencies.
PROPOSAL 1:
ELECTION OF DIRECTORS
Proposal 1 is the
election of two directors to serve until the Annual Meeting of Shareholders following our fiscal year 2017 or until their successors
are elected and shall qualify. Upon recommendation of the Governance/Nominating Committee, the Board of Directors has nominated
for election Sidney W. Emery and Patrick D. Spangler to serve as directors until the Annual Meeting following fiscal year 2017.
Mr. Emery and Mr. Spangler meet the criteria applicable to Board nominees that are set out in our Governance Guidelines and summarized
under “Corporate Governance – Director Nominations – Criteria for Nomination to the Board; Diversity Considerations.”
It is intended that proxies will be voted for
the named nominees for this Proposal 1. The Board of Directors believes that the nominees will be able to serve, but should they
be unable to serve as a director, the persons named in the proxies have advised us that they will vote for the election of such
substitute nominee or nominees as the Board of Directors may propose.
Information Regarding the Nominees
Sidney W. Emery, Jr., age 68, has served
as a director since October 2005. In February 2010, Mr. Emery became the owner and Chief Executive Officer of Supply Chain Services,
Inc., a privately-held provider of barcode scanning solutions located in Oakdale, Minnesota. From March 1998 until his retirement
in September 2008, Mr. Emery served as the Chief Executive Officer and President of MTS Systems Corporation (Nasdaq: MTSC), a global
supplier of mechanical testing systems and industrial position sensors. Mr. Emery has also served as the chairman of the
Board of Directors of MTS Systems Corporation from January 1999 until September 2008. Mr. Emery previously held various management
and executive positions with the Bendix Corporation and later Honeywell, Inc. after serving 10 years as an officer in the U.S.
Navy. Since May 2007, Mr. Emery has served as a director of ALLETE, Inc., a diversified energy company (NYSE: ALE).
He is also a director of Field Solutions, Inc., a privately held company providing independent field service technician resources
and headquartered in Minnetonka, Minnesota. Mr. Emery is also Chairman of the Board of Governors at the University of St. Thomas
School of Engineering. Mr. Emery received a Bachelor of Science degree in engineering from the U.S. Naval Academy and a Doctorate
in industrial engineering from Stanford University.
Mr. Emery
is qualified to serve on the Urologix Board because of his demonstrated leadership and executive
management experience, including serving as a Chief Executive Officer of a public company. Mr. Emery is also an audit committee
financial expert as that term is defined under the rules of the Securities and Exchange Commission.
Patrick D. Spangler, age 59, has served
as our director since August 15, 2010. Since September 2, 2014, Mr. Spangler has served as Chief Financial Officer of VigiLanz,
a digital healthcare technology company that provides clinical decision support for hospitals. From September 2012 to September
2014, Mr. Spangler served as the Senior Vice President and Chief Financial Officer of Healthland, a provider of healthcare information
technology solutions to rural community and critical access hospitals. From September 2010 to August 2012, Mr. Spangler served
as the Chief Financial Officer of Epocrates, Inc. (Nasdaq: EPOC), a provider of mobile drug reference tools to healthcare professionals
and interactive services to the healthcare industry. From May 2010 to September 2010, Mr. Spangler acted as an operating partner
of and CFO advisor to Three Fields Capital, a private equity and venture capital firm. From June 2009 to April 2010, he was the
Chief Financial Officer of High Jump Software, a privately-held software company. From March 2005 to January 2009, Mr. Spangler
served as the Senior Vice President and Chief Financial Officer of ev3, Inc., a medical device company that was publicly-held until
it was acquired in July 2010. Mr. Spangler has a Bachelor of Science degree in accounting from the University of Minnesota,
a Master of Business Administration degree from University of Chicago and a Master of Business Taxation degree from the University
of Minnesota.
Mr. Spangler is qualified to serve on the Urologix
Board because of his significant executive management and finance experience at both public and private companies. In particular,
Mr. Spangler’s finance experience will allow him to ably assist our Board and Audit Committee with oversight of our finance
and accounting functions and the development and execution of our financial strategies. Mr. Spangler is also an audit committee
financial expert as that term is defined under the rules of the Securities and Exchange Commission.
Vote Required for Proposal 1
Under Minnesota law and our bylaws, directors
are elected by a plurality of the votes cast at the meeting by holders of common stock voting for the election of directors. This
means that since shareholders will be electing two directors for three year terms, the two nominee receiving the highest number
of votes will be elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE ELECTION OF EACH NOMINEE IDENTIFIED IN THIS PROPOSAL 1
_______________________________________
CORPORATE
GOVERNANCE
Board
Independence
The Board of Directors undertook a review of
director independence in August 2014. As part of that process, the Board reviewed all transactions and relationships between each
director (or any member of his immediate family) and Urologix, our executive officers and our auditors, and other matters bearing
on the independence of directors. As a result of this review, the Board affirmatively determined that each of Messrs. Barys, Emery,
Dann and Spangler is independent according to the “independence” definition of the Nasdaq Listing Rules. Mr. Fluet
is not independent because he currently serves as our Chief Executive Officer and Interim Chief Financial Officer.
Committees
of the Board of Directors and Committee Independence
The Board of Directors has established a Compensation
Committee, an Audit Committee and a Governance/Nominating Committee. The composition and function of these committees are set forth
below.
Compensation Committee. The Compensation
Committee reviews and approves the compensation and other terms of employment of our Chief Executive Officer and other senior management
of Urologix. Among its other duties, the Compensation Committee administers our stock-based compensation plans (such as our 2012
Stock Incentive Plan), and cash incentive plans for executive officers, and recommends director compensation. The Compensation
Committee annually reviews the Chief Executive Officer’s compensation and the Chief Executive Officer’s performance.
In connection with its review of compensation of executive officers or any form of incentive or performance based compensation,
the Committee will also review and discuss risks arising from our compensation policies and practices.
The charter of the Compensation Committee requires
that the Committee consist of no fewer than two members, each of whom must be “independent” according to the Nasdaq
Listing Rules, a non-employee director under Securities and Exchange Commission rules and an “outside director” for
purposes of Section 162(m) of the Internal Revenue Code. Each member of our Compensation Committee meets these requirements. A
copy of the current charter of the Compensation Committee is available on our website, www.urologix.com, by following the link
to “Corporate Governance” in the “Investors” section.
The current members of the Compensation Committee
are Messrs. Emery (Chair), Barys and Spangler. During fiscal year 2014, the Compensation Committee met three (3) times and also
met in executive session without management present for one (1) of these meetings.
Governance/Nominating Committee. The Governance/Nominating
Committee is charged with the responsibility of identifying, evaluating and approving qualified candidates to serve as our directors,
ensuring that the Board and governance policies are appropriately structured, reviewing and recommending changes to our governance
guidelines, overseeing Board and committee evaluations, and reviewing and making recommendations on succession plans for the Chief
Executive Officer. The Governance/Nominating Committee is also responsible for the leadership structure of our Board, including
the composition of the Board and its committees, and an annual review of the position of Chairman of the Board. As part of its
annual review, the Governance/Nominating Committee is responsible for identifying individuals qualified to serve as Chairman and
making recommendation to the Board of Directors for any changes in such position. The Governance/Nominating Committee also has
responsibility for overseeing our annual process of self-evaluation by members of the committees and the Board of Directors as
a whole.
The charter of the Governance/Nominating Committee
requires that this committee consist of no fewer than two Board members who satisfy the “independence” requirements
of the Nasdaq Listing Rules. Each member of the Governance/Nominating Committee meets these requirements. A copy of the current
charter of the Governance/Nominating Committee is available by following the link to “Corporate Governance” in the
“Investor” section of our website at www.urologix.com. A copy of our current Governance Guidelines is also available
in the “Corporate Governance” section of our website.
The current members of the Governance/Nominating
Committee are Messrs. Barys (Chair), Dann, Emery and Spangler. During fiscal year 2014, the Governance/Nominating Committee met
two (2) times.
Audit Committee. The Audit Committee assists
the Board by reviewing the integrity of our financial reporting processes and controls; the qualifications, independence and performance
of the independent auditors; and compliance by us with certain legal and regulatory requirements. The Audit Committee has the sole
authority to retain, compensate, oversee and terminate the independent auditors, as well as the responsibility to pre-approve all
audit and non-audit services performed by the independent auditor. The Audit Committee reviews our annual audited financial statements,
quarterly financial statements and related filings with the Securities and Exchange Commission. The Audit Committee reviews reports
on various matters, including our critical accounting policies, significant changes in our selection or application of accounting
principles, and our internal control processes. Under its charter, the Audit Committee exercises oversight of significant risks
relating to financial reporting and internal control over financial reporting, including discussing these risks with management
and the independent auditor and assessing the steps management has taken to minimize these risks.
The charter of the Audit Committee requires that
this committee consists of three or more “independent” directors under the Nasdaq Listing Rules and that the directors
also be independent under Securities and Exchange Commission Rule 10A-3. The members of the Audit Committee must also meet the
experience and sophistication requirements of the Nasdaq Listing Rules. Each member of the Audit Committee meets the requirements
of the charter. Our Governance/Nominating Committee and our Board of Directors also have reviewed the education, experience and
other qualifications of each of the members of the Audit Committee. After such review, upon the recommendation of the Governance/Nominating
Committee, the Board of Directors has determined that Messrs. Emery and Spangler each meet the Securities and Exchange Commission
definition of an “audit committee financial expert.” A report of the Audit Committee is set forth below.
A copy of the current charter of the Audit Committee
is available by following the “Corporate Governance” link in the “Investor” section of our website at www.urologix.com.
Our Audit Committee consists of Messrs. Spangler (Chair), Emery, and Barys. During fiscal year 2014, the Audit Committee met eight
(8) times, including two (2) times in executive session without management present for these meetings.
Board
Leadership Structure
Currently, the leadership structure of Urologix’
Board consists of a non-executive chairman of the Board, who also serves in the role of lead director, and three standing committees
that are each led by a chairman. The members of each committee are “independent directors” under the Nasdaq Listing
Rules and meet the other similar independence requirements applicable to that committee. Our Chief Executive Officer is a director,
but does not serve as chairman and does not serve on any committee.
The Governance/Nominating Committee believes
that the current Board leadership structure is appropriate for Urologix at this time because it allows the Board and its committees
to fulfill their responsibilities, draws upon the experience and talents of all directors, encourages management accountability
to the Board, and helps maintain good communication among Board members and with management. Our current Board leadership structure
is reflected in our Governance Guidelines and the Governance/Nominating Committee is empowered through its charter to consider
and make changes to the structure if necessary.
Board’s
Role in Risk Oversight
We face a number of risks, including financial,
technological, operational, regulatory, strategic and competitive risks. Management is responsible for the day-to-day management
of risks we face, while the Board has responsibility for the oversight of risk management. In its risk oversight role, the Board
of Directors ensures that the processes for identification, management and mitigation of risk by our management are adequate and
functioning as designed.
Our Governance Guidelines were amended in August
2010 to formalize the Board’s responsibility for risk oversight as our policy.
Our Board is actively involved in overseeing
risk management and it exercises its oversight both through the full Board and through the three standing committees of the Board:
the Audit Committee, the Compensation Committee and the Governance/Nominating Committee. The three standing committees exercise
oversight of the risks within their areas of responsibility, as disclosed in the descriptions of each of the committees above and
in the charters of each of the committees.
The Board and the three committees receive information
used in fulfilling their oversight responsibilities through our executive officers and advisors, including our outside legal counsel
and our independent registered public accounting firm. At meetings of the Board, management makes presentations to the Board regarding
our business strategy, operations, financial performance, fiscal year budgets, technology, quality and regulatory, and other matters.
Many of these presentations include information relating to the challenges and risks to our business and the Board and management
actively engage in discussion on these topics. Each of the committees also receives reports from management regarding matters relevant
to the work of that committee. These management reports are supplemented by information relating to risk from our advisors. Additionally,
following committee meetings, the Board receives reports by each committee chair regarding the committee’s considerations
and actions. In this way, the Board also receives additional information regarding the risk oversight functions performed by each
of these committees.
Director
Nominations
The Governance/Nominating Committee will consider
candidates for Board membership suggested by its members, other Board members, as well as management and shareholders. Shareholders
who wish to recommend a prospective nominee should follow the procedures set forth in Section 3.13 of our bylaws as described in
the section of this proxy statement entitled “Shareholder Proposals for Nominees.”
Criteria for Nomination to the Board; Diversity
Considerations. The Governance/Nominating Committee is responsible for identifying, evaluating and approving qualified candidates
for nomination as directors. The committee has not adopted minimum qualifications that nominees must meet in order for the committee
to recommend them to the Board of Directors, as the committee believes that each nominee should be evaluated based on his or her
merits as an individual, taking into account our needs and the needs of the Board of Directors. The Governance/Nominating Committee
evaluates each prospective nominee against the standards and qualifications set out in our Governance Guidelines, including:
| · | Background, including high personal and professional ethics and
integrity and the ability to exercise good business judgment and enhance the Board’s ability to manage and direct the affairs
and business of Urologix; |
| · | Commitment, including the willingness to devote adequate time to
the work of the Board and its committees, and the ability to represent the interests of all shareholders and not a particular interest
group; |
| · | Board skills needs, in the context of the existing makeup of the
Board, and the candidate’s qualification as independent and qualification to serve on Board committees; |
| · | Business experience, which should reflect a broad experience at
the policy-making level in business, government and/or education; and |
| · | Diversity, in terms of knowledge, experience, skills, expertise,
and other demographics that contribute to the Board’s diversity. |
In considering candidates for the Board, including
the nominee for election at this Annual Meeting, the Governance/Nominating Committee considers the entirety of each candidate’s
credentials with reference to these standards. The Governance/Nominating Committee also considers such other relevant factors as
it deems appropriate.
While the Governance/Nominating Committee does
not have a formal policy with respect to diversity, the Governance/Nominating Committee does believe it is important that the Board
represent diverse viewpoints within the context of these standards. As part of the nominee selection process for this Annual Meeting,
the Governance/Nominating Committee reviewed the knowledge, experience, skills, expertise, and other characteristics of the nominees
and the other directors. The Governance/Nominating Committee considered how each director contributed to the diversity of the Board.
Based upon that review, the Governance/Nominating Committee believes that the overall mix of the directors’ backgrounds contributes
to a diversity of viewpoints that enhances the quality of the Board’s deliberations and decisions.
In reviewing prospective nominees, the Governance/Nominating
Committee reviews the number of public-company Boards on which a director nominee serves to determine if the nominee will have
the ability to devote adequate time to the work of our Board and its committees. Under our Governance Guidelines, non-employee
directors generally may not serve on more than five boards of other publicly owned companies, provided that the service does not
adversely affect the director’s ability to perform his or her duties as a Urologix director.
The Governance/Nominating Committee will consider
persons recommended by the shareholders using the same standards used for other nominees.
Process for Identifying and Evaluating Nominees.
The process for identifying and evaluating nominees to the Board of Directors is initiated by identifying a slate of candidates
who meet the criteria for selection as a nominee and have the specific qualities or skills being sought based on input from members
of the Board and, if the Governance/Nominating Committee deems appropriate, a third-party search firm. The Governance/Nominating
Committee evaluates these candidates by reviewing the candidates’ biographical information and qualifications and checking
the candidates’ references. One or more committee members will interview the prospective nominees in person or by telephone.
After completing the evaluation, the committee makes a recommendation to the full Board of the nominees to be presented for the
approval of the shareholders or for election to fill a vacancy.
Board Nominee for this 2014 Annual Meeting.
The Governance/Nominating Committee selected the nominees for this 2014 Annual Meeting in August 2014. Mr. Emery, a nominee
for election at this 2014 Annual Meeting, was elected by the shareholders at the 2005 Annual Meeting of Shareholders. Mr. Spangler,
also a nominee for election at this 2014 Annual Meeting, was elected by the shareholders at the 2010 Annual Meeting of Shareholders.
We have not engaged a third-party search firm to assist us in identifying potential director candidates, however, the Governance/Nominating
Committee may choose to do so in the future
Shareholder Proposals for Nominees. The
Governance/Nominating Committee will consider written proposals from shareholders for nominees for director.
Any such nominations should be submitted to the
Governance/Nominating Committee in care of the Secretary of Urologix and should include the following information: (i) the name
and address of record of the shareholder who intends to make the nomination; (ii) a representation that the shareholder is a holder
of record of shares of the Company entitled to vote generally at meeting for the election of directors and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) the name, age, business and
residence addresses, and principal occupation or employment of each nominee; (iv) a description of all arrangements or understandings
between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (v) such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission; and (vi) the consent of each nominee to serve as a director of the Company if so elected.
To be considered, the written notice must be
submitted in the time frames described in our bylaws and under the caption “Shareholder Proposals and Shareholder Nominees
for 2014 Annual Meeting” below.
Director
Attendance at Board, Committee and Annual Shareholder Meetings
During fiscal year 2014, the Board of Directors
met twelve (12) times. Each director in fiscal year 2014 attended at least seventy-five percent of the meetings of the Board of Directors
and Board committees on which the director served. We do not have a formal policy on attendance at meetings of our shareholders.
However, we encourage all Board members to attend shareholder meetings when held in conjunction with a meeting of the Board of
Directors. The 2014 Annual Meeting of Shareholders will be held in conjunction with a meeting of the Board of Directors. One (1)
director then serving attended the 2013 Annual Meeting of Shareholders.
Communications
with Directors
The Board of Directors has designated Mitchell
Dann, the Chairman of our Board of Directors, as our lead director. The lead director will act as chair of executive sessions of
the Board. Shareholders may communicate with the Board as a group, the chair of any committee of the Board of Directors or any
individual director by sending an e-mail to lead.director@urologix.com or by directing the communication in care of the
lead director, at the address set forth on the front page of this proxy statement.
Code
of Ethics
We have adopted a code of ethics that applies
to all directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting
officer or persons performing similar functions. This code of ethics is included in our Code of Ethics and Business Conduct. The
Code of Ethics and Business Conduct is publicly available by following the “Corporate Governance” link in the “Investor”
section of our website at www.urologix.com. To the extent permitted, we intend to disclose any amendments to, or waivers from,
the code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or
persons performing similar functions or with respect to the required elements of the code of ethics on our website at www.urologix.com
by following the “Corporate Governance” link in the “Investor” section.
REPORT
OF THE AUDIT COMMITTEE
This is a report of the Audit Committee of the
Board of Directors of Urologix for the year ended June 30, 2014. This report shall not be deemed incorporated by reference into
any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 and shall not otherwise be deemed to be filed
under either such Act.
In accordance with its charter, the Audit Committee
reviewed and discussed the audited financial statements with management and Baker Tilly Virchow Krause LLP, our independent registered
public accounting firm. The discussions with Baker Tilly Virchow Krause LLP also included the matters required by Statement on
Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public
Company Accounting Oversight Board in Rule 3200T.
Baker Tilly Virchow Krause LLP provided to the
Audit Committee the written disclosures and the letter regarding its independence as required by the Public Company Accounting
Oversight Board. This information was discussed with Baker Tilly Virchow Krause LLP.
Based on the discussions with management and
Baker Tilly Virchow Krause LLP, the Audit Committee’s review of the representations of management and the report of Baker
Tilly Virchow Krause LLP, the Audit Committee recommended to our Board of Directors that the audited financial statements be included
in our Annual Report on Form 10-K for the year ended June 30, 2014, filed with the Securities and Exchange Commission.
Submitted by the Audit Committee of the
Board of Directors
Patrick D. Spangler, Chair |
Christopher R. Barys |
Sidney W. Emery, Jr. |
EXECUTIVE OFFICERS
Set forth below is biographical and other information
for our current executive officers. Information about Gregory J. Fluet, our Chief Executive Officer, may be found in this proxy
statement under the heading “Proposal 1: Election of Directors.”
Name |
Age |
Position |
Lisa Ackermann |
42 |
Executive Vice President, Sales and Marketing |
Lisa Ackermann was
appointed as our Vice President, Sales and Marketing on June 16, 2011 and was promoted to Executive Vice President, Sales and Marketing
on April 19, 2012. From September 1999 to June 2011, Ms. Ackermann was employed by Ethicon Endo-Surgery, Inc. (“EES”),
a Johnson & Johnson Company. EES makes and sells minimally invasive surgical products and advanced sterilization products.
Most recently, Ms. Ackermann served as Group Product Director, Endoscopy for EES from May 2010 to June 2011, with responsibility
for marketing management of a $500 million portfolio of products and a team of brand managers. As Group Product Director,
she designed and implemented strategies to protect and grow market leading EES categories, including trocars, endoligation, and
specimen retrieval. From February 2007 to May 2010, Ms. Ackermann was Sales Director, Bariatrics. In that role, she
was responsible for leadership of ten division managers and seventy-five sales representatives in the US. In addition to
creating a culture of teamwork, development, and accountability, she prepared the sales organization to successfully execute the
largest product launch in EES history with the Realize™ gastric band, while growing the endocutter base business in gastric
bypass and sleeve gastrectomy procedures. From January 2005 to February 2007, Ms. Ackermann was Manager, Sales Compensation
for EES with responsibility for development, implementation and monitoring compensation plans for multiple sales teams, as well
as management of an annual budget, commission projection modeling and developing process improvements. She also served as interim
Director of Sales Planning and Operations from July to October 2006 where she was responsible for organizational design changes,
deployment projects, talent development and budget management.
EXECUTIVE COMPENSATION
Summary of Executive Compensation
The following is
an explanation of compensation during fiscal year 2014 to the persons who are referred to in this proxy statement as the “named
executive officers”:
| · | Gregory J. Fluet, our Chief Executive Officer since January 25,
2013 and interim Chief Financial Officer since August 13, 2014 and prior to that, our Interim Chief Executive Officer from November
30, 2012 to January 25, 2013, and our Executive Vice President and Chief Operating Officer from July 2008 to November 30, 2012.
Following Mr. Smrdel’s resignation on August 13, 2014, the Board of Directors appointed Mr. Fluet as the Company’s
Interim Chief Financial Officer and Principal Financial Officer; |
| · | Lisa A. Ackermann, our Executive Vice President, Sales and Marketing;
and |
| · | Brian M. Smrdel, who served as our Chief Financial Officer until
August 13, 2014. On August 13, 2014, Mr. Smrdel tendered his resignation to the Company effective as of that date. |
This section is intended to provide a framework
within which to understand the actual compensation awarded to or earned by the named executive officers during fiscal year 2014,
as reported in the compensation tables and accompanying narrative sections appearing on pages 24 to 32 of this proxy statement.
For a description of employment, severance and
change in control arrangements with the named executive officers please see “Executive Compensation – Employment and
Change In Control Arrangements.”
Role of the Compensation Committee in the Compensation Process
The responsibility of the Compensation Committee
is to develop our philosophy and structure for executive compensation, review and approve the compensation and other terms of employment
of our Chief Executive Officer and other executive officers, approve and oversee our cash incentive plans, and approve any other
performance-based compensation and metrics. The Compensation Committee also oversees our stock-based compensation plans, including
our 2012 Stock Incentive Plan (the “2012 Plan”), and cash incentive plans for executive officers and recommends Board
compensation. The Compensation Committee annually reviews the Chief Executive Officer’s compensation and evaluates the Chief
Executive Officer’s performance.
In carrying out its duties, the Compensation
Committee reviews and approves specific compensation programs, including a bonus program tied to our financial performance
and base salary amounts.
Under its charter, the Compensation Committee
has the authority to engage the services of outside advisors, experts and others to assist it in performing its duties. While the
Compensation Committee has used the services of a compensation consultant in the past, it did not do so in determining fiscal year
2014 compensation for the named executive officers. The Compensation Committee may choose to use the services of a compensation
consultant in the future. In determining fiscal year 2014 compensation, the Compensation Committee reviewed certain compensation
related information and recommendations from certain members of management, as described below.
Role of Management in the Compensation Process
To determine the in-service compensation for
named executive officers other than the Chief Executive Officer, the Compensation Committee solicits input from the Chief Executive
Officer regarding the duties and responsibilities of the other executive officers and the results of their performance reviews.
The Chief Executive Officer also recommends to the Compensation Committee the base salary for all named executive officers, the
amount of potential awards under the cash incentive compensation program, and the awards under our long-term equity program. The
Chief Executive Officer also recommends to the Compensation Committee the performance goals under any performance-based compensation
program, which for fiscal year 2014 was the incentive plan described below.
None of the named executive officers, other than
the Chief Executive Officer, has a role in establishing executive compensation. From time to time, the named executive officers
are invited to attend meetings of the Compensation Committee. However, no named executive officer attends any executive session
of the Compensation Committee or is present during deliberations or determination of such named executive officer’s compensation.
Fiscal Year 2014 Base Salaries
On August 14, 2013, the Compensation Committee
recommended, and the Board of Directors approved, no adjustments for fiscal year 2014 to the annual base salaries for the named
executive officers from the amounts in effect for fiscal year 2013. Accordingly, the annual base salaries for the named executive
officers for fiscal year 2014 were as follows: Mr. Fluet, $200,000 and Ms. Ackerman $210,000.
Design of and Payouts Under the Fiscal Year 2014 Incentive
Plan
Our philosophy with respect to the compensation
of executive officers is to provide competitive levels of compensation consistent with our annual and long-term performance goals,
that recognize individual initiative, and assist us in attracting and retaining qualified executives. We believe that the fiscal
year 2014 incentive plan, which is described below, is consistent with our philosophy.
On August 14, 2013, the Compensation Committee
recommended, and the Board of Directors adopted, the 2014 incentive plan (the “2014 Incentive Plan”) and the performance
goals under the 2014 Incentive Plan for the named executive officers. The Compensation Committee retained the discretion to modify
the terms of the 2014 Incentive Plan and to grant cash bonuses or other compensation to the named executive officers outside the
2014 Incentive Plan.
The performance goals under the 2014 Incentive
Plan for the named executive officers consist of our revenue for fiscal year 2014 and our cash balance at the end of fiscal year
2014, with these goals weighted 75% and 25%, respectively. The Compensation Committee also established minimum, target and maximum
performance goals relating to revenue in fiscal year 2014 and approved a cash balance goal for fiscal year 2014. Under the 2014
Incentive Plan, achievement of the revenue goal at less than target level will result in a decreasing bonus until the achievement
fails to meet the minimum, at which point the named executive officers are entitled to no bonus with respect to that measure. For
the cash balance goal, the target amount is also the minimum amount of achievement that will result in any bonus relating to this
measure and there is no adjustment in the bonus amounts for achievement beyond the target/minimum.
Management recommended that any bonus attributable
to the revenue performance goal be paid in shares of the Company’s common stock. The Committee accepted this recommendation
with respect to the Executives and all other participants in the 2014 Incentive Plan. On August 14, 2013, the Committee recommended
and the Board approved the number of shares issuable to each participant in the 2014 Incentive Plan, including the Executives,
if the Company’s revenue for fiscal year 2014 meets or exceeds the target level. If the Company’s revenue for fiscal
year 2014 meets or exceeds the target level, the Executives will be issued the following number of shares of the Company’s
common stock: Mr. Fluet, 75,000 shares; Mr. Smrdel, 30,375 shares; and Ms. Ackermann, 60,000 shares. Achievement of the revenue
goal at less than target level will result in a decreasing number of shares until the achievement fails to meet the minimum revenue
level, at which point the Executives and other participants in the 2014 Incentive Plan are entitled to no shares. Payouts under
the 2014 Incentive Plan were made following the Compensation Committee’s determination after the end of the fiscal year to
participants in the 2014 Incentive Plan who continued to be employed as of the date of such determination.
The Company’s revenue for fiscal year 2014
did not meet the minimum amount set by the Committee and no bonus was payable with respect to this performance goal. While the
Company’s cash balance at the end of fiscal year 2014 exceeded the target level established by the Committee, under the terms
of the 2014 Incentive Plan, the target amount was also the minimum and maximum amount and there was no adjustment in the bonus
amount for achievement beyond the target. The Committee recommended and the Board approved a bonus for the cash balance performance
goal at the target level. Accordingly, on August 13, 2014, the Committee recommended and the Board approved a bonus for achievement
of the cash balance performance goal to Mr. Fluet of $25,000 and Ms. Ackermann of $20,000. No bonus was paid to Mr. Smrdel under
the 2014 Incentive Plan.
Long-Term Equity Compensation
The long-term equity component of executive compensation
is provided primarily through equity awards that are generally granted to executive officers in connection with their initial employment
and periodically upon review of compensation levels, past performance and future potential.
The Compensation Committee believes that stock
ownership by management and equity-based performance compensation arrangements are beneficial in aligning management and shareholder’s
interest in enhancing shareholder value. Stock options are awarded at an exercise price equal to the fair market value on the date
of grant and these options generally vest over a four-year period. The Compensation Committee’s policy is to grant all equity
awards under shareholder approved equity compensation plans, such as the 2012 Plan.
In fiscal year 2014, the Compensation Committee
granted stock options to purchase an aggregate of 191,500 shares of Urologix’ common stock to employees.
Of these options granted in fiscal year 2014, options to purchase 102,500 shares were awarded to individuals who were named executive
officers on the grant date, as described below.
On August 14, 2013, the Compensation Committee
granted restricted stock and stock options under the 2012 Plan to Mr. Fluet, Mr. Smrdel and Ms. Ackermann for fiscal year 2013
performance.
The following table shows the number of shares
underlying each award type granted to each executive:
Name of Executive |
Shares of Restricted Stock |
Shares
Underlying
Stock Options |
|
|
|
Gregory J. Fluet |
50,000 |
50,000 |
|
|
|
Brian J. Smrdel |
15,000 |
17,500 |
|
|
|
Lisa A. Ackermann |
35,000 |
35,000 |
The restrictions on the shares of
restricted stock lapsed on August 14, 2014, the one year anniversary of the date of grant. These awards were made after
consideration by the Compensation Committee of the factors stated above and also the Compensation Committee’s desire to
use long-term equity compensation, particularly the restricted stock awards, for retention of the named executive officers.
Mr. Smrdel’s restricted stock was forfeited as a result of his resignation on August 13, 2014. Mr. Smrdel’s
resignation took place one day prior to the date the restrictions would have lapsed.
On August 13, 2014, the Compensation Committee
granted restricted stock awards under the 2012 Plan to Mr. Fluet and Ms. Ackermann for fiscal year 2014 performance. The following
table shows the number of shares underlying each award type granted to each executive:
Name of Executive |
Shares of Restricted Stock |
|
|
|
|
Gregory J. Fluet |
60,000 |
|
|
|
|
Lisa A. Ackermann |
40,000 |
|
The restrictions on 25% of the shares of restricted
stock will lapse on August 13, 2015, and 25% will lapse on each of three consecutive anniversary dates thereafter. These awards
were made after consideration by the Compensation Committee of the factors stated above and also the Compensation Committee’s
desire to use long-term equity compensation, particularly the restricted stock awards, for retention of the named executive officers.
Summary Compensation Table
The following table summarizes all compensation
for each of the last two fiscal years awarded to, earned by or paid to the named executive officers: (i) Gregory J. Fluet, current
Chief Executive Officer and interim Chief Financial Officer, who began serving in the CEO role on an interim basis beginning on
November 30, 2012 and on a non-interim basis beginning January 25, 2013 and who previously served as our Executive Vice President
and Chief Operating Officer; (ii) Brian J. Smrdel, our Chief Financial Officer until August 13, 2014; and (v) Lisa A. Ackermann,
our Executive Vice President, Sales and Marketing.
Name and Principal Position | |
Fiscal Year | |
Salary ($) | |
Stock Awards ($) (1) | |
Option Awards ($) (1) | |
Non-Equity Incentive Plan Compensation ($)(2) | |
All Other Compensation (3) | |
Total ($) |
Gregory J. Fluet | |
| 2014 | | |
$ | 200,000 | | |
$ | 6,246 | | |
$ | — | | |
$ | 25,000 | | |
$ | — | | |
$ | 231,246 | |
Chief Executive Officer | |
| 2013 | | |
| 200,000 | | |
| 15,000 | | |
| 12,300 | | |
| — | | |
| — | | |
| 227,300 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Brian J. Smrdel | |
| 2014 | | |
$ | 135,000 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 135,000 | |
Chief Financial Officer(4) | |
| 2013 | | |
| 135,000 | | |
| — | | |
| 10,125 | | |
| — | | |
| — | | |
| 145,125 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Lisa A. Ackermann | |
| 2014 | | |
$ | 210,000 | | |
$ | 4,164 | | |
$ | — | | |
$ | 20,000 | | |
$ | 7,800 | | |
$ | 241,964 | |
Executive Vice President, | |
| 2013 | | |
| 210,000 | | |
| — | | |
| 10,250 | | |
| 20,000 | | |
| 55,800 | | |
| 296,050 | |
Sales and Marketing | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| (1) | Stock awards column represents the grant date fair value, computed in accordance with FASB ASC
Topic 718, Compensation — Stock Compensation, which is reported for the year in which the related services were performed.
See the section of this proxy statement entitled “Summary of Executive Compensation – Design of and Payouts Under the
Fiscal Year 2014 Incentive Plan.” The option awards column represents the aggregate grant date fair value of stock option
awards in the respective fiscal year, each as computed in accordance with FASB ASC Topic 718, Compensation — Stock Compensation.
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option valuation model using
the assumptions discussed in Note 5, “Stock Options and Restricted Stock Awards,” in the notes to financial statements
included in our Annual Report on Form 10-K for the year ended June 30, 2014. |
| (2) | Represents cash bonuses paid to the named executive officers under our fiscal year 2014 Incentive
Plan, which are reported for the year in which the related services were performed. See the section of this proxy statement entitled
“Summary of Executive Compensation – Design of and Payouts Under the Fiscal Year 2014 Incentive Plan.” |
| (3) | For Ms. Ackermann, represents discretionary, supplemental payments of $4,000 per month for a twelve
month period beginning effective July 1, 2012 and ending June 30, 2013. For Ms. Ackermann, this also includes $7,800 each fiscal
year as a car allowance. |
| (4) | Mr. Smrdel resigned on August 13, 2014 as our Chief Financial Officer and ceased being employed
by us as of August 13, 2014. Accordingly, salary amounts for fiscal year 2014 represent a full year. |
Grants of Plan-Based Awards in
2014
The following table sets forth certain information
concerning equity and non-equity plan-based awards granted to the named executive officers during the fiscal year ended June 30,
2014:
|
|
|
|
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards (1) |
|
|
|
|
|
|
Name |
|
Grant
Date |
|
Threshold
($) |
|
Target
($) |
|
Maximum
($) |
|
Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) |
|
Other
Stock
Awards:
Number of
Securities
Underlying
Stock (#) |
|
Exercise
or Base
Price of
Option
Awards
($/Sh) |
|
Grant
Date Fair
Value of
Stock and
Option
Awards
($) (2) |
Gregory J. Fluet |
|
08/14/2013 |
|
— |
|
$25,000 |
|
$ — |
|
— |
|
— |
|
$ — |
|
$ — |
Gregory J. Fluet |
|
08/14/2013 |
|
— |
|
$ — |
|
$ — |
|
50,000 |
|
— |
|
$0.3798 |
|
$ 0.21 |
Gregory J. Fluet |
|
08/14/2013 |
|
— |
|
$ — |
|
$ — |
|
— |
|
50,000 |
|
— |
|
$0.3798 |
Lisa A. Ackermann |
|
08/14/2013 |
|
— |
|
$20,000 |
|
$ — |
|
— |
|
— |
|
$ — |
|
$ — |
Lisa A. Ackermann |
|
08/14/2013 |
|
— |
|
$ — |
|
$ — |
|
35,000 |
|
— |
|
$0.3798 |
|
$ 0.21 |
Lisa A. Ackermann |
|
08/14/2013 |
|
— |
|
$ — |
|
$ — |
|
— |
|
35,000 |
|
— |
|
$0.3798 |
| (1) | Represents bonuses that may have been earned by the named executive officers under our fiscal year
2014 Incentive Plan. See the Summary Compensation Table columns entitled “Non-Equity Incentive Plan Compensation” for
amounts actually paid. For explanation of the fiscal year 2014 Incentive Plan, refer to the description under the heading of Summary
of Executive Compensation entitled “Design of and Payouts Under the Fiscal Year 2014 Incentive Plan.” |
| (2) | Values expressed represent aggregate grant date fair value of stock option awards computed in accordance
with FASB ASC Topic 718, Compensation — Stock Compensation. The fair value of each stock option award is estimated on the
date of grant using the Black-Scholes option valuation model using the assumptions discussed in Note 5, “Stock Options and
Restricted Stock Awards,” in the notes to financial statements included in our Annual Report on Form 10-K for the year ended
June 30, 2014. |
Outstanding
Equity Awards At Fiscal Year-End – Stock Options
The following table sets forth certain information
concerning option awards outstanding to the named executive officers at June 30, 2014:
|
|
Option Awards (1) |
Name |
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable |
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable |
|
Option Exercise
Price ($) |
|
Option Expiration
Date (2) |
Gregory J. Fluet |
|
75,000 |
|
— |
|
1.85 |
|
07/14/2018 |
Gregory J. Fluet |
|
50,000 |
|
— |
|
1.30 |
|
08/06/2019 |
Gregory J. Fluet |
|
52,707 |
|
2,293 |
|
0.91 |
|
08/27/2020 |
Gregory J. Fluet |
|
35,416 |
|
14,584 |
|
0.88 |
|
08/23/2021 |
Gregory J. Fluet |
|
13,749 |
|
16,251 |
|
0.87 |
|
08/10/2022 |
Gregory J. Fluet |
|
— |
|
50,000 |
|
0.38 |
|
08/14/2023 |
Brian J. Smrdel |
|
65,000 |
|
— |
|
1.40 |
|
05/10/2020 |
Brian J. Smrdel |
|
14,166 |
|
5,834 |
|
0.88 |
|
08/23/2021 |
Brian J. Smrdel |
|
— |
|
17,500 |
|
0.38 |
|
08/14/2023 |
Lisa A. Ackermann |
|
25,000 |
|
75,000 |
|
1.03 |
|
06/16/2021 |
Lisa A. Ackermann |
|
11,458 |
|
13,542 |
|
0.87 |
|
08/10/2022 |
Lisa A. Ackermann |
|
— |
|
35,000 |
|
0.38 |
|
08/14/2023 |
| (1) | Options vest and become exercisable with respect to 25% of the shares underlying the option on
the first anniversary of the date of grant and thereafter vests with respect to 1/36th of the shares underlying the
option on the monthly anniversary of the date of grant for each of the next 36 months. |
| (2) | The expiration date of each option is the ten-year anniversary of the date of grant of such option. |
Outstanding Equity Awards At Fiscal
Year-End – Restricted Stock Awards
The following table sets forth certain information
concerning stock awards outstanding to the named executive officers at June 30, 2014.
|
|
Restricted Stock Awards |
Name |
|
Number of Shares or Units of Stock
that Have Not Vested (1)(#) |
|
Market Value of Shares or Units of
Stock That Have Not Vested (2)($) |
Gregory J. Fluet |
|
50,000 |
|
$8,750 |
Lisa A. Ackermann |
|
35,000 |
|
$6,125 |
Lisa A. Ackermann (1) |
|
3,802 |
|
$ 665 |
| (1) | For Ms. Ackermann, restrictions lapse as to 75% of the original award of 45,632 restricted shares
on the first anniversary of the date of grant, which was June 16, 2011, and the remaining 25% ratably on each of the subsequent
three anniversaries of the grant date. |
| (2) | Value is based on the fair market value of our common stock on June 30, 2014, the last day of our
fiscal year, which was $0.175 per share. |
2014 Option Exercises and Stock
Vested
During fiscal 2014, there were no stock option
awards held by certain executive officers that were exercised.
During fiscal year 2014, restricted stock awards
held by certain executive officers vested as follows:
|
|
Restricted Stock Awards |
Name |
|
Number of Shares
Acquired on Vesting (#) |
|
Value Realized
on Vesting ($)(1) |
Lisa A. Ackermann |
|
3,801 |
|
$665 |
| (1) | Represents the number of shares vested multiplied by $0.175 per share, the fair market value of
our common stock on June 30, 2014. |
Employment and Change In Control Arrangements
Agreements and Arrangements with the Named Executive Officers
Letter Agreement with Gregory J. Fluet
We have entered into letter agreements dated
July 14, 2008 with Gregory J. Fluet regarding employment and change in control arrangements. The offer letter set out the initial
compensation of Mr. Fluet, which included annual base compensation of $150,000 for fiscal year 2009 and participation in the cash
bonus program for executive officers for our fiscal year 2009 with a bonus opportunity of 30% of his base salary at the target
level of achievement. Mr. Fluet also was reimbursed for a maximum of $25,000 in costs and expenses associated with temporary housing
and relocation. However, the offer letter provided that Mr. Fluet was required to reimburse us for these amounts if his employment
with us ended prior to the one-year anniversary of his start date. Mr. Fluet also participates in our health, dental and life insurance
benefit plans on the same basis as our other employees.
Pursuant to the offer letter, Mr. Fluet was granted
an incentive stock option on July 14, 2008 to purchase 75,000 shares of our common stock. The option has an exercise price of $1.85,
which is equal to the fair market value of our common stock as of the grant date. The option vests with respect to 25% of the shares
underlying the option on the first anniversary of the date of grant and, thereafter, as to 1/36 of the shares underlying the option
on the monthly anniversary of the date of grant for each of the next 36 months.
In connection with his employment, Mr. Fluet
entered into a letter agreement relating to change in control benefits, which was amended on April 23, 2012. Under this amended
letter agreement, if a Change in Control occurs and Mr. Fluet’s employment is terminated without Cause, or by Mr. Fluet for
Good Reason, within twelve months of a Change in Control, we will pay Mr. Fluet a severance payment in cash in a single sum within
sixty days of the date of termination equal to 100% of the sum of his annual target compensation (base salary and bonus) in effect
on such date. In addition, we will continue Mr. Fluet’s health, dental and life insurance benefits for a period of twelve
months, with Mr. Fluet obligated to pay the employee’s share of the premiums for such benefits. Except with respect to this
letter agreement, Mr. Fluet’s employment with Urologix is “at will.” Mr. Fluet also entered into our standard
agreement with employees governing assignment of inventions, confidential information and non-competition.
Letter Agreement with Lisa A. Ackermann
On June 3, 2011, we entered into an offer letter
agreement with Lisa A. Ackermann in which she agreed to serve as our Vice President, Sales and Marketing beginning on June 16,
2011. The offer letter set out the initial compensation of Ms. Ackermann, which included annual base compensation of $210,000 and
participation in the cash incentive program for executive officers for fiscal year 2012 on terms determined by the Compensation
Committee. Ms. Ackermann is provided with office space in Cincinnati, Ohio and a car allowance of $650 per month. Ms. Ackermann
also participates in health, dental and life insurance benefit plans on the same basis as our other employees.
Pursuant to the offer letter, Ms. Ackermann was
granted an incentive stock option on June 16, 2011 to purchase 100,000 shares of our common stock. The option has an exercise price
of $1.03, which is equal to the fair market value of our common stock as of the grant date. The option vests with respect to 25%
of the shares underlying the option on the first anniversary of the date of grant and, thereafter, as to 1/36 of the shares underlying
the option on the monthly anniversary of the date of grant for each of the next 36 months. On June 16, 2011, Ms. Ackermann was
also granted 45,632 shares of restricted stock on June 16, 2011 with the restrictions and risk of forfeiture lapsing as to 75%
of the shares on the first anniversary of the grant date, and then as to the remaining 25%, ratably on each of the subsequent three
anniversaries of the grant date.
On April 23, 2012, Ms. Ackermann entered into
our current letter agreement relating to change in control benefits. Under this letter agreement, if a Change in Control occurs
and Ms. Ackermann’s employment is terminated without Cause, or by Ms. Ackermann for Good Reason, within twelve months of
a Change in Control, we will pay Ms. Ackermann a severance payment in cash in a single sum within sixty days of the date of termination
equal to 100% of the sum of her annual target compensation (base salary and bonus) in effect on such date. In addition, we will
continue Ms. Ackermann’s health, dental and life insurance benefits for a period of twelve months, with Ms. Ackermann obligated
to pay the employee’s share of the premiums for such benefits. Except with respect to this letter agreement, Ms. Ackermann’s
employment with us is “at will.” Ms. Ackermann also entered into our standard agreement with employees governing assignment
of inventions, confidential information and non-competition. Effective April 19, 2012, the Board of Directors promoted Ms. Ackermann
to Executive Vice President, Sales and Marketing upon the recommendation of the Compensation Committee.
All of the foregoing compensation
determinations and arrangements were recommended or approved by the Compensation Committee. In addition, all stock option
grants or restricted stock grants were made under the 1991 Amended and Restated Stock Option Plan and the 1991 Plan
contains provisions relating to a change in control (as defined under the 1991 Plan) that govern the awards made under the
1991 Plan, including those made to the named executive officers.
Letter Agreement with Brian J. Smrdel
Effective August 13, 2014, we entered into a letter
agreement with Brian J. Smrdel pursuant to which Mr. Smrdel resigned as our Chief Financial Officer. Following termination of Mr.
Smrdel’s employment, we agreed to pay Mr. Smrdel a single payment in the amount of $2,596.15, representing one weeks pay
at Mr. Smrdel’s current base salary. We also agreed to pay for Mr. Smrdel’s group health insurance until the earlier
of August 30, 2014 or the first day Mr. Smrdel received coverage under another group insurance plan. This August 13, 2014 letter
agreement superceded the letter agreement dated April 29, 2010, which was amended on April 23, 2012, between Mr. Smrdel and the
Company relating to employment and change of control payments. Mr. Smrdel also entered into the Company’s standard agreement
with employees governing assignment of inventions, confidential information and non-competition and that agreement continued in
effect following the August 13, 2014 letter agreement.
Certain Definitions Relating to Change in Control
Each of the letter agreements with Mr. Fluet
and Ms. Ackermann described above incorporates the following definitions of “change in control,” “cause”
and “good reason” where “you” refers to the executive officer party to the letter agreement.
Defined Term |
Definition |
|
|
|
Cause |
1. |
The failure by you to use your best efforts to perform the material duties and responsibilities of your position or to comply with any material policy or directive Urologix has in effect from time to time. |
|
|
|
|
2. |
Any act on your part which is harmful to the reputation or business of Urologix, including, but not limited to, conduct which is inconsistent with federal or state law respecting harassment of, or discrimination against, any Urologix employee. |
Defined Term |
Definition |
|
|
|
|
3. |
A material breach of your fiduciary responsibilities to Urologix, such as embezzlement or misappropriation of Urologix funds or properties. |
|
|
|
|
4. |
Your indictment for, conviction of, or guilty plea or nolo contendere plea to a felony or any crime involving moral turpitude, fraud or misrepresentation. |
|
|
|
Change in
Control |
Change in Control of Urologix shall mean a change in control which would be required to be reported in response to Item 1 of Form 8-K promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not Urologix is then subject to such reporting requirement, including without limitation, if: |
|
|
|
|
(i) |
any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of Urologix representing 20% or more of the combined voting power of Urologix’ then outstanding securities; |
|
|
|
|
(ii) |
there ceases to be a majority of the Board of Directors comprised of (A) individuals who, on the date of this Letter Agreement, constituted the Board of Directors of Urologix; and (B) any new director who subsequently was elected or nominated for election by a majority of the directors who held such office prior to a Change in Control; or |
|
|
|
|
(iii) |
Urologix disposes of at least 75% of its assets, other than to an entity owned 50% or greater by Urologix or any of its subsidiaries. |
|
|
|
Good Reason |
Good Reason shall mean, without your express written consent, any of the following: |
|
|
|
|
(a) |
a material diminution of your authority, duties or responsibilities with respect to your position immediately prior to the Change in Control, or |
|
|
|
|
(b) |
a material reduction in your base compensation as in effect immediately prior to the Change in Control; |
|
|
|
|
(c) |
a material reduction in the authority of the person to whom you report (or a change in your reporting directly to the Board of Directors, if applicable); |
|
|
|
|
(d) |
a material change in the geographic location at which you must perform services for Urologix; and |
|
|
|
|
(e) |
any other action or inaction that constitutes a material violation of this Agreement by Urologix; |
|
|
|
|
provided that no such termination for Good Reason shall be effective unless: (i) you provide written notice to the Chair of the Board of Directors of the existence of a condition specified in paragraphs (a) through (e) above within 90 days of the initial existence of the condition; (ii) Urologix does not remedy such condition within 30 days of the date of such notice; and (iii) you terminate your employment within 90 days following the last day of the remedial period described above. |
Additionally, the 1991 and 2012 Plans
provide that upon a change of control, as defined in the plan, each outstanding stock option and each award of restricted
stock, including those held by the named executive officers, will become exercisable in full as to all of the shares covered
thereby without regard to any installment exercise or vesting provisions and all restrictions on the restricted stock will
lapse. For the purposes of the 1991 and 2012 Plans, “change of control” means any of the following:
| · | any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of Urologix representing 50% or more of the combined voting power of Urologix’ then outstanding securities and is required
to file a Schedule 13D under the Exchange Act; or |
| · | the Incumbent Directors cease for any reason to constitute at least a majority of the Board of Directors. The term “Incumbent
Directors” shall mean those individuals who are members of the Board of Directors on August 13, 1997 and any individual
who subsequently becomes a member of the Board of Directors whose election or nomination for election by Urologix’ shareholders
was approved by a vote of at least a majority of the then Incumbent Directors; or |
| · | all or substantially all of the assets of Urologix are sold, leased, exchanged or otherwise transferred
and immediately thereafter, there is no substantial continuity of ownership with respect to Urologix and the entity to which such
assets have been transferred. |
For awards granted under the 1991 and 2012
Plans, if a change in control (as defined in the plan) occurs, and if the agreements effectuating the change in control do not
provide for the assumption or substitution of all stock incentives granted under the 1991 and 2012 Plans, with respect to any
stock incentive granted under the 1991 and 2012 Plans that is not so assumed or substituted, stock incentives shall
immediately vest and be exercisable and any restrictions thereon shall lapse. For the purposes of the 1991 and 2012 Plans,
“change in control means a change in control which would be required to be reported in response to Item 5.01 of Form
8-K promulgated under the Exchange Act (or any successor item of Form 8-K), whether or not Urologix is then subject to such
reporting requirement, including without limitation, if:
| · | any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of Urologix representing 20%
or more of the combined voting power of its then outstanding securities (other than an entity owned 50% or greater by Urologix
or an employee pension plan for the benefit of Urologix employees); |
| · | there ceases to be a majority of the Board comprised of (i) individuals who, on the date of adoption of the 1991 and
2012 Plans,
constituted the Board; and (ii) any new director who subsequently was elected or nominated for election by a majority
of the directors who held such office prior to a Change in Control; or |
| · | Urologix disposes of at least 75% of its assets, other than (i) to an entity owned 50% or greater by Urologix or any of its
subsidiaries, or to an entity in which at least 50% of the voting equity securities are owned by the Urologix shareholders immediately
prior to the disposition in substantially the same percentage or (ii) as a result of a bankruptcy proceeding, dissolution or liquidation
of Urologix. |
Notwithstanding
the foregoing, unless the Compensation Committee determines at or prior to the change in control, no stock incentive that is subject
to any performance criteria for which the performance period has not expired, shall accelerate at the time of a change in control.
Equity Granting Process
Stock awards to our executive officers and senior
management are typically granted annually in conjunction with the review of the individual performance of our executive officers.
This review takes place at a regularly scheduled meeting of the Compensation Committee typically held in August. These regular
grants of stock options are approved in advance by the Compensation Committee. Stock options are also granted in connection with
the hiring of new employees, with the option grant effective as of the date of approval by the Compensation Committee. The new
hire grants are either approved in advance for award on the first day of employment or subsequent to the first day of employment.
The Compensation Committee’s policy is to grant all equity awards under shareholder approved equity compensation plans, such
as the 1991 and 2012 Plans.
Under the 2012 Plan, the Board may delegate to
our executive officers the authority to grant options to persons who are not our executive officers. In the 2014 fiscal year, the
Board of Directors did not exercise this delegation authority.
Our policy is that the exercise price of all
stock options is set at the closing price of our common stock as reported by the OTCQB Marketplace as of the date of grant, which
is the date of the action by the Compensation Committee or Board of Directors selecting an award recipient, determining the number
of shares to be awarded under the option, and establishing all other material terms of the stock option.
PROPOSAL
2:
ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
Provisions of the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) require public companies to hold advisory (non-binding)
votes on executive compensation. The advisory vote on executive compensation is commonly known as “say-on-pay”. The
Dodd-Frank Act say-on-pay requirements are first applicable to Urologix with this 2014 Annual Meeting. Accordingly, the Board of
Directors is asking shareholders to cast an advisory vote on named executive officer compensation as described in this proxy statement.
As described in detail in the section entitled
“Executive Compensation – Explanation of Compensation,” our executive compensation programs are designed to attract,
motivate, and retain our named executive officers. Under these programs, our named executive officers are rewarded for the achievement
of specific annual goals that we believe are critical to our success and are rewarded through equity only through the realization
of increased shareholder value. Shareholders are encouraged to read the Executive Compensation section of this proxy statement
for a more detailed discussion of our executive compensation programs, including information about the fiscal year 2014 compensation
of our named executive officers.
We are asking our shareholders to indicate their
support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay”
proposal, gives our shareholders the opportunity to express their views on our named executive officers’ compensation. This
vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers
and the philosophy, policies and practices described in this proxy statement.
Accordingly, we ask our shareholder to vote “FOR”
the following resolution at the Annual Meeting:
RESOLVED, that the shareholders of Urologix, Inc. approve, on
an advisory basis, the compensation of the named executive officers, as disclosed pursuant to the rules of the Securities and Exchange
Commission in Urologix’s proxy statement for the 2014 Annual Meeting of Shareholders.
Vote Required for Proposal 2
Approval of this Proposal 2 requires the affirmative
vote of the holders of the majority of the shares of common stock represented at this Annual Meeting and entitled to vote on this
Proposal 2. The advisory vote will not be binding on the Compensation Committee or the Board of Directors. However, they will carefully
consider the outcome of the vote and take into consideration concerns raised by shareholders when determining future compensation
arrangements. Proxies will be voted in favor of Proposal 2 unless otherwise indicated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR”
ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
_______________________________________
DIRECTOR COMPENSATION
Our non-employee directors received the following
cash amounts for Board and committee service in fiscal year 2014: $1,500 per Board meeting held in person, $750 per Board meeting
held telephonically, and $750 per committee meeting. In addition, each chair of a committee received an annual retainer of $5,000.
For fiscal year 2014, the non-executive Chairman, who was also the lead director, received an annual retainer of $20,000 for service
in these two roles. If the lead director had not been the non-executive Chairman, the lead director would have received an annual
retainer of $5,000. Each director is also reimbursed for expenses associated with attending Board of Directors and committee meetings.
Mitchell Dann was appointed as our lead director,
in addition to his position as Chairman of the Board, in August 2008 and served in those capacities also in fiscal year 2014. During
fiscal year 2014, Christopher R. Barys, Sidney W. Emery, Jr., and Patrick D. Spangler each chaired one of the three committees
of our Board.
Each of Messrs. Barys, Dann, Emery, and
Spangler received an award of restricted stock under the 2012 Plan with the number of shares of restricted stock equal to $22,500
divided by the closing price of our common stock on the date of the 2013 Annual Meeting, rounded up to the next whole share, subject
to a maximum of 50,000 shares per non-employee director. The restricted stock award was granted on the date of the 2013 Annual
Meeting and the restrictions on the restricted stock will lapse on the first business day immediately prior to the date of the
2014 Annual Meeting of Shareholders if the director is serving as a director as of such date.
The Compensation Committee recommended and the
Board of Directors approved on August 13, 2014 an award of restricted stock to each non-employee director serving as a member of
the Board immediately after this Annual Meeting, with the number of shares of restricted stock equal to $5,000 divided by the closing
price of our common stock on the date of the Annual Meeting, rounded up to the next whole share, subject to a maximum of 50,000
shares per non-employee director. The restricted stock award will be granted under the 2012 Plan on the date of the Annual Meeting.
The restrictions on the restricted stock will lapse on the first business day immediately prior to the date of the 2015 Annual
Meeting of Shareholders if the director is serving as a director as of such date.
The following table shows, for fiscal year 2014,
the cash and other compensation earned by each of the directors serving in fiscal year 2014. Mr. Fluet, who currently serves as
our Chief Executive Officer and a director, receives no compensation for Board service.
Name | |
Fees Earned
in Cash
($) (1) | | |
Stock Awards ($) (2) | | |
Option Awards ($) (3) | | |
Total ($) | |
Christopher R. Barys | |
$ | 19,250 | | |
$ | 10,000 | | |
| — | | |
$ | 29,250 | |
| |
| | | |
| | | |
| | | |
| | |
Mitchell Dann | |
| 31,250 | | |
| 10,000 | | |
| — | | |
| 41,250 | |
| |
| | | |
| | | |
| | | |
| | |
Sidney W. Emery, Jr. | |
| 19,250 | | |
| 10,000 | | |
| — | | |
| 29,250 | |
| |
| | | |
| | | |
| | | |
| | |
Patrick D. Spangler | |
| 20,000 | | |
| 10,000 | | |
| — | | |
| 30,000 | |
| (1) | Represents cash retainer and meeting fees earned in fiscal year 2014 as described above. |
| (2) | Each non-employee director was granted 50,000 shares of restricted stock on November 7, 2013. Values
expressed represent aggregate grant date fair value of restricted stock awards computed in accordance with FASB ASC Topic 718,
Compensation — Stock Compensation. The fair value of each stock award is estimated on the date of grant using the grant date
market value as discussed in Note 5, “Stock Options and Restricted Stock Awards,” in the notes to financial statements
included in our Annual Report on Form 10-K for the year ended June 30, 2014. |
| (3) | Values expressed represent aggregate grant date fair value of stock option awards computed in accordance
with FASB ASC Topic 718, Compensation — Stock Compensation. The fair value of each stock option award is estimated on the
date of grant using the Black-Scholes option valuation model using the assumptions discussed in Note 5, “Stock Options and
Restricted Stock Awards,” in the notes to financial statements included in our Annual Report on Form 10-K for the year ended
June 30, 2014. |
| | The aggregate number of stock options outstanding at June 30, 2014 held by directors was: Mr. Barys,
30,000 shares; Mr. Dann, 70,000 shares; Mr. Emery, 80,000 shares; Mr. Spangler, 30,000 shares; and Mr. Fluet, 226,872 shares. |
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Since the beginning of fiscal year 2014, we have
not entered into any transaction and there are no currently proposed transactions, in which we were or are to be a participant
and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest.
The charter of our Audit Committee provides that
the Audit Committee is responsible for reviewing and approving the terms and conditions of all of transactions we enter into in
which an officer, director or 5% or greater shareholder or any affiliate of these persons has a direct of indirect material interest.
Our Code of Ethics and Business Conduct, which is applicable to all of our employees and directors, also prohibits our employees,
including our executive officers, and our directors from engaging in conflict of interest transactions. Requests for waivers or
requests for consents by our executive officers and directors under our Code of Ethics and Business Conduct must be made to the
Audit Committee.
We have adopted a related person transaction
approval policy describing policies and procedures for the review, approval or ratification of any transaction required to be reported
in our filings with the Securities and Exchange Commission. Our policy applies to any financial transaction, arrangement or relationship
or any series of similar transactions, arrangements or relationships in which our company is a participant and in which a related
person has a direct or indirect interest. Through the policy, the Audit Committee has also identified and pre-approved certain
transactions with related persons, including:
| · | executive officer or director compensation required to be reported
in our proxy statement, |
| · | payment of ordinary expenses and business reimbursements; |
| · | transactions with another company if the related party’s only
relationship is as a non-executive employee, a director or a beneficial owner of less than 10% of that other company’s shares
and if which the dollar amount does not exceed the greater of $100,000 or 2% of the other company’s total revenues; |
| · | charitable contributions in which the dollar amount does not exceed
the lesser of $10,000 or 2% of the charitable organization’s receipts; |
| · | payments made under our articles of incorporation, bylaws, insurance
policies or agreements relating to indemnification; |
| · | transactions in which our shareholders receive proportional benefits;
and |
| · | transactions that involve competitive bid, banking transactions
and transactions where the terms of which are regulated by law or governmental authority. |
The Audit Committee must approve any related
person transaction subject to the policy before commencement of the related party transaction. If pre-approval is not feasible,
the Audit Committee may ratify, amend or terminate the related person transaction. The Audit Committee will analyze
the following factors, in addition to any other factors the Committee deems appropriate, in determining whether to approve a related
party transaction:
| · | whether the terms are fair to us; |
| · | whether the terms of the related party transaction are no less favorable
than terms generally available to an unaffiliated third-party under the same or similar circumstances; |
| · | whether the related party transaction is material to us; |
| · | the role the related party has played in arranging the transaction; |
| · | the structure of the related party transaction; |
| · | the interests of all related parties in the transaction; |
| · | the extent of the related party’s interest in the transaction;
and |
| · | whether the transaction would require a waiver of our Code of Ethics
and Business Conduct. |
The Audit Committee may, in its sole discretion,
approve or deny any related person transaction. Approval of a related person transaction may be conditioned upon our company and
the related person taking such precautionary actions, as the Audit Committees deems appropriate.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act
of 1934 requires our directors and executive officers, and persons who own 10% or more of a registered class of our equity securities,
to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common
stock and our other equity securities. These insiders are required by Securities and Exchange Commission regulations to furnish
us with copies of all Section 16(a) forms they file, including Forms 3, 4 and 5. To our knowledge, our directors, officers and
owners of 10% or more of our common stock timely filed all required Section 16(a) reports during the fiscal year ended June 30,
2014.
PROPOSAL
3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee has selected Baker
Tilly Virchow Krause LLP as our independent registered public accounting firm to audit our financial statements for the fiscal
year ending June 30, 2015, and to perform other appropriate audit-related services. While the Audit Committee retains the sole
authority to retain, compensate, oversee and terminate the independent registered public accounting firm, the Audit Committee is
submitting the selection of Baker Tilly Virchow Krause LLP for ratification. In the event the appointment of Baker Tilly Virchow
Krause LLP is not ratified by the shareholders, the Audit Committee will reconsider the selection.
The affirmative vote of the holders of a majority
of the shares of common stock represented at this Annual Meeting and entitled to vote is required to approve the ratification of
the appointment of the independent registered public accounting firm, provided that the total number of shares that vote on the
proposal represent a majority of our shares outstanding on the record date. Proxies will be voted in favor of this proposal unless
otherwise indicated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE RATIFICATION OF THE APPOINTMENT OF BAKER TILLY VIRCHOW KRAUSE LLP
_______________________________________
RELATIONSHIP
WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Baker Tilly
Virchow Krause LLP to serve as our independent registered public accounting firm for the year ending June 30, 2015. Baker Tilly
Virchow Krause LLP served as the Company’s independent registered public accounting firm for the year ended June 30, 2014.
On February 28, 2013, the Company engaged Baker
Tilly Virchow Krause LLP, independent certified public accountants, to serve as our independent registered public accounting firm
for the remainder of the fiscal year ended June 30, 2013. Also on February 28, 2013, the Company dismissed KPMG LLP, independent
certified public accountants, as the Company’s independent registered public accounting firm. Both the engagement of Baker
Tilly Virchow Krause LLP and dismissal of KPMG LLP were approved by the Audit Committee, which has sole authority and responsibility
with respect to the selection, engagement and dismissal of the Company’s independent registered public accounting firm.
Representatives of Baker Tilly Virchow Krause
LLP are expected to be present at the Annual Meeting of Shareholders and will have the opportunity to make a statement if they
desire to do so. In addition, representatives will be available to respond to appropriate questions.
Accountant
Fees and Services
The following is
an explanation of the fees billed to us by Baker Tilly Virchow Krause LLP (“BTVK”) and KPMG LLP (“KPMG”)
for professional services rendered for the fiscal years ended June 30, 2014 and June 30, 2013. KPMG rendered no services to the
Company during fiscal year 2014. For the fiscal year ended June 30, 2014, total fees billed to us by BTVK were approximately $123,500.
For the fiscal year ended June 30, 2013, total fees billed to us were an aggregate of $148,500, consisting of $60,000 by BTVK and
$88,500 by KPMG.
Audit Fees. The aggregate fees billed
to us by BTVK for professional services related to the audit of our annual financial statements, review of financial statements
included in our quarterly reports on Forms 10-Q, or other services normally provided by our auditor in connection with statutory
and regulatory filings or engagements for the fiscal year ended June 30, 2014 totaled approximately $123,500. The aggregate fees
billed to us for professional services related to the audit of our annual financial statements, review of financial statements
included in our quarterly reports on Forms 10-Q, or other services normally provided by our auditor in connection with statutory
and regulatory filings or engagements for the fiscal year ended June 30, 2013 totaled an aggregate of $111,000, consisting of $60,000
by BTVK and $51,000 by KPMG
Audit-Related Fees. There were no
aggregate fees billed to us for professional services for assurance and related services by our auditors that were reasonably related
to the performance of the audit or review of our financial statements and were not reported above under “Audit Fees”
for the fiscal year ended June 30, 2014 or 2013 by either BTVK or KPMG.
Tax Fees. There were no aggregate
fees billed to us by BTVK for professional services related to tax compliance, tax advice, and tax planning for the fiscal year
ended June 30, 2014. The aggregate fees billed to us for professional services related to tax compliance, tax advice, and tax planning
for the fiscal year ended June 30, 2013 totaled an aggregate of $37,500, all of which were provided by KPMG
All Other Fees. For the fiscal year
ended June 30, 2014 or 2013 there were no fees for such professional services or products.
Audit Committee Pre-Approval Procedures
We have adopted pre-approval policies and procedures
for the Audit Committee that require the Audit Committee to pre-approve all audit and all permitted non-audit engagements and services
(including the fees and terms thereof) by the independent auditors, except that the Audit Committee may delegate the authority
to pre-approve any engagement or service less than $10,000 to the Chair of the Audit Committee, but requires that the Chair report
such pre-approval at the next full Audit Committee meeting. The Audit Committee may not delegate its pre-approval authority for
any services rendered by our independent auditors relating to internal controls. These pre-approval policies and procedures prohibit
delegation of the Audit Committee’s responsibilities to our management. Under the policies and procedures, the Audit Committee
may pre-approve specifically described categories of services which are expected to be conducted over the subsequent twelve months
on its own volition, or upon application by management or the independent auditor.
All of the services described above for fiscal
year 2014 were pre-approved by the Audit Committee or a member of the committee before Baker Tilly Virchow Krause LLP was engaged
to render the services.
SHAREHOLDER
PROPOSALS AND SHAREHOLDER NOMINEES
FOR 2015 ANNUAL MEETING
The proxy rules of the Securities and Exchange
Commission permit shareholders of a company, after timely notice to the company, to present proposals for shareholder action in
the company’s proxy statement where such proposals are consistent with applicable law, pertain to matters appropriate for
shareholder action and are not properly omitted by company action in accordance with the proxy rules. The Urologix, Inc. 2015 Annual
Meeting of Shareholders is expected to be held on or about November 12, 2015, and proxy materials in connection with that
meeting are expected to be mailed on or about October 1, 2015. Shareholder proposals prepared in accordance with the proxy
rules must be received by us on or before June 1, 2015.
Pursuant to our bylaws, in order for any other
proposal to be properly brought before the next annual meeting by a shareholder, including a nominee for director to be considered
at the next annual meeting, the shareholder must give written notice of such shareholder’s intent to bring a matter before
the annual meeting, or nominate the director, in a timely manner.
To be timely under our bylaws, the notice must
be given by such shareholder to the Secretary of Urologix not less than 60 days nor more than 90 days prior to a meeting date corresponding
to the previous year’s annual meeting. Each such notice must set forth certain information with respect to the shareholder
who intends to bring such matter before the meeting and the business desired to be conducted, as set forth in greater detail above
under “Corporate Governance – Director Nominations” and in our bylaws. Shareholders are advised to review our
bylaws carefully regarding the requirements for proposals and director nominations. Notwithstanding the foregoing, the advance
notice provisions of our bylaws do not apply to shareholder proposals made pursuant to, and in accordance with, Rule 14a-8
as may be in effect from time to time.
In addition, if we receive notice of a shareholder
proposal less than 45 days before the date on which we first mailed our materials for the prior year’s annual meeting, such
proposal also will be considered untimely pursuant to Rules 14a-4 and 14a-5(e) and the persons named in proxies solicited by the
Board of Directors for this 2014 Annual Meeting of Shareholders may exercise discretionary voting power with respect to such proposal.
ANNUAL
REPORT
An Annual Report of Urologix, Inc. setting forth
our activities and containing our financial statements for the fiscal year ended June 30, 2014 accompanies this notice of annual
meeting and proxy statement.
Shareholders may receive, without charge, a copy
of our Annual Report on Form 10-K for the fiscal year ended June 30, 2014, including financial statements schedules and amendments
thereto, as filed with the Securities and Exchange Commission, by writing to: Urologix, Inc., 14405 21st Avenue North, Minneapolis,
Minnesota 55447, Attention: Secretary, or by calling us at (763) 475-1400.
OTHER
BUSINESS
The Board of Directors does not intend to bring
other matters before the meeting except items incident to the conduct of the meeting, and the Company has not received timely notice
from any shareholder of an intent to present any other proposal at the meeting. On any matter properly brought before the meeting
by the Board or by others, the persons named as proxies in the accompanying proxy, or their substitutes, will vote in accordance
with their best judgment.
|
Shareowner Services
P.O. Box 64945
St. Paul, MN 55164-0945 |
|
TO VOTE BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS
ON ALL ITEMS BELOW,
SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD.
Please detach here
The Board of Directors Recommends a Vote FOR Items 1,
2 and 3.
1. |
Election of directors:
01 Sidney W. Emery, Jr.
02 Patrick D. Spangler |
o |
Vote FOR all nominees
(except as marked) |
|
o |
Vote WITHHELD
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. |
Advisory vote to approve named executive officer compensation. |
|
o |
For |
o |
Against |
o |
Abstain |
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|
|
|
|
|
|
|
|
3. |
Ratification of the appointment of Baker Tilly Virchow Krause LLP as the independent registered public accounting firm for Urologix, Inc. for the fiscal year ending June 30, 2015. |
|
o |
For |
o |
Against |
o |
Abstain |
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED FOR THE NOMINEES, AND FOR
EACH OTHER PROPOSAL. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION WITH RESPECT TO OTHER MATTERS THAT MAY PROPERLY COME
BEFORE THE MEETING.
Address Change? Mark box,
sign, and indicate changes below: o |
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|
Date |
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Signature(s) in Box
Please sign exactly as your name(s) appears 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. |
UROLOGIX, INC.
ANNUAL MEETING OF SHAREHOLDERS
Thursday, November 6, 2014
4:00 p.m.
Sheraton Minneapolis West
12201 Ridgedale Drive
Minnetonka, MN 55304
|
Urologix, Inc.
14405 Twenty-First Avenue North
Minneapolis, Minnesota 55447 |
proxy |
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
The undersigned hereby appoints Gregory J. Fluet
and Mitchell Dann, or any of them, with power of substitution to each, as proxies, and hereby authorizes them to represent the
undersigned at the Annual Meeting of Shareholders of Urologix, Inc. to be held at the Sheraton Minneapolis West, 12201 Ridgedale
Drive, Minnetonka, MN 55305 on Thursday, November 6, 2014 at 4:00 p.m. local time, and at any adjournment(s) or postponement(s)
thereof, and to vote, as designated below, all shares of Common Stock of Urologix, Inc. held of record by the undersigned on September
18, 2014 and which the undersigned would be entitled to vote at such Annual Meeting, hereby revoking all former proxies.
See reverse for voting instructions.
Urologix (CE) (USOTC:ULGX)
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