SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant : |X|
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or 14a-12
AngioDynamics, Inc.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
|X| No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
ANGIODYNAMICS, INC.
603 Queensbury Avenue
Queensbury, New York 12804
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
I am pleased to give you notice that the 2005 Annual Meeting of
Stockholders of AngioDynamics, Inc. will be held at the Hilton New York, New
York, New York, on Tuesday, October 11, 2005 at 9:00 a.m., local time. At the
annual meeting you will be asked to:
1. Elect three Class II directors of the Company, each for a term of
three years;
2. Ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent registered public accounting firm for the
fiscal year ending June 3, 2006; and
3. Transact such other business as may properly come before the
meeting.
The board of directors has fixed the close of business on August 29, 2005
as the record date for the annual meeting. Only stockholders of record of the
Company's common stock on the Company's stock transfer books on the close of
business on that date are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
/s/ Gregory J. Champion
Gregory J. Champion, Secretary
Queensbury, New York
Dated: September 8, 2005
Whether or not you expect to be present at the meeting, you are urged to
fill in, date, sign and return the enclosed proxy card in the envelope that is
provided, which requires no postage if mailed in the United States.
If you wish to attend the annual meeting, please check the appropriate box
on the enclosed proxy card and return it in the enclosed envelope.
The annual meeting for which this notice is given may be adjourned from
time to time without further notice other than announcement at the meeting or
any adjournment thereof. Any business for which notice is hereby given may be
transacted at any such adjourned meeting.
TABLE OF CONTENTS
PAGE
----
PROXY STATEMENT ............................................................................. 1
Introduction ........................................................................ 1
Date, Time and Place ................................................................ 1
Proposals to be Considered .......................................................... 1
Record Date; Voting Securities ...................................................... 2
Votes Required ...................................................................... 2
Voting of Proxies ................................................................... 2
Revocability of Proxies ............................................................. 3
Solicitation of Proxies ............................................................. 3
PROPOSAL 1 - ELECTION OF DIRECTORS .......................................................... 4
Nominees ............................................................................ 4
Recommendation of the Board of Directors ............................................ 5
Other Directors ..................................................................... 5
Corporate Governance, Board Independence and Committees of the Board ................ 6
Compensation of Directors ........................................................... 10
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM .............................................................. 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .............................. 14
EXECUTIVE COMPENSATION ...................................................................... 16
Summary Compensation Table .......................................................... 16
Option/SAR Grants Table ............................................................. 17
Aggregated Option Exercises and Fiscal Year-End Option Value Table .................. 17
Employment Contracts and Termination of Employment and
Change in Control Arrangements .............................................. 18
Report on Repricing of Options / SARs ............................................... 18
Compensation Committee Interlocks and Insider Participation in Compensation Decisions 18
Compensation Committee Report on Executive Compensation ............................. 18
COMMON STOCK PERFORMANCE GRAPH .............................................................. 22
AUDIT MATTERS ............................................................................... 23
Audit Committee Report .............................................................. 23
Principal Accountant Fees and Services .............................................. 24
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Registered Public Accounting Firm ............................... 25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .............................................. 27
Relationship and Arrangements with E Z EM ........................................... 27
Other Related Party Transactions .................................................... 30
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE ..................................... 31
ANNUAL REPORT ............................................................................... 31
STOCKHOLDER PROPOSALS AND NOMINATIONS ....................................................... 32
OTHER MATTERS ............................................................................... 32
ANGIODYNAMICS, INC.
603 Queensbury Avenue
Queensbury, New York 12804
-----------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
October 11, 2005
-----------------------
Introduction
This proxy statement is being furnished to the stockholders of
AngioDynamics, Inc., a Delaware corporation (the "Company"), by the board of
directors of the Company in connection with the solicitation of proxies for use
at the 2005 Annual Meeting of Stockholders of the Company to be held at the
Hilton New York, New York, New York, on Tuesday, October 11, 2005 at 9:00 a.m.,
local time, or at any adjournment or postponement thereof.
The principal executive offices of the Company are located at 603
Queensbury Avenue, Queensbury, New York 12804. The approximate date on which
this proxy statement and the accompanying proxy are first being sent or given to
stockholders is September 8, 2005.
Date, Time and Place
This proxy statement is being furnished to you in connection with the
solicitation of proxies by the board of directors of AngioDynamics, Inc. from
holders of AngioDynamics' common stock for use at the annual meeting of
stockholders to be held at the Hilton New York, New York, New York, on Tuesday,
October 11, 2005 at 9:00 a.m., local time, and at any adjournments or
postponements of the annual meeting.
Proposals to be Considered
At the annual meeting, we will ask holders of our common stock to consider
and vote upon the following items:
Election of Directors
The election of three of the Company's nine directors, namely Gregory D.
Casciaro, Howard W. Donnelly and Robert E. Flaherty. If elected, these Class II
directors will each serve until the 2008 annual meeting of stockholders and
their respective successors are duly elected and qualified.
Ratification of Appointment of Independent Registered Public Accounting Firm
Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent registered public accounting firm for the fiscal year
ending June 3, 2006.
Record Date; Voting Securities
Stockholders of record at the close of business on August 29, 2005, the
record date for the annual meeting, are entitled to receive this proxy statement
and to vote at the meeting and at any adjournment or postponement thereof. As of
the close of business on the record date there were 12,214,042 outstanding
shares of the Company's common stock entitled to notice of and to vote at the
annual meeting. Holders of our common stock have one vote per share on each
matter to be acted upon. A list of the stockholders of record entitled to vote
at the annual meeting will be available at the annual meeting and for 10 days
prior to the annual meeting, for any purpose germane to the meeting, between the
hours of 9:00 a.m. and 4:30 p.m. at our principal executive offices at 603
Queensbury Avenue, Queensbury, New York 12804, by contacting the Secretary of
the Company.
A majority of the outstanding shares of common stock present in person or
by proxy is required to constitute a quorum at the meeting. For purposes of
determining the presence of a quorum for transacting business at the annual
meeting, abstentions and broker "non-votes" (proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as shares that are present.
Votes Required
Election of Directors
The directors nominated for election will be elected by a plurality of the
votes cast, in person or by proxy, at the annual meeting. Abstentions from
voting and broker "non-votes" on the election of directors will have no effect
since they will not represent votes cast at the annual meeting for the purpose
of electing directors.
Ratification of the Appointment of Independent Registered Public Accounting Firm
The proposal to ratify the appointment of PricewaterhouseCoopers LLP as
the Company's independent registered public accounting firm for the fiscal year
ending June 3, 2006 must be approved by the affirmative vote of a majority of
the votes cast at the annual meeting. For the purposes of this vote, a vote to
abstain will have the same effect as a vote against the proposal and a broker
non-vote will have no effect on the vote on such proposal.
Voting of Proxies
Shares of our common stock will be voted in accordance with the
instructions contained in the proxies. If you return a signed proxy card without
indicating your vote, your shares will be voted:
o FOR the election as directors of the persons who have been nominated
by the board of directors;
o FOR the ratification of the appointment of PricewaterhouseCoopers
LLP as the Company's independent registered public accounting firm
for the fiscal year ending June 3, 2006; and
2
o with respect to any other matter that may properly be brought before
the annual meeting in accordance with the judgment of the person or
persons voting. We do not expect that any matter other than as
described in this proxy statement will be brought before the annual
meeting.
Revocability of Proxies
The grant of a proxy on the enclosed proxy card does not preclude a
stockholder from voting in person. You may revoke a proxy at any time prior to
your proxy being voted at the annual meeting by:
o delivering to the Secretary of the Company, prior to the annual
meeting, a written notice of revocation bearing a later date or time
than the proxy;
o timely delivery of a valid, later dated proxy; or
o attending the annual meeting and voting in person.
Attendance at the annual meeting will not by itself constitute revocation
of a proxy. If an adjournment occurs, it will have no effect on the ability of
stockholders of record as of the record date to exercise their voting rights or
to revoke any previously delivered proxies. We do not expect to adjourn the
annual meeting for a period of time long enough to require the setting of a new
record date for such meeting.
Solicitation of Proxies
The cost of solicitation of proxies being solicited on behalf of the board
of directors will be borne by us. In addition to the use of the mail, proxy
solicitation may be made by telephone, facsimile and personal interview by our
officers, directors and employees. We will, upon request, reimburse brokerage
houses and persons holding common stock in the names of their nominees for their
reasonable expenses in sending soliciting material to their principals.
Stockholders should not send stock certificates with their proxy cards.
3
PROPOSAL 1 -
ELECTION OF DIRECTORS
Nominees
Our board of directors currently consists of nine directors. The board is
classified into three classes, each of which has a staggered three-year term. At
the annual meeting, the stockholders will elect three Class II directors. If
elected, Gregory D. Casciaro, Howard W. Donnelly and Robert E. Flaherty will
hold office until the annual meeting of stockholders to be held in 2008 and
until their successors are duly elected and qualified. The Class I directors and
Class III directors will continue in office during the terms indicated below.
Unless otherwise specified, all proxies received will be voted in favor of the
election of the nominees named below as directors of the Company. Directors will
be elected by a plurality of the votes cast, in person or by proxy, at the
annual meeting.
The term of each of the current Class II directors expires at the annual
meeting when his respective successor is duly elected and qualified. Management
has no reason to believe that any of the nominees will be unable or unwilling to
serve as a director, if elected. Should any of the nominees not remain a
candidate for election at the date of the annual meeting, proxies will be voted
in favor of the nominees who remain candidates and may be voted for substitute
nominees selected by the board of directors. Set forth below is biographical
information for each nominee and for each director whose term of office will
continue after the annual meeting.
Nominees to serve as Class II Directors for a Term Expiring at the 2008 Annual
Meeting:
Gregory D. Casciaro, age 48, joined our board of directors in April 2004.
Since September 2004, Mr. Casciaro has been President, Chief Executive Officer
and a director of XTENT, Inc, a developer of stent for delivering multiple drug
eluting stents of customizable length with a single catheter. From 2000 to 2004,
he was President, Chief Executive Officer and a director of Orquest, Inc., a
developer and manufacturer of devices used for orthopedic procedures that was
acquired by Johnson & Johnson. From 1995 to 2000, he was employed by General
Surgical Innovations, Inc., a videoscopic surgical equipments manufacturer that
was acquired by United States Surgical, a division of Tyco Healthcare Group LP,
in 1999. Mr. Casciaro's last position with General Surgical Innovations was as a
director and its President and Chief Executive Officer from 1998 to 2000. Mr.
Casciaro was employed by the Devices for Vascular Innovations division of
Guidant Corporation from 1991 to 1995, having last served as the Vice President
of Sales from 1994 to 1995. Prior to joining Guidant, he was employed by NAMIC,
from 1983 to 1991, with his last position being Area Sales Manager. Mr. Casciaro
began his career with Procter and Gamble Company in 1978. He is currently a
director of Apneon, Inc. and Kerberos Proximal Solutions.
Howard W. Donnelly, age 44, joined our board of directors in March 2004.
Mr. Donnelly is currently a principal in three privately-held start-up medical
device companies that are targeting the hemodialysis, regional anesthetic and
general anesthesia markets, respectively. Mr. Donnelly is also a principal of
Concert Medical, a privately held contract manufacturer for the medical device
industry. From 1999 to 2002, he was President of Level 1, Inc., a medical device
manufacturer and a subsidiary of Smiths Group. From 1990 to 1999, Mr. Donnelly
was employed at Pfizer, Inc., with his last position being Vice President,
Business Planning and Development, for Pfizer's Medical Technology Group from
1997 to 1999. Mr. Donnelly is currently a director of Vital Signs, Inc., a
medical device manufacturer for the anesthesia, critical care and sleep disorder
markets.
Robert E. Flaherty, age 59, joined our board of directors in April 2004.
Since 1992, Mr. Flaherty has served as Chairman, President and Chief Executive
Officer of Athena Diagnostics, Inc., a commercial
4
laboratory specializing in developing diagnostic testing services focused on
neurological disorders. From 1992 to 1995, Mr. Flaherty served as President and
Chief Executive Officer of Genica Pharmaceuticals, which was acquired by Athena
Neurosciences, Inc., and renamed Athena Diagnostics in 1995. Athena
Neurosciences subsequently was acquired by Elan Corporation plc in 1996. In 2002
Athena Diagnostics, Inc., became a privately held company following a leveraged
buy-out. From 1976 to 1992, Mr. Flaherty was employed by Becton, Dickinson &
Company, a medical technology company, with his last position from 1984 to 1992
being President of that company's largest operating unit, the Becton Dickinson
Division. Before that, he was employed by C.R. Bard, Inc. in various sales and
marketing positions in its surgical and cardiovascular units in the United
States and abroad. Mr. Flaherty began his career with Procter and Gamble Company
in 1968 in manufacturing management. He holds a Bachelor of Science with honors
in Industrial Engineering from Lehigh University and a Master in Business
Administration from the Harvard Business School. Mr. Flaherty is currently a
director of Repromedix, Inc.
Recommendation of the Board of Directors
The board of directors recommends a vote FOR the election of each of the
nominees.
Other Directors
The following Class I and Class III directors will continue on the board
of directors for the terms indicated:
Class I Directors (Term Expiring at the 2007 Annual Meeting):
Jeffrey Gold, age 57, has served as a director since 1997. Mr. Gold has
been a consultant to Boston Scientific Corporation since its acquisition of
CryoVascular Systems Inc. in April 2005. Mr. Gold was President and CEO of
CryoVascular Systems, a peripheral vascular disease device company, from 2001
until its acquisition by Boston Scientific. From 1997 to 2001, he was Executive
Vice President and Chief Operating Officer of Cardio Thoracic Systems, Inc., a
company engaged in the development and introduction of devices for beating-heart
coronary bypass surgery. Before that, he spent 18 years with Cordis Corporation
in a variety of senior management roles including Vice President of
Manufacturing and Vice President of Research and Development, and was a
co-founder and President of Cordis Endovascular Systems, a Cordis subsidiary
engaged in the interventional neuroradiology business. At Cordis, Mr. Gold also
had responsibility for its peripheral vascular business. He serves on the board
of directors of several start-up medical device companies and is a Special
Network Advisor to Sapient Capital Management. Mr. Gold holds a B.S. in
Industrial Engineering from Northeastern University and an MBA from the
University of Florida.
Paul S. Echenberg, age 61, has been a director since 1996 and Chairman of
our board of directors since February 2004. He has been a director of E-Z-EM,
Inc., our former parent company, since 1987, Chairman of the Board of E-Z-EM
since January 2005, and Chairman of the Board of E-Z-EM Canada, an E-Z-EM
subsidiary, since 1994. He has been the President, Chief Executive Officer and a
director of Schroders & Associates Canada Inc., an investment buy-out advisory
services company, and a director of Schroders Ventures Ltd., an investment firm,
since 1996. He is also a founder and has been a general partner and director of
Eckvest Equity Inc., a personal investment and consulting services company since
1989. From 1970 to 1989, he was President and Chief Executive Officer of Twinpak
Inc. and Executive Vice President of CB Pak Inc., both packaging companies. He
also co-founded BDE & Partners, a provider of investment banking and strategic
advisory services, in 1991. He is a director of Lallemand Inc., Benvest Newlook
Income Trust, ITI Medical, Flexia Corp., Fib-Pak Industries Inc., Med-Eng
Systems Inc., MacroChem Corp., MatraPack Industries Inc. and A.P. Plasman Corp.
5
Dennis S. Meteny, age 52, joined our board of directors in March 2004.
Since 2003, Mr. Meteny has been an Executive-in-Residence at the Pittsburgh Life
Sciences Greenhouse, a strategic economic development initiative of the
University of Pittsburgh Health System, Carnegie Mellon University, the
University of Pittsburgh, the State of Pennsylvania and local foundations. From
2001 to 2003, he served as President and Chief Operating Officer of
TissueInformatics, Inc., a privately-held company engaged in the medical imaging
business. From 2000 to 2001, Mr. Meteny was a business consultant to various
technology companies. Prior to that, Mr. Meteny spent 15 years in several
executive-level positions, including as President and Chief Executive Officer,
from 1994 to 1999, with Respironics, Inc. a cardio-pulmonary medical device
company. Mr. Meteny began his career in 1975 with Ernst & Young LLP.
Class III Directors (Term Expiring at the 2006 Annual Meeting):
Eamonn P. Hobbs, age 47, is one of our co-founders. He has been our
President and Chief Executive Officer since June 1996 and a director since our
inception. From 1991 until September 2002, Mr. Hobbs was a Vice President, and
from October 2002 to May 2004 was a Senior Vice-President, of E-Z-EM, with
operational responsibility for our company. He was first employed by E-Z-EM from
1985 to 1986 and was continuously employed by E-Z-EM from 1988 to May 2004. From
1986 to 1988, Mr. Hobbs was Director of Marketing for the North American
Instrument Corporation (NAMIC), a medical device company later acquired by
Boston Scientific. Mr. Hobbs started his career at Cook, Incorporated, a leading
manufacturer of interventional radiology, interventional cardiology and
gastroenterology medical devices. Mr. Hobbs has over 23 years experience in the
interventional radiology, interventional cardiology and gastroenterology medical
device industries. He is a bio-medical engineer, having completed a Bachelor of
Sciences in Plastics Engineering with a Biomaterials emphasis at University of
Lowell in 1980.
David P. Meyers, age 41, has served as a director, and as a director of
E-Z-EM, since 1996. He is a founder of Alpha Cord, Inc., which provides
cryopreservation of umbilical cord blood, and has served as its President since
2002. Previously, he founded MedTest Express, Inc., a provider of contracted
laboratory services for home health agencies, and served as its President, Chief
Executive Officer and a director from 1994 to September 2002.
Howard S. Stern, age 74, has served as a director since our inception and
as Chairman of our board of directors from our inception until February, 2004.
He is a co-founder of E-Z-EM and has been a director of E-Z-EM since its
organization in 1962 and was E-Z-EM's Chairman from 1962 through the end of
2004, when he was appointed Chairman Emeritus. Mr. Stern also served as
President and Chief Executive Officer of E-Z-EM from 1997 to 2000. From 1962 to
1994, Mr. Stern served as E-Z-EM's Chief Executive Officer and from 1962 until
1990 he served as E-Z-EM's President. Mr. Stern is also a director of ITI
Medical, in which E-Z-EM has an investment. Mr. Stern holds a Bachelor of
Science in Business and Engineering Administration and a Master of Science in
Chemical Engineering, both from the Massachusetts Institute of Technology.
Corporate Governance, Board Independence and Committees of the Board
Corporate Governance Principles
Our board of directors has adopted a written set of corporate governance
principles for our company. You may view these principles at our website at
www.angiodynamics.com(1) under the "Corporate Governance Highlights" caption.
Our corporate governance principles have been established
- ---------------------
(1) This website address is not intended to function as a hyperlink, and
information on our website is not a part of the proxy soliciting material.
6
to assist the board of directors in overseeing the management of our company and
in achieving the board's goals of building long-term value for our stockholders
and assuring the vitality of our company for our customers, employees and other
stakeholders.
Board Independence
Under our corporate governance principles, our board of directors must be
composed of a majority of directors who qualify as independent under the listing
standards of the Nasdaq Stock Market ("Nasdaq"). Under the Nasdaq listing
standards, an "independent director" is a director who is not an officer or
employee of AngioDynamics or any subsidiary and who does not have any
relationship that the board of directors believes would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director. Under our corporate governance principles, the board will review the
relationships that each director has with our company on an annual basis, and
only those directors having no direct or indirect material relationship with our
company and who qualify as independent under the Nasdaq listing standards will
be considered independent directors of AngioDynamics.
Our board of directors has determined that six of our nine
directors--Messrs. Gold, Donnelly, Meteny, Flaherty, Echenberg and Casciaro--are
independent under the Nasdaq listing standards.
Committees of the Board
The board of directors has three standing committees, the members of which
have been elected by the board: the audit committee, the nominating and
corporate governance committee, and the compensation committee. Each committee
is composed entirely of independent directors, and the chairman and members of
each committee are appointed annually by the board. Each committee is authorized
to retain its own outside counsel and other advisors as it desires, subject to,
for the nominating and corporate governance committee and the compensation
committee, a $100,000 limitation on fees and expenses for such counsel and
advisors without the full board's prior consent.
Each committee has adopted a written charter, and a brief summary of each
committee's responsibilities follows:
Audit Committee and Audit Committee Financial Expert. The audit committee
assists the board of directors in its oversight of (i) the integrity of the
Company's financial statements, financial reporting process, system of internal
controls over financial reporting, and audit process, (ii) the Company's
compliance with, and process for, monitoring compliance with, legal and
regulatory requirements, (iii) the independent registered public accounting
firm's qualification and independence, and (iv) the performance of the Company's
internal audit function and that of its independent registered public accounting
firm. The audit committee also provides an open avenue of communication between
the independent registered public accounting firm and the board. The authority
and responsibilities of the audit committee are set forth in detail in its
charter, which is attached to this proxy statement as Appendix A and is also
available on our website located at www.angiodynamics.com under the "Corporate
Governance Highlights - Committee Charters - Audit Committee" caption.
The members of the audit committee are Howard W. Donnelly, Robert E.
Flaherty and Dennis S. Meteny, each of whom has been determined by our board to
be independent under the Nasdaq listing standards. Our board has also determined
that each member of the audit committee is financially literate in accordance
with the Nasdaq listing standards. Additionally, the board has determined that
Mr. Meteny is an "audit committee financial expert" as defined under SEC rules.
The audit committee met nine (9) times during the 2005 fiscal year.
7
Compensation Committee. The compensation committee is responsible for (i)
developing and evaluating potential candidates for executive positions, (ii)
reviewing and recommending to the board the corporate goals and objectives with
respect to the CEO's compensation on an annual basis, (iii) reviewing the CEO's
performance annually in light of the committee's established goals and
objectives, (iv) reviewing and approving the evaluation process and compensation
structure for the Company's officers annually and overseeing management's
decisions concerning the performance and compensation of the Company's officers
and (v) reviewing and administering the Company's incentive compensation and
other stock-based plans and recommending changes in such plans to the board, as
needed. The authority and responsibilities of the compensation committee are set
forth in detail in its charter, which is available on our website located at
www.angiodynamics.com under the "Corporate Governance Highlights--Committee
Charters--Compensation Committee" caption.
The members of the compensation committee are Gregory D. Casciaro, Robert
E. Flaherty and Jeffrey G. Gold, each of whom has been determined by our board
of directors to be independent under the Nasdaq listing standards. The
compensation committee met fourteen (14) times during fiscal 2005.
Nominating and Corporate Governance Committee. The nominating and
corporate governance committee is responsible for (i) assisting the board in
identifying individuals qualified to serve as directors of the Company and on
committees of the board, (ii) advising the board with respect to the board
composition, procedures and committees, (iii) developing and recommending to the
board a set of corporate governance principles applicable to the Company,
including principles for determining the form and amount of director
compensation and (iv) overseeing the evaluation of the board and the Company's
management. The nominating and corporate governance committee maintains the
following guidelines for selecting nominees to serve on the board.
The nominating and corporate governance committee may apply several
criteria in selecting nominees. At a minimum, the committee shall consider (a)
whether each such nominee has demonstrated, by significant accomplishment in his
field, an ability to make a meaningful contribution to the board's oversight of
the business and affairs of our company and (b) the nominee's reputation for
honesty and ethical conduct in his personal and professional activities.
Additional factors that the committee may consider include a candidate's
specific experiences and skills, relevant industry background and knowledge,
time availability in light of other commitments, potential conflicts of interest
and any other factors or qualities that the committee believes will enhance the
board's ability to effectively manage and direct the company's affairs and
business, including, where applicable, the ability of board committees to
perform their duties or satisfy any independence requirements under the Nasdaq
listing standards or otherwise.
The nominating and corporate governance committee will identify nominees
by first evaluating the current members of our board of directors whose terms
are expiring and who are willing to continue in service. In doing so, the
committee will balance the skills and experience of such current directors, as
well as the value of continuity of their service, with that of obtaining new
perspectives for the board. For new nominees, the committee will identify
potential candidates based on input from members of the board and management
and, if the committee deems it appropriate, from one or more third-party search
firms.
Once a person has been identified by the committee as a potential
candidate, the committee will assess, based on publicly available information
regarding the person, whether the candidate should be considered further. If the
committee determines that the candidate warrants further consideration and the
person expresses a willingness to be considered and to serve on the board, the
committee will request information from the candidate, review his or her
accomplishments and qualifications and conduct one or more interviews with the
candidate. If the candidate appears qualified, committee members may also
contact references provided by the candidate or other persons with first-hand
knowledge of the
8
candidate's experience and accomplishments. Additionally, serious candidates may
be requested to meet with some or all of the other members of the board of
directors. Using the input from these interviews and the other information it
has obtained, the committee will determine whether it should recommend that the
board nominate, or elect to fill a vacancy with, a final prospective candidate.
The committee's evaluation process does not vary based on whether or not a
candidate is recommended by a stockholder.
Stockholders may recommend individuals to the nominating and corporate
governance committee for consideration as potential director candidates by
submitting their names and appropriate background and biographical information
to the Nominating and Corporate Governance Committee, c/o AngioDynamics, Inc.,
603 Queensbury Avenue, Queensbury, New York 12804 at least 120 days prior to the
anniversary of the date on which our proxy statement was first released to
stockholders for the previous year's annual meeting. Assuming that the
appropriate information has been timely provided, the committee will consider
these candidates in the same manner as it considers other board candidates it
identifies. Our stockholders also have the right to nominate director candidates
without any action on the part of the nominating and corporate governance
committee or our board of directors by following the advance notice provisions
of our by-laws as described under "Stockholder Proposals and Nominations" on
page 34 of this proxy statement.
The authority and responsibilities of the nominating and corporate
governance committee are set forth in detail in its charter, which, together
with the committee's guidelines for selecting nominees to the board, is
available on our website located at www.angiodynamics.com under the "Corporate
Governance Highlights--Committee Charters--Nominating and Corporate Governance
Committee" caption.
The members of the nominating and corporate governance committee are
Jeffrey G. Gold, Dennis S. Meteny and Howard W. Donnelly, each of whom has been
determined by our board of directors to be independent under the Nasdaq listing
standards. The nominating and corporate governance committee met two (2) times
during fiscal 2005.
Meetings of the Board and Committees
Our board of directors held five (5) meetings during fiscal 2005. Each
incumbent director attended at least 75% of all meetings of the board and of
each committee of which he was a member that were held during the period in
which he was a director or committee member.
Communications with the Directors
Stockholders may communicate in writing with any particular director, the
independent directors as a group, or the entire board by sending such written
communication to the Secretary of the Company at the Company's principal
executive offices, 603, Queensbury Avenue, Queensbury, New York 12804. Copies of
written communications received at such address will be provided to the board or
the relevant director or directors unless such communications are determined by
our outside general counsel to be inappropriate for submission to the intended
recipient(s). However, any communication not so delivered will be made available
upon request to any director. Examples of stockholder communications that would
be considered inappropriate for submission include, without limitation, customer
complaints, solicitations, product promotions, resumes and other forms of job
inquiries, as well as material that is unduly hostile, threatening, illegal or
similarly unsuitable.
Policy on Director Attendance at Annual Meetings
All board members are expected to attend our annual meetings of
stockholders absent an emergency or other unforeseen circumstances. Attendance
at the annual meeting will be considered by the
9
nominating and corporate governance committee in assessing director performance.
All of our directors named in this proxy statement, except for Dennis Meteny,
attended our annual meeting of stockholders in 2004.
Code of Business Conduct and Ethics. The board of directors has adopted a
written Code of Business Conduct and Ethics for our company.
Our Code of Business Conduct and Ethics is available on our website
located at www.angiodynamics.com under the "Corporate Governance
Highlights--Governance Documents--Code of Ethics" caption.
Compensation of Directors
Directors who are not our employees receive a monthly retainer of $2,000.
The Chairman of the Board receives an additional $2,000 monthly retainer and the
Chairman of the Audit Committee receives an additional $1,000 monthly retainer.
In addition to the monthly retainer, directors receive $1,500 for each board
meeting attended in person or participated in by telephone. Committee chairmen
receive $1,500, and committee members $750, for each committee meeting in which
they participate in person or by telephone. Directors who are not our employees
also receive an annual grant of an option to purchase 6,000 shares of our common
stock for each year of service on our board of directors. New directors receive
options for 25,000 shares of our common stock upon joining our board. Directors
who are our employees receive no additional compensation for their services as
directors.
We entered into an agreement, effective as of January 2004, with Donald A.
Meyer, who resigned as a director as of March 1, 2004, under which Mr. Meyer
agreed to serve as the trustee of our 401(k) savings plan and to provide other
consulting services at our request. The agreement is for a term of 36 months,
but will terminate sooner upon a change of control of AngioDynamics, Mr. Meyer's
death or a material breach of the agreement that is not cured within 30 days.
Mr. Meyer is receiving 36 equal monthly payments of $3,500 and reimbursement for
reasonable business expenses incurred in providing services under the agreement.
The fees paid in fiscal 2005 were $42,000. Further, under the agreement, the
expiration dates of Mr. Meyer's options were extended to the earlier of (i)
December 31, 2006 or (ii) the tenth anniversary of the original grant date of
each option. In connection with the extension of the expiration dates of Mr.
Meyer's options, the fair value of Mr. Meyer's options to acquire 42,263 shares
of our common stock has been recorded as a non-cash dividend to E-Z-EM in the
amount of $468,000, with the corresponding credit to "Additional Paid-in
Capital" on the effective date.
Effective as of January 1, 2002, E-Z-EM, Inc., our former parent company,
entered into an agreement with Howard S. Stern, then Chairman of E-Z-EM's board
and one of our directors, under which Mr. Stern agreed to provide certain
services to E-Z-EM and us until December 31, 2004. These services include
serving as chairman of both E-Z-EM's and our board of directors, consulting with
management of both companies on corporate governance, investor relations and
other matters and generally providing guidance and assistance on
industry-related matters. Under the agreement, Mr. Stern was nominated for, and
subsequently elected to, a three-year term as a director of E-Z-EM, and served
as the chairman of E-Z-EM's board until the agreement term expired on December
31, 2004. In February, 2004, Mr. Stern resigned as chairman of our board but he
remains a director. So long as Mr. Stern remained chairman of E-Z-EM, he was
entitled to receive twice the regular fees and other compensation (including
cash, stock and options) paid to other directors for service on E-Z-EM's board,
but not compensation paid to our other directors for service on our board.
However, because Mr. Stern's agreement terminated at the end of 2004, he
received the annual grant of stock options we made to all of our directors in
July 2004. As compensation for his services under the agreement, Mr. Stern
received 36 equal monthly payments of $20,833, as well as certain bonus
opportunities from E-Z-EM. Mr. Stern also
10
received other benefits, including medical and dental insurance for himself and
his wife and use of a company automobile, and, so long as he remained E-Z-EM's
chairman, up to $80,000 annually for reimbursement of reasonable business
expenses. Prior to our initial public offering, we reimbursed E-Z-EM for 35% of
Mr. Stern's compensation and expenses paid under the agreement. Under our master
separation and distribution agreement with E-Z-EM, we assumed 35% of E-Z-EM's
payment obligations to Mr. Stern under the agreement, which totaled $7,300 in
fees and $2,300 for expenses on a monthly basis for the remainder of the term of
the agreement. Following expiration of Mr. Stern's agreement on December 31,
2004, he began to receive the same cash and other compensation we pay to our
other non-employee directors.
11
PROPOSAL 2 -
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee of our board of directors has selected
PricewaterhouseCoopers LLP, independent certified public accountants, as the
Company's independent registered public accounting firm for the fiscal year
ending June 3, 2006. Although the selection of the independent registered public
accounting firm is not required under our by-laws or otherwise to be ratified by
our stockholders, the audit committee has directed that the appointment of
PricewaterhouseCoopers LLP be submitted to the stockholders for ratification due
to the significance of their appointment to the Company. If our stockholders
fail to ratify the selection, it will be considered as a direction to the board
of directors and the audit committee to consider the selection of a different
firm. Even if the selection is ratified, the audit committee in its discretion
may select a different independent registered public accounting firm, at any
time during the year if it determines that such a change would be in the best
interests of the Company and our stockholders.
The proposal to ratify the appointment of PricewaterhouseCoopers LLP as
the Company's independent registered public accounting firm for the fiscal year
ending June 3, 2006 must be approved by the affirmative vote of a majority of
the votes cast at the annual meeting.
A representative of PricewaterhouseCoopers LLP is expected to be present
at the annual meeting. The representative will have the opportunity to make a
statement if he or she desires and to respond to appropriate questions.
On May 9, 2005, the audit committee of our board of directors appointed
Pricewaterhouse-Coopers LLP as the Company's independent registered public
accounting firm for the fiscal year ending May 28, 2005, and the fiscal year
ending June 3, 2006, and dismissed Grant Thornton LLP as the Company's
independent auditor for fiscal 2005, effective May 9, 2005.
Grant Thornton LLP's reports on the Company's consolidated financial
statements as of and for the fiscal years ended May 29, 2004 and May 31, 2003
did not contain an adverse opinion or a disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope, or accounting principles.
In connection with the audits of the Company's financial statements for
the fiscal years ended May 29, 2004 and May 31, 2003 and through the date
hereof, there were no disagreements between the Company and Grant Thornton LLP
on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of Grant Thornton LLP would have caused Grant Thornton LLP to make
reference to the matter in their report. During the two most recent fiscal years
and through the date hereof, there have been no "reportable events" (as defined
in Regulation S-K, Item 304(a)(1)(v)).
During the Company's two most recent fiscal years and through the date
hereof, the Company did not consult with PricewaterhouseCoopers LLP regarding
any of the matters or events set forth in Item 304(a)(2)(i) or (ii) of
Regulation S-K.
12
Recommendation of the Board of Directors
The board of directors recommends a vote FOR the ratification of the
appointment of PricewaterhouseCoopers LLP as the Company's independent
registered public accounting firm for the fiscal year ending June 3, 2006.
13
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the AngioDynamics common stock held by each of
our directors, each of our Named Executive Officers, all of our directors and
executive officers as a group and all other persons known to us who beneficially
own 5% or more of the outstanding AngioDynamics common stock as of August 17,
2005. Except as otherwise noted, each individual director or named executive
officer (including his or her family members) had sole voting and investment
power with respect to the AngioDynamics common stock.
Number of
Shares of
Common % of
Stock Owned Outstanding
(a)(b) Shares
----------- -----------
Eamonn P. Hobbs .................................................. 326,292 2.7
Robert M. Rossell ................................................ 3,550 *
Paul J. Shea ..................................................... 2,849 *
William M. Appling ............................................... 30,844 *
Brian S. Kunst ................................................... 2,000 *
Kern Capital Management, LLC (c) ................................. 693,300 5.7
Wellington Management Company, LLP (d) ........................... 827,533 6.8
Arbor Capital Management, LLC (e) ............................... 806,100 6.6
Howard S. Stern .................................................. 1,772,972 14.5
Jeffery Gold ..................................................... 20,374 *
Paul S. Echenberg ................................................ 157,168 1.3
David P. Meyers (f) ............................................. 482,529 4.0
Howard W. Donnelly ............................................... 6,250 *
Dennis S. Meteny ................................................. 8,250 *
Gregory D. Casciaro .............................................. 6,250 *
Robert E. Flaherty ............................................... 7,450 *
----------- -----------
All directors and executive officers as a group (16 persons) ..... 2,866,949 23.5
- ------------------------------
(a) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Under those rules, shares of
common stock subject to options that are exercisable or will become
exercisable within 60 days of August 17, 2005 are deemed to be outstanding
and to be beneficially owned by the person holding the securities for the
purpose of computing the percentage ownership of the person, but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person.
(b) Includes shares of our common stock issuable upon exercise of options
currently exercisable or exercisable within 60 days from August 17, 2005
as follows: Eamonn P. Hobbs (312,503), Robert M. Rossell (2,550), Paul J.
Shea (2,550), William M. Appling (30,550), Brian S. Kunst (2,000), Howard
S. Stern (92,541), Jeffrey Gold (4,009), Paul S. Echenberg
14
(95,563), David P. Meyers (41,690), Howard W. Donnelly (5,250), Dennis S.
Meteny (6,250), Gregory D. Casciaro (6,250), Robert E. Flaherty (6,250),
and all directors and officers as a group (647,886).
(c) Share ownership information obtained from a Schedule 13G filed by Kern
Capital Management, LLC, Robert E. Kern, Jr. and David G. Kern on February
14, 2005.
(d) Share ownership information obtained from a Schedule 13G filed by
Wellington Management LLP on February 14, 2005.
(e) Share ownership information obtained from a Schedule 13G filed by Arbor
Capital Management, LLC and Rick D. Leggott on February 4, 2005.
(f) Excludes 7,427 shares held by a trust established for the benefit of Mr.
Meyers' children, as to which Mr. Meyers disclaims beneficial ownership.
- ---------------
* Less than 1%.
15
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation for
services, in all capacities for fiscal years 2005, 2004, and 2003, of (i) those
persons who were, during fiscal 2005, our Chief Executive Officer ("CEO")
(Eamonn P. Hobbs), and (ii) those persons who were, at the end of fiscal 2005,
our four most highly compensated executive officers other than our CEO
(collectively, with the CEO, the "Named Executive Officers"):
Annual Compensation Long-Term Compensation
-------------------------------- ---------------------------------
Awards Payouts
---------- --------
Other
Annual Restricted Securities All Other
Compensa- Stock Underlying LTIP Compensa-
Name and Principal Fiscal Salary Bonus tion (1) Awards Awards Payouts tion (3)
Position Year ($) ($) ($) ($) # (2)(4) ($) ($)
- --------------------- -------- -------- -------- --------- -------- ---------- ------- ----------
Eamonn P. Hobbs 2005 $267,000 $140,175 None $310,530 16,500 None $10,834
President, Chief 2004 254,400 126,882 None None None None 10,572
Executive Officer 2003 240,000 96,600 None None None None 8,470
Robert M. Rossell 2005 $163,488 $73,570 None $150,560 8,000 None $10,285
Vice President 2004 156,000 65,286 None None None None 11,128
2003 150,000 63,777 None None None None 8,384
Paul J. Shea 2005 $167,988 $74,083 None $150,560 8,000 None $9,989
Vice President 2004 156,000 65,286 None None None None 11,119
2003 150,000 63,777 None None None None 8,384
William M. Appling 2005 $155,628 $69,612 None $150,560 8,000 None $10,174
Vice President 2004 148,500 63,484 None None None None 10,518
2003 135,000 57,949 None None None None 8,508
Brian S. Kunst 2005 $157,500 $70,875 None $150,560 8,000 None $9,864
Vice President 2004 143,000 59,845 None None None None 10,029
2003 130,000 55,640 None None None None 8,567
(1) We have concluded that the aggregate amount of perquisites and other
personal benefits paid to each of the Named Executive Officers for 2005,
2004 and 2003 did not exceed the lesser of 10% of such officer's total
annual salary and bonus for fiscal 2005, 2004, or 2003 or $50,000; such
amounts are, therefore, not reflected in the table.
(2) Awards settle in our common stock. All awards were unvested at May 28,
2005.
(3) For each of the Named Executive Officers, the amounts reported include
amounts we contributed under our Profit Sharing Plan and, as matching
contributions, under the companion 401(k) Plan. For fiscal 2005, 2004, and
2003, such amounts contributed were: $10,542, $9,764, and $7,787,
respectively, for Mr. Hobbs; $10,043, $10,698, and $7,970, respectively,
for Mr. Rossell; $9,658, $10,689, and $7,970, respectively, for Mr. Shea;
$10,043, $10,109, and $8,136, respectively, for Mr. Appling; and $9,672,
$9,635, and $8,209, respectively, for Mr. Kunst. For each of the Named
Executive Officers, the amounts reported include term life insurance
premiums we paid. For 2005, 2004, and 2003, such amounts contributed were:
$292, $808, and $683, respectively, for Mr. Hobbs; $242, $430, and $414,
respectively, for Mr. Rossell; $331, $430, and $414, respectively, for Mr.
Shea; $131, $409, and $372, respectively, for Mr. Appling; and $192, $394,
and $358, respectively, for Mr. Kunst.
(4) Of the total awards, 50% are restricted stock units, which vest in full
upon the recipient's continued employment through on or about May 30,
2009. The remaining 50% of the awards are performance share awards. Under
the performance share award agreements, 25% of the total performance
shares awarded may be earned for each of four consecutive fiscal years of
AngioDynamics, commencing with its 2006 fiscal year. Each year, one-half
of the shares available to be earned that year will be earned upon
achievement by AngioDynamics of specified earnings per share ("EPS") goals
and the other half of the shares will be earned upon the achievement of
specified revenue goals. Shares not earned in a fiscal year may be earned
in the following fiscal year if the EPS or revenue goals in such following
year are exceeded by an amount at least equal to the shortfall for the
applicable goal for the preceding year. The EPS and
16
revenue goals are the same for all of the performance share awards granted
in fiscal 2005. The performance share awards are subject to additional
conditions, including the recipient's continued employment with
AngioDynamics and the recipient's not competing with its business or
otherwise engaging in other activities detrimental to its business.
Option/SAR Grants in Last Fiscal Year
The following table sets forth certain information concerning all grants of
stock options during fiscal 2005 to our Named Executive Officers:
Number of % of Total
Securities Options
Underlying Granted to Exercise or Grant Date
Options Employees in Base Price Expiration Present Value
Name Granted (#) Fiscal Year ($/Share) Date (1)
- -------------------- ----------- ------------ ----------- ---------- -------------
Eamonn P. Hobbs..... 35,500 13.0% $13.18 7/20/2014 $262,114
Robert M. Rossell... 10,200 3.7% $13.18 7/20/2014 $75,312
Paul J. Shea........ 10,200 3.7% $13.18 7/20/2014 $75,312
William M. Appling.. 10,200 3.7% $13.18 7/20/2014 $75,312
Brian S. Kunst...... 8,000 2.9% $13.18 7/20/2014 $59,068
(1) Calculated using the Black-Scholes valuation model with the following
assumptions: expected volatility (58.58%), risk-free rate of return (3.985%),
dividend yield (0%), and expected time of exercise (5.5 years)
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth certain information concerning all exercises of
stock options during 2005 by our Named Executive Officers and the fiscal
year-end value of unexercised stock options held by such officers on an
aggregated basis:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
May 28, 2005 May 28, 2005
(#) ($) (1)
------------- -------------
Shares Exercisable/ Exercisable/
Acquired on Value Unexercisable Unexercisable
Name Exercise (#) Related ($) (2) (2)
- ------------------------------ ------------ ---------- ------------- -------------
Eamonn P. Hobbs............... 100,000 $1,422,220 325,292/ $5,218,399/
36,754 $276,072
Robert M. Rossell............. 52,273 $798,401 None/ None/
10,200 $73,542
Paul J. Shea.................. 25,273 $420,172 27,000/ $433,139/
10,200 $73,542
William M. Appling............ 13,273 $215,616 39,000/ $625,646/
10,200 $73,542
Brian S. Kunst................ 52,273 $876,188 None/ None/
8,000 $57,680
17
(1) Options are "in-the-money" if, on May 28, 2005, the market price of our
common stock exceeded the exercise price of such options. On May 28, 2005,
the closing price of our common stock was $20.39. The value of such
options is calculated by determining the difference between the aggregate
market price of the stock covered by the options on May 28, 2005 and the
aggregate exercise price of such options.
(2) Options are exercisable into common stock of AngioDynamics.
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
We do not have any employment, termination of employment, or change-of-control
agreements with any of our executive officers.
Report on Repricing of Options / SARs
In fiscal 2005, we did not adjust or amend the exercise price of any stock
options previously awarded to any of the Named Executive Officers.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The following directors serve on the Company's Compensation Committee:
Gregory D. Casciaro, Robert E. Flaherty and Jeffrey G. Gold. None of these
directors was an officer or employee of the Company or any of its subsidiaries
during fiscal 2005, nor was formerly an officer or employee of the Company or
any of its subsidiaries. None of such directors had any relationship requiring
disclosure by us under Item 404 of Regulation S-K.
Compensation Committee Report on Executive Compensation
General
The compensation committee of the board of directors (the "Compensation
Committee") is composed solely of directors who are not current or former
employees of AngioDynamics, Inc. (the "Company") and each has been determined by
the board of directors (the "Board") to be independent under the revised listing
standards of The Nasdaq Stock Market, Inc. The Board has delegated to the
Compensation Committee the responsibility to evaluate and make recommendations
to the Board regarding the compensation of the Chief Executive Officer ("CEO")
and to approve the compensation of the other executive officers of the Company.
The Compensation Committee also administers all executive compensation programs,
incentive compensation plans and equity-based plans and all other compensation
and benefit programs current in place at the Company.
Compensation Philosophy and Objectives
The Company operates in an extremely competitive industry. The Committee
believes that the compensation programs for the executive officers should be
designed to attract, motivate and retain talented executives responsible for the
Company's success and should be determined within a framework based on the
achievement of the Company's operating plans, particularly sales from existing
and new products, profits and operating margins; individual contribution; and
financial performance relative to the Company's competitors. Within this overall
philosophy, the Committee's objectives are to:
18
o Offer a total compensation program that takes into consideration the
compensation practices of similarly situated companies with which the
Company competes for executive talent.
o Provide annual bonus incentive awards that are based on the Company's
meeting or exceeding its EBIT budget and individual executive performance.
o Align the financial interests of executive officers with those of
stockholders by providing significant equity-based, long-term incentives.
The three components of the compensation program for executive officers are base
salary, annual cash incentives and long-term equity-based incentive awards in
the form of stock options, performance share awards and restricted stock unit
awards. These components are administered with the goal of providing total
compensation that is competitive in the marketplace, recognizes meaningful
differences in individual performance, and offers the opportunity to earn
superior rewards when merited by individual and corporate performance
The Compensation Committee's policy is to establish ranges for base salary,
annual cash incentives and long term, equity-based incentive awards for
executive officer positions, including that of the CEO, around the averages paid
by similarly situated companies, which are defined as publicly traded companies
of similar size in the health care industry. In determining these ranges, the
Compensation Committee reviewed information from a compensation survey conducted
on the Company's behalf by Top Five Data Services, Inc., an independent
consulting company, covering compensation levels at a variety of such companies.
Base Salaries
The base salary for each executive officer is determined at levels considered
appropriate for comparable positions at similarly situated companies.
Adjustments to each individual's base salary were made based on annual
performance reviews with consideration given to the incumbent's salary compared
with the range of those listed in the aforementioned survey. Among the criteria
used in the annual performance reviews were the work and supervisory performance
of the executive, demonstrated management and leadership skills, performance to
specific established personal goals, and the strengths and weaknesses that the
executive demonstrates on the job. Base salary adjustments for the executive
officers of the Company averaged 4.5% during 2005.
Annual Cash Incentives
The Compensation Committee believes that a substantial portion of the annual
compensation of each executive officer should be in the form of annual incentive
cash bonuses. In 2005, the target incentive payment amounts established for the
CEO and other executive officers were, respectively, 35% and 30% of base salary
with 70% being based on the Company's performance to its planned earnings before
interest and taxes ("EBIT") and 30% based on the individual executive's
performance to personal goals, both having been established at the beginning of
the fiscal year. The incentive plan sets a threshold level of the Company's
performance based on EBIT that must be attained before any incentives are
awarded. Once the fiscal year's threshold is reached, specific formulas are in
place to calculate the actual incentive payment for each executive officer.
Additional compensation up to a maximum of 50% of the target incentive payment
amounts may be awarded if the threshold is exceeded and if specific previously
agreed individual objectives are achieved. In fiscal 2004 and 2005, the Company
exceeded its EBIT goals such that the CEO and the other executive officers were
awarded the maximum EBIT-based incentive payment allowed.
19
Long-Term, Equity-Based Incentive Awards
Stock Incentives. In 2004, the Company adopted its 2004 Stock and Incentive
Award Plan (the "2004 Plan") to supplement the Company's 1997 Stock Option Plan
(the "1997 Plan"), under which very few shares remain available for option
grants. The 2004 Plan provides for the grant of incentive awards, which may be,
but need not be, in the form of performance share awards, performance unit
awards, restricted stock awards and restricted stock unit awards, as well as
incentive and non-qualified stock options and stock appreciation rights. The
Committee has made grants of stock options, restricted stock unit awards and
performance share awards and, in the future, expects to offer other types of
awards allowed under the 2004 Plan in order to provide executive officers with
an opportunity to share, along with stockholders, in the long-term performance
of the Company and to reward officers for their contribution to the Company's
performance.
Stock option grants generally are made initially to each executive officer upon
his or her joining the Company and satisfying the requirements for eligibility
under the Company's stock option plans, with additional grants being made
annually in smaller amounts as options under the initial grants vest. Stock
options granted under the 2004 Plan generally have a four-year vesting schedule,
and generally expire ten years from the date of grant. The exercise price of
options granted under both of the Company's stock option plans is at least 100%
of the fair market value of the underlying stock on the date of grant. The
number of stock options granted to each executive officer is generally based
upon several factors, including the executive officer's position with the
Company and salary and performance, and are targeted to approximate the grants
made, on average, by similarly situated companies to executives with similar
responsibilities. In fiscal 2005, the Compensation Committee granted stock
options for a total of 100,300 shares under the 2004 Plan to the Company's
executive officers. Each officer received a grant equal to the mid-point of the
established range for his job in recognition of the performance of the executive
officers in achieving net sales and EBIT in excess of the Company's plan for
2004 and for successfully completing the Company's initial public offering. In
addition, in fiscal 2006, the Compensation Committee has made, and expects to
make additional, stock option grants in accordance with the above guidelines, as
well as performance share awards and restricted stock unit awards, to each of
the Company's executive officers under the 2004 Plan.
CEO Compensation
The Compensation Committee evaluates, at least annually, the performance of the
Company's CEO and recommends to the Board for approval the CEO's annual
compensation, including salary, bonus and equity-based compensation. For fiscal
2005, Mr. Hobbs' base salary and incentive bonus compensation were determined in
accordance with the criteria described above. In June 2004, Mr. Hobbs received a
salary increase of $13,600, reflecting the Compensation Committee's positive
assessment of his performance, particularly the achievement of the Company's
financial goals for fiscal 2004, and his leadership in that effort. Mr. Hobbs
earned $268,000 in base salary compensation during fiscal 2005.
Mr. Hobbs received an incentive bonus of $136,670 for fiscal 2005. Of this
amount, $112,139 was based the Company's exceeding its EBIT goal. The balance
reflected his personal contribution to the Company's exceeding the revenue and
EBIT goals projected in its fiscal 2005 budget, and his leadership in improving
the Company's gross profit margin, identifying and launching new products, and
establishing a succession planning system for the Company.
In July 2004, Mr. Hobbs was granted an option to purchase 35,500 shares of the
Company's stock at the market price under the 2004 Plan in recognition of the
strong performance of the Company against its financial plans for fiscal 2004
and for his stewardship of the Company during the successful initial public
offering process.
20
Internal Revenue Code Section 162(m) Considerations
Section 162(m) of the Internal Revenue Code prohibits a publicly held
corporation, such as the Company, from claiming a deduction on its federal
income tax return for compensation in excess of $1 million paid for a given
fiscal year to the chief executive officer (or person acting in that capacity)
and to the four most highly compensated officers of the Company other than the
chief executive officer as of the end of the Company's fiscal year. This
limitation does not apply to compensation that meets the requirements under
Section 162(m) for "qualifying performance-based" compensation (i.e.,
compensation paid only if the individual's performance meets pre-established
objective goals based on performance criteria approved by shareholders). The
committee believes that awards under the Company's 2004 Plan will be deductible
pursuant to the Section 162(m). However, awards under the 1997 Plan do not
qualify for the deduction. In 2005, the chief executive officer and one other
officer received compensation in excess of $1.0 million as a result of
exercising options granted under the 1997 Plan. The committee does not intend to
authorize any further option grants under the 1997 Plan; however, exercises of
additional options outstanding under the 1997 Plan may result in the receipt by
the CEO and other officers of compensation in excess of $1.0 million in future
years, which excess amounts will not be deductible by the Company.
The Compensation Committee:
Robert E. Flaherty (Chairman)
Gregory D. Casciaro
Jeffrey G. Gold
21
Common Stock Performance Graph
The following graph shows a one-year comparison of the cumulative total
return for the Company's common stock and The NASDAQ Stock Market (U.S.) and The
NASDAQ Medical Equipment Index. The Company's common stock began trading on the
Nasdaq National Market on May 27, 2004.
COMPARISON OF 1 YEAR CUMULATIVE TOTAL RETURN *
AMONG ANGIODYNAMICS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ MEDICAL EQUIPMENT INDEX
[LINE GRAPH OMITTED]
Cumulative Total Return
5/27/04 8/28/04 11/27/04 2/26/05 5/28/05
------- ------- -------- ------- -------
ANGIODYNAMICS, INC 100.00 100.32 128.00 172.80 163.12
NASDAQ STOCK MARKET (U.S.) 100.00 95.31 99.97 105.41 98.64
NASDAQ MEDICAL EQUIPMENT 100.00 97.14 105.76 108.54 108.73
* $100 invested on 5/27/04 in stock or on 4/30/04 in index-including
reinvestment of dividends. Fiscal year ending May 28.
22
AUDIT MATTERS
Audit Committee Report
The Audit Committee of the Board of Directors (the "Committee") is composed of
three directors, each of whom has been determined by the Board Of Directors (the
"Board") to be independent under the listing standards of The Nasdaq Stock
Market ("Nasdaq"). The Committee operates under a written Audit Committee
Charter (the "Charter"), which was adopted by the Board of Directors on April
19, 2004, and a copy of which is attached as Appendix A to this proxy statement.
Management of the Company is responsible for internal controls, the financial
reporting process and compliance with laws and regulations and ethical business
standards. The Company's independent registered public accounting firm is
responsible for performing an independent audit of the Company's financial
statements in accordance with auditing standards generally accepted in the
United States of America and for issuing a report thereon. The Committee is
charged with the duty to monitor and oversee these processes.
Pursuant to the Charter, the primary responsibilities of the Committee are to
assist the Board in its oversight of (i) the integrity of the Company's
financial statements, financial reporting process, system of internal controls
over financial reporting, and audit process, (ii) the Company's compliance with,
and process for monitoring compliance with, legal and regulatory requirements,
(iii) the independent registered public accounting firm's qualifications and
independence, and (iv) the performance of the Company's internal audit function
and its independent registered public accounting firm, including, without
limitation, ensuring that interim quarterly financial statements are reviewed by
the Company's independent registered public accounting firm. The quarterly
reviews include discussions by management and the independent registered public
accounting firm with the Committee. The Committee must also pre-approve all
audit and permitted non-audit services to be performed by the independent
registered public accounting firm.
The Committee has the authority to select, determine the compensation paid to,
and replace the Company's independent registered public accounting firm. The
Audit Committee has selected PricewaterhouseCoopers LLP as the Company's
independent registered public accounting firm for fiscal 2005. In fiscal 2004,
the Company utilized Grant Thornton as its independent auditor, as did E-Z-EM,
Inc., the Company's former parent which, at the time, owned 80.4% of the
Company's outstanding common stock.
The Charter provides that the Committee shall always consist of not less than
three members, all of whom must be independent directors. No member of the
Committee may serve on the audit committees of more than two other public
companies unless the Board determines that such simultaneous service would not
impair the ability of such director to serve effectively on the Committee, and
discloses this determination in the proxy statement. To carry out its
responsibilities, the Committee met nine times during fiscal year 2005.
The Committee met with both management and the Company's independent registered
public accounting firm to review and discuss the Company's financial statements
for the fiscal year ended May 28, 2005, prior to their issuance and to discuss
significant accounting issues and policies. Management advised the Committee
that the Company's consolidated financial statements were prepared in accordance
with accounting principles generally accepted in the United States of America,
and the Committee has reviewed and discussed the consolidated financial
statements with management and the independent registered public accounting
firm. The Committee's review included discussion with
23
PricewaterhouseCoopers of matters that are required to be discussed pursuant to
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Committee discussed with PricewaterhouseCoopers matters relating to
PricewaterhouseCoopers' independence, including the written disclosures and the
letter provided by PricewaterhouseCoopers to the Committee as required by the
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees). PricewaterhouseCoopers informed the Committee that it was
independent with respect to the Company within the regulations promulgated by
the Securities and Exchange Commission and the requirements of the Independence
Standards Board. The Committee has concluded that PricewaterhouseCoopers is
independent of the Company and its management.
The Committee discussed with the Company's independent registered public
accounting firm the overall scope and plan for their audit. The Committee met
with the independent registered public accounting firm, with and without
management present, to discuss the results of their examination, the evaluation
of the Company's internal controls, and the overall quality of the Company's
financial reporting.
On the basis of these reviews and discussions, the Committee recommended to the
Board of Directors that the Board approve the inclusion of the Company's audited
consolidated financial statements in the Company's Annual Report on Form 10-K
for the fiscal year ended May 28, 2005 for filing with the Securities and
Exchange Commission.
The Audit Committee:
Dennis S. Meteny (Chairman)
Howard W. Donnelly
Robert E. Flaherty
The Audit Committee Report does not constitute soliciting material, and
shall not be deemed to be filed or incorporated by reference into any other
Company filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates the Audit Committee Report by reference therein.
Principal Accountant Fees and Services
The following table presents fees for professional audit services rendered
by PricewaterhouseCoopers LLP for the audit of the Company's financial
statements for the fiscal year ended May 28, 2005, and by Grant Thornton LLP for
the reviews of quarterly financial statements and procedures performed relating
to our registration statements on Form S-8 during the fiscal year ended May 28,
2005, and for the audit of the Company's financial statements for the fiscal
year ended May 29, 2004, and fees billed for other services rendered by
PricewaterhouseCoopers LLP and Grant Thornton LLP during those periods:
24
2005 2004
-------- --------
(in thousands)
Audit Fees(1) ................ $ 215 $ 440
Audit-Related Fees(2) ........ 70 33
Tax Fees ..................... -- --
All Other Fees ............... -- --
-------- --------
$ 285 $ 473
======== ========
-------------------
(1) Fees paid for professional services in connection with the
audit of our annual financial statements, review of our
quarterly financial statements for fiscal 2005, procedures in
fiscal 2005 relating to our registration statements on Form
S-8, and, for fiscal 2004, procedures relating to our
registration statement on Form S-1.
(2) Audit-related fees consist primarily of profit sharing and
401(k) plan audits, interpretation of accounting standards and
a review of internal controls.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Registered Public Accounting Firm
Consistent with SEC policies regarding auditor independence, the Audit
Committee has responsibility for appointing, setting compensation and overseeing
the work of the independent registered public accounting firm. In recognition of
this responsibility, the Audit Committee has established a policy to pre-approve
all audit and permissible non-audit services provided by the independent
registered public accounting firm.
Prior to engagement of the independent registered public accounting firm
for the next year's audit, management will submit a list of services and related
fees expected to be rendered during that year within each of four categories of
services to the Audit Committee for approval.
1. Audit services include audit work performed on the financial statements
and internal control over financial reporting, as well as work that
generally only the independent registered public accounting firm can
reasonably be expected to provide, including comfort letters, statutory
audits, and discussions surrounding the proper application of financial
accounting and/or reporting standards.
2. Audit-Related services are for assurance and related services that are
traditionally performed by the independent registered public accounting
firm, including due diligence related to mergers and acquisitions,
employee benefit plan audits, and special procedures required to meet
certain regulatory requirements.
3. Tax services include all services, except those services specifically
related to the audit of the financial statements, performed by the
independent registered public accounting firm's tax personnel, including
tax analysis; assisting with coordination of execution of tax related
activities, primarily in the area of corporate development; supporting
other tax related regulatory requirements; and tax compliance and
reporting.
25
4. Other Fees are those associated with services not captured in the other
categories. The Company generally doesn't request such services from the
independent registered public accounting firm.
Prior to engagement, the Audit Committee pre-approves independent
registered public accounting firm services within each category. The fees are
budgeted and the Audit Committee requires the independent registered public
accounting firm and management to report actual fees versus the budget quarterly
throughout the year by category of service. During the year, circumstances may
arise when it may become necessary to engage the independent registered public
accounting firm for additional services not contemplated in the original
pre-approval categories. In those instances, the Audit Committee requires
specific pre-approval before engaging the independent registered public
accounting firm.
The Audit Committee may delegate pre-approval authority to one or more of
its members. The member to whom such authority is delegated must report, for
informational purposes only, any pre-approval decisions to the Audit Committee
at its next scheduled meeting.
26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Relationship and Arrangements with E-Z-EM
In June 2004, we completed the initial public offering ("IPO") of our
shares of common stock. The offering consisted of 2,242,500 shares (including
292,500 shares issued pursuant to the underwriters' over-allotment option) at an
initial public offering price of $11.00 per share. Prior to the offering, we
were a wholly owned subsidiary of E-Z-EM, Inc. After the offering, E-Z-EM held
80.4% of our shares. On October 30, 2004, E-Z-EM distributed to its stockholders
in the form of a dividend all of our shares of common stock that it owned, as a
result of which E-Z-EM no longer owned any shares of AngioDynamics common stock.
Before the IPO, we entered into a master separation and distribution
agreement and other agreements with E-Z-EM that relate to our relationship with
E-Z-EM both before and after the distribution by E-Z-EM to its stockholders of
all of the shares of our common stock held by E-Z-EM. In this section of the
proxy statement, references to E-Z-EM include all of its subsidiaries except us.
Master Separation and Distribution Agreement
The master separation and distribution agreement contains the key
provisions related to our separation from E-Z-EM and the distribution of our
shares to E-Z-EM's common stockholders. The other agreements referenced in the
master separation and distribution agreement govern various ongoing
relationships between E-Z-EM and us. These agreements consist of a corporate
agreement and a tax allocation and indemnification agreement.
Under the master separation and distribution agreement, we agreed to
indemnify E-Z-EM and its officers, directors, stockholders, employees or other
representatives from all losses they suffer arising out of or due to any of the
following:
o our failure to pay, perform or discharge in due course the
liabilities, if any, assumed by us in connection with the
distribution or our separation from E-Z-EM;
o our failure to comply with the terms of the master separation and
distribution agreement or any of the other agreements we enter into
with E-Z-EM in connection with the distribution;
o any untrue statement of a material fact or material omission
contained in the prospectus for our IPO or any similar documents
relating to the offering, other than information provided by and
related to E-Z-EM, or, in connection with the distribution, if we
provide E-Z-EM with such information about our business;
o any action or inaction by us that causes the distribution by E-Z-EM
of our stock to its stockholders to be taxable to E-Z-EM or its
stockholders, to the extent E-Z-EM or its stockholders are adversely
affected;
o any out-of-pocket payments by E-Z-EM under its $500,000
self-insurance retention, which are limited to $500,000 per claim,
and any increases in E-Z-EM's insurance premiums caused by claims
based upon our business;
27
o any defense of any claims, investigations or proceedings arising out
of or in connection with the funding and other payment obligations
of AngioDynamics related to E-Z-EM's benefit plans;
o any credit support agreement (e.g., guaranties) previously entered
into by E-Z-EM for our benefit;
o any proceedings relating to the operation of our business prior to
the date of distribution in which E-Z-EM is a defendant solely
because it was our stockholder;
o any claims arising with respect to one of our pre-distribution
employment arrangements;
o any claims based on our gross negligence or willful misconduct in
performing intercompany services; or
o any claims based on our manufacturing and production for E-Z-EM.
These indemnification obligations may be very substantial, particularly
for any losses resulting from any action or inaction by us that causes the
distribution by E-Z-EM to be taxable to E-Z-EM or its stockholders.
E-Z-EM has agreed to similar, less expansive indemnification obligations
in favor of us and our officers, directors, stockholders, employees or other
representatives.
We and E-Z-EM have agreed generally not to compete with one another for
the two years following our IPO. We are also required to provide one another
with access to information about ourselves and our respective businesses for
legal, accounting, regulatory and other purposes.
The master separation and distribution agreement also governed the
provision by E-Z-EM to us of support services rendered to us prior to December
31, 2004. These services included accounting and finance, legal services,
consulting, limited sales and marketing, and other general administrative
functions. In fiscal 2005, we paid E-Z-EM a total of $385,000 for these
services.
Under the master separation and distribution agreement, we provide E-Z-EM
with manufacturing services consistent with those provided prior to the
distribution. On January 1, 2005, the prices E-Z-EM pays increased so as to
result in our achieving a gross margin of 50% on each product we manufacture for
E-Z-EM. These services will terminate on December 31, 2005, unless terminated
sooner by E-Z-EM upon 60 days notice. In fiscal 2005, E-Z-EM paid us $618,000
for these manufacturing services.
To give effect to the separation of our company from E-Z-EM, E-Z-EM
reduced the exercise price of and reduced the number of shares subject to all
E-Z-EM stock options, including options held by our officers and directors,
outstanding prior to the date that E-Z-EM distributed our shares of common stock
to its stockholders. Under the master separation and distribution agreement we
granted options to purchase 421,926 shares of our common stock to the E-Z-EM
option holders at that time. The number of shares subject to, and exercise
prices of, the adjusted E-Z-EM options and the AngioDynamics options were set so
that the adjusted E-Z-EM options and the AngioDynamics options had the same
ratio of exercise price to market price, and, to the extent possible, the same
aggregate difference between the market price and exercise price, or intrinsic
value, as did the E-Z-EM options at the time of the distribution.
28
We adopted certain option plans intended to substantially "mirror" the
provisions of the E-Z-EM option plans under which the outstanding E-Z-EM options
were granted. To ensure that each AngioDynamics option was granted without any
additional benefit not provided by the underlying outstanding E-Z-EM option, the
AngioDynamics options were granted under the terms of the corresponding "mirror"
plan. The AngioDynamics options vest and become exercisable in accordance with
the terms of the E-Z-EM options to which they relate, and will expire according
to different schedules for our officers and directors and other option holders,
but none of the options are exercisable beyond the exercise period of the E-Z-EM
options to which they relate.
Corporate Agreement
The corporate agreement contained various provisions relating to E-Z-EM's
ownership of our common stock, including approval rights for future issuances of
our stock by us, registration rights for the shares held by E-Z-EM, and E-Z-EM's
right to privately sell the shares and related matters. Upon completion of the
distribution by E-Z-EM on October 30, 2004, our obligations under the corporate
agreement were substantially terminated.
Tax Allocation and Indemnification Agreement
Allocation of Taxes
We also have a tax allocation and indemnification agreement ("tax
allocation agreement") with E-Z-EM. The tax allocation agreement governs the
respective rights, responsibilities and obligations of E-Z-EM and us with
respect to tax liabilities and benefits, tax attributes, tax contests and other
matters regarding income taxes, non-income taxes and related tax returns.
In general, under the tax allocation agreement:
o E-Z-EM is responsible for any U.S. Federal income taxes of the
affiliated group of which E-Z-EM is the common parent. However,
during the period (or portion of a period) that we are included in
the affiliated group beginning after the date of the offering, we
are responsible for our share of such income tax liability computed
as if we had filed a separate Federal income tax return that
included only us for that period (or portion of a period). For any
periods beginning after the distribution of E-Z-EM of its shares of
our common stock to its stockholders, we will be responsible for our
own U.S. Federal income taxes.
o E-Z-EM is responsible for any U.S. Federal income taxes reportable
on a consolidated return that includes E-Z-EM or one of its
subsidiaries and us. However, if we are included in such a group for
U.S. Federal income tax purposes for periods (or portions thereof)
beginning after the date of this offering, we are responsible for
our portion of such income tax liability as if we had filed a
separate tax return that included only us for that period (or
portion of a period).
o E-Z-EM is responsible for any U.S. Federal income taxes reportable
on returns that include only E-Z-EM and its subsidiaries (excluding
us), and we are responsible for any state or local income taxes
filed on returns that include only us.
o E-Z-EM and we are each responsible for any non-income taxes
attributable to our business for all periods.
29
E-Z-EM is primarily responsible for preparing and filing any tax return
for the E-Z-EM affiliated group for U.S. Federal income tax purposes. We are
responsible for preparing and filing any tax returns that include only us.
We generally have exclusive authority to control tax contests related to
tax returns that include only us and our subsidiaries. E-Z-EM generally has
exclusive authority to control tax contests related to any tax returns of the
E-Z-EM affiliated group for U.S. Federal income tax purposes and related to any
consolidated, combined or unitary group for U.S. state or local income tax
purposes that includes E-Z-EM or any of its subsidiaries. However, E-Z-EM must
consult with us with respect to any tax issue relating to us or any of our
subsidiaries.
The tax allocation agreement also assigns responsibilities for
administrative matters, such as the filing of returns, payment of taxes due,
retention of records and conduct of audits, examinations or similar proceedings.
In addition, the tax allocation agreement provides for cooperation and
information allocation with respect to taxes.
Preservation of the Tax-free Status of the Distribution
E-Z-EM has received a private letter ruling from the IRS that the
distribution will qualify as a tax-free distribution for which no gain or loss
is recognized by E-Z-EM or its stockholders for Federal income tax purposes
under Section 355 and related provisions of the Internal Revenue Code. In order
to obtain the ruling, we were required to make certain representations regarding
our company and our business and E-Z-EM was required to make certain
representations regarding it and its business. We have also agreed to certain
restrictions that are intended to preserve the tax-free status of the
distribution. We may take certain actions otherwise prohibited by these
covenants if E-Z-EM seeks and obtains another private letter ruling from the IRS
to the effect that such action would not jeopardize the tax-free status of the
distribution. These covenants include restrictions on our:
o issuance, sale or acquisition of our stock or other securities
(including securities convertible into our stock but excluding
certain compensatory arrangements);
o sales of assets outside the ordinary course of business; and
o entering into any other corporate transaction that, together with
the stock that was sold in our initial public offering, and certain
other stock transactions, would cause us to undergo a 50% or greater
change in our stock ownership.
We have generally agreed to indemnify E-Z-EM and its affiliates against
any and all tax-related liabilities incurred by them relating to the
distribution to the extent caused by an acquisition of our stock or assets, or
other actions of ours.
Other Related Party Transactions
William M. Appling, our Vice President, Research has been a partner and
executive officer of Protube Extrusion, LLP since 1992. Protube Extrusion
produces tubing used in some of our catheters. In fiscal 2005 we purchased
$192,000 of products and services from Protube Extrusion. Our board of directors
approved these transactions and determined that the terms of the transactions
are equivalent to terms that would arise in an arm's length relationship. In
September 2004, Mr. Appling resigned as an officer of Protube Extrusion and sold
his interest in it.
30
For information regarding our consulting agreement with Donald A. Meyer, a
former director, and our former consulting agreement with Howard Stern, a
director, please see "Compensation of Directors" on page 10 of this proxy
statement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
executive officers, directors and persons who own more than 10% of a registered
class of our equity securities to file reports of initial ownership and changes
in ownership with the Securities and Exchange Commission. Based solely on our
review of copies of such forms received by us, or on written representations
from certain reporting persons that no reports were required for such persons,
we believe that, during the fiscal year ended May 28, 2005, all of our executive
officers, directors and 10% stockholders complied with all Section 16 filing
requirements, except as follows:
(1) William M. Appling, Paul S. Echenberg, Joseph G. Gerardi, Jeffrey
Gold, Eamonn P. Hobbs, Brian S. Kunst, Harold C. Mapes, David P.
Meyers, Robert M. Rossell, Paul J. Shea, and Howard S. Stern each
filed a Form 4 on August 4, 2004 that was required to be filed on or
before July 22, 2004, reporting the acquisition of common stock
options.
(2) David P. Meyers filed a Form 4 on November 3, 2004 that was required
to be filed on or before October 14, 2004, reporting the sale of
stock.
(3) Paul S. Echenberg filed a Form 4 on November 3, 2004 that was two
business days late, reporting the sale of stock.
(4) Howard S. Stern filed a Form 4 on November 3, 2004 that was required
to be filed by October 17, 2004, reporting the sale of stock.
(5) William M. Appling, Joseph G. Gerardi, Eamonn P. Hobbs, Brian S.
Kunst, Harold C. Mapes, Daniel K. Recinella, Robert M. Rossell, and
Paul J. Shea each filed a Form 4 on June 14, 2005 that was required
to be filed on or before May 13, 2005, reporting the acquisition of
restricted common stock units.
ANNUAL REPORT
All stockholders of record as of the record date, have been sent, or are
concurrently herewith being sent, a copy of the Company's Annual Report on Form
10-K for the fiscal year ended May 28, 2005.
Any stockholder of the Company may obtain without charge additional copies
of the Company's Annual Report on Form 10-K for the 2005 fiscal year (without
exhibits), as filed with the Securities and Exchange Commission, by writing to:
Chief Financial Officer
AngioDynamics, Inc.
603 Queensbury Avenue
Queensbury, New York 12804
31
STOCKHOLDER PROPOSALS AND NOMINATIONS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present
proper proposals for inclusion in the Company's proxy statement and for
consideration at the Company's next annual meeting of stockholders. To be
eligible for inclusion in the Company's 2006 proxy statement, your proposal must
be received by the Company no later than May 11, 2006, and must otherwise comply
with Rule 14a-8. While the Board will consider stockholder proposals, the
Company reserves the right to omit from the Company's proxy statement
stockholder proposals that it is not required to include under the Exchange Act,
including Rule 14a-8.
In addition, the Company's Bylaws contain an advance notice provision with
respect to matters to be brought before at an annual meeting of stockholders,
including nominations for directors, and not included in the Company's proxy
statement. If you would like to nominate a director or bring any other business
before the stockholders at the 2006 Annual Meeting, you must comply with the
procedures contained in the Bylaws and you must notify the Company in writing
and such notice must be delivered to or received by the Secretary no less than
90 days nor more than 120 days prior to the anniversary date (October 11, 2006)
of the 2005 annual meeting.
You may write to the Secretary of the Company at the Company's principal
executive office: 603 Queensbury Avenue, Queensbury, New York 12804, to deliver
the notices discussed above and for a copy of the relevant Bylaw provisions
regarding the requirements for making stockholder proposals and nominating
director candidates.
OTHER MATTERS
As of the date of this proxy statement, we know of no matters other than
those set forth herein that will be presented for consideration at the meeting.
If any other matter or matters are properly brought before the meeting or any
adjournment thereof, the persons named in the accompanying proxy will have
discretionary authority to vote, or otherwise act, with respect to such matters
in accordance with their judgment.
32
APPENDIX A
AngioDynamics, Inc.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
I. PURPOSE
The function of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of AngioDynamics, Inc. (the "Corporation") is to:
A. assist the Board in its oversight of (i) the integrity of the
Corporation's financial statements, financial reporting process,
system of internal controls over financial reporting, and audit
process, (ii) the Corporation's compliance with, and process for
monitoring compliance with, legal and regulatory requirements, (iii)
the independent auditors' qualifications and independence, and (iv)
the performance of the Corporation's internal audit function and its
independent auditors, including, without limitation, ensuring that
interim quarterly financial statements are reviewed by the
Corporation's independent auditors;
B. prepare the report required to be prepared by the Committee under
the rules of the Securities and Exchange Commission (the "SEC") for
inclusion in the Corporation's annual proxy statement; and
C. provide an open avenue of communication between the independent
auditors and the Board.
II. COMPOSITION
A. The Committee shall consist of no fewer than three members of the
Board, all of whom shall be appointed by the Board. The members of
the Committee shall each have been determined by the Board to be
"independent" under the Nasdaq Marketplace Rules (the "Nasdaq
Rules") and under the Sarbanes-Oxley Act of 2002 (the "2002 Act").
B. In selecting the members of the Committee, the Board shall also
determine (i) that each member is able to read and understand
fundamental financial statements, (ii) that at least one member has
"accounting or related financial management expertise," and
"accounting or related financial experience," in each case in
accordance with the Nasdaq Rules, and (iii) to the extent required
by the applicable SEC rules, that at least one member of the
Committee is an "audit committee financial expert" as defined by the
SEC and is financially sophisticated in accordance with the Nasdaq
Rules (or if there is no such member, the reason for not having an
audit committee financial expert on the Committee).
C. Each member of the Committee shall be free of any relationship that,
in the opinion of the Board, would interfere with his or her
individual exercise of independent judgment.
D. No director may serve as a member of the Committee if such director
serves on the audit committees of more than two other public
companies unless the Board determines that such simultaneous service
would not impair the ability of such director to serve effectively
on the Committee, and discloses this determination in the
Corporation's annual proxy statement.
A-1
III. MEETINGS
A. The Committee shall meet at least four (4) times annually and will
be available to meet more frequently as circumstances require.
B. Incidental to any regularly scheduled meetings, the Committee may
meet, if it deems it necessary, with management and the independent
auditors in separate executive sessions to discuss any matters that
the Committee and each of these groups believe should be discussed
privately.
C. The Committee shall appoint its chairperson, after consultation with
the Board.
D. The Committee may invite such members of management, auditors and
other persons to its meetings as it may deem desirable or
appropriate. The Committee's chairperson shall report regularly to
the Board summarizing the Committee's actions and any significant
issues considered by the Committee.
IV. RESPONSIBILITIES AND DUTIES
The following are the duties, responsibilities and authority of the
Committee:
A. To meet with the Corporation's independent auditors (the
"Independent Auditors"), the Corporation's management, and such
other personnel as it deems appropriate and discuss such matters as
it considers appropriate, including the matters referred to below.
The Committee must meet separately with the Independent Auditors and
the Corporation's management at least once each fiscal quarter.
B. To decide whether to appoint, retain or terminate (and recommend to
the Corporation's shareholders the selection or ratification of
selection of Independent Auditors) the Corporation's Independent
Auditors, including having the sole authority to approve all audit
engagement fees and terms and to pre-approve all audit and
permissible non-audit services and fees to be provided by the
Independent Auditors. The Committee shall monitor and evaluate the
Independent Auditors' qualifications, performance and independence
on an ongoing basis, and shall be directly responsible for
overseeing the work of the Independent Auditors (including resolving
disagreements between management and the Independent Auditors
regarding financial reporting). In conducting such evaluations, the
Committee shall:
1. At least annually, obtain and review a report by the
Independent Auditors describing:
a. the Independent Auditors' internal quality-control
procedures;
b. any material issues raised by the most recent internal
quality-control review or peer review of the Independent
Auditors, or by any inquiry or investigation by
governmental or professional authorities, within the
preceding five years, concerning one or more independent
audits carried out by the auditors, and any steps taken
to deal with any such issues; and
c. (to assess the auditors' independence) all relationships
between the Independent Auditors and the Corporation
(including information the Corporation determines
A-2
is required to be disclosed in the Corporation's proxy
statement as to audit and non-audit services provided to
the Corporation and those disclosures required by
Independence Standards Board Standard No.1, as it may be
modified or supplemented).
2. Discuss with the Independent Auditors any relationships or
services that may affect the objectivity or independence of
the Independent Auditors and consider whether the provision of
non-audit services is compatible with maintaining the
Independent Auditor's independence.
3. Review and evaluate the qualifications, performance and
independence of the primary partners of the Independent
Auditors.
4. Take into account the opinions of management.
5. Discuss with management the timing and process for
implementing the rotation of the lead audit partner, the
concurring partner and any other active audit engagement team
partner and consider whether there should be a regular
rotation of the audit firm itself.
The Committee shall present its conclusions concerning the
Independent Auditors to the Board for its information at least
annually.
C. To obtain from the management and Independent Auditors for any audit
a timely report on the Corporation's annual audited financial
statements describing all critical accounting policies and practices
to be used including alternative treatments of financial information
within generally accepted accounting principles discussed with
management, the ramifications of such treatments and the treatment
recommended by auditors, and to obtain from the Independent Auditors
any material written communications between the Independent Auditors
and management, such as any "management" letter, response thereto by
the Corporation's management or schedule of unadjusted differences.
D. Prior to their being filed, to discuss with management and the
Independent Auditors the Corporation's annual audited financial
statements and quarterly financial statements, including the
Corporation's disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations", and to
discuss with the Corporation's Chief Executive Officer and Chief
Financial Officer their certifications to be provided under Sections
302 and 906 of the 2002 Act, including whether the financial
statements fairly present, in all material respects, the financial
condition, results of operations and cash flows of the Corporation
as of and for the periods presented and whether any significant
deficiencies exist in the design or operation of internal controls
that could adversely affect the Corporation's ability to record,
process, summarize and report financial data, assess any material
weaknesses that may exist in internal controls, or consider whether
any fraud has occurred, whether or not material, that involves
management or other employees who have a significant role in the
Corporation's internal controls. The Committee shall discuss, as
applicable: (a) major issues encountered and judgments made
regarding accounting principles, financial statement presentation
and the Corporation's financial statements generally, including any
significant changes in the Corporation's selection or application of
accounting principles, major issues as to the adequacy of the
Corporation's internal controls, any special audit steps adopted in
light of material control deficiencies and any other major
accounting policy changes; (b) analyses prepared by management
and/or the Independent Auditors setting forth significant financial
reporting issues and judgments made in connection
A-3
with the preparation of the financial statements; (c) the effect of
regulatory and accounting initiatives, as well as off-balance sheet
structures, transactions, obligations (including contingent
obligations), other relationships of the Corporation with
unconsolidated entities or other persons on the financial statements
of the Corporation and any unusual methods of acquiring or holding
interests in other entities; and (d) the results of the review of
the Corporation's quarterly financial statements by the
Corporation's Independent Auditors.
E. To review filings (including interim reports) with the SEC and other
published documents containing the Corporation's financial
statements and consider whether the information therein is
consistent with the information in the financial statements before
it is filed with the SEC, Nasdaq or other regulators, exchanges or
associations.
F. To discuss with the Independent Auditors on at least an annual
basis, if applicable, the matters required to be discussed by
Statement on Auditing Standards No. 61, as it may be modified or
supplemented, as well as, any problems or difficulties the auditors
encountered in the course of the audit work, including any
restrictions on the scope of the Independent Auditors' activities or
access to requested information, significant changes required in the
Independent Auditor's accounting plan, any significant disagreements
with management, and any other matters relating to the audit that
are to be communicated to the Committee under GAAP. Among the items
the Committee will consider discussing with the Independent Auditors
are:
1. any accounting adjustments that were noted or proposed by the
Independent Auditors but were "passed" (as immaterial or
otherwise);
2. any communications between the audit team and the Independent
Auditor's national office concerning auditing or accounting
issues presented by the engagement; and
3. any "management" or "internal control" letter issued, or
proposed to be issued, by the Independent Auditors to the
Corporation.
The discussion shall also include the responsibilities, budget and
staffing of the Corporation's internal audit function.
G. To discuss with management the Corporation's earnings press
releases, as well as financial information and any earnings guidance
provided to analysts and rating agencies. Discussion of earnings
releases, as well as financial information and any earnings guidance
may be done generally (i.e., discussion of the types of information
to be disclosed and the type of presentation to be made).
H. To discuss with management on at least an annual basis:
1. the Independent Auditors' annual audit scope, risk assessment
and plan to ensure completeness of coverage, reduction of
redundant efforts, the effective use of internal and external
audit resources and the use of independent public accountants
other than the appointed Independent Auditors;
2. the form of Independent Auditors' report on the annual
financial statements and matters related to the conduct of the
audit under generally accepted auditing standards; and
A-4
3. comments by the Independent Auditors on internal controls and
significant findings and recommendations resulting from the
audit.
I. To discuss with management on at least an annual basis:
o the written procedures regarding the internal audit,
o the adequacy of the Corporation's internal controls, any codes
of conduct and any monitoring of the Corporation's compliance
therewith;
o the annual internal audit plan, risk assessment, and
significant findings and recommendations and management's
responses thereto;
o internal audit staffing; and
o the internal audit function and responsibilities and any scope
restrictions encountered during the execution of internal
audit responsibilities.
J. To establish procedures for the receipt, retention and treatment of
complaints received by the Corporation regarding accounting,
internal accounting controls or auditing matters, and for the
confidential, anonymous submission by the Corporation's employees of
concerns regarding questionable accounting or auditing matters.
K. To establish policies governing the Corporation's hiring of or
engaging as a contractor any current or former employee of the
Independent Auditors and review and concur with the hiring or
engagement of such an individual. These policies shall provide that
no former employee of the Independent Auditors who was a member of
the Corporation's audit engagement team within one year of the date
of the commencement of procedures for a review or audit may
undertake a financial reporting oversight role at the Corporation.
L. To discuss with management on at least an annual basis management's
assessment of the Corporation's market, credit, liquidity and other
financial and operational risks, and the guidelines, policies and
processes for managing such risks.
M. To discuss with the Corporation's general counsel any significant
legal, compliance or regulatory matters that may have a material
impact on the Corporation's business, financial statements or
compliance policies, including related party transactions and
reports or inquiries from governmental or other agencies.
N. To obtain assurance from the Independent Auditors that the audit of
the Corporation's financial statements was conducted in a manner
consistent with Section10A of the Securities Exchange Act of 1934,
as amended, which sets forth certain procedures to be followed in
any audit of financial statements required under that Act.
O. To review and approve all related party transactions (as defined by
the applicable Nasdaq Rule).
P. To conduct or authorize investigations into any matters within the
Committee's charter. The Committee is empowered to: (i) retain
outside counsel or other advisors to advise or assist the Committee
in the conduct of an investigation; (ii) seek any information it
requires from external parties or employees, all of whom are
directed to cooperate with the Committee's
A-5
requests; (iii) meet with management, the Independent Auditors or
outside counsel, as necessary; (iv) meet with the Corporation's
financial advisors; and (v) authorize the payment of any fees in
respect of the foregoing.
Q. To produce the reports described under "Committee Reports" below.
R. To discharge any other duties or responsibilities delegated to the
Committee by the Board, by the Corporation's bylaws or by law from
time to time.
S. To review the Committee's duties and responsibilities at least
annually.
V. Committee Reports
The Committee shall produce the following reports and provide them to the
Board:
A. Any report or filing, including any recommendation, or other
disclosures required to be prepared by the Committee pursuant to the
rules of the SEC or any other regulatory authority for inclusion in
the Corporation's annual proxy statement, including:
1. a report for the annual proxy statement as to the Committee's
review and discussion of matters with the Corporation's
management and the Independent Auditors;
2. filing a copy of the Committee's charter as an appendix to the
annual proxy statement at least once every three (3) years;
and
B. An annual performance evaluation of the Committee, which shall
compare the performance of the Committee with the requirements of
this charter. The performance evaluation shall also include a review
of the adequacy of this charter and shall recommend to the Board any
revisions the Committee deems necessary or desirable, although the
Board shall have the sole authority to amend this charter. The
performance evaluation shall be conducted in such manner as the
Committee deems appropriate.
VI. Compensation of Committee Members
No member of the Committee may receive any compensation from the
Corporation other than (i) director's fees, which may be received in cash,
common stock, equity-based awards or other in-kind consideration
ordinarily available to directors; (ii) a pension or other deferred
compensation for prior service that is not contingent on future service;
and (iii) any other regular benefits that other directors receive.
VII. Delegation to Subcommittee
The Committee may, in its discretion, delegate all or a portion of its
duties and responsibilities to a subcommittee of the Committee. The
Committee may, in its discretion, delegate to one or more of its members
the authority to pre-approve any audit or non-audit services to be
performed by the Independent Auditors, provided that any such approvals
are presented to the Committee at its next scheduled meeting.
A-6
VIII. Resources and Authority of the Committee
The Committee shall have the resources and authority appropriate to
discharge its duties and responsibilities, including the authority to
select, retain, terminate, and approve the fees and other retention terms
of special or independent counsel, accountants or other experts, as it
deems appropriate, without seeking approval of the Board or management.
IX. GENERAL
The Committee may perform any other activities consistent with this
Charter, the Corporation's By-laws and applicable law, as the Committee
deems necessary or appropriate, or as directed by the Board.
X. AMENDMENTS:
This Charter may be amended by the Board.
A-7
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE ANGIODYNAMICS, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 11, 2005
This Proxy is solicited on behalf of the Board of Directors of
AngioDynamics, Inc. for the 2005 Annual Meeting of Stockholders to be held on
October 11, 2005. The 2005 Annual Meeting of Stockholders will be held at the
Hilton New York, New York, New York, on Tuesday, October 11, 2005, at 9:00 a.m.,
local time.
The undersigned, a holder of common stock of AngioDynamics, Inc., hereby
appoints Eamonn P. Hobbs and Joseph G. Gerardi, and each of them, the true and
lawful attorneys and proxies with full power of substitution, for and in the
name, place and stead of the undersigned, to vote all of the shares of common
stock of the Company which the undersigned would be entitled to vote if
personally present at the 2005 Annual Meeting of Stockholders, and at any
adjournment or postponement thereof, in all matters indicated on the reverse
side hereof, and with discretionary authority to vote as to any other matters
that may properly come before such meeting.
With- For All
For hold Except
1. The election of Class II directors of the company, each [_] [_] [_]
for a term of three years.
Gregory D. Casciaro, Howard W. Donnelly
and Robert E. Flaherty
INSTRUCTION: To withhold authority to vote for any individual nominee,
mark "For All Except" and write that nominee's name in the space provided
below.
-------------------------------------------------------------------------
For Against Abstain
2. To ratify the appointment of PricewaterhouseCoopers LLP [_] [_] [_]
as the independent registered public accounting firm of
AngioDynamics, Inc. for the fiscal year ending June 3,
2006.
3. To transact such other business as properly may come before the meeting.
Check here if you plan to attend the Annual Meeting [_]
This Proxy, when properly signed, will be voted in the manner directed. If
no direction is given, this Proxy will be voted FOR Proposal 1, Proposal 2 and
Proposal 3.
NOTE: Please sign exactly as your name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
------------------------
Please be sure to sign and date | Date |
this Proxy in the box below. | |
- --------------------------------------------------------------------------------
| |
| |
- -----------Stockholder sign above----------Co-holder (if any) sign above-------
- --------------------------------------------------------------------------------
^ Detach above card, sign, date and mail in postage paid envelope provided. ^
ANGIODYNAMICS, INC.
- --------------------------------------------------------------------------------
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- --------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
- ----------------------------------
- ----------------------------------
- ----------------------------------