UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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[ ] 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 Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
STEREOTAXIS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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it was determined.
[Stereotaxis Logo]
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 2005
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Dear Stockholder:
You are cordially invited to attend the 2005 Annual Meeting of
Stockholders of Stereotaxis, Inc. The meeting will be held at the Company's
principal offices at 4041 Forest Park Avenue, St. Louis, Missouri 63108 on
Wednesday, May 11, 2005, commencing at 9:00 a.m. Central time, for the
following purposes:
1. To elect three Class I directors to serve until our 2008 annual
meeting of stockholders and one Class II director to serve until our
2006 annual meeting of stockholders;
2. To ratify the appointment of Ernst & Young LLP as our independent
registered public accounting firm for fiscal year 2005; and
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed March 15, 2005 as the record date
for the determination of the stockholders entitled to notice of, and to
vote at, the annual meeting and all adjournments thereof. A list of
stockholders entitled to vote at the annual meeting will be available for
examination by any stockholder at our offices not less than ten days prior
to the annual meeting and at the meeting.
By Order of the Board of Directors,
STEREOTAXIS, INC.
/s/ Fred A. Middleton
Fred A. Middleton
Chairman of the Board of Directors
St. Louis, Missouri
April 6, 2005
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE VOTE
YOUR SHARES. YOU MAY VOTE ON THE INTERNET, BY TELEPHONE OR BY MAIL USING
THE ENCLOSED PROXY CARD. IF YOU CHOOSE TO VOTE BY MAIL, PLEASE COMPLETE THE
ENCLOSED PROXY CARD AND SIGN, DATE AND RETURN IT IN THE ENCLOSED ENVELOPE,
WHICH DOES NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES.
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TABLE OF CONTENTS
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Page
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Questions and Answers About the Annual Meeting.............................1
Election of Directors (Proxy Item No. 1)...................................3
Directors and Executive Officers...........................................4
Security Ownership of Certain Beneficial Owners and Management............11
Executive Compensation....................................................15
Committee Reports.........................................................19
Ratification of Independent Registered Public Accountants
(Proxy Item No. 2).......................................................19
Principal Accounting Fees and Services....................................21
Stock Price Performance Graph.............................................22
Certain Relationships and Related Party Transactions......................22
Section 16(a) Beneficial Ownership Reporting Compliance...................24
General Information.......................................................24
Exhibits.................................................................A-1
EXHIBITS
Audit Committee Charter..................................................A-1
Compensation Committee Charter...........................................B-1
Nominating and Corporate Governance Committee Charter....................C-1
[Stereotaxis Logo]
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 11, 2005
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
WHY AM I RECEIVING THESE MATERIALS?
The Board of Directors of Stereotaxis, Inc. (the "Company") is soliciting
proxies from the Company's stockholders in connection with its 2005 Annual
Meeting of Stockholders to be held on Wednesday, May 11, 2005, and any and
all adjournments thereof. These materials were first sent to our
stockholders on or about April 14, 2005. You are encouraged to vote on the
proposals presented in these proxy materials. You are invited to attend the
annual meeting, but you do not have to attend to vote.
WHEN AND WHERE IS THE ANNUAL MEETING?
We will hold the annual meeting on Wednesday, May 11, 2005, at 9:00 a.m.,
Central time, at our offices at 4041 Forest Park Avenue, St. Louis,
Missouri 63108.
WHO IS ENTITLED TO VOTE AT THE MEETING?
You are entitled to vote (in person or by proxy) at the meeting if you were
a stockholder of record of shares of our common stock at the close of
business on March 15, 2005, the record date for the meeting. On March 15,
2005, there were 27,216,758 shares of our common stock outstanding and
entitled to vote and no shares of our preferred stock outstanding.
WHAT AM I BEING ASKED TO VOTE ON AT THE MEETING?
We are asking our stockholders to elect three Class I directors to serve
until our 2008 annual meeting of stockholders and one Class II director to
serve until our 2006 annual meeting of stockholders, and to ratify the
appointment of Ernst & Young LLP as our independent registered public
accounting firm for the 2005 fiscal year.
HOW DO I VOTE?
Whether or not you expect to be present in person at the annual meeting,
you are requested vote your shares. Most stockholders will be able to
choose whether they wish to vote using the Internet, by telephone or mail.
The availability of Internet voting or telephone voting for stockholders
whose shares are held in street name by a bank or a broker may depend on
the voting processes of that organization. If you vote using the Internet,
you may incur costs
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such as telephone and Internet access charges for which you will be
responsible. Internet and telephone voting facilities will be available 24
hours a day and will close at 5:00 p.m., Central time, on May 10, 2005. If
you vote using the Internet or by telephone, you do not need to return your
proxy card.
Internet - The website for Internet voting is www.proxyvotenow.com/stxs.
Please have your proxy card available and follow the simple instructions
on the screen.
Telephone - The toll-free telephone number for telephone voting is
866-353-7811. Please have your proxy card available and follow the
simple recorded instructions.
Mail - Please complete, sign, date, and return the enclosed form of
proxy. The shares represented thereby will be voted in accordance
with your instructions.
In-person - You may vote by ballot.
If you do not attend the meeting, your shares of common stock may be voted
only when represented by a properly executed proxy. If you hold your shares
in street name through a bank or broker, your bank or broker will send you
a separate package describing the procedures and options for voting your
shares.
WHAT IF I WANT TO CHANGE MY VOTE?
If you are a stockholder of record, you can revoke your proxy at any time
before it is exercised by:
-- timely delivery of a properly executed, later-dated proxy;
-- submission of a later vote by Internet or telephone any time prior to
5:00 p.m., Central time, on May 10, 2005;
-- delivery of a written revocation of your proxy to our Secretary; or
-- voting by ballot at the meeting.
If your shares are held in the name of a bank or brokerage firm, you may
change your vote by submitting new voting instructions to your bank or
broker. If your bank or broker permits you to vote by Internet or
telephone, you may also be permitted to change your vote by Internet or
telephone, depending on the processes of that organization.
WHAT VOTE OF THE STOCKHOLDERS IS NEEDED FOR APPROVAL OF A PROPOSAL?
No business can be conducted at the annual meeting unless a majority of the
outstanding shares of common stock entitled to vote is present in person or
represented by proxy at the meeting. Each share of our common stock is
entitled to one vote with respect to each matter on which it is entitled to
vote. A plurality of the shares entitled to vote and present in person or
by proxy at the meeting must be voted "FOR" a director nominee. A majority
of shares entitled to vote and present in person or by proxy at the meeting
must be voted "FOR" the ratification of Ernst & Young LLP as our
independent registered public accounting firm for the 2005 fiscal year and
"FOR" such other business as may properly come before the meeting.
WHAT DO I DO IF MY SHARES OF COMMON STOCK ARE HELD IN "STREET NAME" AT A
BANK OR BROKERAGE FIRM?
If your shares are held in street name by a bank or brokerage firm as your
nominee, your bank or broker will send you a separate package describing
the procedure for voting your shares. You should follow the instructions
provided by your bank or brokerage firm.
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WHAT HAPPENS IF I RETURN MY SIGNED PROXY CARD BUT FORGET TO INDICATE HOW I
WANT MY SHARES OF COMMON STOCK VOTED?
If you sign, date and return your proxy and do not mark how you want to
vote, your proxy will be counted as a vote "FOR" all of the nominees for
directors and "FOR" the ratification of our independent registered public
accounting firm, and in the discretion of the proxy holders for such other
business as may properly come before the meeting.
WHAT HAPPENS IF I DO NOT INSTRUCT MY BROKER HOW TO VOTE OR IF I MARK
"ABSTAIN" ON THE PROXY?
If you mark your proxy "abstain," your vote will have the same effect as a
vote against the proposal or the election of the applicable director. If
you do not instruct your broker how to vote, your broker will vote your
shares for you at his or her discretion on routine matters such as the
election of directors and ratification of the independent registered public
accounting firm. Broker non-votes with respect to a matter that is not
routine will not be considered as present and entitled to vote with respect
to that matter and thus will have no effect on the vote for that matter.
WHAT DO I NEED TO DO IF I PLAN TO ATTEND THE MEETING IN PERSON?
If your shares are held in the name of a bank, broker or other holder of
record, you must present proof of your ownership, such as a bank or
brokerage account statement, to be admitted to the meeting. All
stockholders, including record holders, must also present a form of
personal identification in order to be admitted to the meeting.
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
The stockholders are being asked to elect Messrs. Abhi Acharya,
David W. Benfer and Gregory R. Johnson as Class I directors to serve on our
board of directors for 3-year terms ending with the 2008 annual meeting of
stockholders, and Mr. Robert J. Messey as a Class II director to serve on
our board of directors for a 1-year term (representing the balance of the
term of an existing Class II director) ending with the 2006 annual meeting
of stockholders, or, in the case of each such nominee, until a successor is
elected and qualified, or until his earlier death, resignation or removal.
For more information regarding the nominees for director, see "Directors
and Executive Officers" below. Proxies cannot be voted for a greater number
of persons than the number of nominees named in each Class.
The board of directors does not contemplate that any of the nominees
will be unable to stand for election, but should any nominee become unable
to serve or for good cause will not serve, all proxies (except proxies
marked to the contrary) will be voted for the election of a substitute
nominee as our board may recommend.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ALL OF THE ABOVE-NAMED NOMINEES FOR DIRECTOR.
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DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is the name, age, position and a brief account of
the business experience of each of the executive officers, directors who
will continue in office after the annual meeting, and nominees for director
of the Company. There are no family relationships between any of our
directors and executive officers.
NAME AGE POSITION(S)
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Bevil J. Hogg 56 President and Chief Executive Officer, Director
Michael P. Kaminski 45 Chief Operating Officer
James M. Stolze 61 Vice President and Chief Financial Officer
Douglas M. Bruce 47 Senior Vice President, Research & Development
Melissa C. Walker 48 Vice President, Regulatory, Quality and Clinical Affairs
Fred A. Middleton 55 Chairman of the Board of Directors
Abhi Acharya, Ph.D. 64 Director
Christopher Alafi, Ph.D. 41 Director
David W. Benfer 58 Director
Ralph G. Dacey, Jr., M.D. 56 Director
Gregory R. Johnson, Ph.D. 61 Director
William M. Kelley 69 Director
Abhijeet J. Lele 39 Director
William C. Mills III 49 Director
Robert J. Messey 59 Nominee for Director
Bevil J. Hogg has served as our President, Chief Executive Officer
and a director since June 1997. From 1994 through 1996, Mr. Hogg served as
President and Chief Executive Officer of Everest & Jennings International
Ltd., a manufacturer of wheelchairs and other hospital, home care and
nursing home products. Prior to Everest & Jennings, he was a founder or
co-founder of three companies, including Trek Bicycle Corporation. Mr. Hogg
received a Diplome Superior d'Etudes Francaises from the Sorbonne
(University of Paris, France).
Michael P. Kaminski has served as our Chief Operating Officer since
he joined the Company in April 2002. Prior to joining the Company, Mr.
Kaminski spent nearly 20 years with Hill-Rom Company (Hillenbrand
Industries). In his last position with Hill-Rom, Mr. Kaminski served as
Senior Vice President of North American Sales and Service. Prior to that,
he served as General Manager of the Acute Care Hospital Division of
Hill-Rom. Mr. Kaminski earned an M.B.A. from Xavier University and a B.S.
in Marketing from Indiana University.
James M. Stolze has served as our Vice President and Chief Financial
Officer since he joined the Company in May 2004. Prior to joining the
Company, Mr. Stolze spent eight years as Executive Vice President and Chief
Financial Officer of MEMC Electronic Materials, Inc., from 1995 to 2003.
Prior to MEMC, Mr. Stolze was an audit partner with KPMG LLP. Mr. Stolze
currently sits on the board of directors and audit committee of ESCO
Technologies, Inc., a public company listed on the New York Stock Exchange.
Mr. Stolze earned an M.B.A. from the University of Michigan and a B.S. in
Mechanical Engineering from the University of Notre Dame and is a certified
public accountant.
Douglas M. Bruce has served as our Senior Vice President, Research &
Development since he joined the Company in May 2001. Prior to joining the
Company, Mr. Bruce was Vice President, Product Development and Marketing,
for Intuitive Surgical, a developer and manufacturer of computer-enhanced
minimally invasive surgery systems, from 1997 to 2001. Prior to Intuitive
Surgical, Mr. Bruce was a Vice President of Engineering at Acuson Corp, a
manufacturer of diagnostic ultrasound systems, and has held positions in
mechanical, process and manufacturing engineering at Tandon Corp, ISS
Sperry Univac and IBM. Mr. Bruce received a M.S. in Mechanical Engineering
from the University of Santa Clara and a B.S. in Mechanical Engineering
from the University of California at Berkeley.
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Melissa C. Walker, RAC has served as our Vice President, Regulatory,
Quality, and Clinical Affairs since she joined the Company in March 2001.
Prior to joining the Company, Ms. Walker led the global regulatory team at
Bausch & Lomb Surgical, Inc., a subsidiary of Bausch & Lomb, Inc. and a
leading manufacturer of surgical instruments for the eye, from 1997 to
2000. Prior to Bausch & Lomb Surgical, Inc., Ms. Walker was Director of
Regulatory Affairs at Ethicon Endo-Surgery, Inc., a Johnson & Johnson
Company and a recognized leader in the manufacture of surgical instruments
used for minimally invasive surgery, from 1992 to 1997. Ms. Walker served
on the board of directors for the Regulatory Affairs Professionals Society
from 1997 to 2002 and was formerly the Board Chairman. Ms. Walker received
a M.S. degree in Zoology and a B.S. in Biology from East Texas State
University.
Fred A. Middleton has served as the Chairman of our board of
directors since June 1990. Mr. Middleton has been a General Partner in
Sanderling Ventures since 1987. Prior to that time, he was an independent
investor in the biomedical field. From 1984 to 1986, Mr. Middleton was
Managing General Partner of Morgan Stanley Ventures. He joined Genentech,
Inc. in 1978 and was a part of the management team in the company's early
formative period, assisting in developing its strategy and holding a
variety of roles including Vice Presidencies of Finance, Administration,
and Corporate Development, and Chief Financial Officer. Mr. Middleton also
served as President of Genentech Development Corporation. Prior to that
time, he served as a consultant with McKinsey & Company and as a Vice
President of Chase Manhattan Bank. Mr. Middleton holds an M.B.A. from
Harvard University and a B.S. degree in Chemistry from the Massachusetts
Institute of Technology.
Abhi Acharya, Ph.D. has served as a director since February 2005.
Dr. Acharya is currently self-employed as a consultant in the medical
device industry. From 1994 to 1997, he was the Vice President Regulatory
Affairs, Quality Assurance and Clinical Research at Target Therapeutics and
from 1993 to 1994, he was a Senior Technical Advisor at Biometric Research
Institute. From 1977 to 1993, Dr. Acharya held various positions at the
U.S. Food and Drug Administration including Director of the Division of
Cardiovascular, Respiratory and Neurological Devices. He currently serves
as a director at Neomend, Inc, InfraReDx, Inc. and Regen Biologics after
having previously served as a director of Somnus. Dr. Acharya holds a B.
Tech degree in Metallurgical Engineering from the Indian Institute of
Technology (Kharagpur, India) and an M.S. and Ph.D. in Biomaterials
Engineering from Northwestern University.
Christopher Alafi, Ph.D., has served as a director since August
2000. Dr. Alafi has been a General Partner of Alafi Capital Company, LLC, a
venture capital firm, since 1995. He was previously a Physiology and
Anatomy teacher at Santa Monica College, a visiting scholar at Stanford
University (Chemistry Department) and a researcher at DNAX. Dr. Alafi
received a B.A. in Biology from Pomona College and a D.Phil. in
Biochemistry from the University of Oxford.
David W. Benfer has served as a director since February 2005. Since
1999, Mr. Benfer has served as President and Chief Executive Officer of
Saint Raphael Healthcare System and the Hospital of Saint Raphael, New
Haven, Connecticut. Previously, he was the President and Chief Executive
Officer of the Provena-Saint Joseph/Morris Health Network in Joliet,
Illinois from 1992 to 1999. Mr. Benfer served as Senior Vice President for
Hospital and Urban Affairs for the Henry Ford Health System in Detroit and
Chief Executive Officer of the Henry Ford Hospital from 1985 to 1992. He
served as the Chairman of the Americal College of Healthcare Executives
(ACHE) from 1998 to 1999 and on their Board of Governors from 1992 to 2000.
Mr. Benfer was named a Fellow of ACHE in 1981 and serves on the Board of
the Catholic Health Association. He earned his B.S.B.A. from Wittenburg
University and his M.B.A. from Xavier University.
Ralph G. Dacey, Jr., M.D., has served as a director since March
2003. Dr. Dacey has been the Chairman of Neurosurgery at Washington
University in St. Louis since 1989. Prior to joining Washington University,
he was an Assistant Professor of Neurological Surgery at the University of
Washington and a Professor and Chief of the Division of Neurosurgery at the
University of North Carolina at Chapel Hill. Dr. Dacey received his B.A.
from Harvard University and his M.D. from the University of Virginia School
of Medicine. He has served as the Secretary of the American Board of
Neurological Surgeons and is a voting member of the American Board of
Medical Specialties. Dr. Dacey is also the Chairman of our Scientific
Advisory Board and served as Principal Investigator of our first Human
Clinical Trial (frontal lobe biopsy).
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Gregory R. Johnson, Ph.D., has served as a director since October
1994. Currently, Dr. Johnson is a Managing Director of Prolog Ventures,
LLC, a life sciences focused venture capital management firm based in St.
Louis. Dr. Johnson organized Prolog in 2000 following 13 years as a General
Partner with Gateway Associates. Prior to joining Gateway, Dr. Johnson
served as Vice President of Monsanto Venture Capital Company. Dr. Johnson
is currently a director of Everest Biomedical Instruments Company and
Singulex, Inc. Dr. Johnson received a Ph.D. and M.A. in Physics from the
University of Rochester and a B.S. in Physics from the Massachusetts
Institute of Technology.
William M. Kelley has served as a director since January 2003. Mr.
Kelley is the current Chairman of Hill-Rom Company, a position he has held
since 1995. While at Hill-Rom, Mr. Kelley also served as President and CEO
from 1992 to 1995, Sr. Vice President, Sales and Operations from 1989 to
1992 and Sr. Vice President, Sales and Marketing from 1980 to 1989. He
currently serves on the Board of National Committee for Quality Health Care
and is a member of HRDI (Healthcare, Research & Development Institute) and
Health Insights. He has been honored numerous times for his contributions
to the healthcare industry including as an Honorary Fellow of the American
College of Health Care Executives. He was educated at Hanover College and
George Washington University.
Abhijeet J. Lele has served as a director since April 2004. Mr. Lele
is a General Partner of EGS Healthcare Capital Partners, a venture capital
firm based in Rowayton, Connecticut, focusing on investments in medical
device, biopharmaceutical and specialty pharmaceutical companies. He joined
EGS in 1998, after spending four years in the health care practice of
McKinsey & Company. Before McKinsey, Mr. Lele held operating positions with
Lederle Laboratories, Progenics Pharmaceuticals and Clontech Laboratories.
He is currently a director of EP MedSystems, CryoCath Technologies,
OptiScan Biomedical and Ekos Corporation. Mr. Lele received his M.A. in
molecular biology from Cambridge University and his M.B.A. with distinction
from Cornell University.
William C. Mills III has served as a director since June 2000. In
August 2004, Mr. Mills became a Managing Member of a new management company
being formed by EGS Healthcare Capital Partners to manage EGS Private
Healthcare Partnership III. Before joining EGS, Mr. Mills was a Partner in
the Boston office of Advent International, a venture capital firm, for five
years. At Advent, he was co-responsible for healthcare venture capital
investments and focused on investments in the medical technology and
biopharmaceutical sectors. He has over 24 years of venture capital
experience. Before joining Advent, Mr. Mills spent over 11 years with the
Venture Capital Fund of New England where he was a General Partner. Prior
to that, he spent seven years at PaineWebber Ventures/Ampersand Ventures as
Managing General Partner. He is also a member of the Board of Managers of
Ascension Health Ventures. Mr. Mills received his A.B. in Chemistry, cum
laude, from Princeton University, his S.M. in Chemistry from the
Massachusetts Institute of Technology and his M.S. in Management from MIT's
Sloan School of Management.
Robert J. Messey, Director Nominee Mr. Messey has served as the
Senior Vice President and Chief Financial Officer of Arch Coal, Inc. since
December 2000. Prior to joining Arch, he served as the Vice President of
Financial Services of Jacobs Engineering Group, Inc. from 1999 to 2000 and
as Senior Vice President and Chief Financial Officer of Sverdrup
Corporation from 1992-1999. Mr. Messey was an audit partner at Ernst &
Young from 1981 to 1992. He currently serves as a director of Baldor
Electric Company. Mr. Messey earned his B.S.B.A. from Washington
University. Mr. Messey was recommended for nomination by Management.
BOARD OF DIRECTORS
Under the Company's restated certificate of incorporation, the
number of directors shall be fixed by the board of directors in the manner
provided in the Company's bylaws. Under the Company's restated bylaws,
subject to the rights of the holders of any series of preferred stock, the
number of directors of the Company may be fixed or changed from time to
time by resolution of a majority of the board of directors; provided the
number shall be no less than three (3) and no more than fifteen (15), or,
if the number is not fixed, the number shall be ten (10). Currently, we
have authorized a thirteen (13) member board of directors. Under the
Company's restated bylaws, the directors are divided into three (3)
classes, Class I, Class II and Class III, each class to be as nearly equal
in number as possible. The term of office of each director shall be until
the third annual meeting following his or her election and until the
election and qualification of his or her successor; provided, however, the
directors first serving as Class I directors shall serve for a term
expiring at this annual meeting of stockholders, the directors first
serving as Class II directors
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shall serve for a term expiring at the annual meeting of stockholders next
following December 31, 2005, and the directors first serving as Class III
directors shall serve for a term expiring at the annual meeting of
stockholders next following December 31, 2006.
Messrs. Parker, Johnson, Ledford, Acharya and Benfer have been
designated as Class I directors, and their terms expire at the 2005 annual
meeting of stockholders; Messrs. Aplin, Alafi, Dacey and Lele have been
designated as Class II directors, and their terms expire at the 2006 annual
meeting of stockholders; and Messrs. Middleton, Kelley, Mills and Hogg have
been designated as Class III directors, and their terms expire at the 2007
annual meeting of stockholders.
At the 2005 annual meeting of stockholders, three Class I directors
will be elected to serve for a term expiring at the annual meeting of
stockholders next following December 31, 2007. There will be two vacancies
in Class I as a result of two of our current Class I directors, Messrs.
Ledford and Parker, not standing for reelection at this meeting. Under the
terms of our restated certificate of incorporation and bylaws, the board of
directors may fill these vacancies at any time; however, the board does not
currently intend to fill these vacancies. In addition, one Class II
director will be elected at the 2005 annual meeting of stockholders to
serve for a term expiring at the 2006 annual meeting of stockholders to
replace one of the current Class II directors, Mr. Aplin, who has advised
the board of directors that he will be retiring effective as of the 2005
annual meeting.
CORPORATE GOVERNANCE
Our board of directors has determined that each of our directors
other than Mr. Hogg is independent under the rules of the Nasdaq National
Market. As a result, our board currently has a majority of independent
directors consistent with the rules of the Nasdaq National Market. Our
independent directors have regularly scheduled meetings at which only the
independent directors are present.
Our board of directors has established an audit committee, a
compensation committee and a nominating and corporate governance committee
and adopted charters for each of these committees. We believe that the
composition of each of these committees meets the criteria for independence
under, and the functioning of these committees complies with, the
applicable requirements of, the current rules and regulations of the Nasdaq
National Market and Securities and Exchange Commission ("SEC").
BOARD MEETINGS AND COMMITTEES
During fiscal year 2004, the board of directors met 12 times. During
fiscal year 2004, all incumbent directors attended 75% or more of the
aggregate meetings of the board and of the board committees on which they
served during the period they held office except for Mr. Ledford and Mr.
Kelley. Directors are encouraged, but not required, to attend our annual
meetings of stockholders.
AUDIT COMMITTEE
Our audit committee currently consists of Messrs. Aplin, Ledford and
Mills, all of whom qualify as "independent directors" and as audit
committee members under the Nasdaq National Market rules, and Mr. Aplin
serves as the chair of the audit committee. Following the 2005 annual
meeting, the audit committee will consist of Messrs. Benfer, Mills and,
upon his election by the stockholders as a Class II director, Mr. Messey,
all of whom will qualify as "independent directors" and as audit committee
members under the Nasdaq National Market rules and Mr. Mills will serve as
the chair of the audit committee. We believe that one or more of the
members of our reconstituted audit committee will qualify as an audit
committee financial expert under SEC rules and regulations. Our board of
directors has determined that each of our current audit committee members
is, and each of our audit committee members following the 2005 annual
meeting will be, financially sophisticated as set forth in Rule
4350(d)(2)(A) of the Nasdaq National Market.
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The audit committee assists our board of directors in its oversight of:
* the integrity of our financial statements;
* our accounting and financial reporting process, including our
internal controls;
* our compliance with legal and regulatory requirements;
* the independent registered public accountants' qualifications and
independence; and
* the performance of our independent registered public accountants.
The audit committee has direct responsibility for the appointment,
compensation, retention and oversight of our independent registered public
accountants. In addition, the audit committee must approve in advance:
* any related-party transaction that creates a conflict of interest
situation;
* all audit services; and
* all non-audit services, except for de minimis non-audit services,
provided the audit committee has approved such de minimis services
prior to the completion of the audit.
During fiscal year 2004, the audit committee met 9 times. Our
written audit committee charter is attached hereto as Exhibit A.
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COMPENSATION COMMITTEE
Our compensation committee currently consists of Messrs. Middleton,
Johnson and Parker, each of whom qualify as "independent directors" under
the Nasdaq National Market rules and as "outside directors" under the
Internal Revenue Code of 1986. Following the 2005 annual meeting, the board
intends to appoint a director to the committee in place of Mr. Parker. Mr.
Middleton serves as the chair of the compensation committee.
The compensation committee assists management and our board of
directors in:
* defining an executive compensation policy;
* determining the total compensation package for our chief executive
officer and other executive officers; and
* administering each of our equity-based compensation plans and
profit sharing plans, including our 1994 Stock Option Plan, our
2002 Stock Incentive Plan, our 2002 Non-Employee Directors' Stock
Plan and our 2004 Employee Stock Purchase Plan.
During fiscal year 2004, the compensation committee met 5 times. Our
written compensation committee charter is attached hereto as Exhibit B.
---------
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Our nominating and corporate governance committee currently consists
of Messrs. Parker, Ledford and Mills, each of whom qualify as "independent
directors" under the Nasdaq National Market rules. Following the 2005
annual meeting, the board intends to appoint 2 directors to the nominating
and corporate governance committee in place of Messrs. Ledford and Parker.
Mr. Parker serves as chairman of the nominating and corporate governance
committee. The nominating and corporate governance committee assists the
board of directors in:
* identifying and evaluating individuals qualified to become board
members;
* reviewing director nominees received from stockholders;
* selecting director nominees for submission to the stockholders at
our annual meeting; and
8
* selecting director candidates to fill any vacancies on the board
of directors.
The nominating and corporate governance committee is also
responsible for developing and recommending to the board of directors a set
of corporate governance guidelines and principles applicable to us.
During fiscal year 2004, the nominating and corporate governance
committee did not hold any formal meetings but frequently met informally
through telephonic conferences. Because we were a private company prior to
August 12, 2005 and the board slate was determined through a stockholders'
agreement among our venture capital investors, the committee believed that
such level of activity was sufficient to carry out its duties during such
time. Our written nominating and corporate governance committee charter is
attached hereto as Exhibit C.
---------
DIRECTOR NOMINATIONS
Our restated bylaws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual meeting of stockholders,
must provide timely notice in writing. To be timely, a stockholder's notice
must be delivered to or mailed and received at our principal executive
offices not more than 120 days or less than 90 days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders. However, in the event that the annual meeting is called for a
date that is not within 30 days before or after such anniversary date,
notice by the stockholder in order to be timely must be received not later
than the close of business on the 10th day following the date on which
notice of the date of the annual meeting was mailed to stockholders or made
public, whichever first occurs. Our restated bylaws specify requirements as
to the form and content of a stockholder's notice. These provisions may
preclude stockholders from bringing matters before an annual meeting of
stockholders or from making nominations for directors at an annual meeting
of stockholders.
Any stockholder wishing to submit a candidate for consideration
should send the following information to the Corporate Secretary,
Stereotaxis, Inc., 4041 Forest Park Avenue, St. Louis, Missouri 63108:
* Stockholder's name, number of shares owned, length of period held,
and proof of ownership;
* Name, age, business and residential address of candidate;
* A detailed resume describing among other things the candidate's
educational background, occupation, employment history, and
material outside commitments (e.g., memberships on other boards
and committees, charitable foundations);
* A supporting statement which describes the candidate's reasons for
seeking election to the board, and documents his/her ability to
satisfy the director qualifications described herein;
* Any information relating to the candidate that is required to be
disclosed in the solicitation of proxies for election of director;
* The class and number of shares of our capital stock that are
beneficially owned by the candidate;
* A description of any arrangements or understandings between the
stockholder and the candidate; and
* A signed statement from the candidate, confirming his/her
willingness to serve on the board.
Our Corporate Secretary will promptly forward such materials to the
chair of our nominating and corporate governance committee and our Chairman
of the Board. Our Corporate Secretary will also maintain copies of such
materials for future reference by the committee when filling board
positions. Stockholders may submit potential director candidates at any
time pursuant to these procedures. The committee will consider such
candidates if a vacancy arises and at such other appropriate times.
Notwithstanding the foregoing, the committee is not obligated to review any
candidate for which the required information is not provided by the time
set forth in our restated bylaws for the nomination of director candidates
by a stockholder that is not approved by the committee or the board. See
also "GENERAL INFORMATION - STOCKHOLDER PROPOSALS".
9
STOCKHOLDER COMMUNICATIONS POLICY
Management intends to propose to the board for its consideration a
policy to provide a process for security holders to send written
communications to our board. Any security holder wishing to send
communications to our board should send the written communication and the
following information to our Corporate Secretary, Stereotaxis, Inc., 4041
Forest Park Avenue, St. Louis, Missouri 63108:
* Security holder's name, number of shares owned, length of period
held, and proof of ownership;
* Name, age, business and residential address of security holder;
and
* Any individual director or committee to which the security holder
would like to have the written statement and other information
sent.
The Corporate Secretary will forward the information to the Chairman
of the Board, if addressed to the full board, or to the specific director
to which the communication is addressed.
COMPENSATION OF DIRECTORS
In March 2002, we adopted the 2002 Non-Employee Directors' Stock
Option Plan to provide for the automatic grant of options to purchase
shares of common stock to our non-employee directors. Under this Plan, at
each annual stockholder meeting, all non-employee directors receive an
annual option to purchase 7,500 shares of common stock, or 15,000 in the
case of the chairman. Newly elected directors will receive an initial
option to purchase 15,000 shares of common stock which will vest over a
2-year period with 50% vesting after the first year and the remainder
vesting monthly thereafter In addition, the Chairman and/or Designated
Financial Expert of the audit committee will receive an annual grant of
5,000 shares and the chairman of the compensation committee and the
chairman of the nominating/governance committee will each receive an annual
grant of 2,500 shares. Such options are granted at a price equal to the
fair market value of the stock on the date of grant and have a term of 10
years.
In addition, non-employee directors receive cash compensation for
their services as board members in addition to being reimbursed for their
out-of-pocket expenses incurred in connection with attending board and
committee meetings. Each non-employee director is entitled to an $18,000
annual retainer ($24,000 for the chairman) for board membership and an
additional payment of $1,500 per in-person board meeting and $500 per
telephonic board meeting. Each member of the audit committee, compensation
committee and nominating/governance committee is entitled to a $2,500
annual retainer. The chairman/designated financial expert of the audit
committee is entitled to a $7,500 annual retainer in lieu of the member
retainer and the chairman of the compensation committee and the chairman of
the nominating/governance committee are each entitled to a $5,000 annual
retainer.
We paid $20,000 to Mr. Kelley and $28,500 to Dr. Acharya in 2004 as
compensation for consulting services unrelated to their service as
directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Middleton served as a member of our compensation committee
during our last fiscal year and as our president from December 1996 through
June 1997. Otherwise, none of our compensation committee members and none
of our executive officers have a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity or insider participation in compensation decisions.
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to us with
respect to the beneficial ownership of our common stock as of March 31,
2005 by:
* each person known by us to own beneficially more than 5% of our
outstanding common stock;
* each of our directors or nominees;
* each of our named executive officers; and
* all of our directors, nominees and executive officers as a group.
There were 27,228,345 shares of common stock outstanding as of March
31, 2005. The table below includes the number of shares underlying options
and warrants that are currently exercisable or exercisable within 60 days
of March 31, 2005. Shares of common stock subject to options and warrants
that are currently exercisable or exercisable within 60 days of March 31,
2005 are considered outstanding and beneficially owned by the person
holding the options or warrants for the purposes of computing beneficial
ownership of that person but are not treated as outstanding for the purpose
of computing the percentage ownership of any other person. To our
knowledge, except as set forth in the footnotes to this table and subject
to applicable community property laws where applicable, each person named
in the table has sole voting and investment power with respect to the
shares set forth opposite such person's name. Except as otherwise
indicated, the address of each of the persons in this table is as follows:
c/o Stereotaxis, Inc., 4041 Forest Park Avenue, St. Louis, Missouri 63108.
PERCENTAGE OF SHARES OF
NAME AND ADDRESS OF NUMBER OF SHARES OF COMMON COMMON STOCK
BENEFICIAL OWNER OF COMMON STOCK STOCK BENEFICIALLY OWNED BENEFICIALLY OWNED
-------------------------------- -------------------------- -----------------------
FIVE PERCENT STOCKHOLDERS
Entities affiliated with Sanderling Ventures(1) 3,231,487 11.87%
400 S. El Camino Real, Suite 1200
San Mateo, CA 94402
Alafi Capital Company LLC(2) 2,351,857 8.64
9 Commodore Drive, Suite 405
Emeryville, CA 94608
Entities affiliated with EGS Healthcare(3) 2,096,880 7.70
105 Rowayton Avenue, 2nd Floor
Rowayton, CT 06853
Entities affiliated with Franklin 1,506,400 5.53
Resources, Inc.(4)
One Franklin Parkway
San Mateo, CA 94403
11
PERCENTAGE OF SHARES OF
NAME AND ADDRESS OF NUMBER OF SHARES OF COMMON COMMON STOCK
BENEFICIAL OWNER OF COMMON STOCK STOCK BENEFICIALLY OWNED BENEFICIALLY OWNED
-------------------------------- -------------------------- -----------------------
DIRECTORS AND NAMED EXECUTIVE OFFICERS
Fred A. Middleton(5) 3,416,606 12.55
Christopher Alafi(6) 2,539,493 9.33
Abhijeet Lele(7) 2,105,213 7.73
Gregory R. Johnson(8) 668,993 2.46
David J. Parker(9) 657,174 2.41
John C. Aplin(10) 798,519 2.93
Randall D. Ledford(11) 782,112 2.87
Bevil J. Hogg(12) 587,036 2.16
Ralph G. Dacey, Jr.(13) 62,498 *
William M. Kelley (14) 46,527 *
William C. Mills III(15) 1,056,021 3.88
Michael P. Kaminski(16) 137,152 *
Douglas M. Bruce(17) 138,888 *
Melissa C. Walker(18) 65,391 *
Abhi Acharya 11,111 *
Davis W. Benfer 1,000 *
Robert J. Messey
---------- -----
All directors, nominees and officers as a group (17
persons) 13,073,733 48.02%
-------
* Indicates ownership of less than 1%
(1) Includes 781,351 shares held by Sanderling Venture Partners
II, L.P., 301,745 shares held by Sanderling Management
Limited, Custodian FBO The Investors of Sanderling Ventures
Limited, 532,758 shares held by and 9,480 shares issuable
under warrants held by Sanderling IV Biomedical
Co-Investment Fund, L.P., 224,515 shares held by Sanderling
Venture Partners IV Co-Investment Fund, L.P., 617,411 shares
held by and 84,997 shares issuable under warrants held by
Sanderling Venture Partners V Co-Investment Fund, L.P.,
89,834 shares held by and 24,702 shares issuable under
warrants held by Sanderling V Beteiligungs GmbH & Co. KG.,
100,970 shares held by and 22,602 shares issuable under
warrants held by Sanderling V Limited Partnership, 374,313
shares held by and 37,705 shares issuable under warrants
held by Sanderling V Biomedical Co-Investment Fund, L.P.,
25,487 shares held by and 3,138 shares issuable under
warrants held by Sanderling Ventures Management V; and 480
shares issuable under warrants held by Sanderling II Limited
Partnership (collectively, "Sanderling").
Middleton-McNeil Associates, L.P. is the general partner of
Sanderling Venture Partners II, L.P. and has voting and
dispositive authority over the shares owned by Sanderling
Venture Partners II, L.P. Middleton-McNeil Associates, L.P.
is managed by its general partners, Fred A. Middleton, one
of our directors, and Robert G. McNeil. Middleton-McNeil,
L.P. is the general partner of Sanderling II Limited
Partnership and has voting and dispositive authority over
the shares owned by such entities. Middleton-McNeil, L.P. is
managed by its general partners, Fred A. Middleton, one of
our directors, and Robert G. McNeil. Middleton-McNeil
Associates IV, LLC is the general partner of Sanderling IV
Biomedical Co-Investment Fund, L.P. and has voting and
dispositive authority over the shares owned by Sanderling IV
Biomedical Co-Investment Fund, L.P. Middleton-McNeil
Associates IV, LLC is managed by its members, Fred A.
Middleton, one of our directors, and Robert G. McNeil.
Middleton-McNeil Associates IV, L.P. is the general partner
of Sanderling Venture Partners IV Co-Investment Fund, L.P.
and has voting and dispositive power over the shares owned
by Sanderling Venture Partners IV Co-Investment Fund, L.P.
Middleton-McNeil Associates IV, L.P. is managed by its
general partners, Fred A. Middleton, one of our directors,
and Robert G. McNeil. Middleton, McNeil & Mills Associates
V, LLC is the Investment General Partner of Sanderling V
Limited Partnership
12
and Sanderling V Beteiligungs GmbH & Co. KG and the General
Partner of Sanderling V Biomedical Co-Investment Fund, L.P.
and Sanderling Venture Partners V Co-Investment Fund, L.P.
and has voting and dispositive authority over the shares
owned by such entities. Middleton, McNeil & Mills Associates
V, LLC is managed by its managing directors, Fred A.
Middleton, one of our directors, and Robert G. McNeil,
Timothy C. Mills and Timothy J. Wollaeger. Sanderling
Ventures Management V is managed by Fred A. Middleton, one
of our directors, and Robert G. McNeil, Timothy C. Mills and
Timothy J. Wollaeger, the individuals who have invested
under the dba Sanderling Ventures Management V, which
individuals have voting and dispositive power over the
shares owned by Sanderling Ventures Management V.
(2) Includes 2,210,346 shares held by and 141,511 shares
issuable under warrants held by Alafi Capital Company LLC
("Alafi Capital"). Christopher Alafi, one of our directors,
and Moshe Alafi are the managing partners of Alafi Capital
and have full voting and investment power with respect to
the shares owned by Alafi Capital.
(3) Includes 583,941 shares held by and 42,001 shares issuable
under warrants held by EGS Private Healthcare Partnership,
L.P., 83,419 shares held by and 6,000 shares issuable under
warrants held by EGS Private Healthcare Counterpart, L.P.,
916,586 shares held by and 130,212 shares issuable under
warrants held by EGS Private Healthcare Partnership II L.P.,
144,554 held by and 20,535 shares issuable under warrants
held by EGS Private Healthcare Investors II, L.P., 137,924
shares held by and 19,593 shares issuable under warrants
held by EGS Private Healthcare Canadian Partners, L.P. and
10,609 shares held by and 1,506 shares issuable under
warrants held by EGS Private Healthcare President's Fund,
L.P. (collectively, "EGS"). EGS Private Healthcare
Investors, L.L.C. is the general partner of EGS Private
Healthcare Partnership II L.P., EGS Private Healthcare
Investors II, L.P., EGS Private Healthcare Canadian
Partners, L.P. and EGS Private Healthcare President's Fund,
L.P. and has voting and dispositive power over the shares
owned by such entities. EGS Private Healthcare Investors,
L.L.C. is managed by a board of managers comprised of
Abhijeet Lele, one of our directors, and Fred Greenberg and
Terry Vance. EGS Private Healthcare Associates, LLC is the
general partner of EGS Private Healthcare Partnership, L.P.
and EGS Private Healthcare Counterpart, L.P. and has voting
and dispositive power over the shares owned by such
entities. EGS Private Healthcare Associates, LLC is managed
by a board of managers comprised of Abhijeet Lele, one of
our directors, and Fred Greenberg.
(4) Based on information provided by Franklin Resources, Inc.
("FRI") and contained in a Schedule 13G jointly filed with
the Securities and Exchange Commission by Charles B.
Johnson, Rupert H. Johnson, Jr. and Franklin Advisers, Inc.
on February 14, 2005. The filing indicates that FRI has sole
power to vote and to dispose of all the shares and that the
joint filers are not acting as a "group" for purposes of
Section 13(d) under the Securities Exchange Act of 1934 and
that they are not otherwise required to attribute to each
other the "beneficial ownership" of securities held by any
of them or by any persons or entities advised by FRI
subsidiaries.
(5) Includes 3,048,384 shares held by and 183,103 shares
issuable under warrants held by Sanderling. Mr. Middleton
disclaims beneficial ownership of the shares and warrants
held by Sanderling and Middleton-McNeil L.P. except to the
extent of his proportionate ownership interest therein. Also
includes options to purchase 25,000 shares of common stock.
(6) Includes 2,210,346 shares held by and 141,511 shares
issuable under warrants held by Alafi Capital Company, LLC
("Alafi Capital"). Dr. Alafi is a general partner of Alafi
Capital and disclaims beneficial ownership of the shares and
warrants held by Alafi Capital except to the extent of his
proportionate partnership interest therein. Includes 19,201
shares issuable under warrants held by Dr. Alafi. Also
includes options to purchase 12,500 shares of common stock.
(7) Includes 1,877,033 shares held by and 219,847 shares
issuable under warrants held by EGS. Mr. Lele is a general
partner of EGS and member of the board of managers of EGS
Private Healthcare Investments, L.L.C. and EGS Private
Healthcare Associates, L.L.C., which control the EGS
entities, and disclaims
13
beneficial ownership of such shares and warrants held by the
EGS entities except to the extent of his proportionate
ownership interest therein. Also includes options to
purchase 8,333 shares of common stock.
(8) Includes 280,333 shares held by Gateway Venture Partners
III, L.P., 216,533 shares held by and 31,681 shares issuable
under warrants held by Prolog Capital A, L.P. and 111,626
shares held by and 16,320 shares issuable under warrants
held by Prolog Capital B, L.P. Dr. Johnson is a Principal of
each of such entities and disclaims beneficial ownership of
the shares and warrants held by such entities except to the
extent of his proportionate partnership interest therein.
Also includes options to purchase 12,500 shares of common
stock.
(9) Includes 12,847 shares held by Ampersand 1999 Companion Fund
Limited Partnership and 629,524 shares held by Ampersand
1999 Limited Partnership. AMP-99 Management Company Limited
Liability Company is the owner of Ampersand 1999 Limited
Partnership and Ampersand 1999 Companion Fund Limited
Partnership. Mr. Parker is a Managing Member of AMP-99
Management Company Limited Liability Company and disclaims
beneficial ownership of the shares and warrants held by it
except to the extent of his proportionate ownership interest
therein. Also includes options to purchase 12,500 shares of
common stock.
(10) Includes 671,830 shares held by and 16,057 shares issuable
under warrants held by CID Equity Capital V, L.P. and 67,135
shares held by and 9,470 shares issuable under warrants held
by CID Equity Capital VIII, L.P. (collectively, "CID"). Dr.
Aplin is a general partner of CID and disclaims beneficial
ownership of the shares and warrants held by CID except to
the extent of his proportionate ownership interest therein.
Also includes options to purchase 27,083 shares of common
stock.
(11) Includes 708,377 shares held by and 39,708 shares issuable
under warrants held by Emersub XXXVIII, Inc., an affiliate
of Emerson Electric Co. Dr. Ledford is an officer of Emerson
Electric Co. and disclaims beneficial ownership of the
shares and warrants held by Emersub XXXVIII, Inc. Also
includes options to purchase 27,033 shares of common stock.
(12) Includes options to purchase 287,036 shares of common stock,
35,590 shares of which, when received upon exercise, would
be subject to repurchase by us. Our right to repurchase
lapses ratably on a monthly basis, with the repurchase right
terminating in full on the fourth anniversary of the date of
the grant.
(13) Includes options to purchase 12,500 shares of common stock.
(14) Includes options to purchase 46,527 shares of common stock.
(15) Consists of options to purchase 34,027 shares of common
stock. Prior to August 1, 2004, Mr. Mills was an officer of
Advent International Corporation and a partner of various
entities associated with Advent International. Shares owned
by entities owned or managed by Advent International include
874,458 shares held by and 43,096 shares issuable under
warrants held by Advent Health Care and Life Sciences II
Limited Partnership, 67,983 shares held by and 3,350 shares
issuable under warrants held by Advent Health Care and Life
Sciences II Beteiligung GmbH & Co. KG, 19,479 shares held by
and 958 shares issuable under warrants held by Advent
Partners HLS II Limited Partnership and 12,076 shares held
by and 594 shares issuable under warrants held by Advent
Partners Limited Partnership (collectively, "Advent"). Mr.
Mills resigned from Advent International effective July 31,
2004. Accordingly, Mr. Mills no longer has voting or
dispositive power with respect to any of the securities held
by Advent, and he disclaims beneficial ownership of such
securities. Mr. Mills continues to hold an ownership
interest in the Advent entities. Advent has the right to
require Mr. Mills to exercise certain of the options listed
in the table and pay the net proceeds thereof to Advent. In
August 2004, Mr. Mills became a managing member of a new
management company being formed by EGS Healthcare Capital
Partners III. Mr. Mills does not have voting or dispositive
power over any of the securities of Stereotaxis owned by
EGS.
(16) Includes options to purchase 137,152 shares of common stock.
14
(17) Includes options to purchase 55,555 shares of common stock,
9,115 shares of which, when received upon exercise, are
subject to repurchase by us. Our right to repurchase both
the shares already received and any shares received upon
exercise of the stock option lapses ratably on a monthly
basis, with the repurchase right terminating in full on the
fourth anniversary of the date of the grant.
(18) Includes options to purchase 65,391 shares of common stock,
2,604 shares of which, when received upon exercise, would be
subject to repurchase by us. Our right to repurchase lapses
ratably on a monthly basis, with the repurchase right
terminating in full on the fourth anniversary of the date of
the grant.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
compensation of our chief executive officer and each of our other four most
highly compensated executive officers whose aggregate cash compensation
exceeded $100,000 during the year ended December 31, 2004. We refer to
these persons as the "named executive officers" elsewhere herein.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- --------------------------------
AWARDS
----------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(4) ($) (#) ($) ($)
--------------------------- ------ -------- ------- ------------ ---------- ---------- ------- ------------
Bevil J. Hogg 2004 $337,667 $76,500 $1,032 -- 97,222 -- $ --
President and 2003 306,000 70,200 1,344 -- 69,444 -- --
Chief Executive Officer 2002 297,917 48,750 667 -- 97,222 -- --
Michael P. Kaminski 2004 272,517 61,875 360 -- 69,444 -- --
Chief Operating 2003 244,800 56,160 238 -- 13,888 -- --
Officer 2002 169,231 27,625 152 -- 138,888 -- 3,578(2)
James M. Stolze(3) 2004 163,590 36,808 924 -- 111,111 -- --
Vice President and 2003 -- -- -- -- -- -- --
Chief Financial Officer 2002 -- -- -- -- -- -- --
Douglas M. Bruce 2004 258,329 56,733 360 -- 20,832 --
Senior Vice President, 2003 243,003 55,598 352 -- 6,944 -- 923(2)
Research & Development 2002 236,133 63,610 346 -- 48,611 -- 16,458(2)
Melissa C. Walker 2004 191,417 43,538 255 -- -- -- --
Vice President,
Regulatory, 2003 165,250 37,913 210 -- 27,777 -- --
Quality and Clinical
Affairs 2002 161,000 30,000 198 -- 13,888 -- --
-------
(1) These amounts represent bonuses earned during the fiscal
years indicated. Annual bonuses earned during a fiscal year
are generally paid in the first quarter of the subsequent
fiscal year.
(2) Represents certain moving expenses reimbursed by us for the
executive officer's relocation in connection with
commencement of employment with us.
(3) Mr. Stolze became our Vice President and Chief Financial
Officer effective May 27, 2004.
(4) Represents compensation related to group term life insurance
premiums paid by the Company.
During fiscal year 2004, the Company did not adjust or amend the
exercise price of stock options previously awarded to any of the named
executive officers, whether through amendment, cancellation or replacement
grants, or any other means.
15
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to
stock options granted to each of our named executive officers during the
fiscal year ended December 31, 2004.
INDIVIDUAL GRANTS
--------------------------------------------------------
PERCENTAGE
OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------------
NAME GRANTED FISCAL 2004 PRICE ($/SH) DATE 5% 10%
---- ---------- ------------ ------------ ---------- ---------- ------------
Bevil J. Hogg 48,611 5.2% $6.77 1/28/2014 $206,967 $ 524,495
Bevil J. Hogg 48,611 5.2% 8.00 8/17/2014 244,570 619,787
Michael P. Kaminski 69,444 7.4% 5.94 1/08/2014 259,417 657,415
James M. Stolze 111,111 11.9% 7.02 5/26/2014 490,537 1,243,118
Douglas M. Bruce 10,416 1.1% 6.77 1/28/2014 44,347 112,385
Douglas M. Bruce 10,416 1.1% 8.00 8/17/2014 52,405 132,803
Melissa C. Walker -- -- -- -- -- --
All options granted to these executive officers in 2004 were
granted under the 2002 Stock Incentive Plan. The percentage of total
options is based on an aggregate of 935,553 shares granted to employees
during 2004. Options vest at the rate of 25.0% after one year of service
from the date of grant, and monthly thereafter, over 36 additional months.
Options have a term of ten years but may terminate before their expiration
dates if the optionee's status as an employee is terminated or upon the
optionee's death or disability. The exercise price on the date of grant was
equal to 100% of the fair market value at the date of grant.
With respect to the amounts disclosed in the column captioned
"Potential Realizable Value at Assumed Annual Rates of Stock Price
Appreciation for Option Term", the 5% and 10% assumed annual rates of
compounded stock price appreciation are mandated by rules of the SEC, are
based on the closing price as of the date of grant and do not represent our
estimate or projection of our future common stock prices.
The potential realizable values are calculated by:
* multiplying the number of shares of common stock subject to a
given stock option by the fair market value at the date of
grant;
* assuming that the aggregate stock value derived from that
calculation compounds at the annual 5% or 10% rate shown in the
table until the expiration of the options; and
* subtracting from that result the aggregate option exercise
price.
Actual gains, if any, on stock option exercises are dependent on
the future performance of our common stock and overall stock market
conditions. The amounts reflected in the table may not necessarily be
achieved.
OPTION EXERCISES
There were no option exercises by the named executive officers in
2004. The following table sets forth the number and value of unexercised
options held by each of the named executive officers on December 31, 2004.
The value of "in-the-money" stock options represents the positive spread
between the exercise price of stock options and
16
the fair market value of the options, based upon the closing market price
of $9.83 per share on that date multiplied by the number of shares
underlying the options less the exercise price payable for these share.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 2004(1) DECEMBER 31, 2004
EXERCISE REALIZED ------------------------------ ------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Bevil J. Hogg -- -- 203,411 199,365 $1,335,709 $806,294
Michael Kaminski -- -- 98,089 124,131 491,751 537,962
James M. Stolze -- -- 0 111,111 -- 312,222
Douglas M. Bruce -- -- 37,180 39,207 185,605 139,286
Melissa C. Walker -- -- 55,985 25,030 398,075 113,434
-------
(1) Certain shares to be acquired upon exercise are subject to a
right of repurchase by us. Our right to repurchase lapses as
to 25% of the shares covered by the respective options on
the first anniversary of the vesting start date, and lapses
ratably on a monthly basis thereafter, with the repurchase
right terminating in full on the fourth anniversary of the
vesting start date.
EMPLOYMENT AGREEMENTS
In June 1997, we entered into letter and employment agreements with
Bevil J. Hogg, our President and Chief Executive Officer, relating to the
terms of his employment. Mr. Hogg's current annual base salary is $365,000
(subject to annual adjustment by the compensation committee) and he is
eligible to receive a cash bonus of up to 25% of his annual base salary,
subject to the achievement of performance goals. His employment is at will.
If Mr. Hogg is terminated without cause, he will be paid a salary
continuance equal to his base salary for the lesser of (1) the period from
the date of his termination of employment until he commences employment
with a new employer or (2) 24 months. In addition, 12 months worth of Mr.
Hogg's unvested stock options will automatically vest. Upon an acquisition
or merger where we are not the surviving entity and a change of control
occurs, 50% of Mr. Hogg's unvested shares will vest. If Mr. Hogg is
terminated after any such acquisition or merger or is not offered a
comparable position in the surviving entity, he will be paid a salary
continuance equal to his base salary for 24 months and 100% of his unvested
options will vest at the end of the salary continuance period.
In April 2002, we entered into letter and employment agreements with
Michael P. Kaminski, our Chief Operating Officer, relating to the terms of
his employment starting on May 5, 2002. Mr. Kaminski's current annual base
salary is $288,330 (subject to annual adjustment by the compensation
committee) and he is eligible to receive an annual cash bonus of up to 25%
of his annual base salary, subject to the achievement of performance goals.
His employment is at will. If Mr. Kaminski is terminated without cause, he
will be paid a salary continuance equal to his monthly base salary for the
lesser of (1) the period from the date of his termination of employment
until he commences employment with a new employer or (2) six months. In
addition, if Mr. Kaminski's employment is terminated as a result of, or
following, an acquisition or merger where we are not the surviving entity
and a change of control occurs, and Mr. Kaminski is not offered a
comparable position and salary in the surviving entity, (1) he will be paid
salary continuance equal to his monthly base salary for the lesser of (a)
the period from the date of his termination of employment until he
commences employment with a new employer or (b) six months, and (2) 100% of
his unvested options will vest at the end of the salary continuance period.
In May 2004, we entered into letter and employment agreements with
James M. Stolze, our Vice President and Chief Financial Officer, relating
to the terms of his employment starting on May 27, 2004. His current annual
base salary is $283,250 (subject to annual adjustment by the compensation
committee) and he is eligible to receive an annual cash bonus of up to 25%
of his salary, subject to the achievement of performance goals. His
employment is at
17
will. If he is terminated without cause, he will be paid salary continuance
equal to his monthly base salary for six months. In addition, if Mr.
Stolze's employment is terminated in contemplation of or within a year of a
change in control of Stereotaxis, 100% of his unvested options will vest
under the terms of the 2002 Stock Incentive Plan.
In April 2001, we entered into letter and employment agreements with
Douglas M. Bruce, our Senior Vice President, Research and Development,
relating to the terms of his employment starting on April 23, 2001. Mr.
Bruce's current annual base salary is $269,725 (subject to annual
adjustment by the compensation committee) and he is eligible to receive an
annual cash bonus of up to 25% of his annual base salary, subject to the
achievement of performance goals. His employment is at will. If he is
terminated without cause at any time after the first anniversary of his
employment, he will be paid salary continuance equal to his monthly base
salary for six months. In addition, if Mr. Bruce is terminated as a result
of, or following, an acquisition or merger where we are not the surviving
entity and a change of control occurs and he is not offered a comparable
position and salary with the surviving entity, or is terminated within one
year of such acquisition or merger, (1) he will be paid salary continuance
equal to his monthly base salary for six months, and (2) any repurchase
rights with respect to his unvested shares will expire at the end of the
salary continuance period and the shares, or any options to purchase these
shares, will become vested. The repurchase right will also expire, and
shares or options will become vested, if Mr. Bruce's employment is
terminated without cause within one year of a change of control
notwithstanding his having been previously offered such comparable position
and salary.
In February 2001, we entered into letter and employment agreements
with Melissa C. Walker, our Vice President, Regulatory, Quality and
Clinical Affairs, relating to the terms of her employment starting on March
5, 2001. Her current annual base salary is $205,110 (subject to annual
adjustment by the compensation committee) and she is eligible to receive an
annual cash bonus of up to 25% of her salary, subject to the achievement of
performance goals. Her employment is at will. If she is terminated without
cause, she will be paid a salary continuance equal to her monthly base
salary for three months. In addition, if Ms. Walker's employment is
terminated as a result of, or following, an acquisition or merger where we
are not the surviving entity and a change of control occurs, and she is not
offered a comparable position and salary in the surviving entity, (1) she
will be paid salary continuance equal to her monthly base salary for three
months and (2) 100% of her unvested options will vest at the end of the
salary continuance period.
CHANGE OF CONTROL
Under the terms of our 2002 Stock Incentive Plan. in the event of a
change of control and if a participant's employment is terminated in
contemplation of, or within one year after, the change of control, the
option fully vests. For these purposes, a change of control means:
* the purchase or acquisition by any person, entity or group of
beneficial ownership of 20% or more of the then-outstanding shares
of our common stock or of the combined voting power to elect the
board of directors;
* a change in a majority of the members of the board of directors in
place at the date of effectiveness of this plan, unless any such
change is approved by a majority of such remaining original board
members; or
* the liquidation, dissolution, sale of all or substantially all of
our assets, or a merger, reorganization or consolidation, under
circumstances whereby the stockholders immediately prior to such
transaction do not own more than 50% of the common stock and
combined voting power of the successor corporation immediately
after such transaction.
18
COMMITTEE REPORTS
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The compensation committee, which is currently comprised of three
non-employee directors, administers our executive compensation program. The
committee works with management to develop general compensation plans and
is responsible for determining the compensation of each executive officer.
The compensation committee also has the authority to administer and to
grant stock options under our stock option plans.
Our executive compensation program is intended to align executive
compensation with our business objectives and the executive's individual
performance and to enable us to attract, retain and reward executive
officers who contribute, and are expected to continue to contribute, to our
long-term success. In analyzing executive compensation, the committee is
guided by the following principles: (i) the total compensation payable to
executive officers should be sufficiently competitive with the compensation
paid by other public companies of a similar size which design, manufacture
and market medical devices for officers in comparable positions so that we
can attract and retain qualified executives, and (ii) individual
compensation should include components which reflect both the financial
performance of the Company and the performance of the individual. The
compensation of our executive officers consists of a combination of base
salary, bonus and equity-based compensation. The committee believes that
executive compensation should be designed to motivate executives to
increase stockholder value and further believes that executive officers can
best increase stockholder value by focusing on our sales and operating
results. Factors such as position, individual performance and contribution
to past and future Company success are considered when establishing
executive compensation levels. In addition, the compensation committee may,
from time to time, hire compensation and benefits consultants to assist in
developing overall compensation strategies, including equity incentive
plans.
COMPENSATION FOR THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
Mr. Hogg's salary is comprised of a base salary plus an annual
incentive bonus payable based on the achievement of corporate objectives
set by the compensation committee and long-term incentive compensation in
the form of stock options. To determine Mr. Hogg's 2004 compensation
package, the compensation committee considered his performance, competitive
compensation data from similar companies within the medical device industry
as well as the other criteria indicated above. During 2004, the
compensation committee awarded Mr. Hogg an increase to his base salary and
a bonus payment based on the achievement of 2003 objectives and additional
stock options.
INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code limits the tax deduction
allowable for executive compensation to $1.0 million per year for certain
executive officers unless such compensation is performance based. As the
cash compensation paid to our executive officers is below $1.0 million and
the compensation committee believes that the options granted would meet the
requirements for performance based compensation, the Company believes that
these limitations did not impact the Company in 2004.
Fred A. Middleton, Chair
Gregory R. Johnson, Ph.D.
David J. Parker
REPORT OF THE AUDIT COMMITTEE
The audit committee assists the board of directors in its oversight
of the Company's accounting and financial reporting process. Management is
primarily responsible for the financial statements and reporting process,
including the systems of internal controls, while the independent
registered public accountants are responsible for performing an independent
audit of the Company's financial statements in accordance with auditing
standards generally accepted
19
in the United States, and expressing an opinion on the conformity of those
financial statements with accounting principles generally accepted in the
United States.
In this context, the committee has met and held discussions with
management and the independent registered public accountants. The committee
discussed with the Company's independent registered public accountants the
overall scope and plan for their audit. The committee has met with the
independent registered public accountants, with and without management
present, and discussed the results of their examinations, their evaluations
of the Company's internal controls, and the overall quality of the
Company's financial reporting. Management represented to the committee that
the Company's financial statements were prepared in accordance with
accounting principles generally accepted in the United States. The
committee has reviewed and discussed the financial statements with
management and the independent registered public accountants, including
their judgments as to the quality, not just the acceptability, of the
Company's accounting principles and such other matters as are required to
be discussed with the committee under auditing standards generally accepted
in the United States.
The company's independent registered public accountants also
provided to the committee the written disclosures and the letter required
by the Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and the committee discussed with the
independent registered public accountants that firm's independence and
those matters required to be discussed by SAS 61 (Codification of
Statements on Auditing Standards, AU Section 380). The Company's
independent registered public accountants did not provide any non-audit
services to the Company during 2004.
In reliance on the reviews and discussions referred to above, the
committee recommended to the board of directors that (and the board has
approved) the audited financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2004 for
filing with the SEC. The committee has appointed Ernst & Young LLP as the
Company's independent registered public accountants for fiscal 2005.
John C. Aplin, Ph.D., Chair
Randall D. Ledford, Ph.D
William C. Mills III
20
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS (PROXY ITEM NO. 2)
Our audit committee, pursuant to its charter, has appointed Ernst &
Young LLP as the Company's independent registered public accountants to
examine the financial statements of the Company for our 2005 fiscal year.
While the audit committee is responsible for the appointment,
compensation, retention, termination and oversight of the independent
registered public accounting firm, the audit committee and our board are
requesting, as a matter of policy, that the stockholders ratify the
appointment of Ernst & Young LLP as the Company's independent registered
public accountants for 2005. The audit committee is not required to take
any action as a result of the outcome of the vote on this proposal.
However, if the stockholders do not ratify the appointment, the audit
committee may investigate the reasons for stockholder rejection and may
consider whether to retain Ernst & Young LLP or to appoint another firm.
Furthermore, even if the appointment is ratified, the audit committee in
their discretion may direct the appointment of a different independent
registered public accounting firm at any time during the year if they
determine that such a change would be in the best interests of the Company
and its stockholders.
A formal statement by representatives of Ernst & Young LLP is not
planned for the annual meeting. However, Ernst & Young LLP representatives
are expected to be present at the meeting and available to respond to
appropriate questions.
----------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S PRINCIPAL
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2005.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The following fees were paid to Ernst & Young LLP, our independent
registered public accountants, for services rendered in fiscal year 2003
and fiscal year 2004:
AMOUNT BILLED FOR
FISCAL YEAR
-----------------
DESCRIPTION OF PROFESSIONAL SERVICE 2003 2004
----------------------------------- ---- ----
AUDIT FEES - professional services rendered for the audit of $100,000 $171,500
our annual financial statements and review of financial
statements included in our Form 10-Q for the third quarter
of 2004 or services that are normally provided by the
accountant in connection with statutory and regulatory
filings or engagements for those fiscal years.
AUDIT-RELATED FEES - assurance and related services by Ernst -- 407,416
& Young LLP that are reasonably related to the performance
of the audit or review of financial statements and are not
reported as "Audit Fees." For 2004, such fees were related
to the initial public offering of our common stock.
TAX FEES - professional services rendered by Ernst & Young 15,500 --
LLP for tax compliance, tax advice and tax planning.
ALL OTHER FEES -- --
TOTAL ERNST & YOUNG LLP FEES $115,500 $578,916
As described in the audit committee charter, which was amended and
restated in March 2004, it is the audit committee's policy and procedure to
review and consider and ultimately pre-approve, where appropriate, all
audit and non-audit engagement services to be performed by our independent
registered public accountants. The audit committee's pre-approval policy is
attached to the audit committee charter which has been attached as Exhibit A
---------
hereto, which is incorporated herein by reference.
Prior to our initial public offering in August 2004, the audit
committee did not pre-approve any of the services provided by Ernst & Young
LLP for fiscal year 2003. Prior to our initial public offering, Ernst &
Young LLP prepared our federal and state income tax returns and provided
certain tax advice to the Company.
21
STOCK PRICE PERFORMANCE GRAPH
The following graph shows the total stockholder return of an
investment of $100 in Stereotaxis common stock since Stereotaxis' initial
public offering of common stock on August 12, 2004 through December 31,
2004, and the Nasdaq Composite (U.S.) Index and the Nasdaq Medical Device
Manufacturer's Index. All values assume reinvestment of the full amount of
all dividends although dividends have never been declared on Stereotaxis'
common stock.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG STEREOTAXIS, INC., THE NASDAQ STOCK MARKET,
AND THE NASDAQ MEDICAL DEVICE MANUFACTURER'S INDEX
[graph]
2004
------------------------------------------------------------------------
AUG 12 AUG 31 SEP 30 OCT 31 NOV 30 DEC 31
------------------------------------------------------------------------
Stereotaxis, Inc. $100.00 $109.85 $124.55 $119.82 $124.68 $125.70
NASDAQ 100.00 104.89 108.24 112.70 119.65 124.13
NASDAQ Medical Device Index 100.00 105.90 108.69 107.76 115.28 118.94
----------------------------
In accordance with the rules of the SEC, the information contained
in the Report of the compensation committee on Executive Compensation, the
Report of the audit committee and the Stock Price Performance Graph shall
not be deemed to be "soliciting material," or to be "filed" with the SEC or
subject to the SEC's Regulation 14A, or to the liabilities of Section 18 of
the Securities Exchange Act of 1934, except to the extent that the Company
specifically requests that the information be treated as soliciting
material or specifically incorporates it by reference into a document filed
under the Securities Act of 1933, or the Securities Exchange Act of 1934.
22
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During the year ended December 31, 2004, there has not been, nor is
there currently planned, any transaction or series of similar transactions
to which we were or are a party in which the amount involved exceeds
$60,000 and in which any director, executive officer or holder of more than
5% of our common stock or any member of such persons' immediate families
had or will have a direct or indirect material interest other than
agreements which are described under the caption "Directors and Executive
Officers" and the transactions described below.
PREFERRED STOCK AND COMMON STOCK WARRANT ISSUANCES
In January and February 2004, we sold shares of our Series E-2
preferred stock, which was converted into shares of common stock upon the
consummation of our initial public offering in August 2004. We sold the
shares pursuant to a preferred stock purchase agreement under which we made
customary representations, warranties and covenants, and provided the
purchasers with the registration rights under the agreements entered into
with our previous financings. The registration rights are the only rights
that survived beyond our initial public offering. In connection with the
sale of the Series E-2 preferred stock, we issued warrants to purchase
shares of our common stock, exercisable at a price of $10.55 per share.
The specific directors and holders of more than 5% of our common
stock who made purchases in the above securities are shown below with the
amounts purchased.
STOCKHOLDERS AND DIRECTORS SHARES WARRANTS(1)
-------------------------- ------ -----------
FIVE PERCENT STOCKHOLDERS:
Entities affiliated with Sanderling Ventures(2) 291,522 58,302
Alafi Capital Company LLC 227,531 45,505
Entities affiliated with EGS Healthcare Capital Partners(3) 379,217 75,842
DIRECTORS:
Fred A. Middleton(4) 291,522 58,302
Christopher Alafi(5) 227,531 45,505
Abhijeet Lele(6) 379,217 75,842
-------
(1) The warrants issued in the E-2 offering were initially
exercisable for an aggregate of 1,076,170 shares of common
stock. After giving effect to our 1-for-3.6 reverse stock
split, the warrants issued in the Series E-2 offerings are
exercisable for an aggregate of 298,925 shares of common
stock at $10.55 per share.
(2) Includes 17,825 shares of Series E-2 preferred stock and
3,565 warrants purchased by Sanderling V Beteiligungs GmbH &
Co. KG; 74,273 shares of Series E-2 preferred stock and
14,854 warrants purchased by Sanderling V Biomedical
Co-Investment Fund, L.P.; 20,033 shares of Series E-2
preferred stock and 4,006 warrants purchased by Sanderling V
Limited Partnership; 122,509 shares of Series E-2 preferred
stock and 24,501 warrants purchased by Sanderling Venture
Partners V Co-Investment Fund L.P.; 9,480 shares of Series
E-2 preferred stock and 1,896 warrants purchased by
Sanderling Ventures Management V; 47,402 shares of Series
E-2 preferred stock and 9,480 warrants purchased by
Sanderling IV Biomedical Co-Investment Fund, L.P.
(3) Includes 287,338 shares of Series E-2 preferred stock and
57,467 warrants purchased by EGS Private Healthcare
Partnership II, L.P.; 45,316 shares of Series E-2 preferred
stock and 9,063 warrants purchased by EGS Private Healthcare
Investors II, L.P.; 43,237 shares of Series E-2 preferred
stock and 8,647 warrants purchased by EGS Private Healthcare
Canadian Partners, L.P.; and 3,326 shares of Series E-2
preferred stock and 665 warrants purchased by EGS Private
Healthcare President's Fund, L.P.
23
(4) Represents shares and warrants purchased by entities
affiliated with Sanderling Ventures. Mr. Middleton is
affiliated with Sanderling Ventures.
(5) Represents shares and warrants purchased by Alafi Capital
Company LLC. Dr. Alafi is a managing partner of Alafi
Capital.
(6) Represents shares and warrants purchased by entities
affiliated with EGS Healthcare Capital Partners. Mr. Lele is
affiliated with EGS Healthcare Capital Partners. Mr. Mills
is currently affiliated with EGS Heathcare Capital Partners
but was not affiliated with EGS Healthcare Capital Partners
at the time of the transaction.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
We have entered into an agreement with certain of our common
stockholders under which those stockholders have registration rights with
respect to their shares of common stock. The directors, executive officers
and holders of more than 5% of our common stock that are parties to this
agreement are entities affiliated with Sanderling Ventures, Alafi Capital
Company, entities affiliated with EGS Healthcare Capital Partners and
Messrs. Middleton, Alafi, Aplin, Johnson, Ledford, Lele and Mills.
OTHER TRANSACTIONS
In September 2004 we sold a Niobe system to the Hospital of St.
Raphael. One of our directors, David Benfer, is the President and Chief
Executive Officer of Saint Raphael Healthcare System and the Hospital of
Saint Raphael, New Haven, Connecticut. This transaction was completed prior
to the date Mr. Benfer was elected to our board of directors.
In November 2001 we loaned $134,700 to Doug Bruce in connection with
the exercise of options to purchase 83,333 shares of common stock. The note
is full recourse and bears interest at the rate of 7% per annum. As of
March 31, 2004 the outstanding principal and interest on the note was
$170,315. Principal and interest are due on November 20, 2006. In December
2000 we loaned $54,250 to Bevil Hogg in connection with the exercise of
options to purchase 69,444 shares of common stock. The note bore interest
at the rate of 7% per annum. Mr. Hogg repaid this note in May 2004.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires all Company executive officers, directors, and persons owning more
than 10% of any registered class of our capital stock to file reports of
ownership and changes in ownership with the SEC. Based solely on the
reports received by us and on written representations from reporting
persons, we believe that all such persons timely filed such reports during
the last fiscal year with the exception of Mr. Middleton who filed a late
Form 4 related to the purchase of 8,172 shares of our common stock in
August, 2004.
GENERAL INFORMATION
STOCKHOLDER PROPOSALS
PROPOSALS INCLUDED IN PROXY STATEMENT
Proposals of stockholders of the Company that are intended to be
presented by such stockholders at the Company's 2006 annual meeting and
that stockholders desire to have included in the Company's proxy materials
relating to such meeting must be received by the Company at its principal
executive offices no later than December 14, 2005, which is 120 calendar
days prior to the anniversary of this year's mailing date. Upon timely
receipt of any such proposal, the Company will determine whether or not to
include such proposal in the proxy statement and proxy in accordance with
applicable regulations governing the solicitation of proxies.
24
PROPOSALS NOT INCLUDED IN THE PROXY STATEMENT
Our restated bylaws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual meeting of stockholders,
must provide timely notice in writing. To be timely, a stockholder's notice
must be delivered to or mailed and received at our principal executive
offices not more than 120 days or less than 90 days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders. However, in the event that the annual meeting is called for a
date that is not within 30 days before or after such anniversary date,
notice by the stockholder in order to be timely must be received not later
than the close of business on the 10th day following the date on which
notice of the date of the annual meeting was mailed to stockholders or made
public, whichever first occurs. Our restated bylaws specify requirements as
to the form and content of a stockholder's notice. These provisions may
preclude stockholders from bringing matters before an annual meeting of
stockholders or from making nominations for directors at an annual meeting
of stockholders.
Any stockholder wishing to submit a candidate for election to our
board of directors should follow the procedures outlined in "Director
Nominations." For all other proposals, as to each matter of business
proposed, the stockholder should send the following information to the
Corporate Secretary, Stereotaxis, Inc., 4041 Forest Park Avenue, St. Louis,
Missouri 63108:
* A brief description of the business desired to be brought before
the meeting and the reasons for conducting such business;
* The text of the business (including the text of any resolutions
proposed and the language of any proposed amendment to our charter
documents);
* The name and address, as they appear in our stockholder records,
of the stockholder(s) proposing such business;
* The class and number of shares of the stock which are beneficially
owned by the proposing stockholder(s);
* Any material interest of the proposing stockholder(s) in such
business; and
* A statement as to whether either the proposing stockholder(s)
intend(s) to deliver a proxy statement and form of proxy to
holders of, in the case of the proposal, at least the percentage
of the Company's voting shares required under applicable law to
carry the proposal.
A more complete description of this process is set forth in our
bylaws.
HOUSEHOLDING OF PROXIES
The Securities and Exchange Commission has adopted rules that permit
companies and intermediaries such as brokers to satisfy delivery
requirements for annual reports and proxy statements with respect to two or
more stockholders sharing the same address by delivering a single annual
report and/or proxy statement addressed to those stockholders. This process
is commonly referred to as "householding." The Company and some brokers
household annual reports and proxy materials, delivering a single annual
report and/or proxy statement to multiple stockholders sharing an address
unless contrary instructions have been received from the affected
stockholders.
Once you have received notice from your broker or the Company that
your broker or we will be householding materials to your address,
householding will continue until you are notified otherwise or until you
revoke your consent. If, at any time, you no longer wish to participate in
householding and would prefer to receive a separate annual report and/or
proxy statement in the future, please notify your broker if your shares are
held in a brokerage account or us if you hold registered shares. If, at any
time, you and another stockholder sharing the same address wish to
participate in householding and prefer to receive a single copy of our
annual report and/or proxy statement, please notify your broker if your
shares are held in a brokerage account or us if you hold registered shares.
25
You may request to receive at any time a separate copy of our annual
report or proxy statement, or notify us that you do or do not wish to
participate in householding by sending a written request to our Corporate
Secretary at 4041 Forest Park Avenue, St. Louis, Missouri 63108, or by
telephoning 314-695-6940.
OTHER INFORMATION
The board of directors knows of no matter, other than those referred
to in this proxy statement, which will be presented at the meeting.
However, if any other matters, including a stockholder proposal excluded
from this proxy statement pursuant to the rules of the SEC, properly come
before the meeting or any of its adjournments, the person or persons voting
the proxies will vote in accordance with their best judgment on such
matters. Should any nominee for director be unable to serve or for good
cause will not serve at the time of the meeting or any adjournments
thereof, the persons named in the proxy will vote for the election of such
other person for such directorship as the board of directors may recommend,
unless, prior to the meeting, the board has eliminated that directorship by
reducing the size of the board. The board is not aware that any nominee
herein will be unable to serve or for good cause will not serve as a
director.
The Company will bear the expense of preparing, printing and mailing
this proxy material, as well as the cost of any required solicitation.
Directors, officers or employees of the Company may solicit proxies on
behalf of the Company. In addition, the Company will reimburse banks,
brokerage firms, and other custodians, nominees and fiduciaries for
reasonable expenses incurred in forwarding proxy materials to beneficial
owners of the Company's stock and obtaining their proxies.
You are urged to vote promptly by marking, signing, dating, and
returning your proxy card. You may revoke your proxy at any time before it
is voted; and if you attend the meeting, as we hope you will, you may vote
your shares in person.
ANNUAL REPORT
This proxy statement has been accompanied with or preceded by our
Annual Report to Stockholders, which contains our Annual Report on Form
10-K, excluding exhibits, as filed with the SEC.
April 6, 2005
26
EXHIBIT A
AUDIT COMMITTEE CHARTER
(ADOPTED: MARCH 2004)
I. STATEMENT OF PURPOSE
The Audit Committee (the "Committee") will assist the Board of
Directors (the "Board") of Stereotaxis, Inc. (the "Company") in fulfilling
the Board's oversight responsibilities with regard to the Company's
accounting and financial reporting process, internal controls and the
Company's independent auditors. The duties of the Committee are ones of
oversight. It is not the duty of the Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and
accurate and prepared in accordance with generally accepted accounting
principles. The primary responsibility for the Company's financial
statements and internal controls rests with the Company's management.
Similarly, it is not the duty of the Committee to conduct investigations or
to assure compliance with laws and regulations or to monitor the Company's
legal compliance programs. The primary responsibility for these matters
also rests with the Company's management. The Board of Directors recognizes
that the Committee necessarily will rely on the advice and information it
receives from the Company's management, internal auditors and independent
auditors. Recognizing these inherent limits on the scope of the Committee's
review, however, the Board expects the Committee to exercise independent
judgment in assessing the quality of the Company's financial reporting
process and its internal controls. The Board also expects that the
Committee will maintain free and open communication with the other
directors, the Company's independent and internal auditors and the
financial management of the Company.
II. COMPOSITION OF THE COMMITTEE
The Committee shall be comprised of at least three members of the
Board of Directors, with the number of members to be determined from time
to time by the Board. The members shall be designated by the Board of
Directors, and the composition of the Committee shall, in the judgment of
the Board, be such as to comply with the rules of the Securities and
Exchange Commission and Rule 4350(d)(2) of The Nasdaq Stock Market Rules,
or the applicable rule(s) governing audit committees of such other national
market system or exchange on which the Company's stock may be traded from
time to time, or any successor rules.
III. MEETINGS
The Committee shall meet at least four (4) times annually, or more
frequently as the Committee may from time to time determine may be
appropriate. No less than quarterly, these meetings shall include separate
executive sessions with the Company's Chief Financial Officer, the
independent auditors and the Controller. Unless the Board has previously
designated the Chair, the members of the Committee shall designate a Chair
by majority vote. Two or more committee members shall constitute a quorum.
Teleconferences may also be held at such other times as shall be
reasonably requested by the Chair of the Board, Chair of the Committee,
independent auditor, or the Company's financial management.
At the invitation of the Committee Chair, the meetings will be
attended by the Chair of the Board, Chief Executive Officer, Chief
Financial Officer, Controller, representatives from the independent audit
firm, and/or other persons as are appropriate to matters under
consideration.
A-1
IV. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
The duties and responsibilities of the Committee shall include the
following:
A. INDEPENDENT AUDITORS
--------------------
1. Receive the written disclosures and letter from the
Company's independent auditors contemplated by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees,
as the same may be modified or supplemented, and discuss with the
independent auditors any issues required to be discussed regarding
their objectivity and independence. The Committee shall monitor all
relationships between the Company and the Company's independent
auditors for compliance with the auditor independence requirements of
the Securities and Exchange Commission, including, but not limited
to, rotation of audit partners, employment by the Company of former
employees of the Company's independent auditor and compensation
practices of the independent auditors.
2. The Committee shall implement procedures to assure that
the Company's independent auditors do not provide any services to the
Company that are prohibited by the rules of the Securities and
Exchange Commission or The Nasdaq Stock Market. The Committee shall
pre-approve all audit and non-audit services (and related fees) that
are to be provided to the Company by the Company's independent
auditors, pursuant to pre-approval policies and procedures set forth
in Appendix A to the Audit Committee Charter attached hereto. The
----------
Committee shall consider any significant non-audit assignments
awarded to the independent auditors and determine whether or not
these have any impact on the independence of the independent auditor
in the performance of the annual audit.
3. Annually evaluate the qualifications, quality control
procedures and prior performance of the Company's current independent
auditors, which shall be ultimately accountable to this Committee, as
representatives of the shareholders.
4. The Committee shall be directly responsible for the
appointment, retention, compensation and oversight of the Company's
independent auditor. If a determination is made to replace the
current independent auditors, the Committee shall be directly
responsible for the appointment of such replacement. The Committee
shall also be directly responsible for the oversight of the work of
the Company's independent auditor (including resolution of
disagreements between management and the public accounting firm
regarding financial reporting) for the purpose of preparing or
issuing an audit report or performing other audit, review or attest
services, and the Company's independent auditor shall report directly
to the Committee.
5. Meet with the independent auditors and financial
management of the Company in advance of the annual audit to review
its proposed scope, the proposed scope of the quarterly reviews, and
the procedures to be followed in conducting the audit and the
reviews.
6. Review and approve the independent auditors' annual
engagement letter, and the compensation of the independent auditors.
7. Review with the independent auditors any matters
required to be discussed by Statement of Auditing Standards No. 61,
as the same may be modified or supplemented.
8. Review and discuss, prior to filing, the Company's
financial statements proposed to be included in the Company's Annual
Report on Form 10-K with the Company's financial management and
independent auditors, including discussions about (i) critical
accounting policies used by the Company, (ii) alternative accounting
treatments that have been discussed by the independent auditors and
management and the ramifications of using those alternatives, (iii)
other written communications between the independent auditors and
management (including any management letter or schedule of unadjusted
differences), (iv) other major issues regarding accounting and
auditing principles and practices, and (v) the
A-2
adequacy of the Company's internal controls. If deemed appropriate
after such review and discussion, recommend to the Board of Directors
that the financial statements be included in the Annual Report on
Form 10-K.
9. Review and discuss, prior to issuance or filing, the
Company's financial statements proposed to be included in the
Company's public earnings reports and the Company's Quarterly Reports
on Form 10-Q with the Company's financial management and independent
auditors, including the results of the independent auditors quarterly
reviews. The Chair of the Committee may represent the entire
Committee for purposes of the Form 10-Q review.
10. Discuss at least annually with the Company's
independent auditors the following: the adequacy and effectiveness of
the Company's internal financial controls; the management letter
issued by the independent auditor and management's response thereto;
actions management has taken or progress it has made in addressing
issues raised by the independent auditors; any disagreements with
management; and major areas of financial risk.
11. Review with management and the independent auditors any
comments or inquiries from the Securities and Exchange Commission
relating to the Company's financial statements or other financial
matters included in the Company's filings with the Commission.
B. INTERNAL AUDITORS
-----------------
1. Approve the annual audit plan, charter and staffing of
the internal audit department.
2. Discuss at least annually with the internal auditor the
effectiveness of the Company's internal accounting controls, as well
as any significant letters or reports to management issued by the
internal auditors, and management's responses thereto.
3. Review annually with the independent auditor and the
controller the coordination of audit efforts to ensure completeness
of coverage, reduction of redundant efforts and the effective use of
audit resources.
C. MANAGEMENT
----------
1. Discuss at least annually with the Company's management
and outside counsel the effectiveness of the Company's legal
compliance programs, any legal matters that may have a material
impact on the Company's financial statements and any material reports
or inquiries received from regulators or government agencies.
2. Review for potential conflict of interest situations
all related party transactions involving the Company and any of the
Company's principal shareholders or members of the Board of Directors
or senior management or any immediate family member of any of the
foregoing. If the Committee determines that any such related party
transaction creates a conflict of interest situation, the transaction
must be approved by the Committee prior to the Company entering into
such transaction.
3. Authorize and oversee investigations deemed appropriate
by the Committee into any matters within the Committee's scope of
responsibility as described in this Charter or as may subsequently be
delegated to the Committee by the Board of Directors, with the power
to retain and set the fees for, at Company expense, independent
counsel, accountants and other advisors and experts to assist the
Committee if deemed appropriate in the discretion of the Committee.
4. Prepare the disclosure required of this Committee by
S-K Item 306 of the Securities and Exchange Commission regulations to
be included in the Company's annual proxy statement.
A-3
5. Review this Charter on an annual basis and make
recommendations to the Board of Directors concerning any changes
deemed appropriate; ensure that this Charter is filed with the
Securities and Exchange Commission, as required.
6. Inquire of the Company's chief executive officer and
chief financial officer as to the existence of any significant
deficiencies or material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely
to adversely affect the Company's ability to record, process,
summarize and report financial information, and as to the existence
of any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's internal
control over financial reporting.
D. OTHER MATTERS
-------------
1. Establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters and for the
confidential, anonymous submission by Company employees of concerns
regarding questionable accounting or auditing matters.
2. Oversee compliance with the Company Code of Ethics and
Business Conduct and periodically review the Code of Ethics and
Business Conduct and recommend to the Board any changes thereto.
3. Report actions of the Committee periodically to the
Board of Directors with such recommendations for action as the
Committee deems appropriate.
4. Maintain minutes or other records, either separately or
within the minutes of the Board of Directors, of meetings and
activities of the Committee.
5. Perform any other activities consistent with this
Charter, the Company's bylaws and governing law, as the Committee or
the Board deems necessary or appropriate.
6. The Company shall provide the Committee with adequate
funding, as determined by the Committee, for payment of compensation
to the Company's independent auditors and to any advisors engaged by
the Committee.
A-4
APPENDIX A
AUDIT AND NON-AUDIT SERVICE PRE-APPROVAL POLICY
-----------------------------------------------
Audit Fees:
----------
Annually, the Committee will review and approve the audit services and the
estimated audit fees for the following fiscal year. The projections will be
updated quarterly and the Committee will pre-approve any amounts exceeding
the original estimates.
Non-Audit Services and Fees:
---------------------------
Annually, and otherwise as necessary, the Committee will review and approve
all non-audit services and the estimated fees for such services for the
current fiscal year. For recurring services such as employee benefit plans,
tax compliance, due diligence, expatriate tax returns, internal control
reviews, statutory filings and import/export reviews, the Committee will
review and approve the services and estimated total fees therefor by
category of service. The projections will be updated quarterly and the
Committee will pre-approve any amounts exceeding the original estimates.
For non-recurring services such as tax or other consulting, the Committee
will review and approve the services and estimated fees by category of
service and all individual projects exceeding an amount determined by the
Committee from time to time. The projections will be updated quarterly and
the Committee will pre-approve any amounts exceeding the original estimates
and any new projects exceeding an amount determined by the Committee from
time to time.
Approval Matrix:
---------------
Should an engagement need pre-approval before the next Committee meeting,
authority to grant such approval is delegated to the Audit Committee
Chairman. Such approval will be reviewed with the entire Committee at the
next quarterly meeting.
A-5
EXHIBIT B
COMPENSATION COMMITTEE CHARTER
(ADOPTED: MARCH 2004)
I. STATEMENT OF PURPOSE
The Compensation Committee (the "Committee") will assist the Board
of Directors (the "Board") of Stereotaxis, Inc. (the "Company") in
fulfilling the Board's oversight responsibilities with regard to the
compensation of the Company's Board and management.
II. COMPOSITION OF THE COMMITTEE
The Committee shall be comprised of at least three members of the
Board of Directors, with the number of members to be determined from time
to time by the Board. The members shall be designated by the Board of
Directors, and all members of the Committee shall be independent pursuant
to Rule 4200(a)(15) of The Nasdaq Stock Market Rules (except as permitted
by Rule 4350(c)(3)(C)), or the applicable rule governing director
independence of such other national market system or exchange on which the
Company's stock may be traded from time to time, or any successor rules.
All of the members shall also be "non-employee" directors as defined by
Rule 16b-3 under the Securities Exchange Act of 1934 and a majority of the
members shall be "outside directors" as defined by Section 162(m) of the
Internal Revenue Code. If any members are not "outside directors" as
defined by Section 162(m) of the Internal Revenue Code, such member(s)
shall recuse themselves from participating in discussion regarding, or
voting on, matters that require the approval of "outside directors" under
Section 162(m) of the Internal Revenue Code.
III. MEETINGS
The Committee shall meet at least four (4) times annually, or more
frequently as the Committee may from time to time determine may be
appropriate. Unless the Board has previously designated the Chair, the
members of the Committee shall designate a Chair by majority vote. Two or
more committee members shall constitute a quorum.
Teleconferences may also be held at such other times as shall be
reasonably requested by the Chair of the Board, Chair of the Committee,
independent auditor, or the Company's financial management.
At the invitation of the Committee Chair, the meetings will be
attended by the Chair of the Board, Chief Executive Officer,
representatives from any compensation consultant retained by the Company,
and/or other persons as are appropriate to matters under consideration.
IV. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
The duties and responsibilities of the Committee shall include the
following:
1. Assist management and the Board of Directors in defining an
executive composition policy that (a) supports overall business strategy
and objectives; (b) attracts and retains key executives; (c) links
compensation with business objectives and organization performance in good
and bad times; and (d) provides competitive compensation opportunities.
2. Determine the total compensation package, including salaries,
bonuses, stock options, benefits and other compensation arrangements, for
the Chief Executive Officer and other executive officers of the Company.
The Chief Executive Officer may not be present at Committee meetings during
discussions of Chief Executive Officer compensation.
B-1
3. Exercise all authority of the Board of Directors under, and
administer in accordance with the terms of, each of the Company's
equity-based compensation plans or profit sharing plans, including, without
limitation, the 1994 Stock Option Plan, 2002 Stock Incentive Plan, 2002
Non-Employee Directors' Stock Plan and any Employee Stock Purchase Plan
(each, as amended and/or restated from time to time, the "Plans"). Such
authority shall include, without limitation, such activities as:
* participating in the establishment of option guidelines and
general size of overall grants;
* selecting participants in the Plans;
* interpreting the Plans;
* making grants and awards under the Plans;
* determining rules, regulations and guidelines relating to the
Plans as the Committee may deem necessary or proper; and
* modifying existing or canceling existing grants and submitting
new ones (with the consent of the grantees); and
* carrying out other duties not inconsistent with the Plans or
this Charter.
4. Approve new incentive plans.
5. Approve changes to the outside directors' compensation
program in respect of competitiveness and plan design.
6. Approve major benefit programs of the Company.
7. Oversee performance evaluations of the Company's executive
officers and issues regarding management succession.
8. Prepare the Compensation Committee report required to be
included in the Company's annual proxy statement.
9. The Committee shall have the authority to engage independent
advisors, including compensation consultants, at Company expense as the
Committee may determine necessary in carrying out its responsibilities
hereunder.
10. Review this Charter on an annual basis and make
recommendations to the Board of Directors concerning any changes deemed
appropriate.
11. Report actions of the Committee periodically to the Board of
Directors with such recommendations for action as the Committee deems
appropriate.
12. Maintain minutes or other records, either separately or
within the minutes of the Board of Directors, of meetings and activities of
the Committee.
B-2
EXHIBIT C
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER
(ADOPTED: MARCH 2004)
I. STATEMENT OF PURPOSE
The Nominating and Corporate Governance Committee (the "Committee")
will assist the Board of Directors (the "Board") of Stereotaxis, Inc. (the
"Company") in evaluating potential Director nominees, overseeing the
composition and structure of the Board and the committees thereof and
developing and implementing the Company's corporate governance standards.
II. COMPOSITION OF THE COMMITTEE
The Committee shall be comprised of at least three members of the
Board of Directors, with the number of members to be determined from time
to time by the Board. The members shall be designated by the Board of
Directors, and all members of the Committee shall be independent pursuant
to Rule 4200(a)(15) of The Nasdaq Stock Market Rules (except as permitted
by Rule 4350(c)(4)(C)), or the applicable rule governing director
independence of such other national market system or exchange on which the
Company's stock may be traded from time to time, or any successor rules.
III. MEETINGS
The Committee shall meet at least four (4) times annually, or more
frequently as the Committee may from time to time determine may be
appropriate. Unless the Board has previously designated the Chair, the
members of the Committee shall designate a Chair by majority vote. Two or
more committee members shall constitute a quorum.
Teleconferences may also be held at such other times as shall be
reasonably requested by the Chair of the Board, Chair of the Committee,
independent auditor, or the Company's financial management.
At the invitation of the Committee Chair, the meetings will be
attended by the Chair of the Board, Chief Executive Officer,
representatives from any director search firm retained by the Company,
and/or other persons as are appropriate to matters under consideration.
IV. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
The duties and responsibilities of the Committee shall include the
following:
1. Oversee the structure and operations of the Board and suggest
to the Board any recommended changes thereto.
2. The Committee shall adopt (i) a policy regarding the
Committee's consideration of candidates proposed by shareholders; (ii) a
description of the minimum criteria, as well as special skills and
qualities, that the Committee believes are necessary for one or more of the
Company's Directors to possess; and (iii) a description of the Committee's
process for identifying and evaluating Director nominees (including
candidates recommended by shareholders).
3. The Committee shall identify, evaluate and recommend to the
Board for determination all nominees for Board membership, whether such
nominees are for the slate of Director nominees to be proposed to
shareholders or nominees to be elected by the Board to fill vacancies on
the Board.
C-1
4. The Committee identifies potential Director nominees from
numerous sources, including, but not limited to, other members of the
Board, members of the Company's management, director search firms and the
Company's shareholders.
5. Recommend to the Board committee structure and
responsibilities, committee appointments, committee chairs and the rotation
of chairperson and committee appointments as the Committee may determine to
be in the best interests of the Company.
6. Evaluate the effect of any change in the personal or
professional status of any Director and request that the Board request the
resignation of any such Director if necessary.
7. Develop and recommend to the Board a set of corporate
governance guidelines and principals applicable to the Company and review
issues that arise in connection with such guidelines and principles.
8. The Committee shall have the authority to engage independent
advisors, including director search firms, at Company expense, as the
Committee may determine necessary in carrying out its responsibilities
hereunder.
9. Review this Charter on an annual basis and make
recommendations to the Board of Directors concerning any changes deemed
appropriate.
10. Report actions of the Committee periodically to the Board of
Directors with such recommendations for action as the Committee deems
appropriate.
11. Maintain minutes or other records, either separately or
within the minutes of the Board of Directors, of meetings and activities of
the Committee.
C-2
YOUR VOTE IS IMPORTANT
STEREOTAXIS, INC. VOTE BY INTERNET / TELEPHONE
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET TELEPHONE MAIL
-------- --------- ----
https://www.proxyvotenow.com/stxs 1-866-353-7811
o Go to the website address listed OR o Use any touch-tone telephone. OR o Mark, sign and date your proxy card.
above. o HAVE YOUR PROXY CARD READY. o Detach your proxy card.
O HAVE YOUR PROXY CARD READY. o Follow the simple recorded o Return your proxy card in the
o Follow the simple instructions that instructions. postage-paid envelope provided.
appear on your computer screen.
--------------------------------
1-866-353-7811
CALL TOLL-FREE TO VOTE --------------------------------
/ / DETACH PROXY CARD HERE
------------------------------------------------------------------------------
PLEASE SIGN, DATE AND RETURN /X/
THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE. VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
1. To elect three Class I directors to serve until our 2008 annual meeting
of stockholders and one Class II director to serve until our 2006 annual
meeting of stockholders;
FOR WITHHOLD
ALL / / FOR ALL / / EXCEPTIONS / /
Nominees Class I: 01 Abhi Acharya, 02 David W. Benfer and 03 Gregory R.
Johnson
Nominee Class II: 04 Robert J. Messey
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THAT NOMINEE'S NAME AND CHECK THE "EXCEPTIONS" BOX ABOVE.)
FOR AGAINST ABSTAIN
/ / / / / /
2. To ratify the appointment of Ernst & Young LLP as our independent
registered public accounting firm for fiscal year 2005; and
3. In their discretion, the proxies are authorized to vote upon any other
business as may properly come before the meeting.
To change your address, please mark this box. / /
To include any comments, please mark this box. / /
----------------------------
S C A N L I N E
----------------------------
Please sign exactly as name(s) appear hereon. Joint owners should each sign
personally. When signing as executor, administrator, corporation officer,
attorney, agent, trustee, guardian or in other representative capacity,
please state your full title as such.
----------------------------------- -----------------------------------------
Date Share Owner sign here Co-Owner sign here
------------------------------------------------------------------------------
STEREOTAXIS, INC
SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
OF STOCKHOLDERS OF STEREOTAXIS, INC. - MAY 11, 2005
The undersigned hereby appoints Fred A. Middleton, Bevil J. Hogg and
James M. Stolze or any of them, attorneys and proxies, with full power of
substitution and revocation in each, for and on behalf of the undersigned,
and with all the powers the undersigned would possess if personally present,
to vote at the above Annual Meeting to be held at Company's principal
offices at 4041 Forest Park Avenue, St. Louis, Missouri 63108 on Wednesday,
May 11, 2005, commencing at 9:00 a.m. Central time.
This proxy, when properly executed, will be voted as directed by the
stockholder. If no direction is given, when the duly executed proxy is
returned, the shares represented by this proxy will be voted FOR proposals 1
and 2 and, in the discretion of the proxies, on such other business as may
properly come before the meeting. All in accordance with the Company's proxy
statement, receipt of which is hereby acknowledged.
(Continued, and to be signed and dated, on the reverse side.)
STEREOTAXIS, INC.
P.O. BOX 11200
NEW YORK, N.Y. 10203-0200
APPENDIX
Page 22 of the proxy statement contains a Performance Graph. The
information contained within the graph is presented in a tabular format
immediately following the graph.