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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
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2)
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to rule 14a-11(c) or Rule 14a-12
NOVAMETRIX MEDICAL SYSTEMS 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)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identifying the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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NOVAMETRIX MEDICAL SYSTEMS INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 14, 1997
Wallingford, Connecticut
September 12, 1997
To the Holders of Common Stock
and Series B Preferred Stock of
NOVAMETRIX MEDICAL SYSTEMS INC.:
The Annual Meeting of the Stockholders of NOVAMETRIX MEDICAL SYSTEMS
INC. (the "Company") will be held at the corporate offices of the Company, 5
Technology Drive, Wallingford, Connecticut 06492 on Tuesday, October 14, 1997 at
10:30 a.m. for the following purposes, as more fully described in the
accompanying Proxy Statement:
1. To elect two Class B directors of the Company for the
ensuing three years.
2. To consider and take action upon a proposal to approve the
Novametrix Medical Systems Inc. 1997 Long Term Incentive Plan.
3. To consider and take action upon a proposal to ratify the
Board of Directors' selection of Ernst & Young LLP to serve as the Company's
independent auditors for the fiscal year ending May 3, 1998.
4. To transact such other business as may properly come before
the Meeting or any adjournment or adjournments thereof.
The close of business on September 5, 1997 has been fixed by the Board
of Directors as the record date for the determination of stockholders entitled
to notice of, and to vote at, the Meeting.
By Order of the Board of Directors,
Joseph A. Vincent, Secretary
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. IF YOU DO
NOT EXPECT TO BE PRESENT, PLEASE MARK, SIGN AND DATE THE ENCLOSED FORM OF PROXY
AND MAIL IT IN THE ENCLOSED RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES, SO THAT YOUR VOTE CAN BE RECORDED.
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NOVAMETRIX MEDICAL SYSTEMS INC.
--------------
PROXY STATEMENT
--------------
This Proxy Statement, which will be mailed commencing on or
about September 12, 1997 to the persons entitled to receive the accompanying
Notice of Annual Meeting of Stockholders, is provided in connection with the
solicitation of Proxies on behalf of the Board of Directors of Novametrix
Medical Systems Inc. (the "Company") for use at the Annual Meeting of
Stockholders (the "Meeting") to be held on October 14, 1997, and at any
adjournment or adjournments thereof, for the purposes set forth in such Notice.
The Company's executive offices are located at 5 Technology Drive, Wallingford,
Connecticut 06492.
Holders of record of issued and outstanding shares of (i)
common stock, $.01 par value ("Common Stock"), of the Company and (ii)
convertible preferred stock, Series B, $1.00 par value ("Series B Preferred
Stock"), of the Company, in each case as of September 5, 1997 (the "Record
Date"), will be entitled to notice of and to vote at the Meeting as described
below. On the Record Date, there were issued and outstanding 7,603,998 shares of
Common Stock and 40,000 shares of Series B Preferred Stock. The Company has no
class or series of stock outstanding and entitled to vote at the Meeting other
than the Common Stock and the Series B Preferred Stock.
Each share of Common Stock is entitled to one vote with
respect to each matter to be voted on at the Meeting. Each share of Series B
Preferred Stock is entitled to 11 votes with respect to each matter to be voted
on at the Meeting.
The presence, in person or by proxy, of the holders of a
majority of the voting power of all the outstanding shares of Common Stock and
Series B Preferred Stock entitled to vote at the Meeting is necessary to
constitute a quorum at the Meeting or any adjournments thereof. Directors of the
Company are elected by a plurality vote. Adoption of Proposals 2 and 3 will
require the affirmative vote of a majority of the voting power of the shares
present at the Meeting, in person or by proxy, and entitled to vote on that
proposal. Abstentions and broker non-votes (as hereinafter defined) will be
counted as present for the purpose of determining the presence of a quorum. For
the purpose of determining the vote required for approval of matters to be voted
on at the Meeting, shares held by stockholders who abstain from voting will be
treated as being "present" and "entitled to vote" on the matter and, thus, an
abstention has the same legal effect as a vote against the matter. However, in
the case of a broker non-vote or where a stockholder withholds authority from
his proxy to vote the proxy as to a particular matter, such shares will not be
treated as "present" and "entitled to vote" on the matter and, thus, a broker
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non-vote or the withholding of a proxy's authority will have no effect
on the outcome of the vote on the matter. A "broker non-vote" refers to shares
of Common Stock or Series B Preferred Stock represented at the Meeting in person
or by proxy by a broker or nominee where such broker or nominee (i) has not
received voting instructions on a particular matter from the beneficial owners
or persons entitled to vote and (ii) the broker or nominee does not have
discretionary voting power on such matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The stockholders (including any "group," as that term is used
in Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"))
who, to the knowledge of the Board of Directors of the Company, owned
beneficially more than five percent of any class of the outstanding voting
securities of the Company as of July 1, 1997, and their respective shareholdings
as of such date (according to information furnished by them to the Company), are
set forth in the following table. Except as indicated in the footnotes to the
table, all of such shares are owned with sole voting and investment power.
TITLE OF SHARES PERCENT
NAME AND ADDRESS CLASS BENEFICIALLY OWNED OF CLASS
- ---------------- ----- ------------------ --------
Novametrix 13D Stockholders Group............... Common 423,970 (1) 5.8%
184 Main Street
Lewiston, Maine 04243
Charles F. Manning, Jr., M.D. Group............. Common 575,338 (2) 7.9%
1831 Ox Bottom Road
Tallahassee, Florida 32312
First Union Corporation......................... Common 716,182 (3) 9.0%
One First Union Center Series B
Charlotte, North Carolina 28288 Preferred 40,000 (3) 100%
William J. Lacourciere.......................... Common 380,990 (4) 5.2%
5 Technology Drive
Wallingford, Connecticut 06492
- ----------
(1) Information as to the Novametrix 13D Stockholders Group, is based upon
reports on Schedule 13D filed with the Securities and Exchange Commission
(the "Commission") by such Group. Such reports indicate that such Group
beneficially owns an aggregate of 423,970 shares, which includes 75,530
shares issuable on the exercise of currently exercisable warrants.
(2) Information as to the Charles F. Manning, Jr., M.D. Group is based upon
reports on Schedule 13D filed with the Commission by such Group. Such
reports indicate that such Group beneficially owns an aggregate of
575,338 shares, which includes 72,570 shares issuable on the exercise
of currently exercisable warrants. It is currently contemplated that
all of the members of such Group would enter into a stockholders
agreement with the Company. See "Election of Directors - Stockholders
Agreement."
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(3) Consists of (i) 444,444 shares issuable upon the conversion of 40,000
shares of Series B Preferred Stock and (ii) 271,738 shares issuable upon
the exercise of currently exercisable warrants held by First Union
Corporation ("First Union"), which warrants will expire on May 23, 2000.
The Series B Preferred Stock and warrants currently held by First Union
as a result of First Union's merger with First Fidelity Bancorporation
consummated in January 1996 were previously held by First Fidelity Bank,
Connecticut ("FFB-CT"), a wholly owned subsidiary of First Fidelity
Bancorporation. Information as to the holdings of First Union is based
upon a report on Schedule 13D filed with the Commission by FFB-CT and
Northeast Bancorp, Inc., its parent corporation prior to the acquisition
of FFB-CT by First Fidelity Bancorporation.
(4) Includes (i) 5,887 shares held for the account of Mr. Lacourciere under
the Company's Employee Stock Ownership Plan (the "ESOP"), (ii) 1,000
shares issuable upon the exercise of Class A warrants and 1,000 shares
issuable upon the exercise of Class B warrants held by Mr. Lacourciere,
which warrants are currently exercisable and will expire on December 8,
1997 and December 8, 1999, respectively, and (iii) 30,000 shares issuable
upon the exercise of currently exercisable options held by Mr.
Lacourciere.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of July 1, 1997, the number
of shares of the outstanding voting securities of the Company beneficially owned
by each of the Company's directors and each executive officer named in the
Summary Compensation Table, and all directors and executive officers as a group,
according to information furnished by such persons to the Company.
TITLE OF SHARES PERCENT
NAME AND ADDRESS CLASS BENEFICIALLY OWNED OF CLASS
- ---------------- ----- ------------------ --------
Paul A. Cote................................. Common 90,695 (1) 1.2%
Director of the Company
Vartan Ghugasian............................. Common 57,500 (2) *
Director of the Company
Thomas M. Haythe............................. Common 116,540 (3) 1.6%
Director of the Company
William J. Lacourciere....................... Common 380,990 (4) 5.2%
Chairman of the Board, President
and Chief Executive Officer of
the Company and Director of the
Company
Photios T. Paulson........................... Common 15,500 (5) *
Director of the Company
Steven J. Shulman............................ Common 6,000 *
Director of the Company
Joseph A. Vincent............................ Common 71,116 (6) 1.0%
Executive Vice President, Chief
Operating Officer, Treasurer and
Secretary of the Company
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TITLE OF SHARES PERCENT
NAME AND ADDRESS CLASS BENEFICIALLY OWNED OF CLASS
- ---------------- ----- ------------------ --------
Philip F. Nuzzo.............................. Common 39,262 (7) *
Vice President - Marketing and
Product Development
All directors and executive.................. Common 810,613(1) (2) 10.9%
officers as a group (3) (4)
(nine persons) (5) (6)
(7) (8)
- ----------
* Less than one percent.
(1) Includes 20,575 shares issuable upon the exercise of currently
exercisable warrants held by Mr. Cote, which warrants will expire on
December 8, 1999.
(2) Includes 3,000 shares issuable upon the exercise of currently exercisable
warrants held by Dr. Ghugasian, which warrants will expire on December 8,
1997, and (ii) 1,000 shares issuable upon the exercise of currently
exercisable warrants held by Dr. Ghugasian, which warrants will expire on
December 8, 1999. Does not include shares beneficially owned by the other
members of the Novametrix 13D Group of which Dr. Ghugasian is a member.
(3) Includes (i) 14,844 shares issuable upon the exercise of currently
exercisable warrants held by Mr. Haythe, which warrants will expire on
December 31, 1997, and (ii) 10,744 shares issuable upon the exercise of
currently exercisable warrants held by Mr. Haythe, which warrants will
expire on March 10, 1999.
(4) Includes (i) 5,887 shares held for the account of Mr. Lacourciere under
the ESOP, (ii) 1,000 shares issuable upon the exercise of Class A
warrants and 1,000 shares issuable upon the exercise of Class B warrants
held by Mr. Lacourciere, which warrants are currently exercisable and
will expire on December 8, 1997 and December 8, 1999, respectively, and
(iii) 30,000 shares issuable upon the exercise of currently exercisable
stock options held by Mr. Lacourciere.
(5) Includes 10,000 shares issuable upon the exercise of currently
exercisable warrants held by Mr. Paulson, which warrants will expire on
November 30, 2002.
(6) Includes (i) 3,158 shares held for the account of Mr. Vincent under the
ESOP, (ii) 200 shares issuable upon the exercise of Class A warrants and
200 shares issuable upon the exercise of Class B warrants held by Mr.
Vincent, which warrants are currently exercisable and will expire on
December 8, 1997 and December 8, 1999, respectively, and (iii) 20,000
shares issuable upon the exercise of currently exercisable stock options
held by Mr. Vincent.
(7) Includes (i) 2,545 shares held for the account of Mr. Nuzzo under the
ESOP and (ii) 35,500 shares issuable upon the exercise of currently
exercisable stock options held by Mr. Nuzzo.
(8) Includes (i) 1,475 shares held for the account of Leslie E. Mace, Vice
President - Engineering of the Company, under the ESOP and (ii) 12,000
shares issuable upon the exercise of currently exercisable stock
options held by Mr. Mace.
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I. ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for the
division of the Board of Directors into three classes. The Class A directors of
the Company are Paul A. Cote and Vartan Ghugasian, the Class B directors of the
Company and the nominees for election at the Meeting are Photios T. Paulson and
Steven J. Shulman, and the Class C directors of the Company are Thomas M. Haythe
and William J. Lacourciere. Each class of directors is elected to serve for a
term of three years. If the number of directors is increased, the increase will
be apportioned among the classes so as to make all classes as nearly equal in
number as possible.
Two Class B directors will be elected at the Meeting to serve
for three years and until their respective successors shall have been elected
and qualified. The Class C directors will be elected at the 1998 Annual Meeting
and the Class A directors will be elected at the 1999 Annual Meeting. It is the
intention of each of the persons named in the accompanying form of Proxy to vote
the shares represented thereby in favor of the nominees for Class B director,
Photios T. Paulson and Steven J. Shulman, unless otherwise instructed in such
Proxy. In case either one of the nominees is unable or declines to serve, such
persons reserve the right to vote the shares represented by such Proxy for
another person duly nominated by the Board of Directors in such nominee's stead.
The Board of Directors has no reason to believe that either of the nominees will
be unable or will decline to serve.
Information concerning the nominees for election as Class B
directors and the other directors of the Company whose terms of office will
continue after the Meeting is set forth below. Such information was furnished by
them to the Company.
NOMINEES FOR ELECTION
PHOTIOS T. PAULSON (Class B director), age 58; Vice President,
bioAlliance, SA (privately-held French holding company), since January
1995; Chairman, bioMerieux Vitek Inc. (manufacturer of clinical
diagnostic systems) since July 1991; Senior Adviser-Health Care
Industry and International Investment Banking, Prudential Securities
Inc. (investment bankers) since prior to 1991; Director of the Company
since 1992.
STEVEN J. SHULMAN (Class B director), age 45; recently named President
and Chief Executive Officer of Prudential HealthCare (one of the
nation's ten largest healthcare providers); President, Pharmacy &
Disease Management Group of Value Health, Inc. (provider of specialty
managed care programs) from November 1995 to March 1997; Executive Vice
President, Value Health, from April 1991 until September 1993; Senior
Vice President, Value Health since prior to 1991 until September 1993;
Acting President and Chief Executive Officer of American
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PsychManagement, Inc. (wholly-owned subsidiary of Value Health),
October 1990 through April 1991; various managerial positions, CIGNA
Healthplan, Inc. (provider of group life and health insurance,
including managed care products) since prior to 1989; Director of Value
Health and Ramsay Health Care, Inc. (provider of behavioral healthcare
services); Director of the Company since 1993.
OTHER DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE MEETING
PAUL A. COTE (Class A director), age 67; practicing lawyer in Maine
since 1955; President and Director, Cote, Cote & Hamann (law firm);
Director, Secor Federal Savings & Loan, Birmingham, Alabama, from 1992
to 1993; Member, Advisory Board, Fleet Bank (and predecessors Northeast
Bankshares Association and Norstar), from 1975 to 1992; Director of the
Company since November 1996.
VARTAN GHUGASIAN (Class A director), age 52; Practicing dentist in
Massachusetts since 1972; Associate in Prosthetic Dentistry, Harvard
School of Dental Medicine, from 1980 until 1993; Director, Karagheusian
Commemorative Corporation; member of the Novametrix 13D Stockholders
Group (see "Security Ownership of Certain Beneficial Owners," above);
Director of the Company since November 1996.
THOMAS M. HAYTHE (Class C director), age 57; Partner, Haythe & Curley
(law firm) since prior to 1991; Director: Isomedix Inc. (provider of
commercial sterilization services), Guest Supply, Inc. (provider of
hotel guest room amenities and accessories), Westerbeke Corporation
(manufacturer of marine engine products) and Ramsay Health Care, Inc.
(provider of behavioral healthcare services); Director of the Company
since 1978.
WILLIAM J. LACOURCIERE (Class C director), age 57; Chairman of the
Board of the Company since September 1991; Chief Executive Officer of
the Company since February 1991; President of the Company since August
1986; Chief Operating Officer of the Company from March 1983 to
February 1991; Executive Vice President of the Company from March 1983
to August 1986; Executive Vice President - Marketing of the Company
from October 1982 to March 1983; Vice President - Domestic Sales of the
Company, April 1980 to October 1982; Director of the Company since
1982.
During the fiscal year ended April 27, 1997, the Board of
Directors of the Company met fourteen times. All of the directors attended at
least 75% of the meetings of the Board of Directors held during the period in
which they served as directors.
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The Board of Directors has a Stock Option Committee, whose
members are Messrs. Cote, Paulson and Shulman, a Compensation Committee, whose
members are Messrs. Ghugasian, Haythe and Shulman, and an Audit Committee, whose
members are Messrs. Cote, Haythe, Paulson and Shulman. Mr. Haythe was a member
of the Stock Option Committee until January 21, 1997, at which time Mr. Cote
became a member of such committee. Mr. Paulson was a member of the Compensation
Committee until January 21, 1997, at which time Dr. Ghugasian became a member of
such committee. The Board of Directors does not have a Nominating Committee.
The Stock Option Committee administers the Company's stock
option plans and its employee stock purchase plan. The Compensation Committee
determines the compensation arrangements for executive officers of the Company.
The Audit Committee is authorized to review the results of the auditors'
examinations and to make recommendations with respect to accounting practices
and procedures and internal controls. During the fiscal year ended April 27,
1997, the Stock Option Committee met three times, the Compensation Committee met
one time and the Audit Committee met one time. All of the directors attended at
least 75% of the meetings of any committee on which such directors served.
Pursuant to an Underwriting Agreement dated as of June 16,
1994 between the Company and Keane Securities Co., Inc. ("Keane"), the Company
has agreed that until June 8, 1999, at the request of Keane, the Company will
use its best efforts to cause one individual designated by Keane to be elected
to the Board of Directors.
No family relationships exist between any of the directors and
officers of the Company.
The Company's certificate of incorporation contains a
provision, authorized by Delaware law, which eliminates the personal liability
of a director to the Company or to any of its stockholders for monetary damages
for a breach of his fiduciary duty as a director, except in the case where the
director breached his duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or knowingly violated a law, authorized a payment of a
dividend or approved a stock repurchase in violation of Delaware corporate law,
or obtained an improper personal benefit.
STOCKHOLDERS AGREEMENT
The Company and the members of the Charles F. Manning, Jr.,
M.D., Group (the "Manning Group") propose to enter into a Stockholders Agreement
promptly following the mailing of this Proxy Statement. Under the Stockholders
Agreement, the members of the Manning Group agree to vote their shares of Common
Stock for the election of the Company's nominees for director at the Meeting.
The Stockholders Agreement also provides that, if there shall not have been any
solicitation of proxies on or
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after the date of the Stockholders Agreement (whether or not any members of the
Manning Group participate in such solicitation) not publicly supported by a
resolution of a majority of the current members of the Board of Directors, the
Company and the Board of Directors will increase by one the number of Class C
directors of the Company, will elect John P. Mahoney, M.D., a member of the
Manning Group, as the new Class C director promptly following the Meeting and
will nominate Dr. Mahoney for reelection as a Class C director at the 1998
Annual Meeting of Stockholders.
Dr. Mahoney, age 49, has served as a staff pathologist with
Pathology Associates, Inc. (pathology group providing services in surgical,
cytologic, clinical and forensic pathology) from 1981 to 1994 and since 1996.
During such time, Dr. Mahoney has served as Chief of Staff, Tallahassee
Community Hospital; President, Capital Medical Society; and Associate Medical
Examiner, State of Florida, District II. From 1987 to 1995, Dr. Mahoney was
President and Chief Executive Officer of Health Enterprises, Inc., a holding
company that included a 62,000 member health maintenance organization, which was
merged with Coastal Physicians Group in 1995. Dr. Mahoney is a director of
Coastal Physicians Group. As of April 2, 1997, Dr. Mahoney beneficially owned
217,209 shares of Common Stock, including 10,400 shares issuable upon the
exercise of currently exercisable warrants, but excluding shares held by other
members of the Manning Group. The foregoing information regarding Dr. Mahoney is
provided as required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder in connection with the possible election of Dr. Mahoney as a Class C
director pursuant to the Stockholders Agreement.
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EXECUTIVE COMPENSATION
The following table sets forth information for the fiscal
years ended April 27, 1997, April 28, 1996 and April 30, 1995 concerning the
compensation of the Company's Chief Executive Officer and other executive
officers of the Company whose total annual salary and bonus exceeded $100,000
during the fiscal year ended April 27, 1997.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
------------------- ------------
Name and Fiscal All Other
Principal Position Year Salary Bonus Stock Options Compensation (1)
- ------------------ ---- ------ ----- ------------- ----------------
William J. Lacourciere 1997 $220,192 $ 0 0 $3,155
Chairman of the Board, 1996 200,000 15,000 0 4,511
President and Chief 1995 200,000 25,000 30,000 4,478
Executive Officer
Joseph A. Vincent 1997 115,000 20,000 0 2,722
Executive Vice 1996 104,904 10,000 0 3,141
President and Chief 1995 100,000 15,000 20,000 2,651
Operating Officer
Philip F. Nuzzo (2) 1997 110,780 0 0 2,447
Vice President - 1996 -- -- -- --
Marketing and Product 1995 -- -- -- --
Development
- ----------
(1) Includes contributions made by the Company on behalf of the named
executive officers to the ESOP, the Company's 401(k) Plan and a term
life insurance plan.
(2) Mr. Nuzzo was appointed Vice President - Marketing and Product
Development of the Company effective August 1996.
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The following table sets forth the number and value, net of
exercise price, of shares of Common Stock acquired upon exercise of options on
the date of exercise by the executive officers named in the Summary Compensation
Table during the past fiscal year, and the number and value of options held by
such executive officers at April 27, 1997.
AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR
ENDED APRIL 27, 1997 AND FISCAL YEAR END OPTION VALUES
Number of Unexercised Value of Unexercised
Securities Underlying In-the Money Options
Options at April 27, 1997 at April 27, 1997(1)
------------------------- --------------------
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
William J. Lacourciere - 0 - - 0 - 20,000 10,000 $27,500 $13,750
Joseph A. Vincent 45,000 $170,625(2) 13,333 6,667 18,333 9,167
Philip F. Nuzzo - 0 - - 0 - 28,833 6,667 68,190 9,167
- ---------------
(1) In-the-money options are those where the fair market value of the
underlying Common Stock exceeds the exercise price thereof. The value of
in-the-money options is determined in accordance with regulations of the
Securities and Exchange Commission by subtracting the aggregate exercise
price of the options from the aggregate year-end market value of the
underlying Common Stock.
(2) Value shown reflects the aggregate market value on the date of exercise
for the shares of Common Stock acquired, net of exercise price, determined
without regard to forfeiture restrictions to which such shares are subject
until March 20, 1998.
COMPENSATION OF DIRECTORS
The Company pays its directors who are not employees of the
Company an annual fee of $7,500, $1,000 for each meeting of the Board of
Directors of the Company attended and $500 for each telephone and committee
meeting attended. Directors are also reimbursed for out-of-pocket expenses
incurred in attending meetings.
During the past fiscal year, the non-employee directors of the
Company were granted options to purchase Common Stock of the Company. Options
for 25,000 shares were granted to each of Mr. Haythe, Mr. Paulson and Mr.
Shulman and options for 10,000 shares were granted to each of Mr. Cote and Dr.
Ghugasian. All of such options were granted with an exercise price equal to the
market price of the Common Stock on the date of grant and become exercisable in
one-third increments on the first, second and third anniversaries of the date of
grant.
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EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement with Mr.
Lacourciere. The term of the employment agreement commenced as of June 1, 1988
and is automatically extended on an annual basis, unless a notice of
non-extension is given by either party. The current term of the agreement, as so
extended, expires on December 31, 1997. The employment agreement provided for an
initial annual salary of $200,000, subject to increases based on increases in
the Consumer Price Index and additional increases at the discretion of the Board
of Directors. The salary under the employment agreement is currently $250,000
per year. The agreement also provides, in the event of the termination of Mr.
Lacourciere's employment by the Company other than for cause, for a cash payment
to Mr. Lacourciere equal to three times his average annual cash compensation
during the five most recent taxable years of the Company ending before the date
of such termination, less $1,000. In the event Mr. Lacourciere's employment with
the Company is terminated at this time, such termination payment would be
approximately $581,000. In the event of the occurrence of certain change of
control events involving the Company without the approval of the Board of
Directors, Mr. Lacourciere may terminate his employment with the Company during
the one-year period following any such change of control event and such
termination of employment would entitle him to the same termination payment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee reviews and makes recommendations
regarding the compensation for executive officers and other key employees of the
Company, including salaries and bonuses. No member of the Compensation Committee
is an executive of the Company. The current members of the Compensation
Committee are Vartan Ghugasian, Thomas M. Haythe and Steven J. Shulman. Mr.
Haythe is a member of the law firm of Haythe & Curley, the Company's general
counsel. See "Certain Relationships and Related Transactions," below.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common
Stock. Officers, directors and greater than ten percent stockholders are
required by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on a review of copies
of such reports furnished and confirmations that no other reports were required
during the fiscal year ended April 27, 1997, except as provided below, its
directors, executive officers and
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greater than percent stockholders complied with all Section 16(a) filing
requirements. Mr. Cote and Dr. Ghugasian were elected as Directors of the
Company at the 1996 Annual Meeting of Stockholders of the Company and filed
their initial reports of ownership on Form 3 in February 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Thomas M. Haythe, a director of the Company, is a member of
the law firm of Haythe & Curley, the Company's general counsel. It is expected
that Haythe & Curley will continue to render legal services to the Company in
the future.
PERFORMANCE GRAPH
The following performance graph compares the cumulative total
shareholder return on the Company's Common Stock to the NASDAQ Stock Market-US
Index and to the Standard and Poor's Medical Products and Supplies Index for the
Company's last five fiscal years. The graph assumes that $100 was invested in
each of the Company's Common Stock, the NASDAQ Stock Market-US Index and the
Standard and Poor's Medical Products and Supplies Index on May 1, 1992 and that
all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
NOVAMETRIX MEDICAL SYSTEMS INC., S&P HEALTHCARE INDEX (MEDICAL PRODUCTS)
AND THE NASDAQ STOCK MARKET (U.S.) INDEX
MAY 1, 1992 - APRIL 25, 1997
[Graph showing data points set forth below]
Value of Initial $100 Investment 1992 1993 1994 1995 1996 1997
- -------------------------------- ---- ---- ---- ---- ---- ----
Novametrix $100.00 $ 91.67 $150.00 $179.17 $191.67 $187.50
NASDAQ STOCK MARKET (U.S.) $100.00 $114.40 $126.93 $145.98 $205.29 $209.17
S&P Health Care (Medical Products) $100.00 $ 77.75 $ 71.37 $109.14 $142.15 $158.53
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The report of the Compensation Committee documents the
Committee's policies regarding executive officer compensation. The Company's
philosophy and objectives in setting compensation are (i) to offer levels of
compensation which are competitive with those offered by other companies in
similar businesses; (ii) to compensate executives based on each executive's
level of responsibility and contribution to the Company's business goals; (iii)
to link compensation with the Company's financial performance; and (iv) to align
the interests of the Company's executives with the interests of the Company's
stockholders.
Base Salary. Base salary is determined by level of
responsibility, individual performance and Company performance, as well as by
the need to provide a competitive package that allows the Company to retain key
executives. After reviewing individual and Company performance and market
studies on salaries at other companies of similar size, the President makes
recommendations to the Compensation Committee concerning officers' salaries,
other than his own. The Compensation Committee reviews and, with any changes it
deems appropriate, approves these recommendations. Using the same review
process, the Compensation Committee makes decisions pertaining to the
President's salary. On the basis of the foregoing factors, during the 1997
fiscal year, the Compensation Committee established an annual salary of $250,000
for William J. Lacourciere, the President and Chief Executive Officer of the
Company.
Executive Bonuses. Executive bonuses provide the opportunity
for executive officers to earn additional compensation by achieving specific
performance goals. The Company will pay a percentage of each participant's
annual base salary as an annual bonus, provided the Company achieves specific
performance objectives. These objectives are established by the Board of
Directors of the Company at the beginning of each fiscal year in consultation
with such executive officers.
Stock Options. The Company periodically grants stock options
to its executive officers and other key employees. The primary purpose of stock
option grants is to align the interests of the Company's executive officers more
closely with the interests of the Company's stockholders by offering the
executives an opportunity to benefit from increases in the market price of the
Company's Common Stock. Stock options provide long-term incentives that have
enabled the Company to attract and retain key employees by encouraging their
ownership of Common Stock. The stock option plans are administered by the Stock
Option Committee of the Company's Board of Directors, which determines the
persons who are to receive options and the number of shares to be subject to
each option. In selecting individuals for options and determining the terms
thereof, the Stock Option Committee may take into consideration any factors it
deems relevant, including present and potential contributions to the success of
the Company.
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Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), limits the deductibility of compensation exceeding $1
million to each of the Company's Chief Executive Officer and four other most
highly compensated executive officers. Qualifying performance-based compensation
meeting the requirements promulgated by the Internal Revenue Service under
Section 162(m) will not be subject to the deduction limit. The Company intends
to qualify its executive compensation arrangements to comply with such
requirements.
Photios T. Paulson was a member of the Compensation Committee
during 1996 and until January 21, 1997, at which time he was succeeded by Vartan
Ghugasian.
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS:
Vartan Ghugasian
Thomas M. Haythe
Steven J. Shulman
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II. APPROVAL OF THE NOVAMETRIX MEDICAL SYSTEMS INC.
1997 LONG TERM INCENTIVE PLAN
The Board of Directors of the Company believes that attracting
and retaining highly qualified key employees, consultants and directors is
essential to the Company's growth and success. The Board of Directors also
believes that important advantages to the Company are gained by a comprehensive
compensation program which includes different types of incentives for motivating
such individuals and rewards for outstanding service. In this regard, stock
options and other stock-related awards have been and will continue to be an
important element of the Company's compensation program because such awards
enable employees and directors to acquire or increase their proprietary interest
in the Company, thereby promoting a close identity of interests between such
individuals and the Company's stockholders. Such awards also provide to
employees and directors an increased incentive to expend their maximum efforts
for the success of the Company's business.
Only a limited number of shares remain available for stock
option grants under the current stock option plans of the Company. Stock option
grants have been an important aspect of the Company's compensation program in
attracting and retaining senior executives, directors and other key personnel.
The Board of Directors believes that it is in the interests of the Company and
its stockholders that the ability of the Company to grant stock options and
other stock-based awards be continued.
In August 1997, the Board of Directors unanimously adopted,
subject to stockholder approval at the Meeting, the Novametrix Medical Systems
Inc. 1997 Long Term Incentive Plan (the "Incentive Plan"). In authorizing grants
of a range of awards, including options, stock appreciation rights ("SARs"),
restricted stock, performance awards and other stock-based awards, the Incentive
Plan is intended to give the Company greater flexibility to respond to rapidly
changing business, economic and regulatory requirements and conditions. In
addition, such flexibility will enhance the ability of the Company to closely
link compensation to performance. The Incentive Plan will not become effective
unless approved by the holders of a majority of the shares of Common Stock
present or represented and voting thereon at the Meeting. The text of the
Incentive Plan is set forth in Exhibit A hereto.
The following discussion of the material features of the
Incentive Plan is qualified by reference to the text of the Incentive Plan set
forth in Exhibit A hereto.
Shares Subject to the Plan. Under the Incentive Plan, 500,000
shares of Common Stock will be available for issuance of awards. Shares
distributed under the Incentive Plan may be either newly issued shares or
treasury shares. If any shares subject to an Incentive Plan award are forfeited
or the award is settled in cash or otherwise terminates without a distribution
of shares, the shares subject to such award will again be
18
16
available for awards under the Incentive Plan. Thus, for example, if an award is
voluntarily surrendered in exchange for a new award, the shares that were
subject to the surrendered award would be available for the new award (or other
awards) under the Incentive Plan. The maximum number of shares of Common Stock
which may be granted to any individual under the Incentive Plan in any one-year
period shall not exceed 50,000 shares, subject to the adjustments described in
the next paragraph.
The Incentive Plan provides that, in the event of changes in
the corporate structure of the Company affecting the Common Stock, the Stock
Option Committee may adjust (i) the number and kind of shares which may be
issued in connection with awards, (ii) the number and kind of shares issued or
issuable in respect of outstanding awards, and (iii) the exercise price, grant
price, or purchase price relating to any award, and the Stock Option Committee
may also provide for cash payments relating to awards. The Stock Option
Committee may also adjust performance conditions and other terms of awards in
response to these kinds of events or to changes in applicable laws, regulations
or accounting principles. The Incentive Plan provides that, in connection with
any merger or consolidation in which the Company is not the surviving
corporation or any sale or transfer by the Company of all or substantially all
its assets or any tender offer or exchange offer for or the acquisition,
directly or indirectly, by any person or group of all or a majority of the then
outstanding voting securities of the Company, all outstanding options under the
Incentive Plan will become exercisable in full on and after (i) 15 days prior to
the effective date of such merger, consolidation, sale, transfer or acquisition
or (ii) the date of commencement of such tender offer or exchange offer, as the
case may be.
Eligibility. Any employee (including any officer or
employee-director) of or consultant or other individual providing services to
the Company and its subsidiaries is eligible to receive awards under the
Incentive Plan. Directors of the Company who are not employees are eligible for
grants of stock options under the Incentive Plan.
Administration. The Incentive Plan will be administered by the
Stock Option Committee of the Board of Directors. Subject to the terms and
conditions of the Incentive Plan, the Stock Option Committee is authorized to
designate participants who are employees, directors or consultants of the
Company and its subsidiaries and affiliated companies, determine the type and
number of awards to be granted, set terms and conditions of such awards,
prescribe forms of award agreements, interpret the Incentive Plan, specify rules
and regulations relating to the Incentive Plan, and make all other
determinations which may be necessary or advisable for the administration of the
Incentive Plan.
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17
Stock Options and SARs. The Stock Option Committee is
authorized to grant stock options, including both incentive stock options
("ISOs"), which can result in potentially favorable tax treatment to the
participant, and nonqualified stock options, and also to grant SARs entitling
the participant to receive the excess of the fair market value of a share on the
date of exercise or other specified date over the grant price of the SAR. The
exercise price per share of Common Stock subject to an option and the grant
price of an SAR is determined by the Stock Option Committee, provided that the
exercise price may not be less than the fair market value of the Common Stock on
the date of grant. The term of each such option or SAR, the times at which each
such option or SAR shall be exercisable, and provisions requiring forfeiture of
unexercised options at or following termination of employment, generally will be
fixed by the Stock Option Committee, except no ISO or SAR relating thereto will
have a term exceeding ten years. Options may be exercised by payment of the
exercise price in cash, or in stock, outstanding awards or other property
(including notes or obligations to make payment on a deferred basis, such as
through "cashless exercises") having a fair market value equal to the exercise
price, as the Stock Option Committee may determine from time to time. Methods of
exercise and settlement and other terms of the SARs will be determined by the
Stock Option Committee.
Restricted Stock. The Incentive Plan also authorizes the Stock
Option Committee to grant restricted stock. Restricted stock is an award of
shares which may not be disposed of by participants and which may be forfeited
in the event of certain terminations of employment prior to the end of a
restriction period established by the Stock Option Committee. Such an award
would entitle the participant to all of the rights of a stockholder of the
Company, including the right to vote the shares and the right to receive any
dividends thereon, unless otherwise determined by the Stock Option Committee.
Performance Awards. The Incentive Plan also authorizes the
Stock Option Committee to grant to eligible employees performance awards. A
performance award is an award which consists of a right (i) denominated or
payable in cash, Common Stock, other securities or other property (including,
without limitation, restricted securities), and (ii) which shall confer on the
holder thereof rights valued as determined by the Stock Option Committee and
payable to, or exercisable by, the holder of the performance award upon the
achievement of such performance goals during such performance periods as the
Stock Option Committee shall establish. Subject to the terms of the Incentive
Plan and any applicable award agreement, performance goals to be achieved during
any performance period, the length of any performance period, the amount of any
performance award granted and the amount of any payment or transfer to be made
pursuant to any performance award will be determined by the Stock Option
Committee and by the other terms and conditions of any performance award.
Other Stock-Based Awards. In order to enable the Company to
respond to business, economic and regulatory developments, and to trends in
executive compensation practices, the Incentive Plan authorizes the Stock Option
Committee to grant awards that
20
18
are denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to Common Stock. The Stock Option Committee
determines the terms and conditions of such awards, including consideration to
be paid to exercise awards in the nature of purchase rights, the period during
which awards will be outstanding, and forfeiture conditions and restrictions on
awards.
Other Terms of Awards. The flexible terms of the Incentive
Plan will permit the Stock Option Committee to impose performance conditions
with respect to any award. Such conditions may require that an award be
forfeited, in whole or in part, if performance objectives are not met, or
require that the time of exercisability or settlement of an award be linked to
achievement of performance conditions.
No awards may be granted under the Incentive Plan after
December 31, 2006.
Awards may be settled in cash, stock, other awards or other
property, in the discretion of the Stock Option Committee. The Stock Option
Committee may condition the payment of an award on the withholding of taxes and
may provide that a portion of the Common Stock or other property to be
distributed will be withheld (or previously acquired Common Stock or other
property surrendered by the participant) to satisfy withholding and other tax
obligations. Awards granted under the Incentive Plan may not be pledged or
otherwise encumbered and are not transferable except by will or by the laws of
descent and distribution to a guardian or legal representative designated to
exercise such person's rights and receive distributions under the Incentive Plan
upon such person's death, or otherwise if permitted under Rule 16b-3 and by the
Stock Option Committee.
The Stock Option Committee may, however, grant awards alone or
in addition to, in tandem with or in substitution for any other award under the
Incentive Plan, other awards under other Company plans, or other rights to
payment from the Company. Awards granted in addition to or in tandem with other
awards may be granted either at the same time or at different times. If an award
is granted in substitution for another award, the participant must surrender
such other award in consideration for the grant of the new award.
The Board may amend, modify or terminate the Incentive Plan at
any time provided that, unless required by law, (i) the number of shares of
Common Stock available under the Incentive Plan may not be amended without
shareholder approval (subject to certain provisions relating to adjustment as
discussed above) and (ii) no amendment or termination of the Incentive Plan may,
without a participant's consent, adversely affect any rights already accrued
under the Incentive Plan by the participant. In addition, no amendment or
modification shall, unless previously approved by the stockholders (where such
approval is necessary to satisfy then applicable requirements of federal
securities laws, the Code, or rules of any stock exchange on which the Common
Stock is listed) (i)
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19
in any manner affect the eligibility requirements of the Incentive Plan, (ii)
increase the number of shares of Common Stock subject to any option, (iii)
change the purchase price of the shares of Common Stock subject to any option,
(iv) extend the period during which awards may be granted under the Incentive
Plan or (v) materially increase the benefits to participants under the Incentive
Plan.
Unless earlier terminated by the Board of Directors, the
Incentive Plan will terminate when no shares remain available for issuance and
the Company has no further obligation with respect to any outstanding award.
Federal Income Tax Implications of the Plan. The following
description summarizes the material federal income tax consequences arising with
respect to the issuance and exercise of awards granted under the Incentive Plan.
The grant of an option or SAR (including a stock-based award in the nature of a
purchase right) will create no tax consequences for the participant or the
Company. A participant will not have taxable income upon exercising an ISO
(except that the alternative minimum tax may apply) and the Company will receive
no deduction at that time. Upon exercising an option other than an ISO
(including a stock-based award in the nature of a purchase right), the
participant must generally recognize ordinary income equal to the difference
between the exercise price and fair market value of the freely transferable and
nonforfeitable Common Stock acquired on the date of exercise, and upon
exercising an SAR, the participant must generally recognize ordinary income
equal to the cash or the fair market value of the freely transferable and
nonforfeitable Common Stock received. In each case, the Company will be entitled
to a deduction equal to the amount recognized as ordinary income by the
participant.
A participant's disposition of shares acquired upon the
exercise of an option, SAR or other stock-based award in the nature of a
purchase right generally will result in short-term or long-term capital gain or
loss measured by the difference between the sale price and the participant's tax
basis in such shares (or the exercise price of the option in the case of shares
acquired by exercise of an ISO and held for the applicable ISO holding periods).
Generally, there will be no tax consequences to the Company in connection with a
disposition of shares acquired under an option or other award, except that the
Company will be entitled to a deduction (and the participant will recognize
ordinary taxable income) if shares acquired upon exercise of an ISO are disposed
of before the applicable ISO holding periods have been satisfied.
With respect to other awards granted under the Incentive Plan
that may be settled either in cash or in Common Stock or other property that is
either not restricted as to transferability or not subject to a substantial risk
of forfeiture, the participant must generally recognize ordinary income equal to
the cash or the fair market value of Common Stock or other property received.
The Company will be entitled to a deduction for the same amount. With respect to
awards involving stock or other property that is restricted
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as to transferability and subject to a substantial risk of forfeiture, the
participant must generally recognize ordinary income equal to the fair market
value of the shares or other property received at the first time the shares or
other property become transferable or not subject to a substantial risk of
forfeiture, whichever occurs earlier. The Company will be entitled to a
deduction in an amount equal to the ordinary income recognized by the
participant. A participant may elect under Section 83(b) of the Code to be taxed
at the time of receipt of shares or other property rather than upon lapse of
restrictions on transferability or the substantial risk of forfeiture, but if
the participant subsequently forfeits such shares or property he would not be
entitled to any tax deduction, including as a capital loss, for the value of the
shares or property on which he previously paid tax. Such election must be made
and filed with the Internal Revenue Service within thirty days of the receipt of
the shares or other property.
Section 162(m) of the Code limits deductibility of certain
compensation for each of the Chief Executive Officer of the Company and the
additional four executive officers who are highest paid and employed at year end
to $1 million per year. The Company anticipates that action will be taken with
respect to awards under the Incentive Plan to ensure deductibility.
The Stock Option Committee may condition the payment of an
award on the withholding of taxes and may provide that a portion of the stock or
other property to be distributed will be withheld (or previously acquired stock
or other property surrendered by the participant) to satisfy withholding and
other tax obligations.
The foregoing summarizes the material federal income tax
consequences arising with respect to the issuance and exercise of awards granted
under the Incentive Plan. Different tax rules may apply with respect to
participants who are subject to Section 16 of the Exchange Act, when they
acquire stock in a transaction deemed to be a nonexempt purchase under that
statute or within six months of an exempt grant of a derivative security under
the Incentive Plan. This summary does not address the effects of other federal
taxes or taxes imposed under state, local or foreign tax laws.
The Board of Directors recommends that the Company's
stockholders vote FOR approval of the Incentive Plan. It is the intention of the
persons named in the accompanying form of Proxy to vote the shares represented
thereby in favor of such approval unless otherwise instructed in such Proxy.
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III. RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Ernst &
Young LLP to serve as independent auditors for the Company for the fiscal year
ending May 3, 1998. Such firm has examined the financial statements of the
Company since the Company's inception. The Board of Directors considers Ernst &
Young LLP to be eminently qualified.
Although it is not required to do so, the Board of Directors
is submitting its selection of the Company's auditors for ratification at the
Meeting in order to ascertain the views of stockholders regarding such
selection. If the selection is not ratified, the Board of Directors will
reconsider its selection.
The Board of Directors recommends that the Company's
stockholders vote FOR ratification of the selection of Ernst & Young LLP to
examine the consolidated financial statements of the Company and its
subsidiaries for the fiscal year ending May 3, 1998. It is the intention of the
persons named in the accompanying form of Proxy to vote the shares represented
thereby in favor of such ratification unless otherwise instructed in such Proxy.
A representative of Ernst & Young LLP will be present at the
Meeting with the opportunity to make a statement if such representative desires
to do so, and will be available to respond to appropriate questions.
IV. OTHER MATTERS
The Board of Directors of the Company does not know of any
other matters which may be brought before the Meeting. However, if any such
other matters are properly presented for action, it is the intention of the
persons named in the accompanying form of Proxy to vote the shares represented
thereby in accordance with their judgment on such matters.
MISCELLANEOUS
If the accompanying form of Proxy is executed and returned,
the shares represented thereby will be voted in accordance with the terms of the
Proxy, unless the Proxy is revoked. If no directions are indicated in such
Proxy, the shares represented thereby will be voted FOR the nominees proposed by
the Board of Directors in the election of two Class B directors, FOR the
approval of the Novametrix Medical Systems Inc. 1997
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Long Term Incentive Plan and FOR ratification of the Board of Directors'
selection of independent auditors for the Company. Any Proxy may be revoked at
any time before it is exercised by written notice to the Secretary of the
Company. The casting of a ballot at the Meeting by a stockholder who may
theretofore have given a Proxy, or the subsequent delivery of a Proxy, will have
the effect of revoking the initial Proxy.
All costs relating to the solicitation of Proxies will be
borne by the Company. Proxies may be solicited by officers, directors and
employees of the Company and its subsidiaries personally, or by mail, telephone
or telecopier, and the Company may pay brokers and other persons holding shares
of stock in their names or those of their nominees for their reasonable expenses
in sending soliciting material to their principals.
It is important that Proxies be returned promptly.
Stockholders who do not expect to attend the Meeting in person are urged to
mark, sign and date the accompanying form of Proxy and mail it in the enclosed
return envelope, which requires no postage if mailed in the United States, so
that their votes can be recorded.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1998
Annual Meeting of Stockholders of the Company must be received by the Company by
May 15, 1998 in order to be considered for inclusion in the Company's Proxy
Statement relating to such meeting.
ANNUAL REPORT ON FORM 10-K
Copies of the Company's Annual Report on Form 10-K, including
the financial statements for the fiscal year ended April 27, 1997, which has
been filed with the Securities and Exchange Commission, will be sent without
charge to stockholders to whom this Proxy Statement is mailed upon written
request to the Chief Financial Officer, Novametrix Medical Systems Inc., 5
Technology Drive, Wallingford, Connecticut 06492.
September 12, 1997
25
EXHIBIT A
NOVAMETRIX MEDICAL SYSTEMS INC.
1997 LONG TERM INCENTIVE PLAN
SECTION 1. Purpose. The purposes of this Novametrix Medical
Systems Inc. 1997 Long Term Incentive Plan (the "Plan") are to encourage
selected employees, officers, directors and consultants of, and other
individuals providing services to, Novametrix Medical Systems Inc. (together
with any successor thereto, the "Company") and its Affiliates (as defined below)
to acquire a proprietary interest in the growth and performance of the Company,
to generate an increased incentive to contribute to the Company's future success
and prosperity thus enhancing the value of the Company for the benefit of its
shareholders, and to enhance the ability of the Company and its Affiliates to
attract and retain exceptionally qualified individuals upon whom, in large
measure, the sustained progress, growth and profitability of the Company depend.
SECTION 2. Definitions. As used in the Plan, the following
terms shall have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or
through one or more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, as determined by
the Committee.
"Award" shall mean any Option, Stock Appreciation Right,
Restricted Security, Performance Award, or Other Stock-Based Award granted under
the Plan.
"Award Agreement" shall mean any written agreement, contract
or other instrument or document evidencing any Award granted under the Plan.
"Board" shall mean the Board of Directors of the Company.
"Cause", as used in connection with the termination of a
Participant's employment, shall mean (i) with respect to any Participant
employed under a written employment agreement with the Company or an Affiliate
of the Company which agreement includes a definition of "cause," "cause" as
defined in such agreement or, if such agreement contains no such definition, a
material breach by the Participant of such agreement, or (ii) with respect to
any other Participant, the failure to perform adequately in carrying out such
Participant's employment responsibilities, including any directives from the
Board, or engaging in such behavior in his personal or business life as to lead
the Committee in its reasonable judgment to determine that it is in the best
interests of the Company to terminate his employment.
"Common Stock" shall mean the common stock of the Company,
$.01 par value.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated thereunder.
"Committee" shall mean the Stock Option Committee or any other
committee of the Board designated by the Board to administer the Plan and
composed of not less than three nonemployee directors.
"Common Shares" shall mean any or all, as applicable, of the
Common Stock and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 4(b) of the Plan and any other securities of the Company or any
Affiliate or any successor that may be so designated by the Committee.
26
A-2
"Employee" shall mean any employee of the Company or of any
Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Fair Market Value" shall mean (A) with respect to any
property other than the Common Shares, the fair market value of such property
determined by such methods or procedures as shall be established from time to
time by the Committee; and (B) with respect to the Common Shares, the last sale
price regular way on the date of reference, or, in case no sale takes place on
such date, the average of the high bid and low asked prices, in either case on
the principal national securities exchange on which the Common Shares are listed
or admitted to trading, or if the Common Shares are not listed or admitted to
trading on any national securities exchange, the last sale price reported on the
National Market System of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") on such date, or the average of the
closing high bid and low asked prices in the over-the-counter market reported on
NASDAQ on such date, whichever is applicable, or if there are no such prices
reported on NASDAQ on such date, as furnished to the Committee by any New York
Stock Exchange member selected from time to time by the Committee for such
purpose. If there is no bid or asked price reported on any such date, the Fair
Market Value shall be determined by the Committee in accordance with the
regulations promulgated under Section 2031 of the Code, or by any other
appropriate method selected by the Committee.
"Good Reason", as used in connection with the termination of a
Participant's employment, shall mean (i) with respect to any Participant
employed under a written employment agreement with the Company or an Affiliate
of the Company, "good reason" as defined in such written agreement or, if such
agreement contains no such definition, a material breach by the Company of such
agreement, or (ii) with respect to any other Participant, a failure by the
Company to pay such Participant any amount otherwise vested and due and a
continuation of such failure for 30 business days following notice to the
Company thereof.
"Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of Section
422 of the Code or any successor provision thereto.
"Non-Qualified Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is not intended to be an Incentive Stock
Option. Any stock option granted by the Committee which is not designated an
Incentive Stock Option shall be deemed a Non-Qualified Stock Option.
"Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option.
"Other Stock-Based Award" shall mean any right granted under
Section 6(e) of the Plan.
"Participant" shall mean any individual granted an Award under
the Plan.
"Performance Award" shall mean any right granted under Section
6(d) of the Plan.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.
"Released Securities" shall mean securities that were
Restricted Securities but with respect to which all applicable restrictions have
expired, lapsed or been waived in accordance with the terms of the Plan or the
applicable Award Agreement.
"Restricted Securities" shall mean any Common Shares granted
under Section 6(c) of the Plan, any right granted under Section 6(c) of the Plan
that is denominated in Common Shares or any other Award under which issued and
outstanding Common Shares are held subject to certain restrictions.
A-3
27
A-3
"Rule 16a-1" and "Rule 16b-3" shall mean, respectively, Rule
16a-1 and Rule 16b-3 promulgated by the Securities and Exchange Commission under
the Exchange Act, or any successor rule or regulation thereto as in effect from
time to time.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
SECTION 3. Administration. The Plan shall be administered by
the Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee
by the Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to an
eligible Employee or other individual under the Plan; (iii) determine the number
and classification of Common Shares to be covered by (or with respect to which
payments, rights or other matters are to be calculated in connection with)
Awards; (iv) determine the terms and conditions of any Award; (v) determine
whether, to what extent, and under what circumstances Awards may be settled or
exercised in cash, Common Shares, other securities, other Awards or other
property, or canceled, forfeited or suspended, and the method or methods by
which Awards may be settled, exercised, canceled, forfeited or suspended; (vi)
determine requirements for the vesting of Awards or performance criteria to be
achieved in order for Awards to vest; (vii) determine whether, to what extent
and under what circumstances cash, Common Shares, other securities, other
Awards, other property and other amounts payable with respect to an Award under
the Plan shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (viii) interpret and administer the Plan and any
instrument or agreement relating to, or Award made under, the Plan; (ix)
establish, amend, suspend or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (x) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award shall be within the sole discretion of the Committee, may be
made at any time and shall be final, conclusive and binding upon all Persons,
including the Company, any Affiliate, any Participant, any holder or beneficiary
of any Award, any shareholder and any Employee. Notwithstanding the foregoing,
the maximum number of Awards which may be granted to any one Participant under
this Plan in any one-year period shall not exceed 50,000 Common Shares, subject
to the adjustments provided in Section 4(b) hereof and no Awards under this Plan
shall be granted after December 31, 2006.
SECTION 4. Common Shares Available for Awards.
(a) Common Shares Available. Subject to adjustment as provided
in Section 4(b):
(i) Calculation of Number of Common Shares Available.
The number of Common Shares available for granting Awards under the
Plan shall be 500,000, any or all of which may be or may be based on
Common Stock, any other security which becomes the subject of Awards,
or any combination thereof. Initially 500,000 shares of Common Stock
shall be reserved for Awards hereunder. Further, if, after the
effective date of the Plan, any Common Shares covered by an Award
granted under the Plan or to which such an Award relates, are
forfeited, or if an Award otherwise terminates or is canceled without
the delivery of Shares or of other consideration, then the Common
Shares covered by such Award or to which such Award relates, or the
number of Common Shares otherwise counted against the aggregate number
of Common Shares available under the Plan with respect to such Award,
to the extent of any such forfeiture, termination or cancellation,
shall again be, or shall become, available for granting Awards under
the Plan.
(ii) Accounting for Awards. For purposes of this
Section 4,
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(A) if an Award is denominated in or based upon
Common Shares, the number of Common Shares covered by such
Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of
Common Shares available for granting Awards under the Plan and
against the maximum number of Awards available to any
Participant; and
(B) Awards not denominated in Common Shares may be
counted against the aggregate number of Common Shares
available for granting Awards under the Plan and against the
maximum number of Awards available to any participant in such
amount and at such time as the Committee shall determine under
procedures adopted by the Committee consistent with the
purposes of the Plan;
provided, however, that Awards that operate in tandem with (whether
granted simultaneously with or at a different time from), or that are
substituted for, other Awards may be counted or not counted under
procedures adopted by the Committee in order to avoid double counting.
Any Common Shares that are delivered by the Company, and any Awards
that are granted by, or become obligations of, the Company, through the
assumption by the Company or an Affiliate of, or in substitution for,
outstanding awards previously granted by an acquired company shall, in
the case of Awards granted to Participants who are officers or
directors of the Company for purposes of Section 16 of the Exchange
Act, be counted against the Common Shares available for granting Awards
under the Plan.
(iii) Sources of Common Shares Deliverable Under
Awards. Any Common Shares delivered pursuant to an Award may consist,
in whole or in part, of authorized and unissued Common Shares or of
treasury Common Shares.
(b) Adjustments. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Common Shares, other securities or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase or exchange of Common Shares or other
securities of the Company, issuance of warrants or other rights to purchase
Common Shares or other securities of the Company, or other similar corporate
transaction or event affects the Common Shares such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and kind of Common Shares (or
other securities or property) which thereafter may be made the subject of
Awards, (ii) the number and kind of Common Shares (or other securities or
property) subject to outstanding Awards, and (iii) the grant or exercise price
with respect to any Award or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Award; provided, however, that the
number of Common Shares subject to any Award denominated in Common Shares shall
always be a whole number.
In connection with any merger or consolidation in which the
Company is not the surviving corporation and which results in the holders of the
outstanding voting securities of the Company (determined immediately prior to
such merger or consolidation) owning less than a majority of the outstanding
voting securities of the surviving corporation (determined immediately following
such merger or consolidation), or any sale or transfer by the Company of all or
substantially all its assets or any tender offer or exchange offer for or the
acquisition, directly or indirectly, by any person or group of all or a majority
of the then outstanding voting securities of the Company, all outstanding
Options under the Plan shall become exercisable in full, notwithstanding any
other provision of the Plan or of any outstanding Options granted thereunder, on
and after (i) the fifteenth day prior to the effective date of such merger,
consolidation, sale, transfer or acquisition or (ii) the date of commencement of
such tender offer or exchange offer, as the case may be. The provisions of the
foregoing sentence shall apply to any outstanding Options which are Incentive
Stock
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Options to the extent permitted by Section 422(d) of the Code and such
outstanding Options in excess thereof shall, immediately upon the occurrence of
the event described in clause (i) or (ii) of the foregoing sentence, be treated
for all purposes of the Plan as Non-Qualified Stock Options and shall be
immediately exercisable as such as provided in the foregoing sentence.
SECTION 5. Eligibility. Any Employee, including any officer or
employee-director of the Company or of any Affiliate, and any consultant of, or
other individual providing services to, the Company or any Affiliate shall be
eligible to be designated a Participant. A non-employee director shall be
eligible to receive Non-Qualified Stock Options under the Plan.
SECTION 6. Awards.
(a) Options. The Committee is hereby authorized to grant to
eligible individuals options to purchase Common Shares (each, an "Option") which
shall contain the following terms and conditions and with such additional terms
and conditions, in either case not inconsistent with the provisions of the Plan,
as the Committee shall determine:
(i) Exercise Price. The purchase price per Common Share
purchasable under an Option shall be determined by the Committee;
provided, however, that such purchase price shall not be less than one
hundred percent (100%) of the Fair Market Value of a Common Share on
the date of grant of such Option, or such other price as required under
Subsection 6(a)(iv) hereof.
(ii) Time and Method of Exercise. Subject to the terms
of Section 6(a)(iii), the Committee shall determine the time or times
at which an Option may be exercised in whole or in part, and the method
or methods by which, and the form or forms (including, without
limitation, cash, Common Shares, outstanding Awards, or other property,
or any combination thereof, having a Fair Market Value on the exercise
date equal to the relevant exercise price) in which, payment of the
exercise price with respect thereto may be made or deemed to have been
made.
(iii) Exercisability Upon Death, Retirement and
Termination of Employment. Subject to the condition that no Option may
be exercised in whole or in part after the expiration of the Option
period specified in the applicable Award Agreement:
(A) Subject to the terms of paragraph (D) below, upon
the death of a Participant while employed or within 3 months
of retirement or disability as defined in paragraph (B) below,
the Person or Persons to whom such Participant's rights with
respect to any Option held by such Participant are transferred
by will or the laws of descent and distribution may, prior to
the expiration of the earlier of: (1) the outside exercise
date determined by the Committee at the time of granting the
Option, or (2) nine months after such Participant's death,
purchase any or all of the Common Shares with respect to which
such Participant was entitled to exercise such Option
immediately prior to such Participant's death, and any Options
not so exercisable will lapse on the date of such
Participant's death;
(B) Subject to the terms of paragraph (D) below, upon
termination of a Participant's employment with the Company (x)
as a result of retirement pursuant to a retirement plan of the
Company or an Affiliate or disability (as determined by the
Committee) of such Participant, (y) by the Company other than
for Cause, or (z) by the Participant with Good Reason, such
Participant may, prior to the expiration of the earlier of:
(1) the outside exercise date determined by the Committee at
the time of granting the Option, or (2) three months after the
date of such termination, purchase any or all of the Common
Shares with respect to which such Participant was entitled to
exercise any
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Options immediately prior to such termination, and any Options
not so exercisable will lapse on such date of termination;
(C) Subject to the terms of paragraph (D) below, upon
termination of a Participant's employment with the Company
under any circumstances not described in paragraphs (A) or (B)
above, such Participant's Options shall be canceled to the
extent not theretofore exercised;
(D) Upon (i) the death of the Participant, or (ii)
termination of the Participant's employment with the Company
(x) by the Company other than for Cause (y) by the Participant
with Good Reason or (z) as a result of retirement or
disability as defined in paragraph (B) above, the Company
shall have the right to cancel all of the Options such
Participant was entitled to exercise at the time of such death
or termination (subject to the terms of paragraphs (A) or (B)
above) for a payment in cash equal to the excess, if any, of
the Fair Market Value of one Common Share on the date of death
or termination over the exercise price of such Option for one
Common Share times the number of Common Shares subject to the
Option and exercisable at the time of such death or
termination; and
(E) Upon expiration of the respective periods set
forth in each of paragraphs (A) through (C) above, the Options
of a Participant who has died or whose employment has been
terminated shall be canceled to the extent not theretofore
canceled or exercised.
(F) For purposes of paragraphs (A) through (D) above,
the period of service of an individual as a director or
consultant of the Company or an Affiliate shall be deemed the
period of employment.
(iv) Incentive Stock Options. The following provisions
shall apply only to Incentive Stock Options granted under the Plan:
(A) No Incentive Stock Option shall be granted to any
eligible Employee who, at the time such Option is granted,
owns securities possessing more than ten percent (10%) of the
total combined voting power of all classes of securities of
the Company or of any Affiliate, except that such an Option
may be granted to such an Employee if at the time the Option
is granted the option price is at least one hundred ten
percent (110%) of the Fair Market Value of the Common Shares
(determined in accordance with Section 2) subject to the
Option, and the Option by its terms is not exercisable after
the expiration of five (5) years from the date the Option is
granted; and
(B) To the extent that the aggregate Fair Market
Value of the Common Shares with respect to which Incentive
Stock Options (without regard to this subsection) are
exercisable for the first time by any individual during any
calendar year (under all plans of the Company and its
Affiliates) exceeds $100,000, such Options shall be treated as
Non-Qualified Stock Options. This subsection shall be applied
by taking Options into account in the order in which they were
granted. If some but not all Options granted on any one day
are subject to this subsection, then such Options shall be
apportioned between Incentive Stock Option and Non-Qualified
Stock Option treatment in such manner as the Committee shall
determine. For purposes of this subsection, the Fair Market
Value of any Common Shares shall be determined, in accordance
with Section 2, as of the date the Option with respect to such
Common Shares is granted.
(v) Other Terms and Conditions of Options.
Notwithstanding any provision contained in the Plan to the contrary,
during any period when any member of the Committee shall
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not be a "nonemployee director" as defined in Rule 16b-3, then, the
terms and conditions of Options granted under the Plan to any director
or officer, as defined in Rule 16a-1, of the Company during such
period, unless other terms and conditions are approved in advance by
the Board, shall be as follows:
(A) The price at which each Common Share subject to
an option may be purchased shall, subject to any adjustments
which may be made pursuant to Section 4, in no event be less
than the Fair Market Value of a Common Share on the date of
grant, and provided further that in the event the option is
intended to be an Incentive Stock Option and the optionee owns
on the date of grant securities possessing more than ten
percent (10%) of the total combined voting power of all
classes of securities of the Company or of any Affiliate, the
price per share shall not be less than one hundred ten percent
(110%) of the Fair Market Value per Common Share on the date
of grant.
(B) The Option may be exercised to purchase Common
Shares covered by the Option not sooner than six (6) months
following the date of grant. The Option shall terminate and no
Common Shares may be purchased thereunder more than ten (10)
years after the date of grant, provided that if the Option is
intended to be an Incentive Stock Option and the Optionee owns
on the date of grant securities possessing more than ten
percent (10%) of the total combined voting power of all
classes of securities of the Company or of any Affiliate, the
Option shall terminate and no Common Shares may be purchased
thereunder more than five (5) years after the date of grant.
(b) Stock Appreciation Rights. The Committee is hereby
authorized to grant to eligible Employees "Stock Appreciation Rights." Each
Stock Appreciation Right shall consist of a right to receive the excess of (i)
the Fair Market Value of one Common Share on the date of exercise or, if the
Committee shall so determine in the case of any such right other than one
related to any Incentive Stock Option, at any time during a specified period
before or after the date of exercise over (ii) the grant price of the right as
specified by the Committee, which shall not be less than one hundred percent
(100%) of the Fair Market Value of one Common Share on the date of grant of the
Stock Appreciation Right (or, if the Committee so determines, in the case of any
Stock Appreciation Right retroactively granted in tandem with or in substitution
for another Award, on the date of grant of such other Award). Subject to the
terms of the Plan and any applicable Award Agreement, the grant price, term,
methods of exercise, methods of settlement, and any other terms and conditions
of any Stock Appreciation Right granted under the Plan shall be as determined by
the Committee. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it may deem appropriate.
(c) Restricted Securities.
(i) Issuance. The Committee is hereby authorized to
grant to eligible Employees "Restricted Securities" which shall consist
of the right to receive, by purchase or otherwise, Common Shares which
are subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote
such Common Shares or the right to receive any dividend or other right
or property), which restrictions may lapse separately or in combination
at such time or times, in such installments or otherwise, as the
Committee may deem appropriate.
(ii) Registration. Restricted Securities granted under
the Plan may be evidenced in such manner as the Committee may deem
appropriate, including, without limitation, book-entry registration or
issuance of a stock certificate or certificates. In the event any stock
certificate is issued in respect of Restricted Securities granted under
the Plan, such certificate shall
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be registered in the name of the Participant and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Securities.
(iii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of a Participant's employment for any
reason during the applicable restriction period, all of such
Participant's Restricted Securities which had not become Released
Securities by the date of termination of employment shall be forfeited
and reacquired by the Company; provided, however, that the Committee
may, when it finds that a waiver would be in the best interests of the
Company, waive in whole or in part any or all remaining restrictions
with respect to such Participant's Restricted Securities. Unrestricted
Common Shares, evidenced in such manner as the Committee shall deem
appropriate, shall be issued to the holder of Restricted Securities
promptly after such Restricted Securities become Released Securities.
(d) Performance Awards. The Committee is hereby authorized to
grant to eligible Employees "Performance Awards." Each Performance Award shall
consist of a right, (i) denominated or payable in cash, Common Shares, other
securities or other property (including, without limitation, Restricted
Securities), and (ii) which shall confer on the holder thereof rights valued as
determined by the Committee and payable to, or exercisable by, the holder of the
Performance Award, in whole or in part, upon the achievement of such performance
goals during such performance periods as the Committee shall establish. Subject
to the terms of the Plan and any applicable Award Agreement, the performance
goals to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award granted, the termination
of a Participant's employment and the amount of any payment or transfer to be
made pursuant to any Performance Award shall be determined by the Committee and
by the other terms and conditions of any Performance Award. The Committee shall
issue performance goals prior to the commencement of the performance period to
which such performance goals pertain.
(e) Other Stock-Based Awards. The Committee is hereby
authorized to grant to eligible Employees "Other Stock-Based Awards." Each Other
Stock-Based Award shall consist of a right (i) which is other than an Award or
right described in Section 6(a), (b), (c) or (d) above and (ii) which is
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, Common Shares (including, without limitation,
securities convertible into Common Shares) as are deemed by the Committee to be
consistent with the purposes of the Plan; provided, however, that such right
shall comply, to the extent deemed desirable by the Committee, with Rule 16b-3
and applicable law. Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the terms and conditions of Other
Stock-Based Awards. Common Shares or other securities delivered pursuant to a
purchase right granted under this Section 6(e) shall be purchased for such
consideration, which may be paid by such method or methods and in such form or
forms, including, without limitation, cash, Common Shares, other securities,
other Awards, other property, or any combination thereof, as the Committee shall
determine.
(f) General.
(i) No Cash Consideration for Awards. Awards may be
granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law.
(ii) Awards May Be Granted Separately or Together.
Awards may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution for any other
Award, except that in no event shall an Incentive Stock Option be
granted together with a Non-Qualified Stock Option in such a manner
that the exercise of one Option affects the right to exercise the
other. Awards granted in addition to or in tandem with other Awards may
be granted either at the same time as or at a different time from the
grant of such other awards.
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(iii) Forms of Payment Under Awards. Subject to the terms
of the Plan and of any applicable Award Agreement, payments or
transfers to be made by the Company or an Affiliate upon the grant,
exercise or payment of an Award may be made in such form or forms as
the Committee shall determine, including, without limitation, cash,
Common Shares, other securities, other Awards, or other property, or
any combination thereof, and may be made in a single payment or
transfer, in installments, or on a deferred basis, in each case in
accordance with rules and procedures established by the Committee. Such
rules and procedures may include, without limitation, provisions for
the payment or crediting of reasonable interest on installment or
deferred payments. In accordance with the above, the Committee may
elect (i) to pay a Participant (or such Participant's permitted
transferee) upon the exercise of an Option in whole or in part, in lieu
of the exercise thereof and the delivery of Common Shares thereunder,
an amount of cash equal to the excess, if any, of the Fair Market Value
of one Common Share on the date of such exercise over the exercise
price of such Option for one Common Share times the number of Common
Shares subject to the Option or portion thereof so exercised or (ii) to
settle other stock denominated Awards in cash.
(iv) Limits on Transfer of Awards.
(A) No award (other than Released Securities), and no
right under any such Award, may be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered
by a Participant otherwise than by will or by the laws of
descent and distribution (or, in the case of Restricted
Securities, to the Company) and any such purported assignment,
alienation, pledge, attachment, sale or other transfer or
encumbrance shall be void and unenforceable against the
Company or any Affiliate.
(B) Each award, and each right under any Award, shall
be exercisable during the Participant's lifetime only by the
Participant or, if permissible under applicable law, by the
Participant's guardian or legal representative.
(v) Terms of Awards. The term of each Award shall be
for such period as may be determined by the Committee; provided,
however, that in no event shall the term of any Option exceed a period
of ten years from the date of its grant.
(vi) Rule 16b-3 Six-Month Limitations. To the extent
required in order to maintain the exemption provided under Rule 16b-3
only, any equity security offered pursuant to the Plan must be held for
at least six months after the date of grant, and with respect to any
derivative security issued pursuant to the Plan, at least six months
must elapse from the date of acquisition of such derivative security to
the date of disposition of the derivative security (other than upon
exercise or conversion) or its underlying equity security. Terms used
in the preceding sentence shall, for the purposes of such sentence
only, have the meanings, if any, assigned or attributed to them under
Rule 16b-3.
(vii) Common Share Certificates. All certificates for
Common Shares delivered under the Plan pursuant to any Award or the
exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan
or the rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which such Common Shares
are then listed, and any applicable Federal or state securities laws,
and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(viii) Delivery of Common Shares or Other Securities and
Payment by Participant of Consideration. No Common Shares or other
securities shall be delivered pursuant
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to any Award until payment in full of any amount required to be paid
pursuant to the Plan or the applicable Award Agreement is received by
the Company. Such payment may be made by such method or methods and in
such form or forms as the Committee shall determine, including, without
limitation, cash, Common Shares, other securities, other Awards or
other property, or any combination thereof; provided that the combined
value, as determined by the Committee, of all cash and cash equivalents
and the Fair Market Value of any such Common Shares or other property
so tendered to the Company, as of the date of such tender, is at least
equal to the full amount required to be paid pursuant to the Plan or
the applicable Award Agreement to the Company.
SECTION 7. Amendments; Adjustments and Termination. Except to
the extent prohibited by applicable law and unless otherwise expressly provided
in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board may amend, alter,
suspend, discontinue, or terminate the Plan without the consent of any
shareholder, Participant, other holder or beneficiary of an Award, or other
Person; provided, however, that, subject to the Company's rights to adjust
Awards under Sections 7(c) and (d), any amendment, alteration, suspension,
discontinuation, or termination that would impair the rights of any Participant,
or any other holder or beneficiary of any Award theretofore granted, shall not
to that extent be effective without the consent of such Participant, other
holder or beneficiary of an Award, as the case may be; and provided further,
however, that notwithstanding any other provision of the Plan or any Award
Agreement, without the approval of the shareholders of the Company no such
amendment, alteration, suspension, discontinuation, or termination shall be made
that would:
(i) increase the total number of Common Shares
available for Awards under the Plan, except as provided in Section 4
hereof; or
(ii) otherwise cause the Plan to cease to comply with
any tax or regulatory requirement, including for these purposes any
approval or other requirement which is or would be a prerequisite for
exemptive relief from Section 16(b) of the Exchange Act.
(b) Amendments to Awards. The Committee may waive any
conditions or rights under, amend any terms of, or alter, suspend, discontinue,
cancel or terminate, any Award theretofore granted, prospectively or
retroactively; provided, however, that, subject to the Company's rights to
adjust Awards under Sections 7(c) and (d), any amendment, alteration,
suspension, discontinuation, cancellation or termination that would impair the
rights of any Participant or holder or beneficiary of any Award theretofore
granted, shall not to that extent be effective without the consent of such
Participant or holder or beneficiary of an Award, as the case may be.
(c) Adjustment of Awards Upon Certain Acquisitions. In the
event the Company or any Affiliate shall assume outstanding employee awards or
the right or obligation to make future such awards in connection with the
acquisition of another business or another corporation or business entity, the
Committee may make such adjustments, not inconsistent with the terms of the
Plan, in the terms of Awards as it shall deem appropriate in order to achieve
reasonable comparability or other equitable relationship between the assumed
awards and the Awards granted under the Plan as so adjusted.
(d) Adjustments of Awards Upon the Occurrence of Certain
Unusual or Nonrecurring Events. The Committee is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or non-recurring events (including, without
limitation, the events described in Section 4(b) hereof) affecting the Company,
any Affiliate, or the financial statements of the Company or any Affiliate, or
of changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan.
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SECTION 8. General Provisions.
(a) No Right to Awards. No Employee or other Person shall have
any claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Employees, or holders or beneficiaries of Awards
under the Plan. The terms and conditions of Awards need not be the same with
respect to each recipient.
(b) Delegation. Subject to the terms of the Plan and
applicable law, the Committee may delegate to one or more officers or managers
of the Company or any Affiliate, or to a committee of such officers or managers,
the authority, subject to such terms and limitations as the Committee shall
determine, to grant Awards to, or to cancel, modify, waive rights with respect
to, alter, discontinue, suspend, or terminate Awards; provided, however, that,
no such delegation shall be permitted with respect to Awards held by Employees
who are officers or directors of the Company for purposes of Section 16 of the
Exchange Act, or any successor section thereto or who are otherwise subject to
such Section.
(c) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission, or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.
(d) Withholding. The Company or any Affiliate shall be
authorized to withhold from any Award granted, from any payment due or transfer
made under any Award or under the Plan or from any compensation or other amount
owing to a Participant the amount (in cash, Common Shares, other securities,
other Awards, or other property) of withholding taxes due in respect of an
Award, its exercise, or any payment or transfer under such Award or under the
Plan and to take such other action as may be necessary in the opinion of the
Company or Affiliate to satisfy all obligations for the payment of such taxes.
(e) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.
(f) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment, free from any liability, or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(g) Governing Law. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan shall be determined
in accordance with the laws of the State of Delaware and applicable Federal law.
(h) Severability. If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or as to any Person or Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan or
the Award, such provision shall be stricken as to such jurisdiction, Person or
Award and the remainder of the Plan and any such Award shall remain in full
force and effect.
(i) No Trust or Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
36
A-12
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(j) No Fractional Common Shares. No fractional Common Shares
shall be issued or delivered pursuant to the Plan or any Award, and the
Committee shall determine whether cash, other securities, or other property
shall be paid or transferred in lieu of any fractional Common Shares or whether
such fractional Common Shares or any rights thereto shall be canceled,
terminated, or otherwise eliminated.
(k) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
SECTION 9. Adoption, Approval and Effective Date of the Plan.
The Plan shall be considered adopted and shall become effective on the date the
Plan is approved by the Board; provided, however, that the Plan and any Awards
granted under the Plan shall be void, if the shareholders of the Company shall
not have approved the adoption of the Plan within twelve (12) months after the
effective date, by a majority of votes cast thereon at a meeting of shareholders
duly called and held for such purpose.
37
NOVAMETRIX MEDICAL SYSTEMS INC.
PROXY - Annual Meeting of Stockholders - October 14, 1997
COMMON STOCK
The undersigned, a stockholder of NOVAMETRIX MEDICAL SYSTEMS
INC., does hereby appoint William J. Lacourciere and Joseph A. Vincent, or
either of them, with full power of substitution, the undersigned's proxies, to
appear and vote at the Annual Meeting of Stockholders to be held on October 14,
1997 at 10:30 a.m., local time, or at any adjournments thereof, upon such
matters as may come before the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby instructs said proxies or their
substitutes to vote as specified below on the following matters and in
accordance with their judgment on other matters which may properly come before
the Meeting.
1. Election of Class B Directors.
FOR both nominees listed below [ ] WITHHOLD authority
(except as marked to the for both nominees
contrary below) listed below [ ]
Photios T. Paulson and Steven J. Shulman
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
2. Approval of the Novametrix Medical Systems Inc. 1997 Long Term
Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Ratification of appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending May 3, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The Board of Directors favors a vote "FOR" each item.
(Continued and to be Completed on Reverse Side)
38
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED AS TO ITEM 1, SUCH SHARES WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES NAMED AND IF NO DIRECTION IS INDICATED AS TO EITHER ITEM 2 OR ITEM 3,
SUCH SHARES WILL BE VOTED FOR SUCH ITEM.
IMPORTANT: Before returning this Proxy, please sign your name or names on the
line(s) below exactly as shown hereon. Executors, administrators, trustees,
guardians or corporate officers should indicate their full titles when signing.
Where shares are registered in the names of joint tenants or trustees, each
joint tenant or trustee should sign.
Dated ________________________, 1997
______________________________(L.S.)
______________________________(L.S.)
Stockholder(s) Sign Here
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(Continued From Other Side)
39
FIRST UNION CORPORATION: 40,000 Preferred Shares (440,000 votes)
NOVAMETRIX MEDICAL SYSTEMS INC.
PROXY - Annual Meeting of Stockholders - October 14, 1997
SERIES B PREFERRED STOCK
The undersigned, a stockholder of NOVAMETRIX MEDICAL SYSTEMS
INC., does hereby appoint WILLIAM J. LACOURCIERE and JOSEPH A. VINCENT, or
either of them, with full power of substitution, the undersigned's proxies, to
appear and vote all shares of Series B Preferred Stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
on October 14, 1997 at 10:30 a.m., local time, or at any adjournments thereof,
upon such matters as may properly come before the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS
DIRECTED. IF NO DIRECTION IS INDICATED AS TO ITEM 1, SUCH SHARES WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES NAMED AND IF NO DIRECTION IS INDICATED AS TO
EITHER ITEM 2 OR ITEM 3, SUCH SHARES WILL BE VOTED FOR SUCH ITEM.
The Board of Directors favors a vote "FOR" each item.
1. Election of Class B Directors.
FOR both nominees WITHHOLD authority to vote
listed below [ ] for both nominees listed below [ ]
Photios T. Paulson and Steven J. Shulman
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
2. Approval of the Novametrix Medical Systems Inc. 1997 Long Term
Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Ratification of appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending May 3, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Continued and to be Completed on Reverse Side)
40
The undersigned hereby instructs said proxies or their substitutes to vote as
specified above on each of the above matters and in accordance with their
judgment on any other matters which may properly come before the Meeting.
IMPORTANT: Before returning this Proxy, please sign your name or names on the
line(s) below exactly as shown hereon. Executors, administrators, trustees,
guardians or corporate officers should indicate their full titles when signing.
Where shares are registered in the names of joint tenants or trustees, each
joint tenant or trustee should sign.
Dated _______________________, 1997
_____________________________ (L.S.)
_____________________________ (L.S.)
Stockholder(s) Sign Here
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE.
(Continued From Other Side)