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NOVAMETRIX MEDICAL SYSTEMS INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 1, 1998
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Wallingford, Connecticut
July 29, 1998
To the Holders of Common 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, September 1, 1998,
at 10:30 a.m. for the following purposes, as more fully described in the
accompanying Proxy Statement:
1. To elect two Class C directors of the Company for the ensuing
three years.
2. 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 2, 1999.
3. To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
The close of business on July 17, 1998 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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NOVAMETIX MEDICAL SYSTEMS INC.
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PROXY STATEMENT
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This Proxy Statement, which will be mailed commencing on or about July 29,
1998 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 September 1, 1998, 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 common stock, $.01
par value ("Common Stock"), of the Company as of July 17, 1998 (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 8,857,786 shares of
Common Stock. The Company has no class or series of stock outstanding and
entitled to vote at the Meeting other than the Common Stock. Each share of
Common Stock is entitled to one vote 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
outstanding shares of Common 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 Proposal 2 will require
the affirmative vote of a majority 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 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 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 beneficially owned more
than five percent of the Common Stock as of July 1, 1998, 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.
SHARES OF COMMON STOCK PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
- ---------------- ---------------------- --------
Charles F. Manning, Jr., M.D. Group......................... 575,338(1) 6.4%
1831 Ox Bottom Road
Tallahassee, Florida 32312
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(1) Information as to the Charles F. Manning, Jr., M.D. 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 575,338 shares, which includes 72,570
shares issuable on the exercise of currently exercisable warrants.
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In addition, a group of stockholders of the Company which includes Elliott
Associates, L.P., 712 Fifth Avenue, New York, New York 10019 (the "Elliott
Group") has filed a report on Schedule 13D with the Commission. Such report, as
amended, indicates that the Elliott Group beneficially owns an aggregate of
546,746 shares of Common Stock (including 135,121 shares issuable on the
exercise of currently exercisable warrants), representing approximately 6.1% of
the outstanding Common Stock. A member of the Elliott Group is a co-trustee of
the Pellegrino Family Trust, the beneficial owner of 186,121 shares of Common
Stock (including 135,121 shares issuable on the exercise of currently
exercisable warrants). Such 186,121 shares are included in the aggregate number
of shares beneficially owned by the Elliott Group because of the shared voting
and dispositive power over such shares held by the co-trustee who is a member of
the Elliott Group. However, such Trust is not a member of the Elliott Group.
Moreover, the shares of such Trust cannot be voted by the member of the Elliott
Group without approval by both trustees of such Trust. The co-trustee of such
Trust has informed the Company and the members of the Elliott Group that he
opposes the views of the Elliott Group and, accordingly, the shares beneficially
owned by such Trust will not be voted in favor of any such views. In light of
the foregoing, it is the position of the Company that the shares owned by the
Pellegrino Family Trust are not appropriately includable in the number of shares
beneficially owned by the Elliott Group and that, accordingly, the Elliott Group
beneficially owns 360,625 shares (approximately 4.0%) of the Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of July 1, 1998, the number of shares of
Common Stock beneficially owned by each of the Company's directors and each
executive officer named in the Summary Compensation
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Table, and all directors and executive officers as a group, according to
information furnished by such persons to the Company.
SHARES OF COMMON STOCK PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
---------------- ---------------------- --------
Paul A. Cote................................................ 75,458(1) *
Director of the Company
Vartan Ghugasian............................................ 60,833(2) *
Director of the Company
Thomas M. Haythe............................................ 124,873(3) 1.4%
Director of the Company
William J. Lacourciere...................................... 381,003(4) 4.3%
Chairman of the Board, President and
Chief Executive Officer of the
Company and Director of the Company
John P. Mahoney............................................. 176,209(5) 2.0%
Director of the Company
Photios T. Paulson.......................................... 23,833(6) *
Director of the Company
Steven J. Shulman........................................... 14,333(7) *
Director of the Company
Joseph A. Vincent........................................... 72,461(8) *
Executive Vice President, Chief
Operating Officer, Treasurer and
Secretary of the Company
Philip F. Nuzzo............................................. 36,528(9) *
Vice President -- Marketing and
Product Development
All directors and executive officers as a group............. 1,011,128(1) 11.2%
(eleven persons) (2)(3)(4)
(5)(6)(7)
(8)(9)(10)
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* Less than one percent.
(1) Includes 5,575 shares issuable upon the exercise of currently exercisable
warrants held by Mr. Cote, which warrants will expire on December 8, 1999,
and 3,333 shares issuable upon the exercise of currently exercisable stock
options held by Mr. Cote.
(2) Includes 1,000 shares issuable upon the exercise of currently exercisable
warrants held by Dr. Ghugasian, which warrants will expire on December 8,
1999, and 3,333 shares issuable upon the exercise of currently exercisable
stock options held by Dr. Ghugasian.
(3) Includes 8,333 shares issuable upon the exercise of currently exercisable
stock options held by Mr. Haythe.
(4) Includes (i) 5,900 shares held for the account of Mr. Lacourciere under the
Novametrix Medical Systems Inc. Employee Stock Ownership Plan (the "ESOP"),
(ii) 1,000 shares issuable upon the exercise of currently exercisable
warrants held by Mr. Lacourciere, which warrants will expire on December 8,
1999, and (iii) 30,000 shares issuable upon the exercise of currently
exercisable stock options held by Mr. Lacourciere.
(5) Includes 10,400 shares issuable upon the exercise of currently exercisable
warrants held by Dr. Mahoney, which warrants will expire on December 8,
1999.
(6) Includes 10,000 shares issuable upon the exercise of currently exercisable
warrants held by Mr. Paulson, which warrants will expire on November 30,
2002, and 8,333 shares issuable upon the exercise of currently exercisable
stock options held by Mr. Paulson.
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(7) Includes 8,333 shares issuable upon the exercise of currently exercisable
stock options held by Mr. Shulman.
(8) Includes (i) 3,170 shares held for the account of Mr. Vincent under the
ESOP, (ii) 200 shares issuable upon the exercise of currently exercisable
warrants held by Mr. Vincent, which warrants will expire on December 8,
1999, and (iii) 21,333 shares issuable upon the exercise of currently
exercisable stock options held by Mr. Vincent.
(9) Includes (i) 2,555 shares held for the account of Mr. Nuzzo under the ESOP
and (ii) 32,833 shares issuable upon the exercise of currently exercisable
stock options held by Mr. Nuzzo.
(10) Includes (i) 1,482 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. Includes (i) 1,530 shares held for the account of Jeffery
A. Baird, Chief Financial Officer of the Company, under the ESOP and (ii)
15,833 shares issuable upon the exercise of currently exercisable stock
options held by Mr. Baird.
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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 are
Photios T. Paulson and Steven J. Shulman, and the Class C directors of the
Company are Thomas M. Haythe, William J. Lacourciere and John P. Mahoney. 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 C 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 A directors will be elected at the 1999 Annual Meeting and
the Class B directors will be elected at the 2000 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 C director,
Thomas M. Haythe and William J. Lacourciere, 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 C 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
THOMAS M. HAYTHE (Class C director), age 58; Partner, Haythe & Curley (law
firm) since prior to 1991; Director: Guest Supply, Inc. (provider of hotel guest
room amenities, accessories and products), Westerbeke Corporation (manufacturer
of marine engine products) and Ramsay Health Care, Inc. (provider of management
programs and services for at-risk youth and related behavioral healthcare
services); Director of the Company since 1978.
WILLIAM J. LACOURCIERE (Class C director), age 58; 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.
OTHER DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE MEETING
PAUL A. COTE (Class A director), age 68; 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 53; Practicing dentist in
Massachusetts since 1972; Associate in Prosthetic Dentistry, Harvard School of
Dental Medicine, from 1980 until 1993; Director, Karagheusian Commemorative
Corporation; Director of the Company since November 1996.
PHOTIOS T. PAULSON (Class B director), age 59; 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 47; President and Chief
Executive Officer of Prudential HealthCare (one of the nation's ten largest
healthcare providers) since August 1997; President,
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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 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 Ramsay Health Care, Inc. (provider of behavioral healthcare services);
Director of the Company since 1993.
The term of John P. Mahoney, a Class C director of the Company, will expire
on the date of the Meeting.
During the fiscal year ended May 3, 1998, the Board of Directors of the
Company met eight 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.
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, Mahoney and Paulson. The Board of Directors does not have
a Nominating Committee.
The Stock Option Committee administers the Company's Stock Option Plans,
its 1997 Long Term Incentive Plan 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 May 3, 1998, the Stock Option Committee met four times, the
Compensation Committee met two times 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, except that Mr. Shulman was unable to attend the meeting
of the Audit Committee.
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, should such request be made, 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") entered into a Stockholders Agreement in September 1997. Under
the Stockholders Agreement, the members of the Manning Group agreed to vote
their shares of Common Stock for the election of the Company's nominees for
director at the 1997 Annual Meeting. The Stockholders Agreement also provides
that, if there shall not have been any solicitation of proxies on or 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 would increase by one the number of Class C directors of
the Company, would elect John P. Mahoney, M.D., a member of the Manning Group,
as a Class C director promptly following the 1997 Annual Meeting and would
nominate Dr. Mahoney for reelection as a Class C director at the 1998 Annual
Meeting of Stockholders. Dr. Mahoney has decided not to seek reelection at the
1998 Annual Meeting.
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EXECUTIVE COMPENSATION
The following table sets forth information for the fiscal years ended May
3, 1998, April 27, 1997 and April 28, 1996 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 May 3, 1998.
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........ 1998 $250,000 $ -0- 50,000 $1,583
Chairman of the Board, 1997 220,192 -0- -0- 3,155
President and Chief 1996 200,000 15,000 -0- 4,511
Executive Officer
Joseph A. Vincent............. 1998 132,692 -0- 19,000 1,307
Executive Vice 1997 115,000 20,000 -0- 2,722
President and Chief 1996 104,904 10,000 -0- 3,141
Operating Officer
Philip F. Nuzzo(2)............ 1998 123,269 -0- 19,000 1,145
Vice President- 1997 110,780 -0- -0- 2,447
Marketing and Product 1996 -- -- -- --
Development
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(1) Includes contributions made by the Company on behalf of the named executive
officers to the Company's 401(k) Plan and the Employee Stock Ownership Plan,
and a term life insurance plan.
(2) Mr. Nuzzo was appointed Vice President -- Marketing and Product Development
of the Company effective August 1996.
The following table sets forth the grants of stock options to the executive
officers named in the Summary Compensation Table during the fiscal year ended
May 3, 1998. The amounts shown for each of the named executive officers as
potential realizable values are based on arbitrarily assumed annualized rates of
stock price appreciation of five percent and ten percent over the exercise price
of the options during the full terms of the options. No gain to the optionees is
possible without an increase in stock price which will benefit all stockholders
proportionately. These potential realizable values are based solely on
arbitrarily assumed rates of appreciation required by applicable Securities and
Exchange Commission regulations. Actual gains, if any, on option exercises and
holdings of Common Stock are dependent on the future performance of the Common
Stock and overall stock market conditions. There can be no assurance that the
potential realizable values shown in this table will be achieved.
OPTION GRANTS IN THE FISCAL YEAR ENDED
MAY 3, 1998
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------- ANNUAL
% OF TOTAL RATES OF STOCK PRICE
OPTIONS APPRECIATION FOR
NO. OF GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION --------------------
NAME GRANTED IN FISCAL YEAR PER SHARE DATE 5% 10%
---- ------- -------------- --------- ---------- -------- --------
William J. Lacourciere......... 50,000 24.0% $7.625 11/24/07 $239,766 $607,614
Joseph A. Vincent.............. 4,000 1.9% 5.50 6/9/07 13,836 35,062
15,000 7.2% 9.125 10/14/07 86,080 218,143
Philip F. Nuzzo................ 4,000 1.9% 5.50 6/9/07 13,836 35,062
15,000 7.2% 9.125 10/14/07 86,080 218,143
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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 May 3, 1998.
AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR
ENDED MAY 3, 1998 AND FISCAL YEAR END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE MONEY OPTIONS
SHARES OPTIONS AT MAY 3, 1998 AT MAY 3, 1998(1)
ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------- ----------- ------------- ----------- -------------
William J
Lacourciere......... -0 - -0 - 30,000 50,000 $121,890 $34,400
Joseph A. Vincent..... -0 - -0 - 20,000 19,000 81,260 11,252
Philip F. Nuzzo....... 4,000 $ 28,750 31,500 19,000 147,610 11,252
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(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.
COMPENSATION OF DIRECTORS
The Company pays its directors who are not employees of the Company an
annual fee of $7,500, a fee for each meeting of the Board of Directors of the
Company attended of $1,000, and a fee for each telephone and committee meeting
attended of $500. Directors are also reimbursed for out-of-pocket expenses
incurred in attending meetings.
During the past fiscal year, Dr. Mahoney and Mr. Shulman were granted
options to purchase Common Stock of the Company. 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.
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, 1998. 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 $695,000. 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. In
November 1997, the Company and Mr. Lacourciere amended Mr. Lacourciere's
employment agreement to provide Mr. Lacourciere with a retirement benefit upon
his retirement from the Company at any time subsequent to his attaining age 65.
The aggregate amount of the retirement benefit is equal to three times Mr.
Lacourciere's average annual cash compensation during the five most recent
taxable years of the Company ending prior to the date of his retirement and is
payable in equal monthly installments over the
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three-year period commencing upon his retirement. The amendment also provides
for a reduced retirement benefit for Mr. Lacourciere in the event of his
retirement from the Company after attaining age 62 but prior to attaining age
65.
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 May 3, 1998, except as provided below, its directors,
executive officers and greater than 10 percent stockholders complied with all
Section 16(a) filing requirements. Dr. Mahoney filed his initial report of
ownership on Form 5 and Messrs. Ghugasian, Haythe, Lacourciere and Vincent each
reported one transaction involving the exercise of warrants to purchase Common
Stock on Form 5.
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 3, 1993 and that all dividends
were reinvested.
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COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
NOVAMETRIX MEDICAL SYSTEMS INC., S&P HEALTHCARE INDEX
AND THE NASDAQ STOCK MARKET (U.S.) INDEX
MAY 2, 1993 - MAY 3, 1998
VALUE OF INITIAL $100 INVESTMENT
S&P HEALTH CARE
MEASUREMENT PERIOD NASDAQ STOCK (MEDICAL
(FISCAL YEAR COVERED) NOVAMETRIX MARKET (U.S.) PRODUCTS)
1993 100 100 100
1994 164 111 94
1995 195 129 146
1996 209 184 198
1997 205 195 230
1998 302 292 329
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* Assumes $100 investment in the common stock of Novametrix Medical Systems
Inc., Nasdaq Stock Market Index (U.S. Companies), and S&P Health Care (Medical
Products), derived from compounded daily returns with dividend reinvestment on
the exdate.
ANNUAL RETURN
S&P HEALTH CARE
MEASUREMENT PERIOD NASDAQ STOCK (MEDICAL
(FISCAL YEAR COVERED) NOVAMETRIX MARKET (U.S.) PRODUCTS)
1993 N/A N/A N/A
1994 64.00% 11.00 (6.00%)
1995 18.90% 16.22% 55.32%
1996 7.18% 42.64% 35.62%
1997 (1.91%) 5.98% 16.16%
1998 47.32% 49.74% 43.04%
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 1998 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.
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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.
In November 1997, the Company and Mr. Lacourciere amended Mr. Lacourciere's
employment agreement to provide Mr. Lacourciere with a retirement benefit upon
his retirement from the Company at any time subsequent to his attaining age 65.
The aggregate amount of the retirement benefit is equal to three times Mr.
Lacourciere's average annual cash compensation during the five most recent
taxable years of the Company ending prior to his date of retirement and is
payable in equal monthly installments over the three-year period commencing upon
his retirement. The amendment also provides for a reduced retirement benefit for
Mr. Lacourciere in the event of his retirement from Company after attaining age
62 but prior to attaining age 65. The Committee believes that the amendment
furthers the interests of the Company by serving as an inducement and incentive
for Mr. Lacourciere to continue his service with the Company, while providing
Mr. Lacourciere with fair compensation for his long and meritorious service with
the Company.
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.
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS:
Vartan Ghugasian
Thomas M. Haythe
Steven J. Shulman
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II. RATIFICATION OF SELECTION 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 2,
1999. 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 2, 1999. 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.
III. 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 C directors 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 1999 Annual Meeting
of Stockholders of the Company must be received by the Company by March 29, 1999
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 May 3, 1998, 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.
July 29, 1998
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NOVAMETRIX MEDICAL SYSTEMS INC.
PROXY - Annual Meeting of Stockholders - September 1, 1998
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 September 1,
1998 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 C Directors.
For both nominees listed below |_| Withhold authority for both nominees listed |_|
(except as marked to the contrary below)
Thomas M. Haythe and William J. Lacourciere
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
-----------------------------------------------------------
2. Ratification of appointment of Ernst & Young LLP as independent auditors for
the fiscal year ending May 2, 1999.
FOR |_| AGAINST |_| ABSTAIN |_|
The Board of Directors favors a vote "FOR" each item.
(Continued and to be Completed on Reverse Side)
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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 ITEM 2 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 _______________________, ____
___________________________ (L.S.)
___________________________ (L.S.)
Stockholder(s) Sign Here
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.