13D SHAREHOLDERS GROUP
John C. Allen, Sr. Donn Gifford
Lillian I. Allen Linda Gifford
Roland R. Batson Ginette Gladu
Richard Boulet TO: All Sharholders Robert R. Gladu
Joan P. Cote Of Andrew Gross
Paul A. Cote Novametrix Medical Systems, Inc. Dana Gross
Normand F. Doyon John F. Gross
Pauline G. Doyon FROM: The Novametrix 13D Susan T. Gross
Sandra Dunham Shareholders Group Diane James
Thomas B. Dunham Richard James
Adrienne R. Emmi DATE: August 6, 1996 William Lagerson
Anthony N. Emmi Pierre Levesque
Armen Ghugasian Edgar Morin
Takuhe Ghugasian John Orestis
Vartan Ghugasian Raymond E. Robichaud
For some time now, a A substantial number of Novametrix
shareholders have become increasingly dissatisfied with Management's lack of
concern for interest in maximizing shareholder values
and concerns . To emphasize their concerns, On
April 17, 1996 the shareholders formed a so-called 13D Group, which now
represents including those listed on the letterhead of this letter,
representing about 9% of the Company's common shareholders, and filed the
scheudle with the Securities and Exchange Commission. The Group has now been
expanded to include approximately 15 16% of the
common shareholders stock of the Company. We want the
Company and its shareholders to prosper.
As you can see from the following material, we We have
encountered strong opposition and were rebuffed by Management in attempting to
present a Shareholder Proposal requesting company action on our concerns. As a
result of this opposition, we felt that:
1. Management had no real interest in the shareholder's
shareholders' concerns;
2. The Management's opposition was indicative of
a continuous attitude towards shareholders; and
3. The shareholders should We must take decisive
action . to correct the situation.
- WE NEED YOUR SUPPORT -
In view of Management's continuing opposition, we feel there is only one way to
get company action on our concerns. This is to wage a proxy contest at this
year's Annual Shareholder Meeting and get true shareholder representation on
the Board of Directors. We seek the election of two directors at this year's
Annual Shareholder Meeting and we have proposed our own slate in the enclosed
proxy materials.
We urge you to read the enclosed proxy material carefully, and
if you share the Group's concerns, please sign the enclosed
proxy card and return it to us promptly in the enclosed envelope.
Let's elect two shareholder representatives to the board and send
a real message to Management.
You will be receiving from Management proxy material asking you to vote for
their slate of Directors. If you share our concerns, then DO NOT RETURN THE
MANAGEMENT PROXY. IF YOU DO, YOU MAY CANCEL YOUR VOTE FOR THE INDEPENDENT
DIRECTORS.
WHAT HAS BEEN MANAGEMENT'S ATTITUDE TOWARD SHAREHOLDER CONCERNS?
We feel strongly that some of the shareholders most basic concerns are being
ignored by Management, such as:
* What are the Company's prospects?
* What is the Company actually worth?
* Does Management have a constructive program in place to enhance
shareholder values?
Before the 13D Group was formed to make the Shareholder Proposal, several
members of the Group attempted to have a constructive dialog with Management
about the members' concerns. Each was rebuffed. The Group was then organized
and filed a formal Shareholder Proposal with the Company to be included with
the proxy material the Management sends out to shareholders for the annual
meeting. The Proposal urged the directors to develop a program to maximize
shareholder values, including retention of an investment banking firm to
address these concerns on an organized basis. A copy of the Proposal is
included in our proxy statement. The Management flatly refused to include the
Group's Proposal with their proxy materials on the ground that the Proposal
involved matters in the ordinary course of business.
WHY WE BELIEVE MANAGEMENT IS FREE TO ACT ARBITRARILY
The reason is that the bylaws and Articles of Incorporation of
the Company are structured so that Management and Directors can
apparently operate almost as they see fit without any real control by
shareholders. For example:
1. Management has nominated the directors and elects them routinely with
your proxies.
2. Directors themselves can change their total number between
three and nine at any time without the approval of the shareholders.
3. Directors can change the bylaws at any time without the approval of
the shareholders.
4. Shareholders cannot change the bylaws or the Articles of
Incorporation unless they get approval of 80% of all shareholders.
5. Management can call a special meeting of shareholders any time to
discuss their own proposals.
6. Shareholders cannot call a special meeting to discuss their proposals
or their dissatisfaction with Management unless:
a. the directors agree to it; or
b. they can get 80% of all shareholders to agree.
As a result of these one-sided restrictions, we believe Management is operating
as if it were sheltered behind a form of Iron Curtain. The shareholders, on
the other hand, are on the outside, looking in.
HOW HAS MANAGEMENT EXERCISED ITS POWERS?
After we formed our 13D Shareholders Group on April 17, 1996, Management
tried to take away the ultimate power we have as shareholders to elect the
members of the Board of Directors. Although management's proxy statements in
1994 and 1995 promised the shareholders that three existing Class A Directors
would be up for election at the 1996 Annual Meeting of Shareholders, just two
months ago the Board of Directors took away from the shareholders the decision
of whether Steven Shulman would continue as a Director. Instead, they appointed
Mr.Shulman a Director and limited the number of Directors to stand for election
at the Shareholder Meeting to two, rather than three, of the six member Board.
By doing so, the existing Board was able to prevent Shareholders from electing
at the Shareholders Meeting one half of the Board of Directors. Management
was able to ensure its hand-picked candidates would comprise a majority of the
Board of Directors.
What's more, Mr. Shulman will now serve, in effect, a four year term. This is
contrary to the Certificate of Incorporation of the Company, which was the
basis on which the Company was formed. The Certificate limits the term to
three years. We believe it also violates the Bylaws of the Company and the
Securities laws. It is as if the Vice President of the United States said that
the President would serve a four year term until 1997 rather than stand for
election in 1996. This undemocratic action by the Board of Directors should
not be permitted.
WHAT CAN THE SHAREHOLDERS DO ABOUT IT?
It is clear to us that the shareholders have little say in the
Company, and, under the present restrictions, probably never will have a
significant voice. We asked for a chance to bring before all the shareholders in
the annual proxy statement a perfectly reasonable proposal and were turned down
flat. With such a precedent, it appears that shareholder
proposals are likely to meet with resistance from Management in the future.
To have any meaningful voice at all in this Company, the shareholders must have
representation on the Board of Directors, through directors they nominate and
choose. Without that, we feel very strongly that we are just
captives of Management and their handpicked Board of Directors. After all, we
are supposed to own this Company and we are entitled to have a management that
is responsive to shareholder interests. We believe that the
present system is excessively management-oriented and not in the best interests
of the Company and its shareholders. In fact, two of the current directors do
not even own any stock in the Company. Make no mistake: Management has clearly
demonstrated to us that it wants no input or interference from
shareholders. Let's change that.
WE NEED TO ELECT REAL SHAREHOLDER REPRESENTATIVES TO THE BOARD OF DIRECTORS
We believe this is the only way to create an effective shareholder voice in
this company. This year there will be three two directors
elected at the Annual Meeting. As usual, Management will hand-pick its own
slate and send it to you for your vote. If we do not present an opposing slate
of candidates, the Management slate will be elected as usual - and the current
Management attitude will continue unchanged. In our opinion,
Your your vote will have had no significance . in
our opinion.
If you agree with the Group's concerns and want to create real shareholder
interest in this company, then we urge you to vote for the 13D
slate of candidates. They are:
Dr. Vartan Ghugasian
Paul A. Cote
We urge you to review the materials enclosed regarding them.
You will be receiving from Management proxy material asking you to vote
for their slate of Directors. If you share our concerns, then DO NOT
RETURN THE MANAGEMENT PROXY. IF YOU DO, YOU MAY CANCEL YOUR VOTE FOR THE
INDEPENDENT DIRECTORS.