<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 Section 240.14a-11(c) or Section 240.14a-12
Bionx Implants, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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 identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO OF BIONX IMPLANTS INC. APPEARS HERE]
April 15, 1998
Dear Stockholder:
On behalf of the Board of Directors and management, I am pleased to invite
you to the 1998 Annual Meeting of Stockholders of Bionx Implants, Inc., our
first stockholders' meeting as a public company. The meeting will be held on
Tuesday, May 19, 1998 at 10:00 a.m. at the Doubletree Hotel, 640 W. Germantown
Pike, Plymouth Meeting, Pennsylvania. A notice of meeting, proxy statement and
proxy card are enclosed for your review.
I urge you to read the enclosed materials carefully and to complete, sign
and mail promptly the proxy card contained with this letter to assure that
your vote will be counted.
The officers, directors and staff of Bionx Implants sincerely appreciate
your continuing support.
Very truly yours,
David W. Anderson
President and Chief Executive
Officer
<PAGE>
BIONX IMPLANTS
NOTICE OF ANNUAL MEETING
The Annual Meeting of Stockholders of Bionx Implants, Inc. (the "Company")
will be held at the Doubletree Hotel, 640 W. Germantown Pike, Plymouth
Meeting, Pennsylvania on Tuesday, May 19, 1998 at 10:00 a.m., to consider and
act upon the following:
1. Election of two directors to serve for a term of three years; and
2. The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the closing of business on April 8, 1998 are
entitled to notice of, and to vote at, the meeting.
Michael J. O'Brien
Secretary
Blue Bell, Pennsylvania
April 15, 1998
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY CARD IN THE RETURN ENVELOPE
PROVIDED.
<PAGE>
BIONX IMPLANTS, INC.
1777 SENTRY PARKWAY WEST
GWYNEDD HALL, SUITE 400
BLUE BELL, PENNSYLVANIA 19422
PROXY STATEMENT
The Board of Directors of Bionx Implants, Inc. (the "Company") is soliciting
proxies for use at the Annual Meeting of Stockholders to be held at the
Doubletree Hotel, 640 W. Germantown Pike, Plymouth Meeting, Pennsylvania on
Tuesday, May 19, 1998 at 10:00 a.m., and for use at any adjournments thereof
(the "Annual Meeting"). This Proxy Statement and the enclosed form of proxy
are first being sent to stockholders on or about April 15, 1998.
RECORD DATE AND QUORUM. Only stockholders of record at the close of business
on April 8, 1998 (the "Record Date") will be entitled to vote at the Annual
Meeting. On that date, there were outstanding 8,922,076 shares of the
Company's Common Stock ("Common Stock"). Each share of Common Stock is
entitled to one vote on each matter to be voted on at the Annual Meeting. The
presence at the Annual Meeting, in person or by proxy, of holders as of the
Record Date of a majority of the issued and outstanding shares of Common Stock
will constitute a quorum.
VOTING PROCEDURES. Directors will be elected by a plurality of the votes
cast. Approval of any other matter to be submitted to the stockholders will
require the affirmative vote of a majority of the votes cast thereon at the
Annual Meeting. Properly executed proxies will be voted as directed in the
proxy; however, if no direction is given, a properly executed proxy will be
voted FOR the election of the nominees described below. Proxies marked
"abstention" on a matter will be considered to be represented at the meeting,
but not voted, for these purposes. Shares registered in the names of brokers
or other "street name" nominees for which proxies are voted on some but not
all matters will be considered to be represented at the meeting, but will be
considered to be voted only as to those matters actually voted.
PROXIES AND REVOCATION. A proxy card is enclosed. Any stockholder giving a
proxy may revoke it at any time before it is exercised. In order to revoke a
proxy, the stockholder must either give written notice of such revocation to
the Secretary of the Company or to the Secretary of the Annual Meeting or vote
the shares of Common Stock subject to the proxy by a later dated proxy or by
written ballot at the Annual Meeting. The presence at the Annual Meeting of
any stockholder who has given a proxy will not in and of itself revoke the
proxy.
ELECTION OF DIRECTORS OF THE COMPANY
The Company's Board of Directors is divided into three classes, with each
class serving staggered terms of three years, so that only one class is
elected in any one year. At present there are six directors on the Board. Two
directors are to be elected at the Annual Meeting to serve until the 2001
Annual Meeting and until their respective successors are elected and have
qualified.
Each of the nominees for director is presently a director of the Company.
Each has consented to being named as a nominee in this Proxy Statement and has
agreed to serve as a director if elected at the Annual Meeting. It is the
intention of the persons named as proxies to vote the shares represented by
the accompanying form of proxy for the election of each of the nominees listed
below. If any nominee shall become unable or unwilling to serve as a director,
the persons named as proxies will cast their votes for the remaining nominee
and have discretion to vote for another person designated by the Board of
Directors. The Board of Directors has no reason to believe that either of the
nominees will be unavailable for election.
1
<PAGE>
The following describes the current and past five years' business
experience, certain directorships and age of each nominee for director and of
each director whose term extends beyond 1998 and thus is continuing in office.
The following information is given as of January 31, 1998:
Nominees
. DAVID W. ANDERSON: President and Chief Executive Officer of the Company
(1995 to the Present); President and Chief Executive Officer, Kensey Nash
Corporation (developer of cardiology products) (1992 to 1994). Director of the
Company since 1995. Age: 45.
. TERRY D. WALL: Chairman of the Board of the Company (1995 to the Present);
President and Chief Executive Officer of Vital Signs, Inc. ("Vital Signs")
(manufacturer of disposable anesthesia and respiratory devices) (more than the
past five years). Director of Vital Signs and Exogen, Inc. Director of the
Company since 1995. Age: 56.
Continuing Directors Serving Until 1999
. DAVID J. BERSHAD: Senior Partner, Milberg Weiss Bershad Hynes & Lerach
(law firm) (more than the past five years). Director of Vital Signs. Director
of the Company since 1995. Age: 58.
. PERTTI TORMALA: Executive Vice President, Research and Development of the
Company (1995 to the Present); chief executive officer (and co-founder) of the
Company's foreign subsidiaries (prior years). Director of the Company since
1995. Age: 52.
Continuing Directors Serving Until 2000
. ANTHONY J. DIMUN: Executive Vice President and Chief Financial Officer of
Vital Signs (more than the past five years). Director of EchoCath, Inc. and
Vital Signs. Director of the Company since 1995. Age: 54.
. DAVID H. MACCALLUM: Executive Vice President, Furman Selz LLC (investment
banking firm) (April 1998 to Present); Managing Director for Life Sciences
Investment Banking, UBS Securities LLC (investment banking firm) (1994 to
March 1998); Co-Head, Investment Banking, Hambrecht & Quist LLC (1983-1994)
(investment banking firm). Director since 1995. Age: 60.
During 1997, the Board of Directors held eight meetings, the Audit Committee
of the Board held two meetings and the Compensation Committee of the Board
held three meetings. During 1997, no director attended less than 75 percent of
the aggregate number of meetings of the Board of Directors of the Company and
committees of the Board of which he was a member. There are no relationships
by blood, marriage, or adoption, not more remote than first cousin, between
any nominee for director, continuing director or executive officer of the
Company and any other nominee for director, continuing director or executive
officer of the Company.
Audit Committee--The functions of the Audit Committee are to review, act on
and report to the Board with respect to various auditing and accounting
matters, including the selection of the Company's independent auditors, the
scope of the annual audits, the fees to be paid to the auditors, the
performance of the Company's auditors and the accounting practices of the
Company. The Audit Committee is composed of two directors who are not officers
or employees of the Company or its subsidiaries. The current members of the
Audit Committee are Mr. Dimun and Mr. MacCallum.
Compensation Committee--The functions of the Compensation Committee are to
determine the salaries and incentive compensation of the employee-officers of
the Company and to provide recommendations for the salaries and incentive
compensation of the other employees and consultants of the Company. The
Compensation Committee also administers the Company's Stock Option/Stock
Issuance Plan. The current members of the Compensation Committee are Mr.
Bershad and Mr. Wall.
2
<PAGE>
The Board has no nominating committee; the functions of a nominating
committee are performed by the entire Board. No procedures have been developed
with respect to obtaining nominations from stockholders.
SECURITIES OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth the beneficial ownership of shares of Common
Stock as of February 28, 1998 by (i) the only stockholders of the Company
known by management to beneficially own more than 5% of the Company's Common
Stock, (ii) the directors of the Company, (iii) the executive officers named
in the Summary Compensation Table below ("Named Executive Officers") and (iv)
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER(2) OWNED (1)(2) BENEFICIALLY OWNED
- ------------------- ------------------------- ------------------
<S> <C> <C>
Bionix, B.V. (3)........................ 2,684,211 30.1
Terry D. Wall (4).................... 2,568,717 28.8
Kaufman Fund, Inc. (5)............... 985,000 11.0
David W. Anderson (6)................ 386,772 4.2
David J. Bershad (7)................. 393,890 4.4
Anthony J. Dimun (8)................. 168,570 1.9
Stephen A. Lubischer (9)............. 26,317 *
David H. MacCallum (10).............. 138,817 1.6
Michael J. O'Brien (11).............. 16,790 *
Pertti Tormala (12).................. 1,124,816 12.6
Pertti Viitanen (13)................. 144,853 1.6
All directors and executive officers
as a group
(ten persons)(14)................... 4,971,842 54.1
</TABLE>
- --------
* Represents less than 1% of the outstanding Common Stock.
(1) Applicable percentage ownership is based on 8,922,076 shares of Common
Stock outstanding as of February 28,1998 together with applicable stock
options for such stockholder. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission,
based on factors including voting and investment power with respect to
shares. Shares of Common Stock subject to stock options currently
exercisable, or exercisable within 60 days after February 28, 1998, are
deemed outstanding for computing the percentage ownership of the person
holding such stock options but are not deemed outstanding for computing
the percentage ownership of any other person. Each owner of an equity
interest in Bionix, B.V. (the "Dutch Company") is deemed to beneficially
own a percentage of the shares of the Common Stock owned by the Dutch
Company equal to such owner's proportionate equity interest in the Dutch
Company.
(2) Except as otherwise indicated in the footnotes to this table and pursuant
to applicable community property laws, persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock and the address of the 5% stockholders is c/o the Company, 1777
Sentry Parkway West, Gwynedd Hall, Suite 400, Blue Bell, Pennsylvania
19422.
(3) The capital stock of the Dutch Company is owned by the former
stockholders of the Company's operating subsidiaries. The Board of
Directors of the Dutch Company consists of David W. Anderson (who is also
the chief executive officer of the Dutch Company), David J. Bershad,
Anthony J. Dimun, David H. MacCallum, Pertti Tormala, Pertti Viitanen and
Pentti Rokkanen, all but the last of whom are directors or executive
officers of the Company. As of February 28, 1998, Messrs. Anderson,
Bershad, Dimun, MacCallum and Wall beneficially owned capital stock of
the Dutch Company representing, in the aggregate, approximately 23.5% of
the equity of the Dutch Company's capital stock. As of February 28, 1998,
Messrs. Tormala and Viitanen beneficially owned capital stock of the
Dutch Company representing, in the aggregate, approximately 47.3% of the
equity of the Dutch Company's capital stock. The remaining equity of the
Dutch Company's capital stock is allocated among several other Finnish
investors.
3
<PAGE>
(4) Mr. Wall's shares include 484,421 shares of Common Stock owned by the
Dutch Company, representing Mr. Wall's proportionate equity interest in
the shares of Common Stock owned by the Dutch Company. Mr. Wall has the
right to cause the Dutch Company to transfer such 484,421 shares to him
pursuant to an agreement with the Dutch Company. All of Mr. Wall's shares
of Common Stock and of the Dutch Company's capital stock are held in an
investment partnership which he controls.
(5) The information set forth herein regarding the Kaufman Fund's beneficial
ownership is based on a report filed by the Kaufman Fund with the
Securities and Exchange Commission dated February 17, 1998. The address
of the Kaufman Fund is 140 E. 45th Street, 43rd Floor, Suite 2624, New
York, New York 10017.
(6) Mr. Anderson's shares include 221,608 shares of Common Stock issuable
upon the exercise of vested stock options and 34,842 shares of Common
Stock owned by the Dutch Company, representing Mr. Anderson's
proportionate equity interest in the shares of Common Stock owned by the
Dutch Company. Mr. Anderson has the right to cause the Dutch Company to
transfer such 34,842 shares to him pursuant to an agreement with the
Dutch Company. Pursuant to the Company's Stock Option/Stock Issuance
Plan, Mr. Anderson has transferred to a trust established for his son
vested stock options covering 61,947 of the aforementioned 221,608
shares.
(7) Mr. Bershad's shares include 50,736 shares of Common Stock owned by the
Dutch Company, representing Mr. Bershad's proportionate equity interest
in the shares of Common Stock owned by the Dutch Company. Mr. Bershad has
the right to cause the Dutch Company to transfer such 50,736 shares to
him pursuant to an agreement with the Dutch Company. A total of 254,732
of Mr. Bershad's shares of Common Stock and all of Mr. Bershad's shares
of the Dutch Company's capital stock are held in an investment
partnership which he controls.
(8) Mr. Dimun's shares include 34,679 shares of Common Stock owned by the
Dutch Company, representing Mr. Dimun's proportionate equity interest in
the shares of Common Stock owned by the Dutch Company. Mr. Dimun has the
right to cause the Dutch Company to transfer such 34,679 shares to him
pursuant to an agreement with the Dutch Company. All of Mr. Dimun's
shares of Common Stock and the Dutch Company's capital stock are held in
entities which he controls.
(9) Mr. Lubischer's shares represent shares of Common Stock issuable upon the
exercise of vested options.
(10) Mr. MacCallum's shares include 26,900 shares of Common Stock owned by
the Dutch Company, representing Mr. MacCallum's proportionate equity
interest in the shares of Common Stock owned by the Dutch Company. Mr.
MacCallum has the right to cause the Dutch Company to transfer such
26,900 shares to him pursuant to an agreement with the Dutch Company. A
total of 14,738 of Mr. MacCallum's shares of Common Stock are held in an
entity which he controls.
(11) Includes 15,790 shares of Common Stock issuable upon the exercise of
vested stock options.
(12) Represents the proportionate equity interest of Professor Tormala in the
shares of Common Stock owned by the Dutch Company. Professor Tormala has
the right to cause the Dutch Company to transfer such 1,124,816 shares
to him pursuant to an agreement with the Dutch Company. That agreement
enables Professor Tormala to direct the voting by the Dutch Company of a
specified number of shares of the Company's Common Stock held by the
Dutch Company. As of February 28, 1998, that specified number equals
2,052,633, representing Professor Tormala's proportionate equity
interest in the 2,684,211 shares of Common Stock owned by the Dutch
Company (1,124,816 shares) and the proportionate equity interest of all
other Finnish investors in such 2,684,211 shares (927,817 shares). The
table above excludes from Professor Tormala's beneficial ownership the
927,817 shares attributable to the equity interests of such other
Finnish investors.
(13) Represents Mr. Viitanen's proportionate equity interest in the shares of
Common Stock owned by the Dutch Company. Mr. Viitanen has the right to
cause the Dutch Company to transfer such 144,853 shares to him pursuant
to an agreement with the Dutch Company.
(14) Includes 263,715 shares of Common Stock issuable upon the exercise of
vested stock options, and 1,901,247 shares of Common Stock owned by the
Dutch Company, representing the directors' and executive officers'
proportionate equity interest in the 2,684,211 shares of Common Stock
owned by the Dutch Company. As of February 28, 1998, the directors and
executive officers as a group beneficially own approximately 70.8% of
the equity associated with the capital stock of the Dutch Company. The
directors and executive officers of the Company as a group have a right
to vote all of the 2,684,211 shares of Common Stock Owned by the Dutch
Company. If all such 2,684,211 shares were deemed to be beneficially
owned by the Company's directors and executive officers, such persons as
a group would be deemed to be the beneficial owners of 5,754,806 shares
of Common Stock, representing 62.6 % of the shares outstanding on
February 28, 1998.
4
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table and accompanying footnotes set forth certain summary
information, relating to the two years ended December 31, 1997, with respect
to the Company's Chief Executive Officer and the Company's four other most
highly compensated executive officers during 1997:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- ----------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2)(3) COMPENSATION($)(1) OPTIONS/SARS (#) COMPENSATION($)(2)
- --------------------------- ---- --------- -------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
David W. Anderson 1997 160,000 50,000 6,000 -- 17,316
President and Chief 1996 151,600 40,000 -- -- 7,708
Executive Officer
Stephen Lubischer (3) 1997 107,500 32,000 6,000 -- 11,740
Vice President 1996 74,622 35,000 -- 52,632 7,462
U.S. Sales
Michael J. O'Brien (4) 1997 110,000 48,250 500 -- 10,368
Vice President, 1996 9,167 -- -- 65,790 917
Finance and
Administration and
Chief Financial Officer
Pertti Tormala 1997 118,070 22,000 9,423 -- 68,650(5)
Executive Vice 1996 84,680 -- -- -- 26,400(5)
President, Research
and Development
Pertti Viitanen, 1997 90,001 16,000 9,620 -- --
Managing Director of 1996 80,725 -- -- -- --
the Company's Finnish
Subsidiary
</TABLE>
- --------
(1) Represents car allowances.
(2) For 1997, for Messrs. Anderson, Lubischer and O'Brien, represents (a)
amounts paid on behalf of the Named Executive Officer for various
employee benefits selected by such individual pursuant to a cafeteria
plan (Mr. Anderson: $16,000; Mr. Lubischer: $10,750; and Mr. O'Brien:
$9,445) and (b) employer contributions to the Company's 401(k) plan (Mr.
Anderson: $1,316; Mr. Lubischer: $990; and Mr. O'Brien: $923).
(3) Mr. Lubischer joined the Company in April 1996.
(4) Mr. O'Brien joined the Company in November 1996.
(5) Represents royalty payments to Professor Tormala under a superseded
employment agreement with respect to 1996 product sales.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of beneficial
ownership and reports of changes of beneficial ownership of the Common Stock
with the Securities and Exchange Commission. Executive officers and directors
are required to furnish the Company with copies of all Section 16(a) reports
that they file.
5
<PAGE>
Based upon a review of these filings and other documentation, the Company
notes that Michael J. O'Brien failed to timely report the purchase of 1,000
shares during April 1997 and Anthony J. Dimun failed to timely report the sale
of 25,000 shares during December 1997. Both such late filings were
inadvertent; filings were made promptly after the deficiencies were noticed.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with David W. Anderson,
its President and Chief Executive Officer. The term of the agreement will
expire on December 31, 1998. Pursuant to the agreement, Mr. Anderson receives
minimum annual compensation of $160,000 and is entitled to receive a
performance based bonus. Mr. Anderson is also entitled to receive all health
insurance benefits generally made available to the Company's employees as well
as a monthly car allowance of $500. The agreement further provides that if Mr.
Anderson's employment is terminated without cause by the Company prior to the
expiration of the initial term, Mr. Anderson will be entitled to base salary
and health insurance benefits continuation for a period of one year after the
date of termination.
The Company has also entered into an employment agreement with Pertti
Tormala. The agreement provides for a term expiring in 2002. Pursuant to the
agreement, Professor Tormala will receive a minimum base salary of 540,000 FIM
(approximately $100,000) and is eligible to receive cash bonuses granted by
the Company's Board of Directors. Professor Tormala is also entitled to a car,
certain pension benefits and reimbursement of all reasonable travel and
entertainment expenses. Under the agreement, all patents, patent applications
and other industrial property rights developed by Professor Tormala relating
to the Company's research and development activities are the sole property of
the Company. The agreement permits Professor Tormala to spend up to 16 hours
per month working on a business spun-off from the Company prior to the
consummation of its initial public offering. See "Transactions with Interested
Persons."
The Company has also entered into an employment agreement with Michael J.
O'Brien, its Vice President, Finance and Administration and Chief Financial
Officer. The term of the agreement will expire on December 1, 1999. Pursuant
to the agreement, Mr. O'Brien receives minimum annual compensation of $110,000
and is entitled to receive a bonus. Mr. O'Brien is also entitled to receive
all health insurance benefits generally made available to the Company's
employees as well as a monthly car allowance of $500. The agreement further
provides that if Mr. O'Brien's employment is terminated without cause by the
Company prior to the expiration of the initial term, Mr. O'Brien will be
entitled to base salary and health insurance benefits continuation for a
period of one year after the date of termination.
STOCK OPTION/STOCK ISSUANCE PLAN
The Company's Stock Option/Stock Issuance Plan (the "Plan") was adopted by
the Company's Board of Directors and stockholders in September 1996. A total
of 850,000 shares of Common Stock have been authorized for issuance under the
Plan. In no event may any one person participating in the Plan receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 278,947 shares in any calendar year.
The Plan is divided into four separate components: (i) the Discretionary
Option Grant Program under which employees, non-employee directors,
consultants and other independent advisors who provide services to the Company
may, at the discretion of the plan administrator, be granted options to
purchase shares of Common Stock; (ii) the Stock Issuance Program under which
such persons may, in the plan administrator's discretion, be issued shares of
Common Stock directly, either through the immediate purchase of such shares at
a price not less than the fair market value of the Common Stock on the date of
issuance or as a bonus for services rendered to the Company; (iii) the Salary
Investment Option Grant Program under which employees designated by the plan
administrator may elect to have a portion of their base salary invested each
year in options to purchase shares of
6
<PAGE>
Common Stock at an exercise price equal to thirty-three and one-third percent
(33 1/3%) of the fair market value of the Common Stock on the grant date; and
(iv) the Automatic Option Grant Program under which eligible non-employee
directors shall automatically, at periodic intervals, receive option grants to
purchase shares of Common Stock at an exercise price equal to one hundred
percent (100%) of the fair market value of the Common Stock on the grant date.
The Discretionary Option Grant, the Salary Investment Option Grant and the
Stock Issuance Program are administered by the Compensation Committee of the
Company's Board of Directors. The Compensation Committee, as plan
administrator, has full authority to determine which eligible persons are to
receive option grants or stock issuances, the time or times when such option
grants or stock issuances are to be made, the number of shares subject to each
such grant or isssuance, the status of any granted option as either an
incentive option or a non-statutory option under the Federal tax laws, the
vesting schedule (if any) applicable to the option grant or stock issuance and
the maximum term for which any granted option is to remain outstanding. The
Automatic Option Grant Program is self-executing, with all grants thereunder
being made in strict compliance with the express terms of the program, and no
administrative discretion will be exercised by the Board of Directors or any
committees with respect to those grants.
Under the Automatic Option Grant Program, each non-employee director first
elected or appointed to the Board of Directors after the date of the Company's
initial public offering will automatically be granted a non-statutory option
for 3,000 shares of Common Stock, provided that such individual has not been
in the prior employ of the Company. In addition, at each annual stockholders'
meeting (including the upcoming Annual Meeting described herein), each
individual with at least six months service on the Board of Directors as a
non-employee director and who will continue to serve as a non-employee
director following the meeting will automatically be granted a non-statutory
option for 3,000 shares of Common Stock, provided such individual has
continued his or her service as a non-employee director for a period of at
least one year after he or she ceases serving as an employee of the Company.
Each automatic grant will have a term of ten years, subject to earlier
termination following the optionee's cessation of service on the Board of
Directors as provided in the Plan. Fifty percent of the shares subject to an
automatic grant will vest on the date of grant, 25% one year after the date of
grant, and the remaining 25% two years after the date of grant.
No stock options or stock appreciation rights were granted to or exercised
by the Named Executive Officers during 1997 and no stock appreciation rights
were outstanding as of December 31, 1997. The following table sets forth
certain information with respect to the value of stock options held by the
Named Executive Officers as of December 31, 1997.
FISCAL YEAR END OPTIONS VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1997(#) DECEMBER 31, 1997(1)($)
------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David W. Anderson........... 166,207 110,802 3,586,747 2,390,963
Stephen A. Lubischer........ 26,317 26,315 454,625 417,093
Michael J. O'Brien.......... 15,790 50,000 205,270 650,000
</TABLE>
- --------
(1) Based on a value equal to the closing sale price of the Common Stock on
December 31, 1997, minus the per share exercise price, multiplied by the
number of shares underlying the options.
7
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until the Company consummated its initial public offering in April 1997, the
Board of Directors performed all of the responsibilities of the Compensation
Committee. Mr. Wall, who is the Chairman of the Board of the Company, Mr.
Anderson, who is the President and Chief Executive Officer of the Company, and
Professor Tormala, who is an Executive Vice President of the Company,
participated in all Board discussions and decisions regarding salaries and
incentive compensation for all employees of the Company, except that Mr.
Anderson and Professor Tormala were excluded from discussions regarding their
own salary and incentive compensation. Mr. Wall has not received any salary or
incentive compensation from the Company. In 1997, the Company formed its
Compensation Committee. The Compensation Committee consists of Mr. Wall and
David J. Bershad. Mr. Wall, Mr. Bershad and Anthony J. Dimun serve on the
Boards of Directors of both the Company and Vital Signs (which latter company
does not have a compensation committee). For information regarding
transactions between the Company and persons named in this paragraph, see
"Transactions with Interested Persons" immediately below.
TRANSACTIONS WITH INTERESTED PERSONS
The Company consummated its initial public offering (the "IPO") in April,
1997. Concurrent with the consummation of the IPO, all of the Company's
existing Series A Preferred Stock was converted into Common Stock and all of
the Company's warrants to purchase Common Stock were exercised. Pursuant to
such transactions, 88,422 shares of Common Stock were issued to David J.
Bershad or entities associated with Mr. Bershad, 29,475 shares of Common Stock
were issued to Anthony J. Dimun or entities associated with Mr. Dimun, 14,738
shares of Common Stock were issued to David H. MacCallum or entities
associated with Mr. MacCallum, and 117,896 shares of Common Stock were issued
to Terry D. Wall or entities associated with Mr. Wall.
Terry Wall, Pertti Tormala and the Company were each one-third equity owners
in a business organized to engage in developing, manufacturing and selling
polymer-based advanced drug delivery systems (the "Business"). The Company
acquired its interest in the Business from an unrelated individual in 1996 in
exchange for a payment of $85,000 and did not incur any expenses relating to
the Business since that time. During 1997, the Business had no tangible assets
and is expected to be in the development stage for a period of at least four
years. The Board of Directors of the Company concluded that in light of the
substantial expenditures that would be required in order to bring any of the
Business' products to market, it was in the best interests of the Company and
its stockholders for the Company to forego its development of the Business and
to instead spin-off the Business. Accordingly, the Company distributed its
interest in the Business to stockholders of record of the Company as of a date
prior to the closing of the IPO, pro rata to their ownership interest in the
Company prior to the IPO. Professor Tormala's employment agreement with the
Company enables him to dedicate certain of his services to the Business but
provides he may not work more than 16 hours per month during business hours on
matters pertaining to the Business.
Until recently, David H. MacCallum, a director of the Company, was the
Managing Director for Life Sciences Investment Banking at UBS Securities LLC
("UBS"). UBS was a co-managing underwriter of the IPO. Aggregate underwriting
discounts and commissions paid by the Company to the underwriters as a group
in connection with the IPO amounted to $1.7 million.
As disclosed in the Summary Compensation Table set forth above, the Company
was required to make certain royalty payments to Pertti Tormala pursuant to an
employment agreement that no longer remains in effect. During 1997, such
payments totaled $68,650.
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for implementing, overseeing and
administering the Company's overall compensation policy. The basic objectives
of that policy are to (a) provide compensation levels that are fair and
competitive with peer companies, (b) align pay with performance and (c) where
appropriate, provide incentives which link executive and stockholder interests
and long-term corporate objectives through the use of equity-based incentives.
Overall, the Company's compensation program is designed to attract, retain and
motivate high quality and experienced employees at all levels of the Company.
The principal elements of executive officer compensation are base pay, bonus
and stock options, together with health benefits. The various aspects of the
compensation program, as applied to the Company's Chief Executive Officer and
the Company's other executive officers, are outlined below.
Executive officer compensation is, in large part, determined by the
individual officer's ability to achieve his or her performance objectives.
Each of the Company's executive officers participates in the development of an
annual business strategy from which individual objectives are established and
performance goals are measured. Initially, the objectives are proposed by the
particular officer involved. Those objectives are then determined by the Chief
Executive Officer or, in the case of Mr. Anderson's objectives, by the Board
of Directors.
Base Pay
The Company determines base pay for its executive officers through an
evaluation of the extent to which such individuals have achieved their
performance objectives and a comparative analysis of total compensation for
similar positions within other companies.
The Chief Executive Officer's performance is analyzed against his objectives
by the full Board of Directors (other than Mr. Anderson). Mr. Anderson, in
turn, reviews the performance of the other executive officers. Salaries are
reviewed on an annual basis after consideration of performance analyses and
compensation paid by other companies. The Compensation Committee has reviewed
Mr. Anderson's performance and has decided to increase his base salary to
$180,000 per annum for 1998.
Of the Named Executive Officers, Mr. Lubischer was the only officer whose
cash compensation included commissions during 1997. Commission-based
compensation is considered to be appropriate for Mr. Lubischer in light of his
position as Vice President, U.S. Sales.
Bonus
Each executive officer of the Company is eligible to receive a bonus if such
officer achieves his or her individual performance objectives and the Company
achieves its performance goals. The Compensation Committee approved the
bonuses of each of the Named Executive Officers during 1997. Mr. Anderson
received bonuses of $50,000 for 1997 performance pursuant to this program.
Stock Options
The Compensation Committee believes that a stock option plan provides
capital accumulation opportunities to participants in a manner that fosters
the alignment of the participants' interests and risks with the interests and
risks of the Company's public stockholders. The Compensation Committee further
believes that stock options can function to assure the continuing retention
and loyalty of employees. The options that have been granted to executive
officers carry multiple year vesting schedules. Officers who leave the
Company's employ before their options are fully vested will lose a portion of
the benefits that they might otherwise receive if they remain in the Company's
employ for the entire vesting period. Historically, stock option grants for
existing employees have been based upon the Company's needs to provide
incentive compensation and an analysis of the performance of the employees
involved in light of the objectives established for such employees.
9
<PAGE>
During 1997, none of the Named Executive Officers were granted any stock
options. The Compensation Committee believed that the awards previously
granted to certain of the Named Executive Officers were sufficient to
incentivize such employees during 1997.
The Compensation Committee believes that an appropriate compensation program
can help in fostering a continuation of profitable operations if the program
reflects a suitable balance between providing appropriate awards to key
employees while at the same time effectively controlling compensation costs,
principally by establishing cash compensation at competitive levels and
emphasizing supplemental compensation that correlates to the performance of
individuals, the Company and the Company's Common Stock.
This report has been furnished by the Compensation Committee of Bionx
Implants' Board of Directors.
Terry D. Wall
David J. Bershad
10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
stockholder return on the Company's Common Stock with the cumulative total
return of the Nasdaq Market Index and the S&P Health Care Medical
Products/Supplies Index for the period from April 25, 1997 (the date on which
the Common Stock was first publicly traded) through December 31, 1997. For
purposes of the graph, it is assumed that the value of the investment in the
Company's Common Stock and each index was 100 on April 25, 1997 and that all
dividends were reinvested.
COMPARISON OF 8 MONTH CUMULATIVE TOTAL RETURN
AMONG BIONX IMPLANTS, THE NASDAQ
MARKET INDEX AND THE S&P HEALTH CARE MEDICAL
PRODUCTS/SUPPLIES INDEX
<TABLE>
<CAPTION>
NASDAQ
BIONX IMPLANTS, INC. S&P GROUP INDEX MARKET INDEX
<S> <C> <C> <C>
4/25/1997 100.00 100.00 100.00
5/30/1997 152.38 108.31 111.24
6/30/1997 161.90 116.92 114.62
7/31/1997 201.19 126.83 126.67
8/29/1997 245.24 122.83 126.20
9/30/1997 210.71 121.58 133.77
10/31/1997 198.81 111.55 127.05
11/28/1997 200.00 119.42 127.59
12/31/1997 214.29 123.38 125.48
</TABLE>
ASSUMES $100 INVESTED ON APRIL 25, 1997
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1997
11
<PAGE>
DIRECTOR COMPENSATION
The Company has not yet commenced paying cash fees to directors in
connection with their service on the Board of Directors or on committees of
the Board. For information regarding stock option grants to non-employee
directors, see "Stock Option/Stock Issuance Plan."
OTHER MATTERS
COSTS
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited personally or by telephone or
telegraph by regular employees of the Company and its subsidiaries. Brokerage
houses and other custodians, nominees and fiduciaries will be requested to
forward soliciting material to their principals, and the Company will, upon
request, reimburse them for the reasonable expense of doing so.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick, certified public accountants, have been selected by the
Board of Directors to audit and report on the Company's financial statements
for the year ending December 31, 1998. A representative of that firm is
expected to be present at the Annual Meeting and will have an opportunity to
make a statement if he or she so desires. The representative is expected to be
available to respond to appropriate questions from stockholders.
OTHER MATTERS TO BE PRESENTED
The Board of Directors does not know of any matters, other than those
referred to in the accompanying Notice of the Annual Meeting, to be presented
at the Annual Meeting for action by stockholders. However, if any other
matters are properly brought before the Annual Meeting or any adjournment
thereof, it is intended that votes will be cast with respect to such matters,
pursuant to the proxies, in accordance with the best judgment of the persons
acting under the proxies.
STOCKHOLDER PROPOSALS
If a stockholder of the Company wishes to have a proposal included in the
Company's proxy statement for the 1999 Annual Meeting of Stockholders, the
proposal must be received at the Company's principal executive offices by
December 16, 1998.
By Order of the Board of Directors,
Michael J. O'Brien, Secretary
April 15, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 1997, INCLUDING CONSOLIDATED FINANCIAL STATEMENTS, ACCOMPANIES
THIS PROXY STATEMENT. THE ANNUAL REPORT IS NOT TO BE REGARDED AS PROXY
SOLICITING MATERIAL OR AS A COMMUNICATION BY MEANS OF WHICH ANY SOLICITATION
IS TO BE MADE.
12
<PAGE>
LOGO
APPENDIX 1
BIONX IMPLANTS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS.
MAY 19, 1998
The undersigned hereby appoints David W. Anderson and Michael J. O'Brien, and
each of them, attorneys and proxies, with power of substitution in each of
them, to vote for and on behalf of the undersigned at the annual meeting of the
stockholders of Bionx Implants, Inc. to be held on May 19, 1998, and at any
adjournment thereof, upon matters properly coming before the meeting, as set
forth in the related Notice of Meeting and Proxy Statement, both of which have
been received by the undersigned. Without otherwise limiting the general
authorization given hereby, said attorneys and proxies are instructed to vote
as follows:
1. Election of the Board's nominees for Director.
[_] FOR the nominees listed below (except as marked to the contrary below)
[_] WITHHOLD AUTHORITY to vote for the nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name in the space provided below)
------------------------------------
Nominees: David W. Anderson and Terry D. Wall
2. Upon all such other matters as may properly come before the meeting and/or
any adjournment or adjournments thereof, as they in their discretion may
determine. The Board of Directors is not aware of any such other matters.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES OR SPACE PROVIDED IN THIS PROXY,
THIS PROXY WILL BE VOTED FOR EACH OF THE BOARD'S NOMINEES.
(continued and to be signed on reverse side)
<PAGE>
(Continued from other side)
Date: ____________________________, 1998
________________________________________
Signature
Date: ____________________________, 1998
________________________________________
Signature (if held jointly)
NOTE: PLEASE SIGN THIS PROXY AND RETURN
IT PROMPTLY WHETHER OR NOT YOU EXPECT
TO ATTEND THE MEETING. YOU MAY
NEVERTHELESS VOTE IN PERSON IF YOU
ATTEND. PLEASE SIGN EXACTLY AS YOUR
NAME APPEARS HEREON. GIVE FULL TITLE IF
AN ATTORNEY, EXECUTOR, ADMINISTRATRIX,
TRUSTEE, GUARDIAN, ETC. FOR AN ACCOUNT
IN THE NAME OF TWO OR MORE PERSONS,
EACH SHOULD SIGN, OR IF ONE SIGNS, HE
SHOULD ATTACH EVIDENCE OF HIS
AUTHORITY.
