UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ( )
Filed by a Party other than the Registrant (X)
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential for Use of
the Commission Only (as
( ) Definitive Proxy Statement permitted by Rule
14a-6(e)(2))
(x) Definitive Additional Materials
( ) Soliciting Material Pursuant to (Section)240.14a-11(c) or
(Section)240.14a-12
_______________Novametrix Medical systems, Inc.________________________________
(Name of Registrant as Specified In Its Charter)
_________Paul A. Cote on behalf of Novametrix 13D Shareholders Group_________
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
( ) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2)
or item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the contoversy pursuant to Exchange Act
Rule 14a-6(i)(3).
( ) 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:
_________________________________________________________________
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:
_________________________________________________________________
DEFINITIVE PROXY STATEMENT
NOVAMETRIX 13D SHAREHOLDERS GROUP
November 20, 1996
Dear Fellow Shareholders:
This is the last time we are writing you prior to the shareholders meeting
on November 25. We oppose the Andros merger for the following reasons:
* Andros has a negative net worth and had a net operating loss in the most
recent year;
* Andros' sales declined by 25% from 1994 to 1995 and were flat in this
last year;
* The guaranty by our Company of $42 million of bank debt of Andros
creates risks. Please note that management's proxy statement indicated
that the Company MAY guaranty the Andros bank debt. On November 13 the
President of the Company stated to the 13D Group that if the merger goes
through the Company WILL guarantee $42 million of bank debt. In our
November 15 letter to you we stated that management's proxy statement
dated October 23, 1996 was silent on this fact. What we meant by that
was management's proxy statement did not definitively indicate the
Company would guaranty the $42 million of bank debt. Management's
November 1 letter to shareholders filed with the SEC and available to
the public states that "the Company assumes approximately $42 million of
debt" in the merger. Also, what we meant by the statement in our
November 15 letter that the ISS report ignores the guaranty is that the
report did not specifically address whether the Company would be
guaranteeing the Andros debt. It should be noted that the report states
that "Andros does carry a substantial amount of debt, but we see no
evidence that it is unserviceable." What was not stated by ISS in the
report is whether, if the debt is not serviced, the assets of the
Company would be exposed to claims by the lenders;
* The Andros debt load is large;
* The merger would give Genstar substantial control over Novametrix
because of ownership by one stockholder of 38% of the Company and its
ability to nominate 1/2 of the Board of Directors; and
* In our opinion, Management's claims regarding the future success of the
merger are based only on estimates, predictions and projections
regarding the future, and, as management states, there can be no
assurance that these will come true.
In our November 15 letter, we erroneously included the following quote:
"If all our predictions, projections and estimates as to the future of the
merged companies come true, the merged company will be very prosperous and we
can meet all our obligations." No member of management, or any of their
advisors, made this statement. This was not a quotation of management.
Rather, the members of the 13D Group present at the meeting (Richard Boulet,
Paul Cote, Thomas Dunham, Armen Ghugasian, Vartan Ghugasian, Robert Gladu, John
Gross and John Orestis), together with Irving Isaacson, counsel for the 13D
Group, had this impression from the presentation made by the President of the
Company at the meeting.
In our proxy statement and November 5, 1996 letter we indicated that there
was a 55% reduction in net book value to the shareholders of Novametrix as a
result of the merger. This was based on combining the book values of both
Andros and Novametrix as of July 28, 1996, without including the post-merger
adjustments, shown in the Company's proxy statement on page 47, and applying
the 38% dilution in stock ownership. On a per share basis, prior to the
merger the net book value per share of the Company was $1.97. Based on the
combination of the book values of both companies without any post-merger
adjustments, divided by the number of shares that would be outstanding
immediately after the merger, the book value per share would be $.68 per share
(rather than the $1.08 per share indicated in the proxy statement). This would
be a 65% decrease in the net book value per share. We believe that each of the
post-closing adjustments shown on page 47 of management's proxy statement (and
the footnotes to this page) should not be considered, because they represent
subjective opinions on the effect of events that have not occurred.
FOR THOSE STOCKHOLDERS WHO HAVE THEIR SHARES WITH PRUDENTIAL SECURITIES OR
LIVADA SECURITIES, PLEASE NOTE THAT PRUDENTIAL, WHICH ACTS ON BEHALF OF LIVADA
IN CONNECTION WITH SENDING PROXY SOLICITATION MATERIALS, FAILED TO INCLUDE OUR
NOVEMBER 5, 1996 LETTER TO SHAREHOLDERS. WE INCLUDE ANOTHER COPY FOR YOUR
REFERENCE. IF YOU HAVE NOT VOTED THE GREEN PROXY CARD OF THE 13D GROUP OR HAVE
MISPLACED YOUR CARD, YOU CAN CONTACT YOUR BROKER DIRECTLY, OR TELEPHONE THE 13D
GROUP AT 1-800-344-1116, TO OBTAIN A REPLACEMENT CARD OR MAKE OTHER
ARRANGEMENTS REGARDING YOUR VOTE.
Please also note it is the last proxy card submitted -- whether
management's white card or the 13D Group's green card -- that will be valid.
WE URGE YOU TO VOTE THE GREEN CARD<F1>
<F1> NOVAMETRIX 13D SHAREHOLDERS GROUP consists of John C. Allen, Sr., Lillian
I. Allen, Roland R. Batson, Richard Boulet, Joan P. Cote, Paul A. Cote, Normand
F. Doyon, Pauline G. Doyon, Sandra Dunham, Thomas B. Dunham, Adrienne R. Emmi,
Anthony N. Emmi, Armen Ghugasian, Takuhe Ghugasian, Vartan Ghugasian, Donn
Gifford, Linda Gifford, Ginette Gladu, Robert R. Gladu, Andrew Gross, Dana
Gross, John F. Gross, Susan T. Gross, Diane James, Richard James, William
Lagerson, Pierre Levesque, Edgar Morin, John Orestis, Raymond E. Robichaud.
Each of us is a shareholder of Novametrix Medical Systems, Inc. and is a member
of the Novametrix 13D Shareholders Group. Collectively, we own in the
aggregate, including currently exercisable warrants, approximately 10.8% of the
common stock of Novametrix. None of us are members of management of the
Company or have any business relationship with management.
THIS LETTER
IS
CLARIFIED
BY THE
NOVEMBER 20, 1996
LETTER.
<PAGE>
NOVAMETRIX 13D SHAREHOLDERS GROUP
November 5, 1996
Dear Fellow Shareholders:
Management has set November 25, 1996 as the date of the annual
shareholders meeting to vote on various proposals, including a merger with
Andros. It has sent you a two hundred page book (Management's Proxy
Statement) full of financial tables, legal documents, opinions, projections,
estimates, etc., in support of the proposals.
THE 13D GROUP OPPOSES THE MERGER. The full statement of our position and
the back-up material is in the following pages of this letter and the enclosed
proxy statement. We urge you strongly to read this letter and proxy statement
and form a judgment. WE ARE AGAINST THE MERGER BECAUSE:
1. YOUR STOCK INTEREST IN THE COMPANY WOULD BE SEVERELY DILUTED, IN OUR
OPINION.
2. NOVAMETRIX WOULD BE GETTING A COMPANY IN EXTREMELY POOR FINANCIAL
CONDITION, INCLUDING HAVING A NEGATIVE NET WORTH, A NET OPERATING LOSS
IN THE MOST RECENT YEAR AND SALES THAT HAVE DECLINED SINCE 1994.
3. ANDROS HAS A HUGE DEBT THAT NOVAMETRIX'S SUBSIDIARY WOULD HAVE TO
ASSUME.
4. WE BELIEVE THE PRICE NOVAMETRIX IS PAYING FOR ANDROS IS EXCESSIVE
COMPARED TO WHAT NOVAMETRIX IS GETTING.
5. THE ANDROS DEBT LOAD IS SO LARGE THAT NOVAMETRIX COULD HAVE SEVERE
FINANCIAL PROBLEMS TRYING TO SERVICE IT.
6. MANAGEMENT'S CLAIMS AS TO FUTURE PROFITABILITY ARE BASED LARGELY ON
THEIR ESTIMATES, PREDICTIONS AND PROJECTIONS AS TO FUTURE FINANCIAL
RESULTS.
7. THE MERGER WOULD GIVE GENSTAR, WHICH OWNS ANDROS, TOO MUCH CONTROL
OVER THE AFFAIRS OF NOVAMETRIX.
AGAIN, WE URGE YOU TO READ THIS LETTER AND GET THE FULL STORY. ALSO PLEASE
CALL US AT 1-800-344-1116 IF YOU HAVE ANY QUESTIONS.
<PAGE>
PROPOSAL NUMBER 1: THE MERGER AGREEMENT
WE BELIEVE THAT THE FACTS CLEARLY SHOW THE MERGER IS A BAD DEAL FOR
SHAREHOLDERS AND SHOULD BE VOTED DOWN. HERE'S WHY:
1. WHAT IS ACTUALLY HAPPENING HERE?
Although the transaction is cast in the form of a merger and stock
exchange, the net result is actually a purchase and sale arrangement.
Novametrix (the Company), through a subsidiary, will acquire all of the
assets of Andros and pay Genstar Capital Partners II, L.P. (Genstar),
which is the 98% owner of Andros, with 4,389,586 shares of Novametrix
stock and assumption by the subsidiary of $59 million of Andros'
liabilities.
2. WHAT IS GENSTAR?
Genstar Capital Partners II, L.P. (Genstar), in a separate private
placement memorandum, states that it is in the business of buying and
selling companies using leveraged buy-outs through raising large amounts
of debt in an acquired company. Its principals have made more than sixty
acquisitions and fifty divestitures.
3. THE CURRENT INTEREST OF NOVAMETRIX SHAREHOLDERS WILL BE SEVERELY DILUTED.
As of July 28, l996 on a book value basis, combiningNovametrix and Andros
would have resulted in a 55% reduction in book value to a Novametirix
shareholder. Please see the enclosed proxy statement for details.
4. WE BELIEVE THE PRICE TO BE PAID FOR ANDROS IS BASED ALMOST ENTIRELY ON
GUESSES, ESTIMATES AND PROJECTIONS OF ITS FUTURE VALUE.
As of July 31, l996, Andros had:
A negative net worth of $3.614 million
Total liabilities of approximately $59 million. Total Assets of $55
million, of which $34 million are tangible assets and $21 million are
intangible assets. Substantially all of the assets are mortgaged to
lenders.
An operating loss of almost $20 million
25% sales decline from 1994 to 1995 and relatively flatsales in 1996.
Novametrix is paying over $25,000,000 worth of stock for Andros and its
subsidiary is assuming all its debt. (Please see the enclosed proxy
statement for details.)
Novametrix is providing to Genstar anti-dilution rights regarding the
approximately 2-1/2 million options and warrants so that Andros could
receive in the future an additional 950,000 shares of the Company free.
<PAGE>
WHERE IS ANDROS' VALUE?
Management claims that, in spite of all this, the future growth and
prospects of the combined companies will make the deal worthwhile. But,
even Management admits that these claims are based largely on
projectedfutureperformance, potential cost savings, potential synergies.
Management is hoping that these future developments will take place.
Management itself admits in its proxy statement "that no assurance can be
provided as to any future financial results".
5. IN OUR OPINION, THE "FAIRNESS OPINION" OF TUCKER ANTHONY IN FAVOR OF THE
MERGER CANNOT BE RELIED UPON.
Management relies on Tucker Anthony, its hired investment advisor, to
approve the merger as being fair to the Company and the shareholders. We
believe their fairness opinion is unreliable.
THEY ARE NOT IMPARTIAL. While Tucker Anthony has already received
fees for acting as a financial adviser and for rendering the opinion,
as Tucker Anthony states in its October 18, 1996 letter, a substantial
portion of their fee depends on the merger being successful. Tucker
Anthony has been paid some monies to date.
THEIR OPINION OF FUTURE PERFORMANCE IS BASED LARGELY ON ESTIMATES AND
PROJECTIONS GIVEN TO THEM BY MANAGEMENT.
THEY HAVE ASSUMED THAT SUCH PROJECTIONS WILL BE REALIZED. In other
words, in support of their opinion they are assuming that things will
happen just the way Management says they will.
6. IN OUR OPINION, THE COMPANY MAY HAVE SERIOUS FINANCIAL PROBLEMS IN
SERVICING THE ANDROS BANK DEBT OF $44 MILLION.
In 1997, principal and interest payments on the Andros term loan and
subordinated loans totalling $44 million will be almost $7 million.
In 1998, payments on these loans will be almost $8 million.
In l996, Novametrix had net operating income of $2.13 million. Andros,
for the year ended July 31, 1996, had an operating loss of almost $20
million.
WHERE IS THE DEBT SERVICE COMING FROM?
The banks have a mortgage on substantially all of the Andros assets to
secure the loans. If Management's predictions of future earnings do not
come true, the bank could be in a position to foreclose on the loan.
7. THE AGREEMENT GIVES GENSTAR EFFECTIVE CONTROL OF THE COMPANY.
A 38% - 43% single block of stock in itself amounts to practical voting
control.
In addition, a Voting Agreement between the parties gives Genstar (until
January l, 1999) the power to elect half of the directors.
Genstar will acquire in effect a negative veto over the Company's affairs.
8. SHOULD GENSTAR HAVE THAT MUCH CONTROL OF NOVAMETRIX?
According to the private placement memorandum, Genstar is in the business
of buying and disposing of companies. We believe its principal objective
is short term profits.
Andros is an example of how it operates. Before the Genstar acquisition,
(on May 1, 1996) Andros had approximately $26 million of cash and no bank
debt. Genstar used all of Andros own cash to pay out its shareholders and
then loaded the company with over $44 million of bank debt. Six months
after the acquisition, it wants to sell Andros to Novametrix under the
merger agreement.
PROPOSAL NUMBER 2: LONG TERM INCENTIVE PLAN
We are strongly in favor of employee incentive programs, which provide
incentives to employees and not directors. We do not believe that the
Company's plan will accomplish this objective.
Of the 750,000 shares set aside for awards, up to 300,000 or 40% can go to
directors alone.
The Company has previously granted directors options and warrants for
stock. As of August, 1995 directors had received 437,675 options and
warrants.
In order to motivate other key employees, we feel that the plan should be
revised to take into consideration previous options given to directors.
PROPOSAL NUMBER 3: ELECTION OF DIRECTORS
We urge you to vote for the election of Paul Cote and Vartan Ghugasian -
as directors who will truly represent the interests of shareholders on the
Board.
IF YOU AGREE WITH OUR POSITION, WE URGE YOU:
1. DO NOT SIGN AND RETURN THE -- COMPANY PROXY CARD.
2. DATE, SIGN, AND RETURN THE ENCLOSED GREEN PROXY CARD IN THE ENCLOSED
ENVELOPE.
VOTE NO CONFIDENCE -- VOTE THE GREEN CARD
NOVAMETRIX 13D SHAREHOLDERS GROUP<F1>
consisting of
John C. Allen, Sr. Donn Gifford
Lillian I. Allen Linda Gifford
Roland R. Batson Ginette Gladu
Richard Boulet Robert R. Gladu
Joan P. Cote Andrew Gross
Paul A. Cote Dana Gross
Normand F. Doyon John F. Gross
Pauline G. Doyon Susan T. Gross
Sandra Dunham Diane James
Thomas B. Dunham Richard James
Adrienne R. Emmi William Lagerson
Anthony N. Emmi Pierre Levesque
Armen Ghugasian Edgar Morin
Takuhe Ghugasian John Orestis
Vartan Ghugasian Raymond E. Robichaud
<F1>Each of us is a shareholder of Novametrix Medical Systems, Inc. and is a
member of the Novametrix 13D Shareholders Group. Collectively, we own in the
aggregate, including currently exercisable warrants, approximately 10.8% of the
common stock of Novametrix. None of us are members of management of the
Company or have any business relationship with management.
