<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2)
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to rule 14a-11(c) or Rule 14a-12
NOVAMETRIX MEDICAL SYSTEMS INC.
- --------------------------------------------------------------------------------
(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)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identifying the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
NOVAMETRIX MEDICAL SYSTEMS INC.
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 6, 1999
---------------
Wallingford, Connecticut
August 30, 1999
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 Ramada Plaza Hotel, 275
Research Parkway, Meriden, Connecticut 06450 on Wednesday, October 6, 1999, at
10:30 a.m. for the following purposes, as more fully described in the
accompanying Proxy Statement:
1. To elect two Class A 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 April 30, 2000.
3. To transact such other business as may properly come
before the Meeting or any adjournment or adjournments thereof.
The close of business on August 20, 1999 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.
<PAGE> 3
NOVAMETRIX MEDICAL SYSTEMS INC.
--------------
PROXY STATEMENT
--------------
This Proxy Statement, which will be mailed commencing on or
about August 30, 1999 to the persons entitled to receive the accompanying Notice
of Annual Meeting of Stockholders, is provided in connection with the
solicitation of Proxies on behalf of the Board of Directors of Novametrix
Medical Systems Inc. (the "Company") for use at the Annual Meeting of
Stockholders (the "Meeting") to be held on October 6, 1999, and at any
adjournment or adjournments thereof, for the purposes set forth in such Notice.
The Meeting will be held at the Ramada Plaza Hotel, 275 Research Parkway,
Meriden, Connecticut 06450. 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 August 20, 1999
(the "Record Date") will be entitled to notice of and to vote at the Meeting as
described below. On the Record Date, there were issued and outstanding 7,949,949
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.
<PAGE> 4
2
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, 1999, 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.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES OF COMMON STOCK PERCENT
- ---------------- BENEFICIALLY OWNED OF CLASS
------------------ --------
<S> <C> <C>
Charles F. Manning, Jr., M.D. Group.......... 575,338(1) 7.2%
1831 Ox Bottom Road
Tallahassee, Florida 32312
Ashford Capital Management, Inc.............. 487,000(2) 6.1%
P.O. Box 4172
Wilmington, Delaware 19807
</TABLE>
- ----------
(1) Information as to the Charles F. Manning, Jr., M.D. Group is based upon
reports on Schedule 13D filed with the Securities Exchange Commission
(the "Commission") on April 10, 1997 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.
(2) Information as to Ashford Capital Management, Inc. is based upon a report
on Schedule 13G filed with the Commission on December 31, 1998 by such
Group. Such report indicates that such Group beneficially owns an
aggregate of 487,000 shares.
<PAGE> 5
3
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of July 1, 1999, 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 Table, and all
directors and executive officers as a group, according to information furnished
by such persons to the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES OF COMMON STOCK PERCENT
- ---------------- BENEFICIALLY OWNED OF CLASS
------------------ --------
<S> <C> <C>
Paul A. Cote ........................................ 61,096(1) *
Director of the Company
Vartan Ghugasian .................................... 64,166(2) *
Director of the Company
Thomas M. Haythe .................................... 137,706(3) 1.7%
Director of the Company
William J. Lacourciere .............................. 399,466(4) 5.0%
Chairman of the Board, President and
Chief Executive Officer of the Company
and Director of the Company
John P. Mahoney ..................................... 184,142(5) 2.3%
Director of the Company
Philip F. Nuzzo ..................................... 44,416(6) *
Vice President - Marketing and Product
Development
Photios T. Paulson .................................. 32,166(7) *
Director of the Company
Steven J. Shulman ................................... 25,999(8) *
Director of the Company
Joseph A. Vincent ................................... 78,800(9) 1.0%
Executive Vice President, Chief Operating
Officer, Treasurer and Secretary of the
Company
All directors and executive 1,080,113(1) 13.2%
officers as a group (2)(3)(4)
(eleven persons) (5)(6)(7)
(8)(9)(10)
</TABLE>
- ----------
* Less than one percent.
<PAGE> 6
4
(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 6,666 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 6,666 shares issuable upon the exercise of currently
exercisable stock options held by Dr. Ghugasian.
(3) Includes 16,666 shares issuable upon the exercise of currently
exercisable stock options held by Mr. Haythe.
(4) Includes (i) 5,907 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) 46,666 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, and 3,333 shares issuable upon the exercise of
currently exercisable stock options held by Dr. Mahoney.
(6) Includes (i) 2,561 shares held for the account of Mr. Nuzzo under the
ESOP and (ii) 39,166 shares issuable upon the exercise of currently
exercisable stock options held by Mr. Nuzzo.
(7) 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 16,666 shares issuable upon the exercise of
currently exercisable stock options held by Mr. Paulson.
(8) Includes 19,999 shares issuable upon the exercise of currently
exercisable stock options held by Mr. Shulman.
(9) Includes (i) 3,176 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) 27,666 shares issuable upon the exercise of currently
exercisable stock options held by Mr. Vincent.
(10) Includes (i) 1,486 shares held for the account of Leslie E. Mace, Vice
President - Engineering of the Company, under the ESOP and (ii) 13,666
shares issuable upon the exercise of currently exercisable stock options
held by Mr. Mace. Includes (i) 1,533 shares held for the account of
Jeffery A. Baird, Chief Financial Officer of the Company, under the ESOP
and (ii) 20,499 shares issuable upon the exercise of currently
exercisable stock options held by Mr. Baird.
<PAGE> 7
5
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 John P. Mahoney, Photios T. Paulson and Steven J. Shulman, and the
Class C directors of the Company are Thomas M. Haythe and William J.
Lacourciere. Each class of directors is elected to serve for a term of three
years. If the number of directors is increased, the increase will be apportioned
among the classes so as to make all classes as nearly equal in number as
possible.
Two Class A 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 B directors will be elected at the 2000 Annual Meeting
and the Class C directors will be elected at the 2001 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 A director,
Paul A. Cote and Vartan Ghugasian, 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 A
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
PAUL A. COTE (Class A director), age 69; 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
Bankshare Association and Norstar), from 1975 to 1992; Director of the
Company since November 1996.
VARTAN GHUGASIAN (Class A director), age 54; practicing dentist in
Massachusetts since 1972; Associate in Prosthetic Dentistry, Harvard
University School of Dental Medicine, from 1980 until 1993; Director,
Karagheusian Commemorative Corporation; Director of the Company since
November 1996.
<PAGE> 8
6
OTHER DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE MEETING
THOMAS M. HAYTHE (Class C director), age 59; 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 Youth
Services, Inc. (provider of youth and educational services); Director
of the Company since 1978.
WILLIAM J. LACOURCIERE (Class C director), age 59; 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.
JOHN P. MAHONEY (Class B director), age 51; Staff Pathologist,
Pathology Associates, Inc. (pathology group providing services in
surgical, cytologic, clinical and forensic pathology) from 1981 to 1994
and since 1996); Chief of Staff, Tallahassee Community Hospital;
President, Capital Medical Society; Associate Medical Examiner, State
of Florida, District II; President and Chief Executive Officer, Health
Enterprises, Inc. (holding company that included a 62,000 member health
maintenance organization, which was merged with Coastal Physicians
Group in 1995); Director of the Company since October 1997.
PHOTIOS T. PAULSON (Class B director), age 60; Vice President,
bioMerieux Alliance, SA (privately-held French holding company), since
January 1995; Chairman, bioMerieux Vitek Inc. (manufacturer of clinical
diagnostic systems) since July 1991; Senior Advisor-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 48; President and Chief
Executive Officer of Prudential HealthCare (one of the nation's ten
largest healthcare providers) since August, 1997; President, Pharmacy &
Disease Management Group of Value Health, Inc. (provider of specialty
managed care programs) from November 1995 to March 1997; Executive Vice
President, Value Health, from April 1991 until September 1993; Senior
Vice President, Value Health since prior to 1991 until September 1993;
Acting President and Chief Executive Officer of American
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 Youth Services, Inc. (provider of youth and educational
services); Director of the Company since 1993.
<PAGE> 9
7
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 2, 1999, the Board of
Directors of the Company met 11 times. The Stock Option Committee met two times,
the Audit Committee met one time and the Compensation Committee did not meet.
All of the directors attended at least 75% of the aggregate of the total number
of meetings of the Board of Directors and of the Committees of the Board on
which such director served which were held during the time that such director
served, except that Mr. Shulman attended 69% and Mr. Paulson attended 64% of
such aggregate number of meetings.
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.
<PAGE> 10
8
EXECUTIVE COMPENSATION
The following table sets forth information for the fiscal
years ended May 2, 1999, May 3, 1998 and April 27, 1997 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 2, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
----------------------- -------------
Name and Fiscal All Other
Principal Position Year Salary Bonus Stock Options Compensation (1)
- ------------------ ---- ------ ----- ------------- ----------------
<S> <C> <C> <C> <C> <C>
William J. Lacourciere 1999 $243,686 $ -0- -0- $ 1,552
Chairman of the Board, 1998 250,000 -0- 50,000 1,583
President and Chief 1997 220,192 -0- -0- 3,155
Executive Officer
Joseph A. Vincent 1999 132,894 -0- -0- 1,158
Executive Vice 1998 132,692 -0- 19,000 1,307
President and Chief 1997 115,000 20,000 -0- 2,722
Operating Officer
Philip F. Nuzzo 1999 123,116 -0- -0- 1,195
Vice President - 1998 123,269 -0- 19,000 1,145
Marketing and Product 1997 110,780 -0- -0- 2,447
Development
</TABLE>
- ----------
(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.
In October 1998, the Company established the Novametrix
Medical Systems Inc. Director and Senior Officer Stock Retention Program. The
purpose of the Stock Retention Program is to encourage the acquisition and
retention of Company Common Stock by the directors and senior officers of the
Company by providing them with loans to assist them in purchasing and/or
continuing to own shares of Common Stock. Loans are for a term of three years
and bear interest at the Applicable Federal Rate prescribed by the Internal
Revenue Code of 1986. Pursuant to the Stock Retention Program, the Company has
made a loan to Mr. Lacourciere in the principal amount of $20,000 and to Mr.
Vincent in the principal amount of $50,000.
<PAGE> 11
9
The following table sets forth the number and value of options
held by the executive officers named in the Summary Compensation Table at May 2,
1999. None of such executive officers exercised options during the fiscal year
ended May 2, 1999.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Securities Underlying In-the Money Options
Options at May 2, 1999 at May 2, 1999 (1)
---------------------- ------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William J. Lacourciere 46,666 33,334 $15,000 $ -0-
Joseph A. Vincent 26,333 12,667 10,000 -0-
Philip F. Nuzzo 37,833 12,667 35,375 -0-
</TABLE>
- ---------------
(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.
<PAGE> 12
10
The following table sets forth certain information as to the
repricing of options held by executive officers of the Company named in the
Summary Compensation Table which occurred on November 23, 1998. Further
explanation concerning this repricing is included in the Compensation Committee
Report on Executive Compensation, below.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NAME DATE NUMBER OF MARKET PRICE EXERCISE PRICE NEW LENGTH OF
- ---- ---- OPTIONS OF STOCK AT AT TIME OF EXERCISE ORIGINAL OPTION
REPRICED OR TIME OF REPRICING OR PRICE TERM REMAINING
AMENDED REPRICING OR AMENDMENT ----- AT DATE OF
------- AMENDMENT --------- REPRICING OR
--------- AMENDMENT
---------
<S> <C> <C> <C> <C> <C> <C>
William J. Lacourciere 11/23/98 50,000 $ 6.3125 $ 7.625 $ 6.3125 9 years
Philip F. Nuzzo 11/23/98 15,000 6.3125 9.125 6.3125 9 years
Joseph A. Vincent 11/23/98 15,000 6.3125 9.125 6.3125 9 years
</TABLE>
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.
Pursuant to the Stock Retention Program, the Company has made
loans to Mr. Cote in the principal amount of $104,000, to Mr. Haythe in the
principal amount of $100,000, and to Dr. Mahoney in the principal amount of
$98,100.
<PAGE> 13
11
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, 1999. 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 $691,000. 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 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.
<PAGE> 14
12
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 2, 1999, except as provided below, its
directors, executive officers and greater than 10 percent stockholders complied
with all Section 16(a) filing requirements. Dr. Mahoney reported a purchase of
Common Stock occurring in April 1999 on Form 5 in June 1999.
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.
<PAGE> 15
13
PERFORMANCE GRAPH
The following performance graph compares the cumulative total
shareholder return on the Company's Common Stock to the NASDAQ Stock Market-(US)
Index and to the Standard and Poor's Medical Products and Supplies Index for the
Company's last five fiscal years. The graph assumes that $100 was invested in
each of the Company's Common Stock, the NASDAQ Stock Market-(US) Index and the
Standard and Poor's Medical Products and Supplies Index on May 1, 1994 and that
all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
NOVAMETRIX MEDICAL SYSTEMS INC., S&P HEALTHCARE INDEX (MEDICAL PRODUCTS)
AND THE NASDAQ STOCK MARKET (U.S.) INDEX
MAY 1, 1994 - MAY 2, 1999
[LINE GRAPH]
<TABLE>
<CAPTION>
VALUE OF INITIAL $100 INVESTMENT 1994 1995 1996 1997 1998 1999
- -------------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Novametrix $100 $119 $128 $125 $185 $106
NASDAQ Stock Market (U.S.) $100 $116 $166 $175 $262 $356
S&P Health Care (Medical Products) $100 $156 $211 $245 $350 $450
</TABLE>
<PAGE> 16
14
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 1999
fiscal year, the Compensation Committee established an annual salary of $250,000
for William J. Lacourciere, the President and Chief Executive Officer of the
Company.
Executive Bonuses. Executive bonuses provide the opportunity
for executive officers to earn additional compensation by achieving specific
performance goals. The Company will pay a percentage of each participant's
annual base salary as an annual bonus, provided the Company achieves specific
performance objectives. These objectives are established by the Board of
Directors of the Company at the beginning of each fiscal year in consultation
with such executive officers.
Stock Options. The Company periodically grants stock options
to its executive officers and other key employees. The primary purpose of stock
option grants is to align the interests of the Company's executive officers more
closely with the interests of the Company's stockholders by offering the
executives an opportunity to benefit from increases in the market price of the
Company's Common Stock. Stock options provide long-term incentives that have
enabled the Company to attract and retain key employees by encouraging their
ownership of Common Stock. The stock option plans are administered by the Stock
Option Committee of the Company's Board of Directors, which determines the
persons who are to receive options and the number of shares to be subject to
each option. In selecting individuals for options and determining the terms
thereof, the Stock Option Committee may take into consideration any factors it
deems relevant, including present and potential contributions to the success of
the Company.
<PAGE> 17
15
On November 23, 1998, the Board of Directors amended certain
stock options for the purchase of Common Stock of the Company granted to
executive officers and other managers and employees of the Company to reduce the
exercise price to $6.3125 per share, the closing price for the Common Stock on
that date. The Board of Directors believes that stock options are a significant
factor in the Company's ability to retain and motivate key employees who are
important to the Company's long-term success. In light of the decline in the
market price of the Common Stock following the original date of grant of the
amended options and the resulting disparity between the exercise price of these
options and the market price of the Common Stock, the Board of Directors
determined that such options were not providing meaningful incentives to the
employees holding these options. The Board of Directors approved the amendments
of the option prices as a means of ensuring that these employees will continue
to have meaningful equity incentives, which is important to the Company's
stockholders' long-term best interests.
Section 162(m) of the Internal Revenue Code of 1986 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
<PAGE> 18
16
II. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Ernst &
Young LLP to serve as independent auditors for the Company for the fiscal year
ending April 30, 2000. 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 April 30, 2000. 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 A 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.
<PAGE> 19
17
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 2000
Annual Meeting of Stockholders of the Company must be received by the Company by
April 3, 2000 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 2, 1999, 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.
August 30, 1999
<PAGE> 20
NOVAMETRIX MEDICAL SYSTEMS INC.
PROXY - Annual Meeting of Stockholders - October 6, 1999
COMMON STOCK
The undersigned, a stockholder of NOVAMETRIX MEDICAL SYSTEMS
INC., does hereby appoint William J. Lacourciere and Joseph A. Vincent, or
either of them, with full power of substitution, the undersigned's proxies, to
appear and vote at the Annual Meeting of Stockholders to be held on October 6,
1999, 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 A Directors.
<TABLE>
<S> <C>
For both nominees listed below / / Withhold authority for both nominees listed / /
(except as marked to the contrary below)
</TABLE>
Paul A. Cote and Vartan Ghugasian
(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 April 30, 2000.
FOR / / AGAINST / / ABSTAIN / /
The Board of Directors favors a vote "FOR" each item.
(Continued and to be Completed on Reverse Side)
<PAGE> 21
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 _____________________, 1999
____________________________ (L.S.)
____________________________ (L.S.)
Stockholder(s) Sign Here
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
