SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 15, 1996
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Advanced NMR Systems, Inc.
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(Exact name or registrant as specified in its charter)
Delaware 0-11914 22-2457487
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(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification No.)
46 Jonspin Road, Wilmington, Massachusetts 01887
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 657-8876
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N/A
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(Former name or former address, if changed since last report.)
Page 1 of 13 Pages
Exhibit Index on Page 4
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Item 5. Other Events.
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On February 15, 1996, Advanced NMR Systems, Inc.
("Advanced NMR") learned that a class action complaint
("Complaint") was filed on February 9, 1996 in the Court of
Chancery of the State of Delaware, New Castle County, against
Advanced NMR, Advanced Mammography Systems, Inc. ("AMS"), a 61%
owned subsidiary of Advanced NMR, and certain directors of
Advanced NMR and AMS. The Complaint seeks to (i) enjoin the
proposed merger ("Merger") of a newly-formed, wholly-owned
subsidiary of Advanced NMR, AMS Merger Corporation, a Delaware
corporation ("Merger Corp.") into AMS, whereby AMS would become
a wholly-owned subsidiary of Advanced NMR, pursuant to an
Agreement and Plan of Merger (the "Merger Agreement") dated
February 4, 1996 by and among Advanced NMR, Merger Corp. and
AMS; or, (ii) if the Merger is consummated, to award rescissory
damages to the proposed class of plaintiffs, on the principal
basis that Advanced NMR and the directors named in the
Complaint breached their fiduciary duties in approving the
Merger Agreement and thus the Merger is unfair to the public
stockholders of AMS. The Complaint further demands a judgment
ordering defendants, jointly and severally, to pay damages as
provided in the Complaint.
Advanced NMR is reviewing the complaint and the
allegations made therein, however it believes there is no basis
for the claims made by plaintiff and intends to vigorously
defend the action. The investment banking firm of Houlihan,
Lokey, Howard and Zukin, Inc., which was retained by the
committee of independent directors of AMS, has rendered an
opinion that as of the entry into the Merger Agreement the
consideration to be received in the Merger by the AMS
stockholders (other than ANMR) was fair from a financial point
of view to such stockholders.
Item 7. Financial Statements and Exhibits.
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(c) Exhibits:
99. Class Action Complaint Titled Quin R. Frazer v. Jack
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Nelson et al. filed on February 9, 1996 in the Court
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of Chancery in the State of Delaware, New Castle
County. (Civ. No. 14831)
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SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
ADVANCED NMR SYSTEMS, INC.
Dated: February 16, 1996 By: /s/ Jack Nelson
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Name: Jack Nelson
Title: Chairman
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EXHIBIT INDEX
Exhibit Description Page
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99. Class Action Complaint Titled Quin R.
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Frazer v. Jack Nelson et al. filed February
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9, 1996 in the Court of Chancery in the
State of Delaware, New Castle County. (Civ.
No. 14831)
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Exhibit 99
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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QUIN R. FRAZER, on behalf of himself :
and all others similarly situated, :
:
Plaintiff, :
:
v. :
: C.A. No. 14831
JACK NELSON, ROBERT SPIRA, : -----
SOL TRIEBWASSER, GARY A. KITTRELL, :
GEORGE A. SILVER, GEORGE AARON, :
ADVANCED MAMMOGRAPHY SYSTEMS, INC. :
and ADVANCED NMR SYSTEMS, INC. :
:
:
Defendants. :
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CLASS ACTION COMPLAINT
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Plaintiff, by and through his attorneys, alleges the
following upon information and belief, except as to paragraph 1
which is alleged upon personal knowledge:
INTRODUCTION
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This action arises out of an unlawful scheme and plan
by Advanced NMR Systems, Inc. ("NMR"), the 61% shareholder of
Advanced Mammography Systems, Inc. ("AMS" or the "Company") to
acquire the minority shares of the Company for grossly
inadequate consideration in breach of defendants' fiduciary
duties.
<PAGE>
The Parties
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1. Plaintiff is and has been at all relevant times
the owner of shares of the common stock of AMS.
2. Defendant Jack Nelson ("Nelson") is and has been
at all relevant times the Chairman of AMS. In addition, Nelson
serves as the Chairman and Treasurer of NMR.
3. Defendant Robert Spira ("Spira") is and has been
at all relevant times the Vice Chairman of AMS. In addition,
Spira is and has been at all relevant times the Vice Chairman
and a director of NMR.
4. Defendant George Aaron ("Aaron") is and has been
at all relevant times a director of AMS and NMR.
5. Defendant George A. Silver ("Silver"), is and
has been at all relevant times a director of AMS and NMR.
6. Defendant Sol Triebwasser ("Triebwasser") is and
has been at all relevant times a director of AMS and NMR.
7. Defendant Gary A. Kittrell ("Kittrell"), is and
has at all relevant times been a director of AMS.
8. Defendants Nelson, Spira, Triebwasser, Kittrell,
Silver and Aaron are hereinafter collectively referred to as
the "Individual Defendants."
9. By virtue of their positions as officers and/or
directors of AMS, the Individual Defendants are in a fiduciary
relationship with plaintiff and other public
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<PAGE>
stockholders of AMS, and owe plaintiff and other members of the
Class (defined below) the highest obligations of good faith,
candor, loyalty and fair dealing.
10. By virtue of their dual positions as directors
and/or officers of AMS and NMR (except defendant Kittrell), the
Individual Defendants suffer from disabling conflicts of
interest in that their duty to NMR to obtain AMS as cheaply as
possible is in conflict with their obligation to maximize
shareholder value for AMS' public shareholders.
11. Defendant AMS is a Delaware corporation with its
principal executive offices located at 46 Jonspin Road,
Wilmington, Massachusetts. AMS is a development-stage company
which was organized to acquire and develop proprietary
technology from NMR in order to design, manufacture, and
commercialize a dedicated magnetic resonance imaging ("MRI")
system for breast imaging which can be used in the detection of
breast tissue abnormalities and aid in the diagnosis of breast
cancer.
12. Defendant NMR is also a Delaware corporation
with its principal executive offices located at 46 Jonspin
Road, Wilmington, Massachusetts. NMR is a development stage
company which researches MRI systems. NMR also researches and
develops high speed components for MRI systems and magnetic
resonance systems for dedicated purposes.
13. NMR owns 61% of the outstanding shares of AMS
and, as such, is a controlling shareholder and owes fiduciary
obligations of good faith, candor, loyalty and fair dealing to
the public shareholders of AMS.
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<PAGE>
CLASS ACTION ALLEGATIONS
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14. Plaintiff brings this action on behalf of
himself and as a class action, pursuant to Rule 23 of the Rules
of the Court of Chancery, on behalf of all public stockholders
of AMS, and their successors in interest, who are or will be
threatened with injury arising from defendants' actions as more
fully described herein (the "Class"). Excluded from the Class
are defendants herein and any person, firm, trust, corporation,
or other entity related to or affiliated with any of the
defendants.
15. This action is properly maintainable as a class
action because:
(a) The Class is so numerous that joinder of
all members if impracticable. As of March 15, 1995, there were
approximately 6.5 million shares of AMS common stock
outstanding, collectively held by approximately 77 stockholders
of record and many more beneficial owners. Members of the
Class are scattered throughout the United States.
(b) There are questions of law and fact which
are common to the Class.
(c) Defendants have acted and will continue to
act on grounds generally applicable to the Class, thereby
making appropriate final injunctive or corresponding
declaratory relief with respect to the Class as a whole.
16. Plaintiff is committed to the prosecution of
this action and has retained competent counsel experienced in
litigation of this nature. Plaintiff's claims are typical of
the claims of other members of the Class and plaintiff has the
same interests as the
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<PAGE>
other members of the Class. Accordingly, plaintiff is an
adequate representative of the Class and will fairly and
adequately protect the interests of the Class.
CLAIM FOR RELIEF
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17. AMS was organized in July 1992 to acquire and
develop proprietary technology from NMR in order to design,
manufacture, and commercialize an MRI system for breast imaging
which can be used in the detection of breast tissue
abnormalities and aids in the diagnosis of breast cancer.
18. AMS' shares were sold to the public in an
initial public offering in January, 1993 at a price of $6 per
share.
19. In February, 1995, AMS filed an application
seeking FDA clearance to commence commercial marketing of its
dedicated MR Breast Imaging System known as Aurora (TM)
("Aurora").
20. On September 28, 1995, AMS announced that it had
concluded an agreement with the University of Texas medical
branch at Galveston for the first installation of Aurora for
clinical evaluation at the University's Breast Imaging Center.
Aurora is the first dedicated MR breast imaging system and
enables noninvasive, high quality breast images at
significantly lower cost than conventional MRI scanners.
21. On September 28, 1995, Peter B. Roemer, AMS'
executive vice president of research and technology, boasted
that:
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<PAGE>
The Aurora system was designed for patient comfort
and user-friendly operation, as well as maximum image
resolution. We are confident it will ultimately
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become an important tool in more accurately
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diagnosing breast disease for high-risk women for
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whom conventional x-ray mammography is insufficient.
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22. According to NMR's annual report on Form 10-K,
filed with the SEC on or about January 20, 1996, the first
Aurora unit was expected to be shipped with weeks and "it is
expected to be an important adjunct to x-ray mammography and
ultrasound in the diagnostic workup of patients."
23. According to NMR's 1995 10-K, AMS is also
engaged in other promising business activities. For example,
AMS is negotiating with several other breast imaging centers to
establish additional beta test sites for Aurora and is engaged
in pre-market activities to educate potential customers about
Aurora's capabilities. In addition, AMS has developed and has
a patent pending on an imaging technique to suppress fat in
breast images, a technique that is expected to be particularly
helpful in imaging dense breast tissue that is often difficult
to interpret using conventional x-ray mammography. AMS has
also begun developmental work to integrate an MR guided
localization and biopsy device patent.
24. On February 5, 1996, AMS and NMR announced that
they had entered into a definitive merger agreement pursuant to
which the two companies would merge in a stock swap transaction
("agreement"). Pursuant to the terms of the agreement, public
shareholders of AMS would receive the equivalent of $2.625 in
NMR stock for each share of AMS stock held.
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<PAGE>
25. AMS and NMR further announced that the actual
number of shares to be issued for AMS shares would be
determined by dividing $2.625 by the average closing price of
NMR common stock over a 30-day trading period ending five days
prior to the closing of the transaction, but that NMR will not
issue more than 1.297059 shares for each share of AMS common
stock.
26. The agreement is timed to take advantage of the
Company's severely depressed share price, which is currently
well below its 52-week high of $15 1/4. Moreover, the Company
will soon realize the substantial benefits of its much-touted
Aurora system which is to be introduced shortly and which has
not yet been fully reflected in the price of AMS' stock. NMR
has breached is fiduciary duties by failing to offer
consideration for the Company's minority shares which takes
into account the future financial prospects of the Company's
products.
27. Because NMR controls over 60% of AMS, no auction
or market check can be effected to establish AMS' worth through
arms-length bargaining. Thus, NMR has the power and is
exercising its power to acquire AMS' minority shares and
dictate terms which are in NMR's best interest, without
competing bids and regardless of the wishes or best interests
of Class members.
28. The purported review of the transaction by a
special committee of AMS' "independent directors" which,
according to defendants, has reviewed the agreement and found
it to be fair to the Company's shareholders from a financial
point of view, is a sham. As stated above, each of AMS'
directors, with the exception of defendant Kittrell, is also a
director and/or officer of NMR. Defendant Kittrell is
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<PAGE>
dependant upon the remaining directors and NMR for his position
as a director and the substantial benefits that result from
that position. Thus, each of the Individual Defendants suffers
from disabling conflicts of interest in that their desire to
remain entrenched in their positions at AMS and advance the
interests of NMR are in conflict with their obligation to
maximize shareholder value for AMS's minority shareholders.
29. By virtue of the acts and conduct alleged
herein, NMR and the Individual Defendants are not complying
with their fiduciary duties and are carrying out a preconceived
plan and scheme to advance NMR's interests at the expense of
AMS' public shareholders.
30. Unless enjoined by this Court, defendants will
continue to breach their fiduciary duties owed to plaintiff and
the other members of the Class, all to the irreparable harm of
the Class.
31. Plaintiff and the other members of the Class
have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this to be a proper class action;
(b) enjoining consummation of the proposed
transaction; or, if it is consummated, awarding rescissory
damages to the Class;
(c) ordering defendants, jointly and severally,
to account to plaintiff and the other members of the Class for
all damages suffered and to be suffered by them as a result of
the wrongs alleged herein;
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<PAGE>
(d) awarding plaintiff the costs and
disbursements of this action, including a reasonable allowance
for plaintiff's attorney's fees and experts' fees; and
(e) granting such other and further relief as
this Court may deem to be just and proper.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: /s/ [Signature Illegible]
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First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
GOODKIND LABATON RUDOFF
& SUCHOROW LLP
100 Park Avenue
New York, NY 10017
(212) 907-0700
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