<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
BIOMAGNETIC TECHNOLOGIES
- --------------------------------------------------------------------------------
(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] $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 controversy 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:
-------------------------------------------------------------------------
[_] 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.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[LOGO OF BIOMAGNETIC TECHNOLOGIES]
BIOMAGNETIC TECHNOLOGIES
9727 Pacific Heights Boulevard
San Diego, California 92121
February 7, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Biomagnetic Technologies, Inc., which will be held at the offices of the Company
at 9727 Pacific Heights Blvd., San Diego, California on Monday, March 18, 1996
at 9:00 a.m.
Details of the business to be conducted at the Annual Meeting are given in
the attached Notice of Annual Meeting of Shareholders and Proxy Statement.
In order for us to have an efficient meeting, please sign, date and return
the enclosed proxy promptly in the accompanying reply envelope. If you are able
to attend the Annual Meeting and wish to change your proxy vote, you may do so
simply by voting in person at the Annual Meeting.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ James V. Schumacher
James V. Schumacher
Chairman, President and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are requested to
complete, sign and date the enclosed proxy as promptly as possible and return it
in the enclosed envelope. No postage need be affixed if mailed in the United
States.
<PAGE>
BIOMAGNETIC TECHNOLOGIES, INC.
9727 Pacific Heights Boulevard
San Diego, California 92121
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
February 7, 1996
The Annual Meeting of Shareholders of Biomagnetic Technologies, Inc. (the
"Company" or "BTi") will be held at the offices of the Company at 9727 Pacific
Heights Boulevard, San Diego, California on Monday, March 18, 1996 at 9:00 a.m.,
Pacific Standard Time, for the following purposes:
1. To elect a Board of Directors for the following year. Management has
nominated the following persons for election at the meeting: R. Scott
Asen, Jerry C. Benjamin, William C. Black, Jr., Martin P. Egli, Gerald
C. Knudson, Enrique Maso and James V. Schumacher.
2. To ratify the selection of Price Waterhouse LLP as independent
accountants for the fiscal year ending September 30, 1996.
3. To transact any other business which may properly come before the
meeting or any adjournment(s) thereof.
Shareholders of record at the close of business on January 25, 1996 will be
entitled to vote at the Annual Meeting. A list of shareholders entitled to vote
at the Meeting will be available for inspection at the offices of the Company
after February 15, 1996. Whether or not you plan to attend the meeting in
person, please sign, date and return the enclosed proxy in the reply envelope
provided. If you attend the Meeting and vote by ballot, your proxy will be
revoked automatically and only your vote at the meeting will be counted. The
prompt return of your proxy will assist us in preparing for the Meeting.
By Order of the Board of Directors
/s/ Herman Bergman
Dated: February 7, 1996 Herman Bergman, Acting Secretary
<PAGE>
BIOMAGNETIC TECHNOLOGIES, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 18, 1996
These proxy materials and the enclosed proxy card are being mailed in
connection with the solicitation of proxies by the Board of Directors of
Biomagnetic Technologies, Inc., a California corporation (the "Company"), for
the Annual Meeting of Shareholders to be held at 9:00 a.m. on March 18, 1996 and
at any adjournment or postponement of the Annual Meeting. These proxy materials
were first mailed to shareholders of record beginning on approximately February
7, 1996.
The mailing address of the principal executive office of the Company
is 9727 Pacific Heights Boulevard, San Diego, California 92121.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Shareholders. Each proposal is described in more detail in this Proxy
Statement.
VOTING RIGHTS AND SOLICITATION
Any shareholder executing a proxy has the power to revoke it at any
time before it is voted by delivering written notice of such revocation to the
Secretary of the Company before the Meeting or by properly executing and
delivering a proxy bearing a later date. Proxies may also be revoked by any
shareholder present at the Meeting who elects to vote his shares in person. The
cost of soliciting proxies will be paid by the Company and may include
reimbursement paid to brokerage firms and others for their expense in forwarding
solicitation material. Solicitation will be made primarily through the use of
the mail but regular employees of the Company may, without additional
remuneration, solicit proxies personally by telephone or telegram. The Company
has contracted with American Stock Transfer and Trust Co. ("AST") to solicit
proxies on the Board of Director's behalf.
The anticipated cost of the proxy solicitation by AST is $2,000 plus
distribution expenses charged by the various brokerage firms which are expected
to be $2,500. AST will mail a search notice to banks, brokers, nominees and
street-name accounts to develop a listing of shareholders, distribute proxy
material to brokers and banks for subsequent distribution to beneficial holders
of stock and solicit proxy responses from holders of the Company's Common Stock.
The record date for determining those shareholders who are entitled to
notice of, and to vote at, the Meeting has been fixed as January 25, 1996. At
the close of business on the record date, the Company had approximately
39,932,174 outstanding shares of Common Stock (the "Common Stock"). Each share
of Common Stock is entitled to one vote on matters brought before the Meeting.
In voting for directors, each shareholder has the right to cumulate his votes
and give one nominee a number of votes equal to the number of directors to be
elected multiplied by the number of shares he holds, or to distribute his votes
on the same principle among the nominees to be elected in such manner as he may
see fit. A shareholder may cumulate his votes if his candidate or candidates
have been placed in nomination prior to the voting and if any shareholder gives
notice at the Meeting prior to the voting of that shareholder's intention to
cumulate his votes. The persons named in the enclosed proxy card may or may not
elect to give such notice and vote the shares they represent in such a manner.
The shares represented by the proxy will be voted at the Annual Meeting and will
be voted by the proxyholder as specified by the person solicited. California
statute and case law does not give specific instructions regarding the treatment
of abstentions and broker nonvotes for companies such as BTi; however,
-1-
<PAGE>
the Company believes that California law provides that if shares are represented
and vote on any issue at a shareholder meeting their failure to vote yes on any
other issue (through either abstention or a broker nonvote) has the same effect
as a negative vote on that other issue.
-2-
<PAGE>
PROPOSAL 1
----------
ELECTION OF DIRECTORS
A board of seven (7) directors is to be elected at the Meeting to hold
office until the next annual meeting or until their successors are elected.
Unless individual shareholders specify otherwise, each returned proxy will be
voted for the election of the seven (7) nominees who are listed herein, or for
as many nominees of the Board of Directors as possible, such votes to be
distributed among such nominees in the manner as the persons named in the
enclosed proxy card see fit.
If, however, any of those named are unable to serve, or for good cause
decline to serve at the time of the Meeting, the persons named in the enclosed
proxy will exercise discretionary authority to vote for substitutes. The Board
of Directors is not aware of any circumstances that would render any nominee
unavailable for election. Discretionary authority to cumulate votes is being
solicited by the Board of Directors, and it is intended that the proxies
received by the proxy holders pursuant to the solicitation will be voted in a
manner designed to cause the election of the maximum number of the Board of
Directors' nominees. The following schedule sets forth certain information
concerning the nominees for election as directors.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES
---
LISTED HEREIN.
<TABLE>
<CAPTION>
First Year
Elected
Name Director Principal Occupation Age
- ----------------------------- ---------- ---------------------------------------- ---
<S> <C> <C> <C>
R. Scott Asen (1)(2)(3) 1984 President, Asen and Company 51
Jerry C. Benjamin (1)(3) 1988 Director, Advent Limited 55
William C. Black, Jr. 1970 Senior Vice President of Business 57
Development, Biomagnetic Technologies,
Inc.
Martin P. Egli (2) 1995 Partner, Experta Administration Ltd. 43
Gerald C. Knudson 1994 President, Polaroid Medical Imaging 52
Systems
Enrique Maso 1995 Private Investor 70
James V. Schumacher (3)(4) 1993 Chairman, President and Chief Executive 50
Officer, Biomagnetic Technologies, Inc.
</TABLE>
________________________
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Member of Administrative Committee of the 1992 Employee Stock Purchase
Plan.
(4) Mr. Schumacher also serves as a non-voting advisor to the Compensation
Committee.
-3-
<PAGE>
BUSINESS EXPERIENCE OF DIRECTORS
Mr. Asen has served as general partner of Pioneer III and Pioneer IV,
venture capital investment funds, since 1983 and 1984, respectively. Since
1984, Mr. Asen has served as President of Asen and Company, an investment
management firm. Presently, Mr. Asen is a director of Davox Corporation and a
number of privately held companies.
Mr. Benjamin has served as a general partner of Advent First Limited
Partnership and a director of Advent Limited since December 1987, with
responsibility for life science venture capital investments. Mr. Benjamin is
currently a director of a number of privately-held companies and three publicly-
held companies, Gensia Pharmaceuticals, Inc., Dura Pharmaceuticals, Inc. and
Orthofix International N.V.
Dr. Black joined the Company in 1970 and has been Senior Vice President,
Business Development, since August 1984. Dr. Black was President and Chief
Executive Officer of the Company from 1972 to 1984.
Mr. Egli has served since 1993 as a partner and principal of Experta
Administration Ltd., a company which provides investment management, corporate
finance and trust services. From 1988 to 1992 Mr. Egli served as Chief
Executive Officer of BiL Holding Ltd., a banking and investment management
company owned by the Bank in Liechtenstein Group. Mr. Egli is a director of
several privately held companies.
Mr. Knudson has served as President and CEO of Polaroid Medical Imaging
Systems since November 1994. From 1988 to 1994, Mr. Knudson held senior
management positions with Resonex, Inc., a worldwide manufacturer of MRI
systems, his most recent position being President and CEO. Previously, Mr.
Knudson served as Senior Vice President of Acuson, an ultrasound company, for
two years and held senior sales and marketing positions for medical and CAD
products for over 12 years at General Electric Company ("GE").
Dr. Maso, a private investor, is a former large industrialist in Europe and
the former Mayor of Barcelona. He is currently the Chairman of the Board of
Electronic Data Systems in Spain, a position he has held since 1983. He
received a Masters of Industrial Management Engineering from New York University
and a doctorate in Engineering from the Politechnic College of Barcelona.
Mr. Schumacher joined the Company in June 1993 as a Director and Chairman of
the Board and subsequently became President and Chief Executive Officer
effective July 14, 1993. Prior to joining the Company, Mr. Schumacher was
employed by GE for 25 years, his most recent position being General Manager of
Range Products at GE Appliances from 1991 to 1993. From 1970 to 1991, Mr.
Schumacher held several sales and marketing positions with GE Medical Systems in
the U.S. and Europe. These positions included: Vice President - Marketing for
Medical Systems European Business (1986 to 1989), Manager - MR Marketing (1983
to 1986) and National Sales Manager - CT Products (1981 to 1983).
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors held five meetings during the fiscal year
ended September 30, 1995, one of which was telephonic. Each Director nominated
for reelection attended at least 75% of the aggregate of (i) the total meetings
of the Board and (ii) the total number of meetings held by all committees of the
board on which he served. Mr. Egli and Mr. Maso did not join the Board of
Directors until May, 1995 and attended all meetings subsequently held.
The Company has a standing Compensation Committee composed of Directors R.
Scott Asen and Jerry C. Benjamin as of September 30, 1995. Director James V.
Schumacher serves as a non-voting advisor to the Committee. The Compensation
Committee reviews and acts on matters relating to compensation levels and
benefit plans for executive officers and key employees of the Company. The
Compensation Committee met four times during the fiscal year ended September 30,
1995.
-4-
<PAGE>
The Company has a standing Audit Committee composed of Directors R. Scott
Asen and Martin P. Egli as of September 30, 1995. The Audit Committee assists
in selecting the independent auditors, in designating services they are to
perform and in maintaining effective communication with those auditors. The
Audit Committee met two times during the fiscal year ended September 30, 1995.
The Company has a standing Administrative Committee of the 1992 Employee
Stock Purchase Plan (the "Administrative Committee") composed of Directors R.
Scott Asen, Jerry C. Benjamin and James V. Schumacher. The Administrative
Committee has full authority to administer the Stock Purchase Plan. The
Administrative Committee met once during the fiscal year ended September 30,
1995.
The Company does not have a standing Nominating Committee or any other
Committee performing similar functions, and such matters are considered at
meetings of the full Board of Directors.
-5-
<PAGE>
PROPOSAL 2
----------
APPROVAL OF
SELECTION OF INDEPENDENT ACCOUNTANTS
On the recommendation of the Company's management, the Board of Directors
has selected Price Waterhouse LLP to continue in the capacity of independent
accountants for the current fiscal year. Ratification and approval by the
shareholders will be sought for the selection of Price Waterhouse LLP by the
Board of Directors as independent accountants to audit the accounts and records
of the Company for the fiscal year ending September 30, 1996, and to perform
other appropriate services. In the event that a majority of the shares voted at
the Annual Meeting do not vote for ratification of the selection of Price
Waterhouse LLP, the Board of Directors will reconsider such selection.
A representative of Price Waterhouse LLP is expected to be present at the
meeting to respond to your questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION AND APPROVAL
---
OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR FISCAL 1996.
-6-
<PAGE>
PRINCIPAL SHAREHOLDERS
The following are the only persons known by the Company to own beneficially,
as of September 30, 1995, five percent (5%) or more of the outstanding shares of
its Common Stock.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Name and Address ---------------------------
of Beneficial Owner (1) Number (1) Percent (2)
- -------------------------------- ------------ ------------
<S> <C> <C>
Advent Limited (3).............. 2,563,481 6.3
25 Buchingham Gate
London SW1E GLO England
Dassesta International S.A...... 25,000,000 61.8
AM Schanzengraben 23
CH-8002 Zurich, Switzerland
</TABLE>
________________
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to community
property laws, where applicable.
(2) Percentage of ownership is calculated pursuant to SEC Rule 13d-3(d)(1).
(3) Includes an aggregate of 2,354,481 shares and 209,000 options to purchase
Common Stock owned by venture capital limited partnerships of which Advent
Limited is a managing partner.
-7-
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
the Company as of September 30, 1995 by each director and nominee to the Board
of Directors and by each of the Named Officers and by all directors and
executive officers of the Company as a group. All shares are subject to the
named person's sole voting and investment power except where otherwise
indicated.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Name and Address ---------------------------
of Beneficial Owner (1) Number (1) Percent (2)
- ------------------------------ ------------ ------------
<S> <C> <C>
Bruce S. Aboudara............. -0- *
R. Scott Asen (3)............. 1,601,574 4.0
Jerry C. Benjamin (4)......... 6,250 *
Herman Bergman................ -0- *
William C. Black, Jr. (5)..... 111,690 *
D. Scott Buchanan (6)......... 28,438 *
Martin P. Egli (7)............ 25,000,000 61.9
Michael E. Faherty (8)........ 151,650 *
Gerald C. Knudson............. -0- *
Alfred S. LeBlang (9)......... 12,917 *
Enrique Maso.................. -0- *
James V. Schumacher (10)...... 53,000 *
All directors and executive
officers as a group
(10 persons) (11)........... 29,351,424 72.4
</TABLE>
___________
* Less than 1%.
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to community
property laws, where applicable. Share ownership in each case includes
shares issuable on exercise of certain outstanding options as described in
the footnotes below.
(2) Percentage of ownership is calculated pursuant to SEC Rule 13d-3d(1).
(3) Includes an aggregate of 827,671 shares and options to purchase 44,000
shares of Common Stock owned by Pioneer III and Pioneer IV, venture capital
limited partnerships of which Mr. Asen is a general partner. Mr. Asen
disclaims beneficial ownership of such shares which are in excess of his
pecuniary interest.
(4) Does not include 2,354,481 shares and options to purchase 209,000 shares of
Common Stock owned by venture capital limited partnerships of which Advent
Limited is managing partner. Mr. Benjamin is a director of Advent Limited
and may be deemed a beneficial owner of such shares. Mr. Benjamin
disclaims beneficial ownership of such shares.
(5) Shares beneficially owned include options to purchase 28,146 shares of
Common Stock held by Dr. Black which are now exercisable or exercisable
within 60 days.
-8-
<PAGE>
(6) Shares beneficially owned include options to purchase 13,513 shares of
Common Stock held by Dr. Buchanan which are now exercisable or exercisable
within 60 days.
(7) Consists of 25,000,000 shares owned by Dassesta International S.A. Mr.
Egli is a Partner and principal of Experta Administration Ltd., which owns
100% of the capital stock of Dassesta.
(8) Shares beneficially owned include options to purchase 27,667 shares of
Common Stock held by Mr. Faherty which are now exercisable or exercisable
within 60 days. Mr. Faherty resigned in good standing from the Board of
Directors effective September 30, 1995.
(9) Shares beneficially owned include options to purchase 12,917 shares of
Common Stock held by Mr. LeBlang which are now exercisable or exercisable
within 60 days. Mr. LeBlang resigned in good standing from the Board of
Directors effective September 30, 1995.
(10) Shares beneficially owned includes options to purchase 50,000 shares of
Common Stock held by Mr. Schumacher which are now exercisable or
exercisable within 60 days.
(11) Shares beneficially owned include all shares held by entities affiliated
with certain directors as described in the footnotes above and include
options to purchase 395,083 shares of Common Stock held by all directors
and executive officers as a group which are now exercisable or exercisable
within 60 days.
MANAGEMENT
<TABLE>
<CAPTION>
Name Age Position
- ------------------------ --- --------------------------------------
<S> <C> <C>
James V. Schumacher..... 50 President, Chief Executive Officer
and Chairman of the Board of Directors
Bruce S. Aboudara....... 45 Vice President, Marketing and Sales
Herman Bergman.......... 69 Acting Chief Financial Officer and
Secretary
William C. Black, Jr.... 57 Senior Vice President, Business
Development, and Director
D. Scott Buchanan....... 37 Vice President, Product Operations
</TABLE>
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
Mr. Schumacher is being considered for election to the Board of Directors
of the Company. See "Proposal No. 1--Election of Directors" for a description
of his business background.
Mr. Aboudara joined the Company in 1995 as Vice President, Marketing and
Sales. From 1990 to 1994 Mr. Aboudara was employed by Cimlinc Inc., a private
software company where he served as Vice President of World Wide
Marketing/International Business Operations from 1993 to 1994 and as Vice
President of International Business Operations from 1992 to 1993. Previously,
Mr. Aboudara held several senior sales and marketing positions in the medical
systems group of GE from 1977 through 1990.
Mr. Bergman served the Company as a financial consultant in 1994 and was
appointed acting Chief Financial Officer in May 1995 and acting Secretary in
December 1995. Previously, Mr. Bergman served as a financial consultant during
1994 and from 1992 to 1993 was Vice President of Finance of Atari Corporation, a
public company. From 1991 to 1992 he served as Vice President of Finance and
Operations of Proxim Inc., a
-9-
<PAGE>
public company and served as Treasurer and Finance Manager of the Military
Business Division of Siliconix Inc., a public company, from 1988 to 1991.
Dr. Black is being considered for election to the Board of Directors of the
Company. See "Proposal No. 1--Election of Directors" for a description of his
business background.
Dr. Buchanan joined the Company in 1986 and has been Vice President,
Product Operations since February 1992. Dr. Buchanan has been involved with
product and applications development since joining the Company as a staff
physicist. Dr. Buchanan received a B.S. in Physics from Lehigh University in
Pennsylvania and an M.S. and Ph.D. in Physics from the University of Illinois.
-10-
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation earned by the Named Officers (determined as of the end of the last
fiscal year) for services rendered in all capacities to the Company for the
fiscal years ended September 30, 1993, 1994 and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------------------------------------
Awards
--------------
All Other
Other Annual Compen-
Name and Compen- Options/SARs sation
Principal Position Year Salary ($) Bonus ($) sation ($) (#) ($)
- ---------------------------- ---- ---------- ----------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
James V. Schumacher (1) 1995 $250,000 $50,000 $24,000(2) 600,000(3) $-0-
President, CEO and 1994 $250,962 $12,500 $66,286(4) -0- $-0-
Chairman 1993 $ 54,808 $ -0- $31,000(4) 600,000(5) $-0-
Bruce S. Aboudara (6) 1995 $ 84,040 $ -0- $30,684(7) 100,000 $-0-
Vice President, Marketing
and Sales
Herman Bergman (8) 1995 $ 42,788 $ -0- $ -0- 14,000 $-0-
Acting Chief Financial
Officer and Secretary
William C. Black 1995 $127,191 $39,522(9) $ -0- 53,006(3) $-0-
Senior Vice President, 1994 $127,680 $ -0- $ -0- -0- $-0-
Business Development 1993 $127,680 $ -0- $ -0- 10,000 $-0-
D. Scott Buchanan 1995 $116,882 $ -0- $ -0- 98,709(3) $-0-
Vice President, Product 1994 $117,777 $ -0- $ -0- -0- $-0-
Operations 1993 $107,775 $ -0- $ -0- 30,000 $-0-
</TABLE>
- -------------------
(1) Mr. Schumacher was elected Chairman and Director of the Company on June 20,
1993 and subsequently became President and Chief Executive Officer
effective July 14, 1993.
(2) "Other Annual Compensation" for Mr. Schumacher in fiscal 1995 consists of a
cost of living adjustment consistent with the terms of his employment
agreement.
(3) A portion of these options were granted on December 1, 1994 pursuant to an
option cancellation/regrant program for all full-time employees of the
Company. Under the program, each named officer exchanged outstanding
options with exercise prices in excess of $1.35 for an equal number of new
options with an exercise price of $1.00, the approximate fair market value
of the Common Stock on the date of the new grant. The shares granted on
December 1, 1994 vest over four years based on a formula using the number
of previously vested options that were cancelled and the optionee's
completion of service over the four year vesting period measured from the
date of the new grant.
-11-
<PAGE>
Options granted under the cancellation/regrant program were as follows:
Mr. Schumacher - 600,000 options, Dr. Black - 31,250 options and Dr.
Buchanan - 71,667 options.
(4) "Other Annual Compensation" for Mr. Schumacher in fiscal 1993 and 1994
consists of relocation expense payments made by the Company on his behalf.
(5) Excludes non-qualified options for 106,664 shares which were granted in
connection with Mr. Schumacher's election as Chairman and Director in June
1993 and which were subsequently cancelled and replaced with incentive
stock options in August 1993.
(6) Mr. Aboudara joined the Company on January 9, 1995 at an annual salary of
$115,000.
(7) "Other Annual Compensation" for Mr. Aboudara in fiscal 1995 consists of
relocation expense payments made by the Company on his behalf.
(8) Mr. Bergman joined the Company on May 30, 1995 at an annual salary of
$125,000 after serving as a consultant to the Company since 1994.
(9) "Bonus" for Dr. Black in fiscal 1995 represents a payment earned under an
incentive bonus program.
-12-
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1987 Stock Option Plan to the Named Officers in the
last fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term(1)
- ----------------------------------------------------------------------------- ----------------------------
% of
Total
Options/
SARs
Options/ Granted to Exercise
SARs Employees or
Granted in Fiscal Base Price Expiration
Name (#) (2) Year ($/Sh) (3) Date (4) 5% ($) 10% ($)
- -------------------- ------- ---------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
James V. 600,000(5) 37.4% $1.00 12-1-04 $377,334 $956,244
Schumacher
Bruce S. Aboudara 100,000 6.2% $1.00 12-1-04 $ 62,889 $159,374
Herman Bergman 4,000 0.2% $1.00 12-1-04 $ 2,516 $ 6,375
10,000 0.6% $1.00 12-24-99 $ 6,289 $ 15,937
William C. Black 53,000(5) 3.3% $1.00 12-1-04 $ 33,331 $ 84,468
D. Scott Buchanan 98,709(5) 6.1% $1.00 12-1-04 $ 62,077 $157,316
</TABLE>
__________________
(1) There is no assurance provided to any executive officer or any other holder
of the Company's securities that the actual stock price appreciation over
the 10-year option term will be at the assumed five percent and 10 percent
levels or at any other defined level. Unless the market price of the
Common Stock does in fact appreciate over the option term, no value will be
realized from the option grants made to the Named Officers.
(2) Options granted in fiscal 1995 vest ratably on an annual basis over a four-
year period commencing on the date of grant. The grant dates for the
options listed in the above table are as follows:
<TABLE>
<CAPTION>
Options/SARs
Name Granted (#) Grant Date
- ---------------------- ------------ ----------
<S> <C> <C>
James V. Schumacher 600,000 12-1-94
Bruce S. Aboudara 100,000 12-1-94
Herman Bergman 4,000 12-1-94
10,000 5-30-95
William C. Black 53,000 12-1-94
D. Scott Buchanan 98,709 12-1-04
</TABLE>
-13-
<PAGE>
(3) The exercise price per share on the date of grant represents 100% of the
fair market value of the underlying shares at that date.
(4) The options have a term of 10 years, subject to earlier termination based
on certain events related to termination of employment.
(5) A portion of these options were granted on December 1, 1994 pursuant to an
option cancellation/regrant program for all full-time employees of the
Company. Under the program, each named officer exchanged outstanding
options with exercise prices in excess of $1.35 for an equal number of new
options with an exercise price of $1.00, the approximate fair market value
of the Common Stock on the date of the new grant. The shares granted on
December 1, 1994 vest over four years based on a formula using the number
of previously vested options that were cancelled and the optionee's
completion of service over the four year vesting period measured from the
date of the new grant. Options granted under the cancellation/regrant
program were as follows: Mr. Schumacher - 600,000 options, Dr. Black -
31,250 options and Dr. Buchanan - 71,667 options.
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<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information, with respect to the Named
Officers, concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year. No shares were
acquired on exercise of options by the Named Officers during the fiscal year
ended September 30, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Shares in-the-
Acquired on Value Realized Number of Unexercised Money Options/SARs at
Name Exercise (#) ($) Options/SARs at FY-End(#) FY-End ($)(1)
- --------------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James V. Schumacher -0- $-0- 50,000 550,000 $43,750 $481,250
Bruce S. Aboudara -0- $-0- -0- 100,000 $ -0- $ 87,500
Herman Bergman -0- $-0- -0- 14,000 $ -0- $ 12,250
William C. Black -0- $-0- 28,146 46,854 $20,228 $ 40,997
D. Scott Buchanan -0- $-0- 13,513 86,487 $11,566 $ 75,676
</TABLE>
_______________
(1) Calculated on the basis of the fair market value of the underlying
securities at September 30, 1995 ($1.875) minus the exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 1995, R. Scott Asen and Jerry C. Benjamin served as non-employee
members of the Company's Compensation Committee.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
The Company entered into an employment agreement with James V. Schumacher,
effective June 1993, pursuant to which the Company agreed to employ Mr.
Schumacher as President and Chief Executive Officer. The employment term is
automatically renewed annually unless terminated by either party or by Mr.
Schumacher's death or disability. During the employment term, Mr. Schumacher is
entitled to receive a minimum annual base salary of $250,000, subject to
adjustment at the Compensation Committee's discretion. In addition, Mr.
Schumacher will receive an annual bonus of $50,000 based on performance targets
mutually agreed upon by Mr. Schumacher and the Compensation Committee. During
the employment term, Mr. Schumacher is entitled to an annual physical, a term
life insurance policy with a benefit of $500,000 and long-term disability
benefit coverage. Mr. Schumacher has also received payments for certain moving
and relocation expenses in connection with his employment by the Company.
Finally, the Company will pay an amount up to $600,000 to Mr. Schumacher no
later than June 18, 1997, the final amount to be determined by subtracting from
$600,000 the appreciation in value of the Company's common stock underlying
certain options granted to Mr. Schumacher in June and August 1993 and
subsequently regranted in December 1994. In the event of termination of Mr.
Schumacher's employment by the Company other than for cause or permanent
disability, the Company also will be obligated to pay two years' base salary and
benefits. Finally, under the terms of Mr. Schumacher's employment agreement, if
the Company adversely changes Mr. Schumacher's duties and responsibilities,
requires Mr. Schumacher to be based outside San Diego, California, reduces Mr.
Schumacher's base salary, bonus or other benefits or declares bankruptcy, Mr.
Schumacher is entitled to terminate the agreement and the Company
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<PAGE>
will be obligated to pay two years' base salary and benefits. A trust has been
established to ensure the payment of the amount up to $600,000 as well as
payments of two years' base salary and benefits to Mr. Schumacher; in the event
that no payments or reduced payments are required to be made under the terms of
the trust, any remaining funds will be returned to the Company.
In April 1990, the Company established a special incentive bonus program
for the benefit of William C. Black, Jr. pursuant to which Dr. Black received a
bonus of one-half of one percent of the net order value of all Magnes(R) systems
accepted and booked by the Company between April 1, 1990 and March 31, 1991 and
subsequently extended through March 1993. Payments under the bonus program are
based upon cash received from customers on such Magnes orders. Dr. Black
received $10,830 pursuant to this program in fiscal 1991, $9,329 in fiscal 1992,
no payments in fiscal 1993 or fiscal 1994 and $39,522 in fiscal 1995.
The following Compensation Committee Report and Performance Graph should
not be considered to be part of this proxy statement and any current or future
cross-references to this proxy statement and filings with the Securities and
Exchange Commission under either the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, shall not include the Board
Compensation Committee Report on Executive Compensation or the Performance Graph
reproduced below.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY. The Compensation Committee of the Board of
Directors (the "Committee") is responsible for developing and making
recommendations to the Board with respect to the Company's executive
compensation policies. In addition, the Committee, pursuant to authority
delegated by the Board, determines on an annual basis the compensation to be
paid to the Company's Chief Executive Officer and each of the other executive
officers of the Company.
The Committee has adopted the following objectives as guidelines for its
compensation decisions:
. Provide a competitive total compensation package that enables the
Company to attract and retain key executives.
. Integrate all compensation programs with the Company's short-term and
long-term business objectives and strategic goals.
. Ensure that compensation is meaningfully related to the value created
for shareholders.
EXECUTIVE OFFICER COMPENSATION PROGRAM COMPONENTS. The Committee reviews
the Company's compensation program to ensure that salary levels and incentive
opportunities are competitive and reflect the performance of the Company. The
Company's compensation program for executive officers consists of base salary,
annual cash incentive compensation and long-term compensation in the form of
stock options. In addition, certain executive officers may also be provided
supplemental long-term disability insurance.
BASE SALARY. Base salary levels for the Company's executive officers are
determined, in part, through comparisons with companies in the medical device
industry and other companies with which the Company competes for personnel. In
addition, the Committee also evaluates individual experience and performance and
specific issues particular to the Company, such as success in raising capital,
creation of shareholder value and achievement of specific Company milestones.
The Committee reviews each executive's salary once a year and may increase each
executive's salary at that time based on: (i) the individual's increased
contribution to the Company over the prior 12 months; (ii) the individual's
increased responsibilities over the prior 12 months; and (iii) any increase in
median competitive pay levels. Individual contributions are measured with
respect to specific individual accomplishments established for each executive.
ANNUAL INCENTIVE COMPENSATION. The Company's officers are eligible to
receive annual cash incentive compensation at the time their base salaries are
reviewed based on achieving defined specific goals and objectives
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<PAGE>
during the 12 months prior to review. This compensation is intended to provide
a direct financial incentive in the form of an annual cash bonus to executives
who achieve the Company's defined specific goals. Individual contributions are
also considered in determining cash bonuses. Equal weight is given to
achievement of individual accomplishments and strategic corporate goals. Bonus
awards are set at a level competitive within the local medical device
manufacturing and high technology industry as well as among a broader group of
medical device manufacturing and high technology companies of comparable size
and complexity. Such companies are not necessarily included in the indices used
to compare shareholder returns in the Stock Performance Graph. Other than a
bonus awarded to Mr. Schumacher pursuant to his employment contract and a bonus
paid to Dr. Black under an incentive bonus program, no other cash bonuses were
offered to the Company's executive officers in the fiscal year ended September
30, 1995.
STOCK OPTION PROGRAM. The stock option program is the Company's long-term
incentive plan for executive officers and, to a lesser degree, all other
employees. The Committee strongly believes that by providing those persons who
have substantial responsibility for the management and growth of the Company
with an opportunity to increase their ownership of Company stock, the best
interests of shareholders and executives will be more closely aligned.
Generally, stock options are granted once every two years with exercise
prices equal to the prevailing market value of the Company's Common Stock on the
date of grant, have 10-year terms and have vesting periods of four years.
Awards are made at a level calculated to be competitive within both the local
biotechnology industry, and a broader group of biotechnology and medical device
manufacturing companies of comparable size and complexity.
CEO COMPENSATION. In June 1993, the Committee established the annual
salary, discretionary bonus and stock option award for Mr. Schumacher upon his
appointment as the Company's Chairman of the Board, President and Chief
Executive Officer and caused the Company to enter into an employment agreement
with Mr. Schumacher. In setting the compensation for Mr. Schumacher for fiscal
year 1995, the Committee sought to retain a key executive officer while
continuing to tie a significant percentage of such compensation to Company
performance and stock price appreciation. In fiscal 1995, the Committee
maintained the salary, bonus and option package for Mr. Schumacher which was
established in fiscal 1993 and approved a $24,000 cost of living adjustment for
fiscal 1995. The Committee believes the options granted to Mr. Schumacher in
fiscal 1993 and subsequently cancelled and regranted in fiscal 1995 in
accordance with a cancellation/regrant program provide for significant incentive
compensation through the potential appreciation in value of the Company's Common
Stock. With respect to Mr. Schumacher's base salary, it remains the Committee's
intent to provide him with a level of stability and certainty each year and not
have this particular component of compensation affected to any significant
degree by Company performance factors.
It is the Committee's objective to have an increasing percentage of Mr.
Schumacher's total compensation each year tied to the attainment of performance
targets and stock price appreciation of his option shares.
COMPENSATION COMMITTEE REPORT ON 1994 CANCELLATION AND REGRANT OF OPTIONS
During fiscal 1995 the Compensation Committee determined that factors
affecting the stock price of the Company had made it necessary for the Company
to implement a program to cancel and regrant certain options to purchase common
stock held by the Company's Executive Officers and all other employees. A
cancellation/regrant program was implemented, whereby certain outstanding
options were cancelled and new options for the same number of shares were
granted with a lower exercise price per share equal to the fair market price of
the Company's Common Stock on the regrant date.
The Compensation Committee determined that this program was necessary
because equity incentives are a significant component of the total compensation
of each employee and play a substantial role in the Company's ability to retain
the services of individuals essential to the Company's long-term financial
success. Prior to implementation of the program, the market price of the
Company's Common Stock had fallen as a result of market factors which affected
stock prices throughout the industry and which did not necessarily reflect the
-17-
<PAGE>
progress made by the Company in financing operations and product development.
The Compensation Committee felt that the Company's ability to retain key
employees would be significantly impaired, unless value was restored to reflect
their options in the form of regranted options for the Company's Common Stock at
the current market price. Option grants to non-employee directors were eligible
for participation in the cancellation/regrant program.
Accordingly, on December 1, 1994, the Compensation Committee approved the
cancellation and regrant of all outstanding options with an exercise price in
excess of $1.35 per share held by current employees and non-employee directors.
Each optionee holding such an option had the opportunity to i) elect to retain
the old option or ii) accept a new option with an exercise price of $1.00 per
share, the approximate fair market price of the Common Stock on that date, and
to cancel the older, higher-priced option. Each regranted option covered the
same number of shares subject to the higher-priced option at the time of
cancellation and will become exercisable over four years based on a formula
using the number of previously vested options that were cancelled and the
optionee's completion of service over the four year vesting period measured from
the date of the new grant.
The Compensation Committee believes the regranted options and new vesting
schedule strikes an appropriate balance between the interests of the option
holders and those of the stockholders. The lower exercise prices in effect
under the regranted options make those options valuable once again to the
executive officers and key employees critical to the Company's financial
performance. However, those individuals will enjoy the benefits of the
regranted options only if they remain in the Company's employ and contribute to
the Company's financial success.
SUMMARY
After its review of all existing programs, the Committee continues to
believe that the Company's compensation program for its executive officers is
competitive with the compensation programs provided by other companies with
which the Company competes. The Committee intends that any amounts to be paid
under the annual incentive plan will be appropriately related to corporate and
individual performance, yielding awards that are directly linked to the
achievement of Company goals and annual financial and operational results.
We conclude our report with the acknowledgement that no member of the
Compensation Committee is a former or current officer or employee of the Company
or any of its subsidiaries.
COMPENSATION COMMITTEE
R. Scott Asen
Jerry C. Benjamin
-18-
<PAGE>
TEN YEAR INFORMATION REGARDING REPRICING, CANCELLATION AND REGRANT OF OPTIONS
As discussed in the Compensation Committee Report on Executive
Compensation, the Company implemented an option cancellation/regrant program for
executive officers, all other employees and non-employee directors holding stock
options with an exercise price per share in excess of $1.35. The
cancellation/regrant was effected December 1, 1994 and each option held by those
individuals with an exercise price in excess of $1.35, at such individual's
option, was cancelled in exchange for a new option for the same number of shares
with an exercise price of $1.00 per share.
The table below sets forth i) information with respect to each of the
Company's executive officers concerning his participation in the option
cancellation/regrant program which was effected December 1, 1994 and ii)
information with respect to all former or current executive officers of the
Company concerning their participation in other option repricing programs
implemented by the Company during the last ten fiscal years.
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price Option Term
Underlying of Stock at Exercise Price Remaining at
Options/SARs Time of at Time of New Date of
Name and Repriced or Repricing or Repricing or Exercise Repricing or
Principal Position Date Amended Amendment Amendment Price Amendment
- ------------------------------------- ------- ------------ ------------ -------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
James V. Schumacher 12/1/94 493,336 1.03 4.00 1.00 8.6
Chairman, CEO and President 12/1/94 106,664 1.03 3.75 1.00 8.7
William C. Black, Jr. 12/1/94 10,000 1.03 5.25 1.00 6.2
Senior Vice President, Business 12/1/94 11,250 1.03 6.75 1.00 6.7
Development 12/1/94 10,000 1.03 6.00 1.00 8.3
D. Scott Buchanan 12/1/94 1,667 1.03 1.50 1.00 4.0
Vice President, Product Operations 12/1/94 5,000 1.03 5.25 1.00 5.3
12/1/94 5,000 1.03 5.25 1.00 6.2
12/1/94 15,000 1.03 6.75 1.00 6.7
12/1/94 15,000 1.03 9.00 1.00 7.1
12/1/94 30,000 1.03 6.00 1.00 8.3
2/7/91 5,000 5.25 6.00 5.25 9.1
</TABLE>
PERFORMANCE GRAPH
The following graph compares total shareholder returns over the last five
fiscal years to the weighted average return of stocks of companies included in
the Nasdaq Composite Index and a peer group index consisting of the Medical
Instrument and Supplier Manufacturers Index. The total return for each of the
Company's Common Stock, the Nasdaq Composite Index and the Medical Instrument
and Supplier Manufacturers Index assumes the reinvestment of dividends, although
dividends have not been declared on the Company's Common Stock. The Nasdaq
Composite Index tracks the aggregate price performance of equity securities of
companies traded on the Nasdaq. The Company's Common Stock is traded on the
Nasdaq National Market System. The Medical Instrument and Supplier
Manufacturers Index consists of companies with a Standard Industrial
Classification Code identifying them as a manufacturer of medical instruments or
supplies. The shareholder return shown on the graph below is not necessarily
indicative of future performance and the Company will not make or endorse any
predictions as to future shareholder returns.
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<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG BTI, NASDAQ AND PEER GROUP
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) BTI NASDAQ Peer Group
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- $100 $100 $100
FYE 9/30/91 $159 $134 $170
FYE 9/30/92 $188 $132 $170
FYE 9/30/93 $ 61 $172 $136
FYE 9/30/94 $ 29 $182 $154
FYE 9/30/95 $ 37 $221 $245
</TABLE>
DIRECTOR COMPENSATION
Directors are reimbursed for their out-of-pocket expenses incurred in
attending meetings of the Board of Directors and its committees. The Company
does not presently pay fees to its Directors for their participation as a member
of the Board of Directors.
Each non-employee Board Member is eligible to receive grants of a non-
qualified stock option to purchase shares of Common Stock of the Company.
Certain options have previously been granted to directors which are now
exercisable or exercisable within 60 days. See "Security Ownership of
Management."
On October 1, 1995 the Company entered into agreements with Alfred LeBlang
and Michael Faherty, former directors of the Company. The agreements provide
for general business consulting services to the Company as requested by the
President at established rates plus reasonable out-of-pocket expenses. The
consulting agreements expire on September 30, 2000, unless terminated earlier by
the Company or the consultants.
In May 1995, the Company contracted with Mr. LeBlang to render 20 days of
marketing and sales services over a period of five months ending September 30,
1995. As compensation for such services Mr. LeBlang received a total fee of
$1,000 plus out-of-pocket expenses and a stock option to purchase 20,000 shares
of common stock at $1.00.
-20-
<PAGE>
CERTAIN TRANSACTIONS
In March 1995, the Company completed the sale of 25,000,000 shares of
Common Stock of the Company to Dassesta International S.A. ("Dassesta"), a
foreign investment group, for $15,000,000. Dassesta had previously provided a
short-term loan of $1.5 million which was repaid at the closing of the
transaction. In connection with the Dassesta financing the Company repaid
$500,000 of other short-term debt and executed agreements with the holders of
$2.21 million of short-term notes providing for the extinguishment of the note
principle plus accrued interest in exchange for the issuance of 4.9 million
shares of Common Stock plus options to purchase an additional 486,220 shares of
Common Stock. See discussion below and "Principal Shareholders."
In May and June 1994, the Company consummated a private placement of units
(the "Bridge Unit Financing") in the aggregate principal amount of $2,710,000.
Each unit (the "Bridge Unit") consisted of $100,000 principal amount 10% Senior
Secured Promissory Note (the "Bridge Notes") and a purchase option to purchase
20,000 units (the "Bridge Unit Purchase Options"), each consisting of either (i)
units issued in a proposed public offering each comprised of the right to
purchase one share of Common Stock, one Class A Redeemable Common Stock Purchase
Warrant and one Class B Redeemable Common Stock Purchase Warrant or (ii) the
equity security offered by the Company in its next round of financing (if such
round of financing occurs prior to the proposed public offering of the Company's
equity securities) (the "Alternative Financing"). Certain directors and certain
shareholders of the Company affiliated with such directors participated in the
Bridge Unit Financing. The aggregate principal amount of Bridge Notes issued to
each of them are as follows: Michael Faherty, $50,000; and Advent First Limited
Partnership, $500,000 (Jerry C. Benjamin, a director of the Company, is a
director of Advent Limited, the managing partner of Advent First Limited
Partnership). In addition, $530,000 of Bridge Financing Notes issued in May,
1994, including the Bridge Financing Notes held by a certain director and
shareholders of the Company affiliated with such director (R. Scott Asen,
$100,000; Pioneer II, $100,000; and Pioneer IV, $100,00) were converted into
Bridge Units on a dollar for dollar basis. The Bridge Notes accrue interest at
10% per annum and mature on the earlier of the closing of the Company's proposed
public offering or May 31, 1995. At the closing of the Company's proposed
public offering the principal balance of any outstanding Bridge Notes may be
converted, at the option of the holder, into the units sold to the public in
such offering. As part of the Bridge Unit Financing, the Company granted a
security interest in substantially all the assets of the Company to the Bridge
Note holders pursuant to a series of Security Agreements dated May 31, 1994 and
June 15, 1994 (collectively, the "Security Agreement").
The Bridge Unit Purchase Options are exercisable beginning on the earlier
of the closing of the Company's proposed public offering or the closing of the
Alternative Financing and for a period of five years thereafter. The exercise
price and the number of units issuable upon exercise of the Bridge Unit Purchase
Options are subject to proportional adjustment in the event of stock splits,
stock dividends and similar events. The securities underlying the units
issuable upon exercise of the Bridge Unit Purchase Options are also subject to
proportional adjustment according to the terms of those securities.
In October 1994, the Company and more than a majority of the Bridge Note
holders entered into an amendment to the Security Agreement (the "Amendment").
The Amendment provides for the subordination of the Bridge Note holders'
security interests to certain third-party lenders for the purpose of securing a
loan to allow the Company to complete the manufacture of Magnes(R) systems on
order by customers. Certain directors and certain shareholders of the Company
affiliated with such directors, including R. Scot Asen, Pioneer III, Pioneer IV,
Michael Faherty and Advent First Limited Partnership provided their consent to
the amendment of the Security Agreement.
In March and April 1995, the Company entered into definitive agreements
with certain of the Bridge Note holders providing for the conversion of the
principal plus accrued interest of the Bridge Notes to Common Stock of the
Company in connection with the completion of the sale of Common Stock to
Dassesta. These agreements replaced non-binding term sheets negotiated with
certain Bridge Note holders in November 1994 regarding the proposed conversion
of Bridge Notes. The agreements provided for (i) a 10% increase in the
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<PAGE>
principal balance of the Bridge Notes for purposes of conversion to Common
Stock, (ii) issuance of Common Stock at a price per share utilized in the
Dassesta financing less 10% and (ii) a 10% increase in the number of shares of
Common Stock subject to purchase under the Bridge Unit Purchase Options. In
April 1995, the Company issued 4,882,477 shares of Common Stock in connection
with the conversion agreements and repaid $500,000 of principal plus accrued
interest to certain Bridge Note holders electing not to convert their Bridge
Notes to Common Stock.
Certain Directors and shareholders of the Company affiliated with such
directors participated in the conversion of Bridge Notes to Common Stock of the
Company, received revised Bridge Unit Purchase Options as part of the conversion
agreement and purchased certain Bridge Notes and Bridge Unit Purchase Options
from other participants in the Bridge Unit Financing. The aggregate number of
shares of Common Stock issued in connection with the conversion agreement and
the shares issuable upon exercise of the Bridge Unit Purchase Options,
respectively, are as follows: R. Scott Asen 287,460 shares issued, 28,600
purchase options, Pioneer III 221,463 shares issued, 22,000 purchase options,
Pioneer IV 221,463 shares issued, 22,000 purchase options, Michael Faherty
109,615 shares issued, 11,000 purchase options, Advent First Limited
Partnerships 2,084,211 shares issued, 209,000 purchase options.
The Company will not extend or guarantee loans to officers, directors or
affiliates of the Company unless such loans are approved by a majority of the
disinterested, outside directors of the Company and may reasonably be expected
to benefit the Company. As of September 30, 1995, there were no outstanding
loans or loan guarantees to Company officers, directors or affiliates. In
addition, all future transactions between the Company and its officers,
directors or principal shareholders will be on terms no less favorable to the
Company than could be obtained from unaffiliated parties, as determined by a
majority of the Company's disinterested directors.
See "Executive Compensation and Other Information--Employment Contracts and
Change of Control Arrangements" for discussion of employment arrangements with
certain current officers and directors of the Company.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10 percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the SEC and the Nasdaq. Officers, directors and
greater than 10 percent shareholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that, during the period from October 1, 1994 through September 30,
1995, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10 percent beneficial owners were complied with
except for the late filing in January 1995 by Mr. Schumacher, Dr. Black, Dr.
Buchanan, Mr. Benjamin, Mr. Faherty, Mr. Knudson, and Mr. LeBlang with respect
to the following transaction which should have been reported in December 1994:
Form 5 Annual Statement of Changes in Beneficial Ownership with respect to the
derivative securities required under options granted in December 1994.
SHAREHOLDER PROPOSALS FOR 1996 PROXY STATEMENT
Under the present rules of the Securities and Exchange Commission (the
"Commission"), the deadline for shareholders to submit proposals to be
considered for inclusion in the Company's Proxy Statement for next year's Annual
Meeting of Shareholders is expected to be October 1, 1996. Such proposals may
be included in next year's Proxy Statement if they comply with certain rules and
regulations promulgated by the Commission.
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<PAGE>
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND
LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO BIOMAGNETIC TECHNOLOGIES, INC.,
9727 PACIFIC HEIGHTS BOULEVARD, SAN DIEGO, CALIFORNIA 92121.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the meeting other than the matters set forth in this Proxy Statement.
Should any other matter requiring a vote of the shareholders arise, the persons
named as proxies on the enclosed proxy card will vote the shares represented
thereby in accordance with their best judgment in the interest of the Company.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed proxy card.
By Order of the Board of Directors
Dated: February 7, 1996 Herman Bergman, Acting Secretary
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