<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, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
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:
------------------------------------------------------------------------
<PAGE>
BIOMAGNETIC TECHNOLOGIES, INC.
9727 PACIFIC HEIGHTS BOULEVARD
SAN DIEGO, CALIFORNIA 92121
FEBRUARY 17, 1998
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 Tuesday, March 18, 1998
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,
D. Scott Buchanan
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 17, 1998
------------------------
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 Wednesday, March 18, 1998 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: D. Scott
Buchanan, Martin P. Egli, Enrique Maso, Herman Bergman and Rodolfo
Llinas.
2. To ratify the selection of Arthur Andersen LLP as independent
accountants for the fiscal year ending September 30, 1998.
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 February 16, 1998 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 17, 1998. 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 17, 1997 Herman Bergman, SECRETARY
<PAGE>
BIOMAGNETIC TECHNOLOGIES, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 18, 1997
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, 1998
(referred to herein as the "Annual Meeting" or the "Meeting") and at any
adjournment or postponement of the Annual Meeting. These proxy materials were
first mailed to shareholders of record beginning on approximately February 17,
1998.
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 February 16, 1998. As
of January 16, 1998, the Company had approximately 53,344,123 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
1
<PAGE>
does not give specific instructions regarding the treatment of abstentions and
broker nonvotes for companies such as BTI; however, 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.
PROPOSAL I
ELECTION OF DIRECTORS
A board of five directors is to be elected at the Meeting to hold office
until the next annual meeting or until their successors are elected. Each
returned proxy cannot be voted for a greater number of persons than the number
of nominees named (five). Unless individual shareholders specify otherwise, each
returned proxy will be voted for the election of the five nominees who are
listed herein, or for as many nominees of the Board of Directors as possible,
not to exceed five, such votes to be distributed among such nominees in the
manner as the persons named in the enclosed proxy card see fit. Mr. Benjamin and
Mr. Schumacher are not standing for re-election.
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>
D. Scott Buchanan(3)(4)................. 1997 President and Chief Executive Officer, Biomagnetic 39
Technologies, Inc.
Martin P. Egli (1)(2)(3)................ 1995 Senior Partner, Swisspartners S.P. Investment Network 45
LTD.
Enrique Maso (2)(3)..................... 1995 Private Investor 72
Herman Bergman.......................... -- Vice President Finance, Chief Financial Officer & 71
Secretary, Biomagnetic Technologies, Inc.
Rodolfo Llinas.......................... -- Professor of Neuroscience and Chair of the Department 63
of Physiology and Neuroscience at New York
University School of Medicine
</TABLE>
- ------------------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Member of Administrative Committee of the Purchase Plan.
(4) Dr. Buchanan also serves as a non-voting advisor to the Compensation
Committee.
2
<PAGE>
BUSINESS EXPERIENCE OF DIRECTORS
MR. EGLI has served since 1993 as a partner and principal of Swisspartners
S.P. Investment Network LTD., a company which provides investment management,
corporate finance and trust services, and which owns 100% of the capital stock
of Dassesta International S.A. ("Dassesta"). 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.
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 Engineering Management from New York University and a
doctorate in Engineering from the Politechnic College of Barcelona.
DR. BUCHANAN joined the Company in 1986, served as Vice President, Product
Operations from February 1992 through December 1996 and has served as President
since December 1996. 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.
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. He was appointed Vice President-- Finance, Chief Financial
Officer and Secretary of the Company in May, 1996. 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 public
company and served as Treasurer and Finance Manager of the Military Business
Division of Siliconix Inc., a public company, from 1988 to 1991. Mr. Bergman
received his B.S. in Mathematics at Antioch College in Ohio and did his graduate
work in Industrial Organization in Management at Ohio State University.
PROFESSOR RODOLFO LLINAS, M.D., PH.D. is the Thomas and Suzanne Murphy
Professor of Neuroscience and Chair of the Department of Physiology and
Neuroscience at New York University School of Medicine. He is a Member of the
National Academy of Sciences (USA), the Academy of Arts and Sciences and the
American Philosophical Society. Since 1991, Professor Llinas has served as
Advisor to the NASA Neurolab Project, is a Member of the Advisory Council of the
National Deafness and Other Communication Disorder of the National Institute of
Health and served on the Board of Trustees of the Marine Biological Laboratory.
Professor Llinas has contributed over 500 publications to brain research, has
been awarded five honorary degrees and is the recipient of numerous honors.
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors held 5 meetings during the fiscal year
ended September 30, 1997, 1 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.
The Company has a standing Compensation Committee which was composed of
Directors R. Scott Asen and Jerry C. Benjamin as of September 30, 1997. The
current Compensation Committee consists of Martin P. Egli and Jerry C. Benjamin.
Director D. Scott Buchanan 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 had 9 telephonic meetings during the fiscal
year ended September 30, 1997.
The Company has a standing Audit Committee which was composed of Directors
R. Scott Asen and Martin P. Egli as of September 30, 1997. The current Audit
Committe consists of Enrique Maso and Martin P. Egli. The Audit Committee
assists in selecting the independent auditors, in designating services
3
<PAGE>
they are to perform and in maintaining effective communication with those
auditors. The Audit Committee met one time during the fiscal year ended
September 30, 1997.
The Company has a standing Administrative Committee (the "Administrative
Committee") of the Company's 1992 Employee Stock Purchase Plan, (the "Purchase
Plan"), which as of September 30, 1997 was composed of Directors R. Scott Asen,
Jerry C. Benjamin and James V. Schumacher. The current Administrative Committee
consists of D. Scott Buchanan, Enrique Maso and Martin P. Egli. The
Administrative Committee has full authority to administer the Purchase Plan.
There were no meetings of the Administrative Committee during the fiscal year
ended September 30, 1997.
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.
PROPOSAL 2
APPROVAL OF
SELECTION OF INDEPENDENT ACCOUNTANTS
Effective September 24, 1997, the Company retained Arthur Andersen LLP as
its independent certifying accountant, replacing Price Waterhouse LLP ("Price
Waterhouse"), its prior independent certifying accountant, as of the same date.
The change in independent certifying accountant was approved by the Board of
Directors.
The reports of Price Waterhouse with respect to the Company for fiscal year
1995 and 1996 contained no adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or application of
accounting principles, except that Price Waterhouse's report for fiscal 1996
included an explanatory paragraph regarding the Company's ability to continue as
a going concern. During the fiscal years 1995 and 1996 and the subsequent period
thereto prior to the replacement of Price Waterhouse, there were no
disagreements between the Company and Price Waterhouse on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope of procedure, which disagreements if not resolved to the satisfaction of
Price Waterhouse would have caused them to make reference thereto in their
report on the financial statements for such years, nor were there any
"reportable events" as defined by the Securities and Exchange Commission.
During fiscal years 1995 and 1996 and the subsequent period thereto prior to
engaging Arthur Anderson LLP, the Company had no discussions with Arthur
Andersen LLP regarding either the application of an accounting principle, the
type of opinion that would be rendered in the Company's financial statements or
any disagreements or reportable events.
On the recommendation of the Company's management, the Board of Directors
has selected Arthur Andersen LLP to act in the capacity of independent
accountants for the current fiscal year. Ratification and approval by the
shareholders will be sought by the Board of Directors for the selection of
Arthur Andersen LLP as independent accountants to audit the accounts and records
of the Company for the fiscal year ending September 30, 1998, 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 Arthur
Andersen LLP, the Board of Directors will reconsider such selection.
A representative of Arthur Andersen 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 ARTHUR ANDERSEN AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR
FISCAL 1998.
4
<PAGE>
PRINCIPAL SHAREHOLDERS
The following are the only persons known by the Company to own beneficially,
as of January 16, 1998, 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>
Enrique Maso....................................................................... 25,000,000 46.8%
Europa Residence
Place des Moulins
98 000 Montecarlo
Monaco
Dassesta International S.A......................................................... 11,817,602 22.1%
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).
5
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
the Company as of January 16, 1998 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>
Jerry C. Benjamin (3)............................................... 100,000 *
Herman Bergman (4).................................................. 470,041 *
D. Scott Buchanan (5)............................................... 533,584 *
Martin P. Egli (6).................................................. 11,817,602 22.1%
Eugene Hirschkoff (7)............................................... 198,175 *
Enrique Maso........................................................ 25,000,000 46.8%
James V. Schumacher (8)............................................. 935,500 1.7%
Kenneth Squires (9)................................................. 173,787 *
All directors and executive officers as a group (10)................ 41,792,170 74.7%
</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) 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.
(4) Shares beneficially owned include options to purchase 425,041 shares of
Common Stock held by Mr. Bergman which are now exercisable or exercisable
within 60 days of January 16, 1998.
(5) Shares beneficially owned include options to purchase 500,792 shares of
Common Stock held by Dr. Buchanan which are now exercisable or exercisable
within 60 days of January 16, 1998.
(6) Consists of 11,717,602 shares owned by Dassesta. Mr. Egli is a Senior
Partner of Swisspartners S.P. Investment Network LTD., which owns 100% of
the capital stock of Dassesta.
(7) Shares beneficially owned include options to purchase 160,833 shares of
Common Stock held by Dr. Hirschkoff which are now exercisable or exercisable
within 60 days of January 16, 1998.
(8) Shares beneficially owned includes options to purchase 900,000 shares of
Common Stock held by Mr. Schumacher which are now exercisable or exercisable
within 60 days of January 16, 1998.
(9) Shares beneficially owned includes options to purchase 146,233 shares of
Common Stock held by Dr. Squires which are now exercisable or exercisable
within 60 days of January 16, 1998.
(10) Shares beneficially owned include all shares held by entities affiliated
with certain directors as described in the footnotes above and include
options to purchase 2,541,899 shares of Common Stock held by all directors
and executive officers as a group which are now exercisable or exercisable
within 60 days of January 16, 1998.
6
<PAGE>
MANAGEMENT
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- -------------------------------------------------------------
<S> <C> <C>
D. Scott Buchanan...................... 39 President and Chief Executive Officer
Herman Bergman......................... 71 Vice President Finance, Chief Financial Officer and Secretary
Kenneth Squires........................ 54 Vice President, Marketing
Eugene Hirschkoff...................... 56 Vice President, Engineering
</TABLE>
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
DR. BUCHANAN joined the Company in 1986, served as Vice President, Product
Operations from February 1992 through December 1996 and has served as President
since December 1996. 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.
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. He was appointed Vice President-- Finance, Chief Financial
Officer and Secretary of the Company in May, 1996. 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 public
company and served as Treasurer and Finance Manager of the Military Business
Division of Siliconix Inc., a public company, from 1988 to 1991. Mr. Bergman
received his B.S. in Mathematics at Antioch College in Ohio and did his graduate
work in Industrial Organization in Management at Ohio State University.
DR. SQUIRES joined the Company in September 1988. Since that time he has
held various positions as Director of Clinical Applications and Director of
Neuroscience Applications--Marketing and was appointed Vice President of
Marketing in December, 1996. Dr. Squires received his B.S. and M.S. degrees in
Aeronautical engineering at the Unviersity of Minnesota and his Ph.D. in
Experimental Psychology from the University of California, San Diego.
DR. HIRSCHKOFF joined the Company in 1971, and has served in many capacities
in engineering, technology development and manufacturing. From 1990 through
1996, he served as Director of Clinical Applications, managing the Company's
research and development programs with its collaboration partners at the Scripps
Clinic and Research Foundation and the University of California at San Francisco
among others. Dr. Hirschkoff is responsible for the Company's FDA compliance
programs. In December, 1997 he was appointed Vice President, Engineering. Dr.
Hirschkoff received his B.A. in Physics and Mathematics at Reed College in
Oregon; M.A. in Physics at Harvard University; Ph.D in Physics from the
University of California, San Diego; MBA from the State University of
California, San Diego and his J.D. from the University of San Diego.
7
<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 Executive 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, 1995, 1996 and 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------
ANNUAL COMPENSATION
-------------------------------------------- AWARDS ALL OTHER
OTHER ANNUAL ---------------- COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS/SARS (#) ($)
- -------------------------------- ---- ----------- ----------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James V. Schumacher (1)......... 1997 $ 126,385 $ 12,500(1) 0 $ 913,092
Former President, 1996 $ 264,899 $50,000 $ 24,000(1) 900,000(2) $ -0-
Chief Executive Officer 1995 $ 250,000 $50,000 $ 24,000(1) 600,000(3) $ -0-
D. Scott Buchanan............... 1997 $ 163,273 $ -0- $ -0- 150,000 $ -0-
President, Chief Executive 1996 $ 127,368 $ -0- $ -0- 200,000 $ -0-
Officer 1995 $ 116,882 $ -0- $ -0- 98,709(3) $ -0-
Herman Bergman.................. 1997 $ 125,481 $ -0- $ -0- 310,000 $ -0-
Vice President of Finance, 1996 $ 125,481 $ -0- $ -0- 75,000 $ -0-
Chief Financial Officer and 1995 $ 42,788 $ -0- $ -0- 14,000 $ -0-
Secretary
William C. Black................ 1997 $ 127,680 $ -0- $ -0- $ -0- $ -0-
Former Senior Vice 1996 $ 127,680 $15,000 $ -0- 150,000 $ -0-
President, Business 1995 $ 127,191 $39,522 $ -0- 53,006(3) $ -0-
Development
Eugene Hirschkoff (4)........... 1997 $ 115,991 $ 2,500 -0- 80,000 $ 1,500
Vice President 1996 $ 113,854 -0- -0- 25,000 -0-
Engineering 1995 $ 110,849 -0- -0- 35,000 -0-
Kenneth Squires (5)............. 1997 $ 99,730 $ 7,200 -0- 80,000 -0-
Vice President 1996 $ 94,984 $ 4,000 -0- 25,400 -0-
Marketing 1995 $ 93,340 $16,171 -0- 20,000 -0-
</TABLE>
- --------------------------
(1) Mr. Schumacher resigned as Chief Executive Officer of the Company in March
of 1997. The 1997 fiscal year salary shown was paid to him between October
1, 1996 through the term of his employment. "Other Annual Compensation"
consists of a cost of living adjustment consistent with the terms of his
employment agreement. "All Other Compensation" for Mr. Schumacher consists
of cash compensation and stock option guarantees consistent with the terms
of his employment contract and a payment for accrued vacation and sick
leave, as per company policy. See "Employment Contracts and Change of
Control Arrangements."
(2) Mr. Schumacher returned for cancellation 600,000 of the 900,000 options in
January 1997.
(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 $1.00, the approximate fair market value of the
Common Stock on the date of the new grant. The shares granted on December 1,
1994 vest over four years based on a formula using the number of previously
vested options that were cancelled and the optionee's completion of service
over the four year vesting period measured from the date of the new grant.
Options granted under the cancellation/regrant program were as follows: Mr.
Schumacher-- 600,000 options, Dr. Black--31,250 options and Dr.
Buchanan--71,667 options.
(4) "Bonus" for Dr. Hirschkoff represents a payment earned under an incentive
bonus program. "All Other Compensation" represents educational
reimbursements.
(5) "Bonus" for Dr. Squires represents a payment earned under an incentive bonus
program.
8
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1987 Stock Option Plan to the Named Executive
Officers in fiscal 1997:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ------------------------------------------------------------------------------------------ ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS/SARS APPRECIATION FOR
OPTIONS/SARS GRANTED TO EXERCISE OR OPTION TERM (1)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME (#) (2) FISCAL YEAR ($/SH) (3) DATE (4) 5% ($) 10% ($)
- -------------------------------- ------------- --------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
D. Scott Buchanan............... 150,000 9.9% $ .50 12-23-06 $ 47,167 $ 119,530
Herman Bergman.................. 310,000 20.4% $ .50 12-23-06 $ 97,479 $ 247,030
Eugene Hirschkoff............... 80,000 5.3% $ .50 12-23-06 $ 25,156 $ 63,750
Kenneth Squires................. 80,000 5.3% $ .50 12-23-06 $ 25,156 $ 63,750
</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 Executive Officers.
(2) Options granted in fiscal 1997 were issued with vesting on an annual basis
over a two to four-year period commencing on the date of grant. However, due
to change in control of the Company, which took place on September 26, 1997,
all outstanding stock options became fully vested. See "Employment Contracts
and Change of Control Arrangements." 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>
D. Scott Buchanan................................................. 150,000 12/23/96
Herman Bergman.................................................... 310,000 12/23/96
Eugene Hirschkoff................................................. 80,000 12/23/96
Kenneth Squires................................................... 80,000 12/23/96
</TABLE>
(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.
OPTION EXERCISES AND HOLDINGS
The following table provides information, with respect to the Named
Executive 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 Executive Officers during the
fiscal year ended September 30, 1997.
9
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS/SARS AT OPTIONS/SARS AT
NAME EXERCISE (#) REALIZED ($) FY-END (#) FY-END ($) (1)
- ------------------------------- ----------------- --------------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------------- ------------- ---------------
James V. Schumacher............ -0- $ -0- 900,000 -0- $ -0- $ -0-
D. Scott Buchanan.............. -0- $ -0- 448,709 -0- $ -0- $ -0-
Herman Bergman................. -0- $ -0- 399,000 -0- $ -0- $ -0-
Eugene Hirschkoff.............. -0- $ -0- 140,000 -0- $ -0- $ -0-
Kenneth Squires................ -0- $ -0- 125,400 -0- $ -0- $ -0-
William C. Black, Jr........... -0- $ -0- 125,580 -0- $ -0- $ -0-
</TABLE>
- ------------------------
(1) Calculated on the basis of the fair market value of the underlying
securities at September 30, 1997 ($.42) minus the exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 1997, R. Scott Asen and Jerry C. Benjamin served as non-employee
members of the Company's Compensation Committee. In November 1997, R. Scott Asen
resigned as a Director and was, therefore, replaced by Martin Egli, a Director,
as a member of the 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 was to
be automatically renewed annually unless terminated by either party or by Mr.
Schumacher's death or disability. Mr. Schumacher resigned as President and Chief
Executive Officer of the Company in March, 1997. However, during the employment
term, Mr. Schumacher received the pro rata portion of his minimum annual base
salary of $250,000 and annual cost of living adjustment of $24,000, as well as
related benefits, such as an annual physical, a term life insurance policy with
a benefit of $500,000 and long-term disability benefit coverage. In March 1997,
the Company settled with Mr. Schumacher certain other provisions of his prior
employment contract by paying Mr. Schumacher $600,000 out of a trust which had
previously been established by the Company pursuant to the employment contract,
which provided for such payout by no later than June 18, 1997 in connection with
a guarantee for 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. The Company additionally paid Mr.
Schumacher $250,436 for the first of the two years base salary provided for in
his employment agreement, in the event of termination under certain conditions.
The Company remains additionally obligated to pay Mr. Schumacher $250,000 for
the second year less any compensation earned by Mr. Schumacher as an employee or
consultant during said second year, as provided for in the employment contract.
A total of $194,000 remains in the previously established trust fund to cover
this potential obligation to Mr. Schumacher.
In March 1997, upon Mr. Schumacher's resignation as Chief Executive Officer
of the Company, the Company elected D. Scott Buchanan as Chief Executive
Officer. There is currently no employment contract with Dr. Buchanan.
On September 26, 1997, Dr. Enrique Maso, Director, purchased from Dassesta
International S.A. ("Dassesta"), the then primary shareholder of the Company a
total of 25,000,000 shares of common stock owned by Dassesta. On the date of
purchase the Company had a total of 47,720,887 shares outstanding,
10
<PAGE>
and therefore by virtue of this purchase Dr. Maso became the owner of 53.3% of
the outstanding shares. On such date, Dr. Maso was simultaneously elected
Chairman of the Board.
The Company's Stock Option Plan provides for full vesting of all outstanding
stock options upon change of control, and therefore all options outstanding on
September 26, 1997 became fully vested simultaneously with Dr. Maso's purchase
of the 25,000,000 shares from Dassesta.
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 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 bonuses awarded
to Messrs. Hirschkoff and Squires under an incentive bonus program, no other
cash bonuses were offered to the Company's executive officers in the fiscal year
ended September 30, 1997.
11
<PAGE>
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 every year 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 1997, 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 1997, the Committee
maintained the salary, bonus and option package for Mr. Schumacher which was
established in fiscal 1993 and approved a $24,000 annual cost of living
adjustment for fiscal 1997. However, in March of 1997, Mr. Schumacher resigned
as Chief Executive Officer and his employment was terminated. See "Employment
Contracts and Change of Control Arrangements."
D. Scott Buchanan became President and Chief Operating Officer of the
Company on December 20, 1996. Effective January 2, 1997 his base salary was
increased from $125,000 to $175,000 in consideration for the increased
responsibilities then assumed by Dr. Buchanan. In March, 1997, upon Mr.
Schumacher's resignation, Dr. Buchanan was also appointed Chief Executive
Officer of the Company.
It is the Committee's objective to have any increasing percentage of Dr.
Buchanan's total compensation each year tied to the attainment of performance
targets and stock price appreciation of his option shares.
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
/s/ Martin P. Egli
/s/ Jerry C. Benjamin
February 17, 1998
12
<PAGE>
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 over the counter bulletin board. 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BIOMAGNETIC TECH. INDUSTRY INDEX BROAD MARKET
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 32.47 80.13 130.05
1994 15.58 90.56 137.62
1995 19.48 143.96 167.10
1996 7.79 166.88 195.08
1997 4.36 199.53 265.16
</TABLE>
DIRECTOR COMPENSATION
Directors are reimbursed for their out-of-pocket expenses incurred in
attending meetings of the Board of Directors and its committees. In addition,
during fiscal year 1997, the Company reimbursed Enrique Maso and Martin P. Egli
for certain out-of-pocket expenses incurred in connection with their search for
additional strategic investors. 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 of January 16, 1998. See "Security
Ownership of Management."
13
<PAGE>
CERTAIN TRANSACTIONS
In May 1997, the Company entered into a loan facility with Dassesta
International, S.A. ("Dassesta"), the Company's then controlling shareholder.
The loan facility provides for maximum borrowings of $1,700,000 and expires on
December 31, 1998. Interest accrues on outstanding principal at 10% and is
payable on December 31, 1997 and 1998. The loan is collateralized by certain of
the Company's accounts receivable and requires principal repayment upon
collection of such receivables. As of September 30, 1997, the Company had
$975,000 outstanding under the loan which was repaid subsequent to year end.
In December 1997, the Company sold 4,000,000 unregistered shares of common
stock to Dassesta and an additional 1,500,000 unregistered shares of common
stock to Bank Leu under Regulation S at $.50 per share. Consideration received
by the Company in relation to the common stock sales consisted of cash totaling
$793,000 and cancellation of loan principal of $1,700,000, related accrued
interest of $38,000 and accounts payable of $219,000, all owed to Dassesta.
During August 1996, the Company entered into an agreement with Dassesta, for
an unsecured working capital loan of $3,000,000. The note evidencing the loan
was issued under Regulation S, promulgated under the Securities Act of 1933, as
amended. This loan matures February 14, 1997 and bears interest at 9% per annum.
The principal amount of the loan, and any accrued interest thereon, was
convertible at the option of the Company into common stock at any time during
the six months at $.40 per share, and was convertible at the option of the
noteholder at the end of the six months or upon default under the note at $.40
per share. The Company elected to convert the $3,000,000 loan and the accrued
interest thereon of $87,040 into 7,717,602 shares of common stock of the Company
on December 31, 1996.
In March 1995, the Company completed the sale of 25,000,000 shares of Common
Stock of the Company to 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 the equity
security offered by the Company in its next round of financing (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 accrued interest at 10% per annum and matured on May 31,
1995. 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"), which were terminated in
April 1995.
The Bridge Unit Purchase Options are exercisable beginning on 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
14
<PAGE>
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-Registered Trademark- 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 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 (iii)
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, 1997, 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% 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%
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
15
<PAGE>
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, 1996 through September 30, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were met.
SHAREHOLDER PROPOSALS FOR 1997 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 20, 1998. Such proposals may
be included in next year's Proxy Statement if they comply with certain rules and
regulations promulgated by the Commission.
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
/s/ Herman Bergman
Dated: February 17, 1997 Herman Bergman, SECRETARY
16
<PAGE>
<TABLE>
<S> <C>
- --- Please mark your
X votes as in this
- --- example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
FOR WITHHELD Nominees: D. Scott Buchanan, Martin P. Egli,
1. Election of ---- ---- Enrique Maso, Herman Bergman and
Directors Rodolfo Llinas
---- ----
Instruction: To withhold authority to vote for any individual nominee, check the
box "FOR" and write the nominee's name on the line below.
FOR WITHHELD ABSTAIN
2. Ratification and approval of the selection of Arthur Andersen LLP as ---- ---- ---
independent accountants for the fiscal year ending September 30, 1998.
---- ---- ---
----
CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING.
----
Unless otherwise specified by the undersigned, this proxy will be voted FOR
Proposals 1 and 2 and will be voted by the proxyholder at his discretion as to
any other matters properly transacted at the Meeting or any adjournments
thereof. To vote in accordance with the Board of Directors' recommendations just
sign below, no boxes need be checked.
SIGNATURE(S) ______________________________________________ DATE _______________
Note: Please sign exactly as name appears hereon. If signing as attorney,
executor, administrator, trustee or guardian, please give full title as such,
and, if signing for a corporation, give your title. When shares are in the names
of more than one person, each should sign.
</TABLE>
<PAGE>
PROXY BIOMAGNETIC TECHNOLOGIES, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints D. Scott Buchanan and Herman Bergman,
jointly and severally, as proxies, with full power of substitution, to vote
all shares of stock which the undersigned is entitled to vote at the Annual
Meeting of Shareholders of Biomagnetic Technologies, Inc. to be held on
Wednesday, March 18, 1998, or at any postponements or adjournments thereof,
as specified below, and to vote in his discretion on such other business as
may properly come before the Meeting and any adjournments thereof.
NEW ADDRESS:____________________
Check here for ---- ________________________________
address change ________________________________
---- ________________________________
(Continued and to be signed and
dated on reverse side)
