<PAGE>
SCHEDULE 14A (RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
NORLAND MEDICAL SYSTEMS, INC.
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(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:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/X/ 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PRELIMINARY COPIES
[LOGO]
106 CORPORATE DRIVE PARK, SUITE 106
WHITE PLAINS, NEW YORK 10604
(914) 694-2285
April __, 1999
To the Stockholders of Norland Medical Systems, Inc.:
The Annual Meeting of Stockholders of Norland Medical Systems, Inc.
(the "Company") will be held on Wednesday, June 2, 1999, at 10:00 a.m. at the
Rye Courtyard By Marriott, 631 Midland Avenue, Rye, New York 10580.
Details of the business to be conducted at the Annual Meeting are
provided in the enclosed Notice of Annual Meeting of Stockholders and Proxy
Statement. The Company's 1998 Annual Report is also enclosed and provides
additional information regarding the financial results of the Company during the
fiscal year ended December 31, 1998.
On behalf of the Board of Directors and employees of the Company, I
cordially invite all stockholders to attend the Annual Meeting. It is important
that your shares be voted on matters that come before the meeting. Whether or
not you plan to attend the meeting, I urge you to promptly complete, sign, date
and return the enclosed proxy card in the prepaid envelope provided.
Sincerely,
REYNALD G. BONMATI
President and Chairman of the Board of Directors
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 2, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Norland Medical Systems, Inc., a Delaware corporation (the "Company"), will be
held at the Rye Courtyard By Marriott, 631 Midland Avenue, Rye, New York 10580,
at 10:00 a.m. on Wednesday, June 2, 1999, for the following purposes:
i. To elect six directors to serve for the ensuing year;
ii. To consider and act upon a proposal to adopt an amendment to the
Company's Certificate of Incorporation which would increase the number of
authorized shares of the Company's Common Stock from 20,000,000 to 45,000,000.
iii. To consider and act upon a proposal to ratify the selection of
Deloitte & Touche LLP as the Company's independent accountants for 1999; and
iv. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on April __, 1999 has been fixed as the record
date for determining the stockholders entitled to notice of and to vote at
the Annual Meeting. Only holders of record of Common Stock of the Company at
that date are entitled to vote at the Annual Meeting or any adjournments
thereof.
By Order of the Board of Directors,
KURT W. STREAMS
Secretary
White Plains, N.Y.
April __, 1999
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE EVEN IF YOU INTEND TO BE PRESENT AT THE MEETING.
RETURNING THE PROXY WILL NOT LIMIT YOUR RIGHT TO VOTE IN PERSON OR TO ATTEND THE
ANNUAL MEETING, BUT WILL ENSURE YOUR REPRESENTATION IF YOU CANNOT ATTEND. IF YOU
HOLD SHARES IN MORE THAN ONE NAME, OR IF YOUR STOCK IS REGISTERED IN MORE THAN
ONE WAY, YOU MAY RECEIVE MORE THAN ONE COPY OF THE PROXY MATERIAL. IF SO, PLEASE
SIGN AND RETURN EACH OF THE PROXY CARDS THAT YOU RECEIVE SO THAT ALL OF YOUR
SHARES MAY BE VOTED. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE.
<PAGE>
[LOGO]
106 CORPORATE PARK DRIVE, SUITE 106
WHITE PLAINS, NEW YORK 10604
(914) 694-2285
April __, 1999
PROXY STATEMENT
This Proxy Statement is being mailed on or about April __, 1999, to
holders of record as of April __, 1999, of Common Stock, par value $.0005 per
share ("Common Stock"), of Norland Medical Systems, Inc. (the "Company") in
connection with the solicitation by the Board of Directors of the Company of
a proxy in the enclosed form for the Annual Meeting of Stockholders of the
Company to be held on June 2, 1999.
A proxy card is enclosed for your use. YOU ARE REQUESTED ON BEHALF OF
THE BOARD OF DIRECTORS TO SIGN, DATE AND RETURN THE PROXY CARD IN THE
ACCOMPANYING ENVELOPE, which requires no postage if mailed in the United States.
If no instructions are specified on the proxy, shares represented
thereby will be voted (i) for the election of the six nominees listed herein as
directors of the Company, (ii) in favor of the adoption of the amendment to the
Company's Certificate of Incorporation increasing the number authorized shares
of Common Stock from 20,000,000 to 45,000,000, (iii) in favor of the
ratification of the appointment of Deloitte & Touche LLP as the Company's
independent accountants for 1999, and (iv) in the discretion of the holder of
the proxy on all other matters that may properly come before the meeting.
Any stockholder who has given a proxy may revoke his or her proxy by
executing a proxy bearing a later date or by delivering written notice of
revocation of his or her proxy to the Secretary of the Company at the Company's
executive offices at any time prior to the meeting or any postponement or
adjournment thereof. Any stockholder who attends in person the Annual Meeting or
any postponement or adjournment thereof may revoke any proxy previously given
and vote by ballot.
As of April __, 1999, there were 18,752,500 shares of Common Stock
issued and outstanding. The presence of the holders of a majority of the
issued and outstanding shares of Common Stock entitled to vote at the Annual
Meeting, either in person or represented by properly executed proxies, is
necessary to constitute a quorum for the transaction of business at the
Annual Meeting. Abstentions and broker "non-votes" (which result when a
broker holding shares for a beneficial owner has not received timely voting
instructions on certain matters from such beneficial owner) will be counted
for purposes of determining the existence of a quorum at the Annual Meeting.
If there are not sufficient shares represented in person or by proxy at the
meeting to constitute a quorum, the meeting may be postponed or adjourned in
order to permit further solicitation of proxies by the Company. Proxies given
pursuant to this solicitation and not revoked will be voted at any
postponement or adjournment of the Annual Meeting in the manner set forth
above.
<PAGE>
The election of directors will be determined by a plurality of the
votes cast by holders of shares of Common Stock, and the approval of any other
matters will require the affirmative vote of holders of a majority of the shares
present in person or represented by duly executed proxies and entitled to vote
on the subject matter. Cumulative voting for the election of directors is not
permitted. Abstentions will be treated as shares present and entitled to vote
for purposes of determining the presence of a quorum and for those matters
requiring the affirmative vote of a majority of the shares present and entitled
to vote at the meeting. Shares relating to any proxy as to which a broker
non-vote is indicated will be considered present and entitled to vote for
determining the presence of a quorum, but will not be considered present and
entitled to vote with respect to any matter as to which the broker has indicated
on the proxy that the broker does not have discretionary authority to vote the
shares. Accordingly, in the case of shares that are present at the Annual
Meeting for quorum purposes, not voting such shares for a particular nominee for
director will not prevent the election of such nominee if other stockholders
vote for such nominee; an abstention on any other proposal, however, will
operate as a vote "against" such proposal. Broker non-votes will have no effect
on the outcome of the vote on any proposals.
The expense of preparing, printing and mailing proxy solicitation
materials will be borne by the Company. In addition, certain directors,
officers, representatives and employees of the Company may solicit proxies by
telephone and personal interview. Such individuals will not receive additional
compensation from the Company for solicitation of proxies, but may be reimbursed
for reasonable out-of-pocket expenses in connection with such solicitation.
Banks, brokers and other custodians, nominees and fiduciaries also will be
reimbursed by the Company for their reasonable expenses for sending proxy
solicitation materials to the beneficial owners of Common Stock.
The Company's Annual Report to Stockholders for the year ended December
31, 1998, which contains the Company's Form 10-K for such year including
financial statements, is being mailed to all stockholders entitled to vote at
the Annual Meeting. The Annual Report does not constitute a part of the proxy
solicitation material.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's By-Laws authorize the Board of Directors to fix the
number of directors of the Company. Currently, the number is fixed at six. The
Board of Directors has nominated the six persons named below to serve as
directors until the next Annual Meeting of Stockholders or until their earlier
resignation or removal. Each nominee is presently a director of the Company.
Each of the directors was elected or reelected to the Board at the 1998 Annual
Meeting of Stockholders. If any of the nominees should be unavailable to serve
for any reason (which is not anticipated), the Board of Directors may (i)
designate a substitute nominee or nominees, in which case the persons named on
the enclosed proxy card will vote all valid proxy cards for the election of such
substitute nominee, (ii) allow the vacancy to remain open until a suitable
candidate or candidates are located or (iii) by resolution provide for fewer
directors. Proxies for this Annual Meeting may not be voted FOR more than six
nominees.
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NOMINEES FOR ELECTION AT THIS ANNUAL MEETING
JEREMY C. ALLEN, age 49, has served as a Director of the Company since October
1997. He has also been a special marketing consultant to the Company since
October 1997. From January 1992 until August 1995 and since May 1997, Mr. Allen
has been a marketing and general management consultant in the health care area.
From August 1995 until May 1997, he was Vice President, Marketing, Osteoporosis,
of Merck & Co., Inc.
JAMES J. BAKER, age 66, has served as a Director of the Company since May 1995.
He has been a private investor for over twelve years, specializing in start-up
venture capital. He is a consultant to Flight Landata, Inc., a company involved
in multi-spectral remote sensing. Previously, Mr. Baker spent twelve years at
Cullinet Software Corporation serving initially as Vice President in charge of
technical development and later as Senior Vice President in charge of customer
support. He holds a B.S. in Mathematics from the Massachusetts Institute of
Technology.
REYNALD G. BONMATI, age 51, has served as a Director of the Company since its
formation in December 1993 and has served as Chairman of the Board, President
and Treasurer of the Company since January 1994. Mr. Bonmati has served since
January 1992 as a Managing Director of Norland Medical Systems B.V., the holding
company that owns Stratec Medizintechnik GmbH, a manufacturer of bone
densitometers marketed by the Company. He has also served as President of
Novatech Resource Corporation, a private investment firm, since 1981 and as
President of Novatech Management Corporation, a private investment firm, since
1990. Mr. Bonmati received B.S. and M.S. degrees from the Institute National
Superieur de Chimie Industrielle, an M.S. degree from the Ecole Nationale
Superieure du Petrole et des Moteurs and an M.B.A. from the University of Paris.
MICHAEL W. HUBER, age 71, has served as a Director of the Company since May
1995. He is retired Chairman and Chief Executive Officer and is currently a
Director of J.M. Huber Corporation, a diversified family-owned company engaged
in natural resource development, and specialty chemical and specialty equipment
and wood product manufacturing. He was a Director of Crompton and Knowles
Corporation, a specialty chemical and equipment manufacturing company, from 1988
to 1998.
ANDRE-JACQUES NEUSY, age 54, has served as a Director of the Company since
September 1997. Dr. Neusy is a Research Scientist and Attending Physician at
Tisch Hospital Center/NYU Medical Center and the Medical Director of the
Dialysis Unit and Chief of Nephrology at Bellevue Hospital Center in New York
City. He has been associated with both hospitals since 1978. Dr. Neusy is also
Associate Professor of Clinical Medicine at New York University School of
Medicine and Attending Physician in Nephrology at the New York Veteran's
Administration Hospital. Dr. Neusy received a B.A. Degree from the International
School in Lubumbashi, Zaire, and an M.D. degree from the Free University of
Brussels Medical School.
ALBERT S. WAXMAN, age 58, has served as a Director of the Company since
January 1994. Dr. Waxman has been Senior Managing Partner of Psilos Group
Managers, LLC, an investment firm, since 1998. From 1993 to 1998, he was
Chairman and Chief Executive Officer of Merit Behavioral Care Corporation,
the parent company of American Biodyne, Inc., which he co-founded in 1985 and
for which he served as Chairman and Chief Executive Officer from 1988 to
1993. From 1983 to 1988, Dr. Waxman served as Chairman and Chief Executive
Officer of Diasonics, Inc., which he founded. Dr. Waxman has served as a
Managing Director of Norland Medical Systems B.V. since January 1992.
Dr. Waxman received a B.S.E.E. degree from City
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College of New York and M.A. and Ph.D. degrees from Princeton University. He
serves on the Advisory Council of Princeton University's School of Engineering
and Applied Sciences.
VOTE REQUIRED FOR APPROVAL
The vote of a plurality of holders of the outstanding shares of Common
Stock present in person or represented by duly executed proxies at the Annual
Meeting for the election of a given nominee is necessary to elect such nominee
as a director of the Company. Accordingly, the six director nominees receiving
the greatest number of votes cast will be elected, regardless of the number of
votes withheld for the election of such director nominees. Shares represented by
an executed proxy in the form enclosed will, unless otherwise directed, be voted
for the election of the six persons nominated to serve as directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF THE SIX PERSONS NOMINATED TO SERVE AS DIRECTORS.
BOARD ORGANIZATION AND MEETINGS
During the year ended December 31, 1998, the Board of Directors held
seven meetings and acted on one other occasion by unanimous written consent.
Each Director attended at least 75% of the meetings of the Board of Directors
and committees of the Board of Directors ("Committees") held in 1998 during his
tenure as a Director or Committee member, except for Dr. Waxman who attended
four Board meetings.
There are two standing Committees:
AUDIT COMMITTEE. The Audit Committee was established in June 1995. The
Audit Committee consists of Jeremy C. Allen and Michael W. Huber. The Audit
Committee: (i) makes recommendations to the Board of Directors with respect to
the independent accountants who conduct the annual audit of the Company's
accounts; (ii) reviews the scope of the annual audit and meets periodically with
the Company's independent accountants to review their findings and
recommendations; (iii) approves major accounting policies or changes thereto;
and (iv) periodically reviews principal internal controls to assure that the
Company is maintaining a sound and modern system of financial controls. The
Audit Committee held one meeting in 1998. A number of actions that could have
been taken by the Audit Committee in 1998 were taken by action of the full Board
of Directors.
COMPENSATION COMMITTEE. The Compensation Committee was established in
June 1995. The Compensation Committee consists of Albert S. Waxman, James J.
Baker, Michael W. Huber and Andre-Jacques Neusy. The Compensation Committee
periodically determines the amount and form of compensation and benefits payable
to all principal officers and certain other management personnel. This Committee
also performs duties of administration with respect to the Company's Amended and
Restated 1994 Stock Option and Incentive Plan (the "1994 Plan"). The
Compensation Committee held one meeting during 1998, and acted on six other
occasions by unanimous written consent.
DIRECTORS' REMUNERATION
During the year ended December 31, 1998, fees for all directors
aggregated $10,000. Each director of the Company who is not an employee of or
consultant to the Company or any subsidiary (a "Non-Employee Director") receives
$1,000 for each regular Board meeting attended and is reimbursed for all
expenses relating to attendance at meetings. Under the 1994 Plan, each
Non-Employee Director receives options to acquire 30,000 shares of Common Stock,
vesting in four equal annual installments, commencing on the first anniversary
of the date of grant, at an exercise price per share equal to the market value
on the
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date of grant. For Mr. Baker, Mr. Huber and Dr. Waxman, such options were
granted on January 3, 1996 at an exercise price of $15.00 per share. For any
Non-Employee Director who first becomes a director after January 3, 1996, such
options will be deemed granted on the date such person becomes a Board member.
For Dr. Neusy, such options were granted on September 8, 1997 at an exercise
price of $11.50. Directors who are employees of or consultants to the Company do
not receive additional compensation for serving as directors. No member of the
Board of Directors was paid compensation during the 1998 fiscal year for his
service as a director of the Company other than pursuant to the standard
compensation arrangements described above.
PROPOSAL 2
PROPOSAL TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has unanimously approved and recommends to
stockholders that they consider and approve a proposal to amend the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 20,000,000 to 45,000,000 ("Authorized Stock
Amendment"). The Company's Restated Certificate of Incorporation also presently
authorizes 1,000,000 shares of Preferred Stock, which will not be changed by the
Authorized Stock Amendment. If the proposed amendment is approved, the first
paragraph of Article Fourth of the Company's Restated Certificate of
Incorporation would be amended to read as follows:
"FOURTH: The total number of shares of all classes of
capital stock which the Corporation shall have authority to
issue is forty-six million (46,000,000) shares, consisting of
the following classes of stock: (A) one million (1,000,000)
shares of Preferred Stock, par value $.0005 per share
("Preferred Stock"); and (B) forty-five million (45,000,000)
shares of Common Stock, par value $.0005 ("Common Stock")."
As of April __, 1999, in addition to the 18,752,500 shares of Common
Stock issued and outstanding, an additional 1,247,500 shares of Common Stock
were reserved for issuance under the 1994 Plan. Therefore, as of the record
date, there were a total of 20,000,000 shares of Common Stock either issued
and outstanding or reserved for issuance out of a total of 20,000,000
authorized shares of Common Stock, leaving no shares of Common Stock
remaining available for subsequent issuance or reservation.
On September 11, 1997, the Company acquired all of the outstanding
stock of Norland Corporation ("Norland Corp.") from Norland Medical Systems B.V.
("NMS BV"). The $17,500,000 purchase price for Norland Corp. consisted of
$1,250,000 in cash paid at closing and a $16,250,000 7% promissory note issued
by the Company to NMS BV (the "Purchase Note"). A $1,250,000 principal payment
on the Purchase Note was originally payable on March 11, 1998. The Purchase Note
was amended to provide that such payment would not be due until such time as the
Company receives at least $2,000,000 in proceeds from a debt or equity
financing. The balance was payable on September 11, 2002 with a right on the
part of the Company to extend the maturity for up to an additional two years. If
the maturity was so extended, the applicable interest rate would be subject to
increases during the extension period. The Purchase Note provided that the
Company could pay principal at any time and that, except for the $1,250,000
payment referred to above, the Company could make payments of principal by
delivering shares of its Common Stock, valued at the average closing price for
the five previous trading days.
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The acquisition of Norland Corp. was the subject of an ongoing
litigation in the Court of Chancery of the State of Delaware, New Castle County.
On December 31, 1998, in connection with the settlement of this litigation,
the terms of the Norland Corp. acquisition were amended. Effective as of
December 31, 1998, the original $17,500,000 purchase price was reduced to
$8,700,000 by reducing the principal amount of the Purchase Note from
$16,250,000 to $7,450,000. In addition, $1,890,000 of principal of the reduced
Purchase Note was paid by delivering 7,000,000 shares of the Company's Common
Stock to NMS BV priced at $0.27 per share, the average closing price for the
five previous trading days. The purchase price reduction and payment with shares
of Common Stock reduced the Company's indebtedness by $10,690,000. The
$5,560,000 balance of the Purchase Note was reissued in a new promissory note
with a reduced annual interest rate of 6 1/2% (the "Amended Note"). The other
payment terms, including those with respect to maturity, prepayment and the
ability to pay principal by delivering shares of Common Stock, were not changed.
The settlement of the litigation was approved by the Court of Chancery on
March 18, 1999.
In March 1999, in order to further significantly reduce the amount of
the Company's outstanding indebtedness, the Company exercised its right to pay
$4,310,000 of the remaining $5,560,000 of Amended Note principal by
delivering additional shares of the Company's Common Stock priced at $0.39 per
share, the average closing price for the five previous trading days. The
11,122,580 shares of Common Stock issuable in payment of such $4,310,000
of principal, when added to the 14,164,031 shares then outstanding and the
1,247,500 shares reserved for issuance pursuant to the 1994 Plan, exceeded the
Company's 20,000,000 authorized shares of Common Stock by 6,534,111 shares (the
"Additional Shares"). Accordingly, the Company issued 4,588,469 shares at the
time of such payment. The Additional Shares are issuable upon approval of the
Authorized Stock Amendment. The outstanding principal balance of the Amended
Note is now $1,250,000. The Company does not have the right to pay any of this
amount by delivering shares of its Common Stock.
There are significant overlaps in the ownership and management of NMS
BV and the ownership and management of the Company. Norland Partners, L.P. owns
42.6% of NMS BV. Reynald G. Bonmati, the President and a director of the Company
is a Managing Director of NMS BV. Through his relationship with Norland
Partners, L.P., as President and 50% stockholder of Novatech Management, the
sole general partner of Norland Partners, L.P., Mr. Bonmati may be considered
the beneficial owner of the 42.6% of NMS BV held by Norland Partners, L.P.
Albert S. Waxman, a director of the Company, is also a Managing Director of
NMS BV. As Chairman and 50% stockholder of Novatech Management, he may also be
considered the beneficial owner, through Norland Partners, L.P., of the same
42.6% of the capital stock of NMS BV. Two of the other directors of the Company,
James J. Baker and Michael W. Huber, neither of whom is an officer or employee
of the Company, have small indirect ownership interests in NMS BV, but neither
is an officer, director or employee of NMS BV. Mr. Huber and Mr. Baker's wife
are limited partners in Novatech Ventures, L.P., which holds a limited
partnership interest in Norland Partners, L.P. Bones, L.L.C., the managing
members of which are Mr. Bonmati and Hans Schiessl, the third Managing Director
of NMS BV, owns 51.7% of NMS BV. Mr. Bonmati and Mr. Schiessl may each be
considered the beneficial owner of the 51.7% interest in NMS BV held by
Bones, L.L.C.
Of the 7,000,000 shares of Common Stock issued to NMS BV in December of
1998, NMS BV has transferred 2,710,526 shares to Norland Partners, L.P. and
3,289,474 shares to Bones, L.L.C. Of the 4,588,469 shares issued in March 1999
payment of $4,310,000 of principal of the Amended Note, 2,072,861 shares are
held by Norland Partners, L.P. and 2,515,608 shares are held by Bones, L.L.C. In
addition, if Authorized Stock Amendment is approved, the 6,534,111 Additional
Shares will be issued, of which Norland Partners, L.P. will receive 2,951,814
shares and Bones, L.L.C. will receive 3,582,297 shares. Following the issuance
of the Additional Shares, a total of 25,286,611 shares of Common Stock will be
outstanding, of which Norland Partners, L.P. will own 7,735,201 shares and
Bones, L.L.C. will own 9,387,379 shares.
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The increased number of authorized shares of Common Stock contemplated
by the proposed Authorized Stock Amendment is necessary in order to issue the
Additional Shares. The Board of Directors believes that the Authorized
Stock Amendment is also desirable to make additional unreserved shares of Common
Stock available for issuance or reservation without further shareholder
authorization, except as may be required by law. Authorizing the Company to
issue more shares than currently authorized by the Restated Certificate of
Incorporation will not affect materially any substantive rights, powers, or
privileges of holders of Common Stock. There are currently no shares of
Preferred Stock outstanding. Except for the Additional Shares, the Company does
not have any current plans or intentions to issue any of the additionally
authorized Common Stock or any Preferred Stock. However, the Board of Directors
believes that having such additional stock authorized and available for issuance
or reservation will allow the Company to have greater flexibility in considering
potential future actions involving the issuance of stock for corporate purposes
such as stock dividends, exercise of stock options, for cash or property and for
other purposes, as occasions may arise. The Board of Directors has no current
plans to effect such potential actions. Other than with respect to the issuance
of the Additional Shares, the Company has no other plans or other existing or
proposed agreements or understandings to issue, or reserve, for future issuance,
any of the additional Common Stock which would be authorized by the Authorized
Stock Amendment.
Neither the presently authorized shares of Common Stock nor the
additional Common Stock that may be authorized pursuant to the Authorized Stock
Amendment carry preemptive rights. The additional Common Stock, if authorized,
could be issued at the direction of the Board of Directors without any further
action by the stockholders, except if required by applicable law or regulations,
in connection with acquisitions, efforts to raise additional capital for the
Company and other corporate purposes.
Any additional stock, if so issued, would have a dilutive effect upon
the percentage of equity of the Company owned by present stockholders. The
issuance of such stock might be disadvantageous to current stockholders in that
any additional issuances would potentially reduce per share dividends, if any.
Stockholders should consider, however, that the possible impact upon dividends
is likely to be minimal in view of the fact that the Company has never paid
dividends, has never adopted any policy with respect to the payment of dividends
and does not intend to pay any cash dividends in the foreseeable future. The
Company instead intends to retain any earnings for use in financing growth and
additional business opportunities. In addition, the issuance of such additional
stock, by reducing the percentage of equity of the Company owned by present
shareholders, would reduce such present shareholders' ability to influence the
election of directors or any other action taken by the holders of Common Stock.
The authorization to issue the additional Common Stock would provide
management with a capacity to negate the efforts of unfriendly tender offerors
through the issuance of securities to others who are friendly or desirable to
management. This proposal is not the result of management's knowledge of any
specific effort to accumulate the Company's stock or to obtain control of the
Company in opposition to management or otherwise. The Company is not submitting
this proposal to enable it to frustrate any efforts by another party to acquire
a controlling interest or to seek Board representation. The submission of this
proposal is not a part of any plan by the Company's management to adopt a series
of amendments to the Certificate of Incorporation or By-Laws so as to render the
takeover of the Company more difficult.
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VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the outstanding shares of Common
Stock present in person or represented by proxies at the Annual Meeting and
entitled to vote is required to approve the Authorized Stock Amendment. Reynald
G. Bonmati, Hans Schiessl, NMS BV, Norland Partners, L.P. and Bones, L.L.C.
collectively own a majority of the outstanding Common Stock, an amount
sufficient to approve this proposal. See "Stock Ownership".
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR APPROVAL OF THE AUTHORIZED STOCK AMENDMENT.
PROPOSAL 3
APPOINTMENT OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee of the Board of Directors,
and subject to ratification by the stockholders, the Board of Directors has
appointed Deloitte & Touche L.L.P. as independent accountants to examine the
Company's consolidated financial statements for the fiscal year ending
December 31, 1999. Deloitte & Touche LLP has served as the Company's independent
accountants since November 13, 1998 and performed the audit of the Company's
1998 financial statements. Representatives of Deloitte & Touche LLP are expected
to be present at the Annual Meeting and will have the opportunity to make a
statement, if they so desire, and to respond to appropriate questions from those
attending the meeting.
On September 22, 1998, PricewaterhouseCoopers LLP (formerly Coopers &
Lybrand L.L.P.) ("PwC"), resigned as the Company's independent accountant. No
report by PwC on the Company's financial statements for either of the fiscal
years ended December 31, 1997 and 1996 contained an adverse opinion or a
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope, or accounting principles. During such fiscal years and the interim period
preceding the date of resignation, there were no disagreements with PwC on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of PwC, would have caused PwC to make a reference thereto in PwC's
report on the consolidated financial statements for such years. Except for the
items set forth in the following paragraph, PwC did not advise the Company of
any reportable event as defined in paragraphs (A) through (D) of Regulations S-K
Item 304 (a) (i) (v).
Following the completion of its audit of the Company's financial
statements for the year ended December 31, 1997, PwC advised the Audit Committee
that, during the course of such audit, PwC noted certain deficiencies in the
design and operation of the Company's internal controls over the sales order
processing, revenue recognition, customer credit and customer collection
functions, and that such deficiencies constituted material weaknesses as defined
by the American Institute of Certified Public Accountants.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the outstanding shares of Common
Stock present in person or represented by proxies at the Annual Meeting and
entitled to vote is required to appoint the Company's independent accountants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
ACCOUNTANTS TO AUDIT THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR 1999.
-8-
<PAGE>
STOCK OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of April __, 1999 (except as
otherwise indicated) by (i) each person known by the Company to be the
beneficial owner of more than 5% of the Company's Common Stock, (ii) each
director and nominee to be a director, (iii) each named executive officer and
(iv) all directors and executive officers as a group. Except as otherwise
indicated below, each of the persons named in the table has sole voting and
investment power with respect to the shares set forth opposite such person's
name.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP (1)
-----------------------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT
- ------------------------ ------ -------
<S> <C> <C>
Reynald G. Bonmati (2)................................... 13,231,132 70.1%
Albert S. Waxman (3) .................................... 6,501,936 34.6
Kurt W. Streams (4) ..................................... 26,250 *
Lewis N. Harrold (4) .................................... 25,000 *
Ralph J. Cozzolino (4) .................................. 15,000 *
James J. Baker (4) ...................................... 22,500 *
Michael W. Huber (5) ................................... 67,825 *
Andre-Jacques Neusy (4) ................................. 7,500 *
Jeremy C. Allen (6) ..................................... 18,000 *
All directors and officers of the Company as a group (9
persons) (2), (3), (4), (5), and (6) .................... 13,435,707 70.6
Hans Schiessl (7) ....................................... 7,925,082 42.8
Markgrafenstrasse 8
75117 Pforzheim
Germany
Bones, L.L.C. (8) ....................................... 6,805,082 36.3
Premium Point
New Rochelle, NY 10801
Norland Partners, L.P. (9) .............................. 5,783,387 30.8
Premium Point
New Rochelle, NY 10801
Norland Medical Systems B.V. ............................ 1,000,000 5.3
Admiraliteskade 50
3063 ED Rotterdam
P.O. Box 4433
3006 AK Rotterdam
The Netherlands
</TABLE>
- ------------------
* Less than 1%.
-9-
<PAGE>
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Under Rule 13d-3(d), shares not
outstanding that are subject to options, warrants, rights or conversion
privileges exercisable within 60 days are deemed outstanding for the
purpose of calculating the number and percentage owned by such person, but
not deemed outstanding for the purpose of calculating the percentage owned
by any other person.
(2) Includes 130,000 shares issuable pursuant to stock options exercisable
within 60 days. Includes 396,049 shares held of record by Novatech
Management Corporation, 87,842 shares held of record by Novatech Resource
Corporation, 1,000,000 shares held of record by Norland Medical Systems
B.V., 4,783,387 shares held of record by Norland Partners, L.P., and
5,805,082 shares held of record by Bones, L.L.C., that Mr. Bonmati may be
deemed to beneficially own due to his relationship with such entities.
Mr. Bonmati is President and a principal stockholder of Novatech
Management Corporation and Novatech Resource Corporation. Novatech
Management Corporation is the sole general partner of Norland Partners,
L.P. Mr. Bonmati is a managing director of Norland Medical Systems B.V.
and a managing member of Bones, L.L.C. Such beneficial ownership is
disclaimed by Mr. Bonmati, except to the extent of his proportionate
interest in such entities. Also includes 21,110 shares held by
Mr. Bonmati's wife, as trustee for their children, with respect to
which Mr. Bonmati disclaims beneficial ownership. Mr. Bonmati's address
is 106 Corporate Park Drive, Suite 106, White Plains, New York 10604.
(3) Includes 22,500 shares issuable pursuant to stock options exercisable
within 60 days. Includes 396,049 shares held of record by Novatech
Management Corporation, 1,000,000 shares held by record by Norland Medical
Systems B.V. and 4,783,387 shares held of record by Norland Partners,
L.P., that Dr. Waxman may be deemed to beneficially own due to his
relationship with such entities. Dr. Waxman is Chairman of the Board and a
principal stockholder of Novatech Management Corporation, the sole general
partner of Norland Partners, L.P. He is also a managing director of
Norland Medical Systems B.V. Such beneficial ownership is disclaimed by
Dr. Waxman, except to the extent of his proportionate interest in such
entities. Dr. Waxman's address is 137 East Inlet Drive, Palm Beach,
Florida 33480.
(4) Consists solely of shares issuable pursuant to stock options exercisable
within 60 days.
(5) Includes 22,500 shares issuable pursuant to stock options exercisable
within 60 days.
(6) Includes 12,500 shares issuable pursuant to stock options exercisable
within 60 days. Also includes 5,500 shares owned by Mr. Allen's wife, with
respect to which Mr. Allen disclaims beneficial ownership.
(7) Includes 1,000,000 shares held of record by Norland Medical Systems B.V.
and 5,805,082 shares held of record by Bones, L.L.C., that Mr. Schiessl
may be deemed to beneficially own due to his relationship with such
entities. Mr. Schiessl is a managing director of Norland Medical Systems
B.V. He is also a managing member of Bones, L.L.C. Such beneficial
ownership is disclaimed by Mr. Schiessl, except to the extent of his
proportionate interest in such entities.
-10-
<PAGE>
(8) Includes 1,000,000 shares held of record by Norland Medical Systems B.V.
that Bones, L.L.C. may be deemed to beneficially own due to its
relationship to Norland Medical Systems B.V. Bones, L.L.C. is a principal
stockholder of Norland Medical Systems B.V. Such beneficial interest is
disclaimed by Bones, L.L.C. except to the extent of its proportionate
interest in such entity. Does not include the 3,582,297 Additional Shares
issuable to Bones, L.L.C. if Proposal 2 is approved.
(9) Includes 1,000,000 shares held of record by Norland Medical Systems B.V.
that Bones, L.L.C. may be deemed to beneficially own due to its
relationship to Norland Medical Systems B.V. Norland Partners, L.P. is a
principal stockholder of Norland Medical Systems B.V. Such beneficial
interest is disclaimed by Norland Partners, L.P. except to the extent of
its pecuniary interest in such entity. Does not include the 2,951,814
Additional Shares issuable to Norland Partners, L.P. if Proposal 2 is
approved.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides, for the periods indicated, certain summary
information concerning the cash and non-cash compensation earned by or awarded
to the Company's President (the chief executive officer) and each of the other
most highly compensated executive officers who were serving as executive
officers as of December 31, 1998 (collectively, the "named executive officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------- -------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(1) COMPENSATION($)(2)
- --------------------------- ---- --------- -------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Reynald G. Bonmati ................. 1998 $303,500 $ 0 360,000 $3,271
Chairman of the Board, 1997 195,741 0 180,000 3,137
President and Treasurer 1996 156,000 0 30,000 0
Kurt W. Streams .................... 1998 119,415 0 40,000 762
Vice President, Finance, 1997 101,038 0 40,000 723
and Secretary 1996 96,000 0 0 0
Lewis N. Harrold ................... 1998 90,000 0 35,000 948
Vice President, Product 1997 86,910 0 35,000 916
Development and Assistant 1996 81,085 0 0 0
Secretary
Ralph J. Cozzolino ................. 1998 149,603 0 27,000 2,178
Vice President, Sales 1997 86,050 0 26,000 2,195
1996 46,608 0 15,000 1,522
</TABLE>
-11-
<PAGE>
- ----------------
(1) Represents shares of Common Stock issuable upon exercise of options
granted to the named executive officers. Includes repriced options
referred to below, even if the original options are included in figures
for prior years.
(2) Represents life insurance and long-term disability premiums paid by the
Company, and, for Messrs. Bonmati, Harrold and Cozzolino, also includes
$2,509, $225 and $1,455, respectively, of Company contributions to 401(k)
plan.
EMPLOYMENT AGREEMENTS
In 1998 the Company entered into a three-year Employment Agreement with
Reynald G. Bonmati, Chairman of the Board, President and a director of the
Company. The term of the Employment Agreement is from May 1, 1998 to April 30,
2001. Mr. Bonmati's base salary of $300,000 is subject to increases to reflect
cost of living increases, as shown by the Consumer Price Index for the New
York-Northwestern New Jersey area. The base salary may also be increased upon
annual review by the Compensation Committee. Mr. Bonmati is also entitled to an
annual bonus payment equal to 5% of the Company's annual consolidated income
before taxes, payable within 30 days after the release of the Company's audited
financial statements for such year. No bonus was payable with respect to 1998.
Following the end of each fiscal quarter during the term of the Employment
Agreement, commencing with the quarter ending March 31, 1999, Mr. Bonmati is to
be granted options under the 1994 Plan to purchase up to 45,000 shares of the
Company's Common Stock. Such options are to be granted two days after the
Company announces its earnings for such quarter. The exercise price will be the
closing price on the date of grant, and the options will vest in four equal
annual installments. The Company's obligation to grant such options is subject
to sufficient shares being available for grant. If the Company terminates
Mr. Bonmati's employment during the term of the Employment Agreement other than
for cause, all unvested options will be deemed vested, and all vested options
will be exercisable at any time during the period ending on the first
anniversary date of such termination.
OPTION GRANTS/EXERCISES/REPRICINGS IN 1998
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended December 31, 1998 to the named
executive officers.
-12-
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------------------------------
PERCENTAGE
OF TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS VALUE AT ASSUME
SECURITIES GRANTED TO EXERCISE ANNUAL RATES OF STOCK
UNDERLYING EMPLOYEES OR PRICE APPRECIATION FOR
OPTIONS IN BASE OPTION TERM(3)
GRANTED FISCAL-YEAR PRICE EXPIRATION ------------------------
NAME (#)(1) (%) ($/SH) DATE 5%($) 10%($)
- ---- ------------ -------------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Reynald G. Bonmati .......... 180,000 19.9% $7.06 1/1/08 $2,070,732 $3,297,295
180,000(2) 19.9 0.67 1/1/08 196,445 312,805
30,000(2) 3.3 0.67 1/2/06 32,741 52,134
100,000(2) 11.0 0.67 2/20/07 109,136 173,781
50,000(2) 5.5 0.67 11/15/07 54,568 86,890
Kurt W. Streams ............ 15,000(2) 1.7 0.67 8/30/05 16,370 26,067
15,000(2) 1.7 0.67 12/28/05 16,370 26,067
5,000(2) 0.6 0.67 2/20/07 5,457 8,689
5,000(2) 0.6 0.67 9/25/07 5,457 8,689
Lewis N. Harrold ............ 30,000(2) 3.3 0.67 11/2/05 32,741 52,134
5,000(2) 0.6 0.67 2/20/07 5,457 8,689
Ralph J. Cozzolino .......... 3,000 0.3 3.00 6/8/08 14,660 23,344
3,000(2) 0.3 0.67 6/8/08 3,274 5,213
15,000(2) 1.7 0.67 5/29/06 16,370 26,067
1,000(2) 0.1 0.67 2/20/07 1,091 1,738
5,000(2) 0.6 0.67 6/17/07 5,457 8,689
</TABLE>
- ---------------
(1) All options were granted pursuant to the 1994 Plan. These options are
incentive stock options, except those granted to Mr. Bonmati, which are
non-qualified stock options. All options become exercisable on each
anniversary of the date of grant in four equal installments, except for
the replacement options (see note 2).
(2) Replacement stock options--see option repricing table below. These
options have same vesting schedule as options they replaced (i.e.,
immediate vesting to the extent the options they replaced were vested and
25% vesting on each anniversary of the date of grant of the options they
replaced). Their term is ten years from the date of grant of the options
they replaced.
(3) Pursuant to Securities and Exchange Commission rules, the table shows the
value of the options at the end of the option terms (ten years) if the
underlying market price of the Common Stock were to appreciate in value
from the date of grant to the end of the option term at annualized rates
of 5% and 10%. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are
dependent upon the future performance of the Common Stock and overall
market conditions. There can be no assurance that the amounts reflected
in this table will be achieved.
-13-
<PAGE>
The following table sets forth certain information concerning the
exercise of options to purchase Common Stock of the Company during 1998 and the
value at December 31, 1998 of outstanding options held by each of the named
executive officers.
OPTION EXERCISES IN 1998 AND VALUE OF OPTIONS AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY(1) OPTIONS
YEAR END(#) AT YEAR END($)(2)
SHARES ---------------------------- -----------------------------
ACQUIRED ON VALUE
NAME EXERCISE(#)(3) REALIZED($)(4) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Reynald G. Bonmati 0 $ 0 52,500 307,500 $ 0 $ 0
Kurt W. Streams 0 0 25,000 15,000 0 0
Lewis N. Harrold 0 0 23,750 11,250 0 0
Ralph J. Cozzolino 0 0 9,000 15,000 0 0
</TABLE>
- ---------------
(1) Options are "in-the-money" if the closing market price of the Company's
Common Stock exceeds the exercise price of the options.
(2) The exercise prices of all such options exceeded $0.19, the closing price
of a share of the Company's Common Stock on December 31, 1998.
(3) Represents the number of shares received upon exercise or, if no shares
were received, the number of shares with respect to which the options
were exercised.
(4) The value of exercised options represents the difference between the
exercise price of such options and the closing price of the Company's
Common Stock on the date of exercise.
During 1998, the Company canceled certain outstanding stock options and
replaced them with new stock options having a lower exercise price equal to the
then market value. The Company also repriced certain stock options in 1997. The
following table sets forth certain information concerning the repricing of
options held by any named executive officer.
-14-
<PAGE>
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE ORIGINAL TERM
UNDERLYING OF STOCK AT EXERCISE PRICE AT NEW REMAINING AT
OPTIONS TIME OF TIME OF EXERCISE DATE OF
NAME DATE REPRICED(#) REPRICING REPRICING($) PRICE($) REPRICING
- ---- -------- ----------- ------------ ----------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Reynald G. Bonmati 12/14/98 30,000 $0.57 $9.75 $0.67 7.0 yrs.
12/14/98 100,000 0.57 6.63 0.67 8.1 yrs.
12/14/98 50,000 0.57 7.06 0.67 8.8 yrs.
12/14/98 180,000 0.57 7.06 0.67 9.0 yrs.
7/28/97 30,000 9.75 15.00 9.75 8.5 yrs.
Kurt W. Streams 12/14/98 15,000 0.57 9.75 0.67 6.7 yrs.
12/14/98 15,000 0.57 9.75 0.67 7.0 yrs.
12/14/98 5,000 0.57 6.63 0.67 8.1 yrs.
12/14/98 5,000 0.57 9.69 0.67 8.7 yrs.
7/28/97 15,000 9.75 10.67 9.75 8.5 yrs.
7/28/97 15,000 9.75 13.83 9.75 8.0 yrs.
Lewis N. Harrold 12/14/98 30,000 0.57 9.75 0.67 6.8 yrs.
12/14/98 5,000 0.57 6.63 0.67 8.1 yrs.
7/28/97 30,000 9.75 12.83 9.75 8.7 yrs.
Ralph J. Cozzolino 10/6/98 15,000 0.67 9.75 0.67 7.4 yrs.
10/6/98 1,000 0.67 6.63 0.67 8.1 yrs.
10/6/98 5,000 0.67 9.75 0.67 8.5 yrs.
10/6/98 3,000 0.67 3.00 0.67 9.5 yrs.
7/28/97 15,000 9.75 22.17 9.75 8.6 yrs.
7/28/97 5,000 9.75 10.13 9.75 9.7 yrs.
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL. The Company's Compensation Committee is composed of four
independent, Non-Employee Directors. The Committee and the Board of Directors
believe that compensation must be competitive, but that it should be directly
and materially linked to the Company's performance. The compensation program is
designed to attract and retain executive talent, to motivate executives to
maximize operating performance, to provide an opportunity to measure performance
on an individual basis, as well as on an overall Company-wide basis, and to link
executive and stockholder interests through the grant of stock options.
The key components of the Company's executive compensation program
consist of salary, bonuses and stock options. The Committee's policy with
respect to each of these elements, including the basis of the compensation
awarded to Mr. Bonmati, the Company's President, are discussed below. Through
these programs, a very significant portion of the Company's executive
compensation is linked to performance and the alignment of executive interests
with those of stockholders. The long-term compensation of all Company
-15-
<PAGE>
executive officers consists of stock options; the short term compensation
consists of base salary and, in certain cases, bonuses.
BASE SALARY. The Company has established base salary levels based upon
competitive market pay rates, each executive's role in the Company and each
executive's performance over time (including, where relevant, executives'
performance prior to joining the Company). Base salaries for executives are
reviewed annually based on a variety of factors, including individual
performance, market salary levels for comparable positions within comparable
companies and the Company's overall financial results, and may be adjusted to
reflect such factors. In the case of Mr. Cozzolino, a portion of his
compensation is based upon commissions.
BONUSES. At the end of each year, bonuses for executive officers may be
recommended by the Company and reviewed and approved by the Committee. Any such
bonuses will be payable out of a bonus pool determined by the Board of Directors
or the Compensation Committee, and will be determined by measuring such
officer's performance, the performance of the operations for which officer has
primary responsibility and the Company's overall performance against target
performance levels to be established by the Compensation Committee. No bonuses
were awarded to any executive officer with respect to 1998.
STOCK OPTIONS. The Committee believes that aligning management's
interest with those of stockholders is an important element of the Company's
executive compensation plan. Stock options align the interests of employees and
stockholders by providing value to the executive through stock price
appreciation only. At December 31, 1998, there were outstanding under the 1994
Plan options to purchase an aggregate of 867,500 shares of Common Stock. In all
cases, the exercise prices of these options are not less than the fair market
value of the Common Stock on the grant dates.
In October and December of 1998, the Board approved the repricing of
certain outstanding stock options granted under the 1994 Plan. Many
outstanding options were exercisable at prices considerably in excess of
the market price of the Common Stock at that time, thereby substantially
impairing the effectiveness of such options as performance incentives.
Consistent with the Company's philosophy of utilizing equity incentives to
motivate and retain management and employees, the Committee felt that it was
important to restore the performance incentives intended to be provided by
options by repricing options having exercise prices in excess of the market
price at the time of repricing. The exercise prices of the repriced options were
set at amounts that were not less than the fair market value of a
share of the Company's Common Stock on the dates of the repricings. A total of
66 option holders holding options to purchase an aggregate of 673,750 shares of
the Company's Common Stock with exercise prices ranging from $3.00 to $9.75 per
share were granted replacement options at a $0.67 exercise price. Except for the
change in exercise price, the terms of the new options are the same as those of
the options they replaced.
Future awards of stock options will be made periodically at the
discretion of the Compensation Committee, in certain cases based upon
recommendations of the Company's President. The size of such grants, in general,
will be evaluated by regularly assessing competitive market practices, the
individual's position and level of responsibility within the Company, and the
overall performance of the Company, including its historic financial success and
its future prospects. The Company believes that stock options are the single
most important element in providing incentives for management performance and
intends to continue to plan to award significant stock options to officers and
key employees.
-16-
<PAGE>
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. Effective May 1, 1998, the
Company entered into the Employment Agreement with Mr. Bonmati described above
(see "Executive Compensation--Employment Agreements"). The Compensation
Committee was of the view that it was critically important to the Company that
it be able to demonstrate concretely to third parties with whom the Company
deals (e.g., potential customers and potential sources of financing)
Mr. Bonmati's commitment to the Company for the long term. Under the Employment
Agreement, Mr. Bonmati's base salary for 1998 was $300,000. No bonus was earned
by Mr. Bonmati for 1998.
On January 2, 1998, Mr. Bonmati was granted options for 180,000 shares
of the Company's Common Stock at an exercise price of $7.06 per share. These
options vest in four equal annual installments commencing January 2, 1999. As a
result of this issuance, Mr. Bonmati held options to purchase an aggregate of
360,000 shares of Common Stock at prices ranging from $6.63 to $9.75 per share.
On December 14, 1998, in connection with the option repricing described above,
the options for all 360,000 shares were repriced at $0.67 per share. Under
Mr. Bonmati's Employment Agreement, as described above, Mr. Bonmati will be
granted options to purchase 45,000 shares each quarter, commencing with the
quarter ending March 31, 1999. Such options will be granted two days after the
Company announces its earnings for such quarter. The exercise price will
be the closing price on the date of grant and will vest in four equal annual
installments.
COMPENSATION COMMITTEE:
Albert S. Waxman
James J. Baker
Michael W. Huber
Andre-Jacques Neusy
-17-
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares, from August 2, 1995, the date of the
initial public offering of the Company's Common Stock, through December 31,
1998, the percentage change in the Company's Common Stock to the cumulative
total return of the NASDAQ Composite Index ("NASDAQ Composite") and the S&P
Healthcare (Medical Products and Supplies) Midcap Index ("Midcap Medical
Products"). The graph plots the growth in value of an initial $100 investment
over the indicated time period, assuming the reinvestment of dividends. From
August 2, 1995 until September 23, 1998, the Company's Common Stock was traded
on the NASDAQ National Market. It is now quoted on the OTC Bulletin Board.
[GRAPH OMITTED]
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
AUG. 2, -----------------------------
1995 1995 1996 1997 1998
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Norland Medical Systems, Inc. $ 100 $221 $ 96 $107 $ 3
NASDAQ Composite 100 106 130 159 224
Midcap Medical Products 100 118 125 157 222
</TABLE>
The performance of the Company's Common Stock reflected above is not
necessarily indicative of future performance of the Common Stock. The
performance graph that appears above shall not be deemed incorporated by
reference by any general statement incorporating this Proxy Statement by
reference into any filing under the Securities Act of 1933, as amended, or under
the Exchange Act, and shall not be deemed filed under either of such Acts except
to the extent that the Company specifically incorporates this information by
reference.
-18-
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons holding more than ten percent of a registered
class of the Company's equity securities to file with the Securities and
Exchange Commission initial reports of ownership, reports of changes in
ownership and annual reports of ownership of Common Stock and other equity
securities of the Company. Such directors, executive officers and ten percent
stockholders are also required to furnish the Company with copies of all such
filed reports.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required during
the 1998 fiscal year, the Company believes that all Section 16(a) reporting
requirements related to the Company's directors and executive officers were
timely fulfilled during 1998, with the exception of one late filing of a Form 4
by Hans Schiessl with respect to two transactions.
CERTAIN TRANSACTIONS
TRANSACTIONS INVOLVING NMS BV
In September 1997 the Company acquired Norland Corp. from NMS BV. In
December 1998 and March 1999, portions of the principal of the promissory note
issued by the Company as part of the purchase price for Norland Corp. were paid
by the issuance of shares of Common Stock of the Company. A total of 11,588,469
shares have been issued in connection with such payments, and an additional
6,534,111 shares will be issued if Proposal 2 is approved. See "Proposal 2--
Proposal to Increase Authorized Shares of Common Stock".
In addition to its own products, the Company also distributes bone
densitometers manufactured by Stratec Medizintechnik GmbH ("Stratec"), which is
a wholly-owned subsidiary of NMS BV. Under the Distribution Agreement in effect
with Stratec during 1998, the Company had distribution rights to medical
diagnostic products manufactured by Stratec. The Company's purchases from
Stratec in 1998 were $1,244,766. Sales of products and services by the Company
to Stratec in 1998 were $9,803.
Mr. Bonmati and Mr. Schiessl each own a 50% interest in a building in
Pforzheim, Germany, part of which is leased to Stratec at a monthly rent of
approximately DM 9,000.
LOANS AND ADVANCES
In September 1996, the Company made an $80,000 loan to Kurt W. Streams,
Vice President, Finance of the Company, to assist with relocation of his
residence. The loan bears interest at 6% per annum and is payable in full in
March 2000, subject to rights which Mr. Streams has to extend the maturity date.
The outstanding balance of the loan, including interest, was $91,304 at
December 31, 1998.
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<PAGE>
SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposal to be presented by a stockholder at the Company's 2000
Annual Meeting of Stockholders must be received by the Company no later than
December 27, 1999, so that it may be considered by the Company for inclusion in
its proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no matters that are expected to be
presented for consideration at the Annual Meeting other than those described in
this proxy statement. Should any other matter properly come before the Annual
Meeting, however, the persons named in the form of proxy accompanying this proxy
statement will vote all shares represented by proxies in accordance with their
best judgment on such matters.
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<PAGE>
PROXY
NORLAND MEDICAL SYSTEMS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 2, 1999
The stockholder(s) whose signature(s) appear(s) on the reverse side of
this proxy form hereby appoint(s) Reynald G. Bonmati and Kurt W. Streams or
either of them as proxies, with full power of substitution, and hereby
authorize(s) them to represent and vote all shares of Common Stock of the
Company which the stockholder(s) would be entitled to vote on all matters which
may come before the Annual Meeting of Stockholders to be held at the Rye
Courtyard By Marriott, 631 Midland Avenue, Rye, New York 10580, at 10:00 a.m. on
Wednesday, June 2, 1999, or at any adjournment thereof. THE PROXIES SHALL VOTE
SUBJECT TO THE DIRECTIONS INDICATED ON THE REVERSE SIDE OF THIS CARD AND THE
PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF. THE PROXIES WILL VOTE AS THE BOARD OF DIRECTORS RECOMMENDS WHERE A
CHOICE IS NOT SPECIFIED.
The nominees for Director are: Jeremy C. Allen, James J. Baker,
Reynald G. Bonmati, Michael W. Huber, Andre-Jacques Neusy and Albert S. Waxman.
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<CAPTION>
(TO BE SIGNED ON REVERSE SIDE.)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
A /X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL DIRECTORS AND FOR PROPOSALS 2 AND 3.
WITHHOLD
FOR FOR
ALL ALL
FOR AGAINST ABSTAIN
1. Election of / / / / NOMINEES: Jeremy C. Allen 2. An amendment to the Company's Restated / / / / / /
directors. James J. Baker Certificate of Incorporation to increase
Reynald G. Bonmati the number of authorized shares of the
Michael W. Huber Company's Common Stock from
Andre-Jacques Neusy 20,000,000 to 45,000,000
Albert S. Waxman
3. Selection of Deloitte & / / / / / /
Touche LLP as the
Company's independent
accountants for 1999.
INSTRUCTION: To withhold authority to
vote for any individual nominee or
nominees, write the names on the space
provided below.
- -------------------------------------- Please complete, sign, date and mail the enclosed Proxy in the
accompanying envelope even if you intend to be present at the
- -------------------------------------- meeting. Returning the proxy will not limit your right to vote in
person or to attend the Annual Meeting, but will ensure your
representation if you cannot attend. If you hold shares in more
than one name, or if your stock is registered in more than one way,
you may receive more than one copy of the proxy material. If so,
please sign and return each of the proxy cards that you receive so
that all of your shares may be voted. The Proxy is revocable at
any time prior to its use.
SIGNATURE(S)
-----------------------------------------------------
DATE
------------------------------------------------------ ---------------------------------
(Note: Please sign above exactly as the shares are issued. When shares are
held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give the full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.)
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