Officials at Aspect Medical Systems Inc. are delaying the company’s annual meeting to prepare for a possible proxy fight against two of its largest stockholders.
Officials at the Norwood-based brain-monitoring equipment maker said they needed “sufficient time to consider the potential director candidates, and provide shareholders with adequate time to consider the Board’s nominees,” according to a filing with the federal Securities and Exchange Commission.
The annual meeting, originally set for May 20, will likely be delayed by about nine days, according to the filing.
The move comes hard on the heels of a flurry of activity in early March by two investment firms that collectively hold 30 percent of Aspect’s stock. Officials at the separate funds are demanding changes to the capital cost structure of Aspect and are threatening to force a merger or change in management if their demands are not met.
Representatives of First Biomed LLC alerted Aspect CFO J. Neal Armstrong March 12 of their intent to nominate three candidates to Aspect’s board of directors for “a special committee of independent directors to study ways to optimize the company’s capital structure and otherwise maximize stockholder value” in an SEC filing.
The three candidates — Jon Biro, Melvin Keating and Vincent Scialli — are affiliated with First Biomed, which owns around 14 percent of Aspect Medical Systems stock. First http://bodybrainmedicine.com/, which operates a series of investment vehicles under the umbrella “First Health Funds,” has been steadily buying up shares of Aspect Medical Systems since June 2007.
Also on March 12, Clint Coghill of Coghill Capital Management LLC, whose firm owned 12 percent of Aspect Medical according to the company’s proxy statement covering 2007, warned Aspect officials of the need for changes to the company’s “cost structure, its direction and leadership, and various strategic alternatives including potential extraordinary transactions that could result in a change of control.”
Coghill’s filing listed a series of potential moves he could make if Aspect’s leadership didn’t comply with his demands, including the dumping of his stock. That could take the bottom out of the company’s share price, forcing a merger or the departure of board members and management.
Despite the turmoil, Aspect Medical has maintained fairly healthy sales in recent years. The company, which makes neurological equipment to measure anesthesia levels, reported $99 million in revenues last year, up 7.6 percent from $97 million during 2007. The jump helped push the company to a net gain of $11 million, compared to $2.5 million for the prior year.
In 2007, the company had a significant influx of cash from the sale of $125 million of 2.5 percent convertible notes. It bought back some $67 million worth of those notes in the ensuring years and concerns persist about the company’s ability to service the debt, which carries annual interest payments of $3.1 million. Aspect still owes $58 million on the notes, which come due in 2014.
Aspect Medical has several provisions written into its bylaws to “discourage, delay or prevent a change in control or takeover attempt of our company by a third party that is opposed by our management and board of directors.”
Some of those provisions include:
• The ability to issue preferred stock to “make it more difficult for a third party to acquire, or to discourage a third party from acquiring, a majority of our outstanding voting stock;”
• The designation of three classes of directors, based on seniority, with more senior directors having more power over the company’s direction.
