<PAGE> 1
SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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-b(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
VASOMEDICAL, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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)(1) 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:
- --------------------------------------------------------------------------------
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> 2
VASOMEDICAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 4, 1997
---------------
TO THE STOCKHOLDERS OF
VASOMEDICAL, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Vasomedical, Inc. will be held at the Griffis Faculty Club, New York
Hospital-Cornell Medical Center, 521 East 68th Street, New York, New York 10021
on Thursday, December 4, 1997 at 10:00 a.m., or at any adjournment thereof, for
the following purposes:
1. To elect two directors.
2. To consider and act upon a proposal to amend the Certificate of
Incorporation to increase the authorized shares of Common Stock
from 85,000,000 to 110,000,000, as set forth in Exhibit A.
3. To consider and act upon a proposal to adopt a 1997 Stock Option
Plan, as set forth in Exhibit B.
4. To ratify the appointment by the Board of Directors of Grant
Thornton LLP as the Company's independent certified public
accountants for fiscal 1998.
5. To consider and act upon such other business as may properly come
before this meeting or any adjournment thereof.
The above matters are set forth in the Proxy Statement attached to this
Notice to which your attention is directed.
Only stockholders of record on the books of the Company at the close of
business on October 6, 1997 will be entitled to vote at the Annual Meeting of
Stockholders or at any adjournment thereof. You are requested to sign, date and
return the enclosed Proxy at your earliest convenience in order that your shares
may be voted for you as specified.
By Order of the Board of Directors,
JOSEPH A. GIACALONE
Secretary
Dated: Westbury, New York
October 15, 1997
<PAGE> 3
VASOMEDICAL, INC.
180 LINDEN AVENUE
WESTBURY, NEW YORK, USA 11590
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, DECEMBER 4, 1997
The Annual Meeting of Stockholders of Vasomedical, Inc. (the "Company")
will be held on Thursday, December 4, 1997 at the Griffis Faculty Club, New York
Hospital-Cornell Medical Center, 521 East 68th Street, New York, New York 10021
at 10:00 a.m. for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders. THE ENCLOSED PROXY IS SOLICITED BY AND ON BEHALF OF THE
BOARD OF DIRECTORS OF VASOMEDICAL, INC. FOR USE AT THE ANNUAL MEETING OF
STOCKHOLDERS. The approximate date on which this proxy statement and the
enclosed proxy are being first mailed to stockholders is October 15, 1997.
If a proxy in the accompanying form is duly executed and returned, the
shares represented by such proxy will be voted as specified. Any person
executing the proxy may revoke it prior to its exercise either by letter
directed to the Company or in person at the Annual Meeting.
VOTING RIGHTS
Only stockholders of record on October 6, 1997 (the "Record Date") will
be entitled to vote at the Annual Meeting or any adjournment thereof. The
Company has outstanding at the Record Date one class of voting capital stock,
namely 47,773,571 shares of Common Stock, $.001 par value ("Common Stock").
Each share of Common Stock issued and outstanding on the Record Date is entitled
to one vote at the Annual Meeting of Stockholders. The affirmative vote of a
majority of the votes cast at the Annual Meeting is required for approval of
each matter submitted to a vote of the shareholders. For purposes of determining
whether proposals have received a majority vote, abstentions will not be
included in the vote totals, nor will shares for which brokers are prohibited
from exercising discretionary authority for beneficial owners who have not
returned a proxy (so called "broker non-votes"). Abstentions and broker
non-votes will, therefore, have no effect on the vote, but will be counted in
the determination of a quorum.
<PAGE> 4
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of
Directors consisting of not less than three nor more than nine directors which
number has been increased to eleven directors in accordance with the Company's
By-Laws. The Board of Directors may be divided into three classes, as nearly
equal in number as possible, whose terms of office expire in successive years.
The Company's Board of Directors for fiscal 1997 consisted of ten directors as
set forth below.
<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
(TO SERVE UNTIL THE (TO SERVE UNTIL THE (TO SERVE UNTIL THE
ANNUAL MEETING OF ANNUAL MEETING OF ANNUAL MEETING OF
STOCKHOLDERS IN 1999) STOCKHOLDERS IN 1997) STOCKHOLDERS IN 1998)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Anthony Viscusi (1) Abraham E. Cohen (5) Dr. Alexander G. Bearn (3)(4)
E. Donald Shapiro (1) (2) (3) Dr. John C.K. Hui (4) Dr. David S. Blumenthal (4)(2)
Dr. Zhen-sheng Zheng (4) Eugene H. Glicksman (1) Dr. Kenneth W. Rind (2)(1)
Francesco Bolgiani (2)(3)
</TABLE>
- ---------------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Medical Advisory Committee
(5) Ex-officio member of all committees except the Medical Advisory Committee
Messrs. Cohen and Hui, current directors in Class II, are to be elected
to serve until the 2000 Annual Meeting of Stockholders or until their successors
are duly elected and qualified. Mr. Glicksman resigned as an officer and
director effective September 1, 1997. Shares represented by executed proxies in
the form enclosed will be voted, unless otherwise indicated, for the election
as directors of the nominees named in Class II unless any such nominee shall be
unavailable, in which event such shares will be voted for a substitute nominee
designated by the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees will be unavailable or, if elected, will
decline to serve.
The Board of Directors held six meetings during the Company's fiscal
year ended May 31, 1997. Each director attended or participated in at least 75%
of such meetings of the Board of Directors, except Dr. Zhen-sheng Zheng. During
the fiscal year ended May 31, 1997, there was one meeting of the Audit
Committee, one meeting of the Compensation Committee, five meetings of the
Executive Committee, and no formal meetings of the Medical Advisory Committee.
The Company's Audit Committee is involved in discussions with the Company's
independent public accountants with respect to the year-end audited financial
statements and the Compensation Committee recommends executive compensation and
the granting of stock options to key employees. See "Compensation Committee
Report on Executive Compensation." The Executive Committee was established to
advise the Board of Directors and make recommendations on matters relating to
the business and operations of the Company. The Medical Advisory Committee acts
in an oversight capacity with respect to medical issues and the Company's
ongoing clinical programs.
2
<PAGE> 5
PRINCIPAL OCCUPATIONS OF DIRECTORS
The following is a brief account of the business experience for the
past five years of the Company's directors:
Dr. Alexander G. Bearn (74 years of age) has been a director of the
Company since November 14, 1994. Dr. Bearn is a physician, scientist and author
who has had distinguished careers in academe and industry. Dr. Bearn is
presently Executive Officer of the American Philosophical Society. Since 1966,
Dr. Bearn has been an adjunct professor at Rockefeller University. He has been
Chairman of the Department of Medicine of Cornell University Medical College and
Senior Vice President of Medical and Scientific Affairs at Merck International.
He serves on many boards, including the Board of Trustees of Rockefeller
University and of the Howard Hughes Medical Institute. Dr. Bearn also serves on
the board of Biogen, Inc., a public company.
Dr. David S. Blumenthal (47) has been a director of the Company since
June 30, 1994. Dr. Blumenthal has been a practicing cardiologist in the State of
New York since 1981 and is affiliated with New York Hospital-Cornell Medical
Center.
Francesco Bolgiani (58) has been director of the Company since December
5, 1995. Mr. Bolgiani has been President of Banca del Gottardo of Lugano,
Switzerland from 1980 to 1994 and Deputy Chairman of the Board of Directors of
Banca del Gottardo since 1994.
Abraham E. Cohen (61) has been Chairman of the Board since June 30,
1994 and a director of the Company since June 4, 1993, and is presently an
independent consultant. He retired in 1992 as Senior Vice President of Merck &
Co., Inc., a position he had since 1985. From 1979 to 1989, Mr. Cohen was also
President of Merck Sharp & Dohme International, a division of Merck & Co., Inc.
Mr. Cohen is a director of the following public companies: Agouron
Pharmaceuticals, Inc., Akzo Nobel Nv., Teva Pharmaceutical Industries, Ltd.,
Neurobiological Technologies, Inc., Vion Pharmaceuticals, Inc., Blue Stone
Capital Partners, LP and Travellers Series Fund, Inc.
Dr. John C.K. Hui (51) has been a director and Senior Vice President of
the Company since February 2, 1995. Dr. Hui has been an Assistant Professor in
the Department of Surgery in the State University of Stony Brook, New York since
1978. He has also been a scientist in the medical department of Brookhaven
National Laboratories. Dr. Hui was president of and a principal stockholder in
Vasogenics, Inc. at the time of its acquisition by the Company in January 1995.
Dr. Kenneth W. Rind (62) has been a director of the Company since
February 2, 1995. Dr. Rind has been Chairman of Oxford Venture Corporation, an
independent venture capital company since 1981. Previously, Dr. Rind was a
principal at Xerox Development Corporation for five years where he was
responsible for acquisitions and venture capital investments. From 1970 to 1976,
he was Vice President-Corporate Finance at Oppenheimer & Co., Inc. He is also a
director of ESC Medical Systems, Inc., Computer Power, Inc., Alpha Technologies,
Inc. and several private companies.
E. Donald Shapiro (65) has been a director of the Company since June 4,
1993. Mr. Shapiro has been the Joseph Solomon Distinguished Professor of Law
since 1983 and is a former Dean of The New York Law School, as well as a
Supernumerary Fellow of St. Cross College at Oxford University, England. He has
authored numerous books and articles in the field of medicine and law and is a
recipient of honors and awards both in the United States and overseas. Mr.
Shapiro is a director of the following public companies: Loral Space and
Communications, Inc. (formerly Loral Corporation), Bank Leumi Trust Co., Premier
Laser Systems, Inc., Eyecare Products PLC, Kranzco Realty Trust, Vion
Pharmaceuticals, Inc., Telepad Corporation and United Industrial Corporation.
3
<PAGE> 6
Anthony Viscusi (64) has been President, Chief Executive Officer and
director of the Company since his employment on June 30, 1994. Mr. Viscusi was
Senior Vice President, Worldwide Marketing for the AgVet division of Merck &
Co., Inc. from 1987 to 1993. In 1961, Mr. Viscusi joined the international human
health division of Merck, in which he spent most of his career in various
general management positions, after having taught at Columbia, Wesleyan and
Princeton universities. Mr. Viscusi is a director of Mallinckrodt, Inc.
Dr. Zhen-sheng Zheng (67) has been a director of the Company since
February 2, 1995. Since 1986, Dr. Zheng has been Director of the Cardiovascular
Research Institute at Sun Yat-sen University of Medical Sciences in Guangzhou,
China. Dr. Zheng has been associated with Sun Yat-sen University since 1955 in
various capacities and is also presently Chairman of the National Laboratory for
Assisted Circulation Research in China. Dr. Zheng was a principal stockholder of
Vasogenics, Inc. prior to its acquisition by the Company in January 1995.
SECURITY OWNERSHIP
The following table sets forth as of September 30, 1997 certain
information with regard to ownership of the Company's Common Stock by (i) each
beneficial owner of 5% or more of the Company's Common Stock, to the knowledge
of the Company based upon filings with the Securities and Exchange Commission;
(ii) each current director and executive officer named in the "Summary
Compensation Table"; and (iii) all executive officers and directors of the
Company as a group:
<TABLE>
<CAPTION>
COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1)(2)(3)
- ------------------------ ----------------------------
<S> <C>
Dr. Alexander G. Bearn (9)(12)(14)(20) 117,428 shs. *
1230 York Avenue
New York, New York 10021
Dr. David S. Blumenthal (9)(11)(14)(20) 117,428 shs. *
407 East 70th Street
New York, New York 10021
Francesco Bolgiani (15)(20) 204,525 shs. *
viale Franscini 8
Lugano, Switzerland CH-6901
Abraham E. Cohen (4)(5)(8)(14)(20) 642,428 shs. (1.3%)
100 United Nations Plaza
New York, New York 10017
Joseph A. Giacalone (6)(7)(19) 308,000 shs. *
180 Linden Avenue
Westbury, New York 11590
Dr. John C. K. Hui (17)(18) 1,210,000 shs. (2.5%)
180 Linden Avenue
Westbury, New York 11590
Anthony E. Peacock (16)(18) 229,000 shs. *
180 Linden Avenue
Westbury, New York 11590
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NAME AND ADDRESS OF COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED (1)(2)(3)
- ------------------------ ----------------------------
<S> <C>
Dr. Kenneth W. Rind (10)(14)(20) 267,428 shs. *
315 Post Road West
Westport, Connecticut 06880
E. Donald Shapiro (4)(5)(8)(14)(20) 652,428 shs. (1.4%)
57 Worth Street
New York, New York 10013
Anthony Viscusi (13)(18) 925,000 shs. (1.9%)
180 Linden Avenue
Westbury, New York 11590
Dr. Zhen-sheng Zheng (14)(20) 117,428 shs. *
74 Zhangshan Road II
Guangzhou, 510089
P.R. China
Directors and executive officers
as a group (11 persons) 4,791,093 shs. (9.4%)
</TABLE>
- ------------------
* Less than 1% of the Company's Common Stock
(1) No officer or director owns more than one percent of the issued and
outstanding Common Stock of the Company unless otherwise indicated.
(2) Ownership represents sole voting and investment power.
(3) Includes Common Stock issuable under stock options and warrants that
are exercisable within 60 days.
(4) Includes warrants to purchase 150,000 shares of Common Stock at $1.50
per share expiring in September 1998.
(5) Includes warrants to purchase 200,000 shares of Common Stock at $1.03
per share expiring in November 1998.
(6) Includes warrants to purchase 150,000 shares of Common Stock at $.41
per share expiring in February 2000.
(7) Includes warrants and stock options to purchase 120,000 shares of
Common Stock at $.91 per share expiring in November 1998.
(8) Includes warrants to purchase 150,000 shares of Common Stock at $.45
per share expiring in June 1999.
(9) Includes warrants to purchase 50,000 shares of Common Stock at $1.50
per share expiring in March 1998.
(10) Includes warrants to purchase 250,000 shares of Common Stock at $.40
per share expiring in February 2000.
(11) Includes warrants to purchase 50,000 shares of Common Stock at $.45 per
share expiring in June 1999.
(12) Includes warrants to purchase 50,000 shares of Common Stock at $.28 per
share expiring in November 1999.
(13) Includes warrants to purchase 750,000 shares of Common Stock at $.45
per share expiring in June 2000.
(14) Includes currently exercisable options to purchase 12,903 shares of
Common Stock at $.78 per share expiring in May 2005 granted pursuant to
the Outside Director Stock Option Plan.
(15) Includes 200,000 shares of Common Stock owned by a company in which Mr.
Bolgiani and his wife have a 50% ownership interest.
5
<PAGE> 8
(16) Includes warrants to purchase 150,000 shares of Common Stock at $.38
per share expiring in January 2000.
(17) Includes warrants to purchase 200,000 shares of Common Stock at $.40
per share expiring in February 2000.
(18) Includes options to purchase 50,000 shares of Common Stock at $3.44 per
share expiring in May 2006.
(19) Includes options to purchase 35,000 shares of Common Stock at $3.44 per
share expiring in May 2006.
(20) Includes currently exercisable options to purchase 4,525 shares of
Common Stock at $2.21 per share expiring in May 2006 granted pursuant
to the Outside Director Stock Option Plan.
MANAGEMENT
The following sets forth information concerning each executive officer
of the Company. The officers of the Company serve at the pleasure of the Board
of Directors or until their successors are chosen and qualify.
<TABLE>
<CAPTION>
POSITION HELD
NAME AGE WITH THE COMPANY
- --------------------------------------------------------------------------------
<S> <C> <C>
Anthony Viscusi 64 President and Chief Executive Officer
Dr. John C. K. Hui 51 Senior Vice President, R&D and Manufacturing
Anthony E. Peacock 56 Vice President, Marketing and
Clinical Affairs
Joseph A. Giacalone 34 Secretary and Treasurer
</TABLE>
- ------------------
Anthony E. Peacock has been Vice President, Marketing and Clinical
Affairs of the Company since his employment on January 23, 1995. From January
1994 to January 1995, Mr. Peacock was Vice President, Marketing of Dendrite
International. For more than five years prior thereto, Mr. Peacock was, among
other positions, Executive Director of Marketing for Cardiovascular Products
with Merck & Co., Inc., where he played a key role in the formulation and
worldwide implementation of strategies for enalapril, Merck's multi-billion
dollar cardiovascular product.
Joseph A. Giacalone, a certified public accountant, has been Secretary
and Treasurer of the Company since February 2, 1994 and has been employed by the
Company since February 1993. From 1983 to 1993, Mr. Giacalone was employed by
the international accounting firm of Grant Thornton LLP, having been a manager
with the firm since 1990.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation of
the Chief Executive Officer and each of the Company's four most highly
compensated officers other than the Chief Executive Officer (the "named
executive officers") for the fiscal years ended May 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------------------------- -------
Other Restricted Shares Covered Long Term
Name and Annual Stock By Option Incentive Plan All Other
Principle Position Year Salary (1) Bonus Compensation Awards (2) Grants Payout Compensation
- ------------------ ---- ---------- ----- ------------ ---------- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anthony Viscusi 1997 $168,333 - - - 150,000 - -
President & CEO 1996 $150,000 - - - - - -
1995 $137,500 - - - 1,000,000 - -
Eugene H. Glicksman 1997 $145,000 - - $169,813 - - -
Executive VP 1996 $145,000 - - $169,813 - - -
1995 $133,333 - $169,812 - - -
John C.K. Hui 1997 $139,167 - - - 150,000 - -
Senior VP 1996 $130,000 - - - - - -
1995 $43,333 - - - 300,000 - -
Anthony E. Peacock 1997 $149,167 - - - 150,000 - -
VP 1996 $140,000 - - - - - -
1995 $49,584 - - - 300,000 - -
Joseph A. Giacalone 1997 $107,183 - - - 105,000 - -
Secretary/Treasurer 1996 $85,000 - - - - - -
1995 $85,000 - - - 200,000 - -
</TABLE>
- --------------------------
(1) Dr. Hui's salary includes payments received by him from the Research
Foundation of the State University of New York at Stony Brook under a grant
funded by the Company.
(2) Represents value of common stock issued in 1993 to Mr. Glicksman under a
stock bonus arrangement providing for vesting of 950,000 shares over five years.
Mr. Glicksman resigned as an officer and director on September 1, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth the number of options granted to the
Company's named executive officers in fiscal 1997.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
--------------------------------------------------------------------------------
Total Number
of Securities % of Total
Underlying Options/SARs Exercise
Options/SARs to Employees Price Expiration
Name Granted (#)(1) in Fiscal Year ($/share) Date 5% 10%
- ---- -------------- -------------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Anthony Viscusi 150,000 19% $3.44 5/31/06 $324,000 $822,000
John C.K. Hui 150,000 19% $3.44 5/31/06 $324,000 $822,000
Anthony E. Peacock 150,000 19% $3.44 5/31/06 $324,000 $822,000
Joseph A. Giacalone 105,000 13% $3.44 5/31/06 $227,000 $575,000
</TABLE>
(1) Represents ten-year, non-qualified stock options that vest equally over
three years commencing June 1, 1997. Such vesting is contingent upon continued
employment with the Company.
7
<PAGE> 10
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND F/Y-END OPTION VALUES
The following table sets forth information for each of the named
executive officers with respect to the value of options or warrants exercised
during the fiscal year ended May 31, 1997 and the value of outstanding and
unexercised options or warrants held as of May 31, 1997, based upon the market
value of the Common Stock of $1-11/16 per share on that date.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Options at In-the-Money Options
Share Acquired Value Fiscal Year End at Fiscal Year End (2)
Name on Exercise (#) Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony Viscusi - - 500,000 650,000 $618,750 $618,750
John C.K. Hui - - 200,000 250,000 $255,500 $127,750
Anthony E. Peacock - - 150,000 300,000 $196,875 $196,875
Joseph A. Giacalone - - 270,000 155,000 $285,375 $63,875
</TABLE>
(1) Represents the difference between the closing price of the Common Stock and
the exercise price of the options on the date of exercise multiplied by the
number of shares acquired upon exercise. The calculation does not reflect the
effects of any income taxes which may be due on the value realized.
(2) Represents the difference between the closing market price of the Common
Stock at May 31, 1997 of $1-11/16 per share and the exercise price per share
multiplied by the number of in-the-money options at May 31, 1997.
EMPLOYMENT AGREEMENTS
The Company maintains employment agreements with its executive
officers, expiring at various dates through January 1999. Such employment
agreements provide, among other things, that in the event there is a change in
the control of the Company, as defined therein, or in any person directly or
indirectly controlling the Company, as also defined therein, the employee has
the option, exercisable within six months of becoming aware of such event, to
terminate his employment agreement. Upon such termination, the employee has the
right to receive as a lump-sum payment certain compensation remaining to be paid
for the balance of the term of the agreement.
In July 1994, in connection with an employment agreement with its newly
appointed President and Chief Executive Officer, the Company issued five-year
warrants to purchase 1,000,000 shares of its Common Stock at $.45 per share
(which approximated market value at the date of grant) vesting at 25% per year
beginning June 30, 1995. Such vesting is contingent upon his continued
employment with the Company.
In October 1994, the Company settled an employment commitment through
December 1997 with its former Chairman and President, aggregating $244,000, for
$35,000. In addition, this former officer forfeited 570,000 shares of the
Company's Common Stock issued as a stock bonus in December 1992 which had not
vested at the settlement date. This former officer also resigned from the
Company's Board of Directors.
In December 1994, the Company settled an employment commitment through
November 1996 with its former Vice President - Finance, aggregating $190,000,
for $75,000. This former officer also resigned from the Company's Board of
Directors.
In January 1995, in connection with an employment agreement with its
recently appointed Vice President of Marketing, the Company issued five-year
warrants to purchase 300,000 shares of its Common Stock at $.38 per share (which
approximated market value at the date of grant) vesting at 25% per year
beginning January 1996. Such vesting is contingent upon his continued employment
with the Company.
In February 1995, in connection with an employment agreement with its
recently appointed Senior Vice President of R&D and Manufacturing, the Company
issued five-year warrants to purchase 300,000 shares of its Common Stock at $.40
per share (which approximated market value at the date of grant) vesting at 33%
per year beginning February 1996. Such vesting is contingent upon his continued
employment with the Company.
8
<PAGE> 11
Also in February 1995, the Company issued five-year warrants to its
Treasurer to purchase 200,000 shares of the Company's Common Stock at $.41 per
share (which approximated market value at the date of grant) with 50,000 such
shares vested immediately and the remainder vesting at 33% per year beginning
February 1996. Such vesting is contingent upon his continued employment with the
Company.
1992 NON-QUALIFIED STOCK OPTION PLAN
In June 1993, the Company's stockholders approved a 1992 Non-Qualified
Stock Option Plan (the "Non-Qualified Plan") for officers, directors, employees
and consultants of the Company, for which the Company had reserved an aggregate
of 1,500,000 shares of Common Stock. Options are exercisable upon payment in
full of the exercise price, either in cash or in Common Stock valued at fair
market value on the date of exercise of the option. In November 1994, the
Company's Board of Directors terminated the Non-Qualified Plan. No other options
have been granted under the Non-Qualified Plan and 25,000 options were
outstanding as of the termination date of which 20,000 remain exercisable
through November 1998.
1995 STOCK OPTION PLAN
In May 1995, the Company's stockholders approved the 1995 Stock Option
Plan (the "1995 Option Plan") for officers and employees of the Company, for
which the Company has reserved an aggregate of 1,500,000 shares of Common Stock.
The 1995 Option Plan provides that it will be administered by a committee of the
Board of Directors of the Company and the committee will have full authority to
determine the identity of the recipients of the options and the number of shares
subject to each option. Options granted under the 1995 Option Plan may be either
incentive stock options or non-qualified stock options. The option price shall
be 100% of the fair market value of the Common Stock on the date of the grant
(or, in the case of incentive stock options granted to any individual who owns
stock possessing more than 10% of the total combined voting power of all voting
stock of the Company [a "Principal Stockholder"], 110% of such fair market
value). The term of any option may be fixed by the committee but in no event
shall exceed ten years from the date of grant. Options are exercisable upon
payment in full of the exercise price, either in cash or in Common Stock valued
at fair market value on the date of exercise of the option. The term for which
options may be granted under the 1995 Option Plan expires March 8, 2005. At May
31, 1997, 912,000 options had been granted, of which 892,000 are outstanding
under the 1995 Option Plan. Upon approval of the 1997 Stock Option Plan proposed
herein, the 1995 Option Plan will be terminated and no new grants will be made
under the 1995 Option Plan.
OUTSIDE DIRECTOR STOCK OPTION PLAN
In May 1995, the Company's stockholders approved an Outside Director
Stock Option Plan (the "Director Plan") for non-employee directors ("Outside
Directors") of the Company, for which the Company has reserved an aggregate of
300,000 shares of Common Stock. The Director Plan will be administered by the
Board of Directors of the Company. In accordance with the terms of the Director
Plan, each outside director will be granted ten-year, non-qualified stock
options commencing June 1, 1995, and on the first day of each June thereafter,
to purchase those number of shares of the Company's common stock having a market
value of $10,000 at the average closing price of the Common Stock on NASDAQ or
such other exchange upon which the Company's stock is listed for the five
trading days immediately preceding the date of grant. Options granted to each
Outside Director shall vest after one year, subject to forfeiture under certain
conditions. Options are exercisable upon payment in full of the exercise price,
either in cash or in Common Stock valued at fair market value on the date of
exercise of the option. On June 1, 1997, 1996 and 1995, options to purchase an
aggregate of 39,550 shares, 31,675 shares, and 77,418 shares of Common Stock,
respectively, at $1.77, $2.21, and $.78 per share, respectively, were granted to
outside directors. Upon approval of the 1997 Stock Option Plan proposed herein,
the Director Plan will be terminated and no new grants will be made under the
Director Plan.
9
<PAGE> 12
SHAREHOLDER RIGHTS PLAN
In March 1995, the Company's Board of Directors approved a Shareholder
Rights Plan, under which a dividend distribution of one Right for each
outstanding share of the Company's Common Stock is authorized. Each Right will
entitle shareholders of record on May 9, 1995 to purchase one-half share of
Common Stock at a 50% discount to market price if a person or group acquires 20%
or more of the Company's outstanding stock. At present, the Company is not aware
of any such person or group seeking to acquire 20% or more of the Company's
outstanding Common Stock.
DIRECTOR'S FEES
It has been the policy of the Company to grant fees of $1,000 per
meeting to each outside director who attends a regularly scheduled or special
meeting of its Board of Directors. Messrs. Cohen and Shapiro do not receive
per-meeting fees but monthly fees of $2,500. In addition, the Company reimburses
out-of-state directors for their cost of travel and lodging to attend such
meetings.
LIMITATION ON LIABILITY OF OFFICERS AND DIRECTORS
The Company has entered into indemnification agreements with each of
its current officers and directors pursuant to which it has agreed, among other
things, to indemnify these officers and directors to the fullest extent
permitted by Delaware law.
CERTAIN TRANSACTIONS
There were no transactions required to be reported in the Company's
last fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, the Company's Compensation Committee consisted of
Messrs. Alexander G. Bearn, Francesco Bolgiani, E. Donald Shapiro and Abraham E.
Cohen (ex-officio). None of these persons were officers or employees of the
Company during fiscal 1997 nor, except as otherwise disclosed, had any
relationship requiring disclosure in this Proxy Statement.
In accordance with rules promulgated by the Securities and Exchange Commission,
the information included under the caption "Compensation Committee Report on
Executive Compensation" will not be deemed to be filed or to be proxy soliciting
material or incorporated by reference in any prior or future filings by the
Company under the Securities Act of 1933 or the Securities Exchange Act.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is generally
determined by the Compensation Committee of the Board of Directors, subject to
applicable employment agreements. Each member of the Compensation Committee is a
director who is not an employee of the Company or any of its affiliates. The
following report with respect to certain compensation paid or awarded to the
Company's executive officers during fiscal 1997 is furnished by the directors
who comprised the Compensation Committee during fiscal 1997.
GENERAL POLICIES
The Company's compensation programs are intended to enable the Company
to attract, motivate, reward and retain the management talent required to
achieve corporate objectives and thereby increase shareholder value. It is the
Company's policy to provide incentives to its senior management to achieve both
short-term and long-term objectives and to reward exceptional performance and
contributions to the development of the Company's business. To attain these
objectives, the Company's executive compensation program includes a competitive
base salary, cash incentive bonuses and stock-based compensation. See
"Management - Employment Agreements."
Stock options are granted to employees, including the Company's
executive officers, by the Compensation Committee under the Company's 1995 Stock
Option Plan. The Committee believes that stock options provide an incentive that
focuses the executive's attention on managing the Company from the perspective
of an owner with an equity stake in the business. Options are awarded with an
exercise price
10
<PAGE> 13
equal to the market value of Common Stock on the date of grant, have a maximum
term of ten years and generally become exercisable starting one year from the
date of grant. Among the Company's executive officers, the number of shares
subject to options granted to each individual generally depends upon the level
of that officer's responsibility. The largest grants are awarded to the most
senior officers who, in the view of the Compensation Committee, have the
greatest potential impact on the Company's profitability and growth. Previous
grants of stock options are reviewed but are not considered the most important
factor in determining the size of any executive's stock option award in a
particular year.
From time to time, the Compensation Committee intends to utilize the
services of independent consultants to perform analyses and to make
recommendations to the Committee relative to executive compensation matters. No
compensation consultant has so far been retained.
RELATIONSHIP OF COMPENSATION TO PERFORMANCE AND COMPENSATION OF
CHIEF EXECUTIVE OFFICER
The Compensation Committee annually establishes, subject to the
approval of the Board of Directors and any applicable employment agreements, the
salaries which will be paid to the Company's executive officers during the
coming year. In setting salaries, the Compensation Committee takes into account
several factors, including competitive compensation data, the extent to which an
individual may participate in the stock plans maintained by the Company, and
qualitative factors bearing on an individual's experience, responsibilities,
management and leadership abilities, and job performance.
In recognition of Mr. Viscusi's significant contribution to the growth
of the Company, the Compensation Committee increased his annual base salary to
$170,000 effective July 1, 1996.
The Compensation Committee:
Alexander G. Bearn, Chairman Francesco Bolgiani
Abraham E. Cohen (ex-officio) E. Donald Shapiro
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who own more than ten percent of a registered
class of the Company's equity securities ("Reporting Persons") to file reports
of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities
and Exchange Commission (the "SEC") and the National Association of Securities
Dealers, Inc. (the "NASDAQ"). These Reporting Persons are required by SEC
regulation to furnish the Company with copies of all Forms 3, 4 and 5 they file
with the SEC and the NASDAQ. Based solely upon the Company's review of the
copies of the forms it has received, the Company believes that all Reporting
Persons complied on a timely basis with all filing requirements applicable to
them with respect to transactions during fiscal 1997, except that Eugene H.
Glicksman, who is no longer an officer or director of the Company, filed late
three Forms 4 reporting various sales of Common Stock.
11
<PAGE> 14
PERFORMANCE GRAPH
The following graph sets forth the cumulative total return to the
Company's stockholders during the five-year period ended May 31, 1997 as well as
an overall stock market index (NASDAQ Stock Market Index) and the Company's peer
group index (S&P Medical Products and Supplies):
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------
5/92 5/93 5/94 5/95 5/96 5/97
--------- ------- -------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Vasomedical, Inc. $100 50 24 33 103 69
NASDAQ Stock Market (US) $100 120 127 151 219 247
S&P Health Care (Medical Products &
Supplies) $100 81 76 112 153 190
</TABLE>
* $100 INVESTED ON 5/31/92 IN STOCK OR INDEX.
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MAY 31.
12
<PAGE> 15
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
General
The Board of Directors has proposed and recommended to its stockholders
the approval of an amendment to Article IV of the Company's Certificate of
Incorporation increasing the total number of shares which the Company has
authority to issue from 86,000,000 to 111,000,000, consisting of 110,000,000
shares of Common Stock and 1,000,000 shares of Preferred Stock, of which 500,000
shares have been designated Class Preferred Stock, Series A and 150,000 shares
have been designated as Class Preferred Stock, Series B.
The Selected Financial Data, Management's Discussion and Analysis of
Financial Condition and Results of Operations and Financial Statements on pages
9 through 11 and F-1 through F-15 of the 1997 Annual Report on Form 10-K are
incorporated herein by reference.
Purpose to Increase Authorized Shares of Common Stock
The purpose of increasing the authorized number of shares of Common
Stock is twofold. First, an increased authorization of 25,000,000 shares of
Common Stock is intended to provide additional flexibility to the Company for
possible capital reorganization, acquisitions, refinancing, exchange of
securities, public offerings and other corporate purposes. In recent years, the
Company has issued a substantial number of shares through stock rights and sales
of securities, which events have decreased the number of shares of Common Stock
presently available for issuance for such purposes. Second, approximately
37,000,000 shares are to be reserved for possible issuance in case the rights to
be issued to shareholders of record on May 9, 1995 are exercised upon an event
described in the Shareholder Rights Plan. See "Management - Shareholder Rights
Plan."
The proposed amendment does not change the terms of the Common Stock,
which do not have preemptive rights. The additional shares of Common Stock for
which authorization is sought will have the same voting rights, the same rights
to dividends and distributions and will be identical in all other respects to
the shares of Common Stock now authorized.
The Board of Directors, which recommends approval of this amendment,
believes it would be advantageous to the Company to be in a position to issue
additional Common Stock without the necessary delay of calling a stockholders'
meeting if one or more suitable opportunities to the Company present themselves.
The following table sets forth as of September 30, 1997, the
approximate number of shares of Common Stock and Preferred Stock authorized,
outstanding, reserved and available for issuance. The table further sets forth
the approximate number of shares that will be available for issuance if this
amendment is approved.
<TABLE>
<CAPTION>
AVAILABLE FOR
AVAILABLE ISSUANCE UPON
FOR APPROVAL OF
AUTHORIZED OUTSTANDING RESERVED(1)(2) ISSUANCE AMENDMENT
---------- ----------- -------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Preferred Stock. . . . . 1,000,000 97,500 - 902,500 902,500
Common Stock. . . . . 85,000,000 47,773,571 37,226,429 0 16,667,000 (3)
</TABLE>
- ---------
(1) Includes shares issuable upon exercise of outstanding stock options,
warrants, rights and upon conversion of Preferred Stock.
(2) Does not include 1,800,000 shares available for issuance under the
Company's 1997 Stock Option Plan assuming approval of this plan. See
"Proposal to Adopt the 1997 Stock Option Plan."
(3) After giving effect to the reservation of 8,333,000 shares issuable upon
exercise of Shareholder Rights.
13
<PAGE> 16
BOARD POSITION AND REQUIRED VOTE
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENT IS IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS
ITS ADOPTION.
Each outstanding share of Common Stock will be entitled to one vote for
or against the proposed Amendment. The proposal will be adopted only if it
receives the affirmative vote of a majority of the outstanding shares of Common
Stock. The Board of Directors urges you to vote FOR the proposed amendment.
Proxies received will be voted in favor of the proposed amendment unless
otherwise instructed.
PROPOSAL TO ADOPT THE 1997 STOCK OPTION PLAN
Introduction
At the Annual Meeting there will be presented to stockholders a
proposal to approve the adoption of the Vasomedical, Inc. 1997 Stock Option Plan
(the "1997 Option Plan"), which was approved by the Board of Directors on August
7, 1997, subject to stockholder approval. Eligible participants are officers,
directors, consultants and employees of the Company or any of its subsidiaries
or affiliates. Options granted under the 1997 Option Plan may be incentive stock
options qualified under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or non-qualified stock options. Upon approval of this
proposal, the Company will automatically terminate its existing 1995 Option Plan
and its Director Plan.
Management believes that the Company's long-term success is dependent
upon the ability of the Company to attract and retain qualified officers,
directors, consultants and employees and to motivate their best efforts on
behalf of the Company's interests. The Company believes that the 1997 Option
Plan will constitute an important part of the Company's compensation of its
officers and other employees.
The full text of the 1997 Option Plan appears in Exhibit B to this
Proxy Statement. The principal features of the 1997 Option Plan are summarized
below, but such summary is qualified in its entirety by reference to the full
text of the 1997 Option Plan.
Stock Subject to the Plan
The stock to be offered under the 1997 Option Plan consists of shares,
whether authorized but unissued or reacquired by the Company, of Common Stock of
the Company. The total number of shares of Common Stock issuable upon the
exercise of all stock options under the 1997 Option Plan may not exceed
1,800,000 shares, subject to adjustments upon the occurrence of certain events,
including stock dividends, stock splits, mergers, consolidations,
reorganizations, recapitalizations, or other capital adjustments.
Administration of the Plan
The 1997 Option Plan is to be administered by the Board of Directors of
the Company; provided, however, that the Board may, at its discretion, designate
from among its members a Compensation Committee or a Stock Option Committee (the
"Committee") consisting of no fewer than two directors. The Board intends that
its Compensation Committee will administer the 1997 Option Plan.
Subject to the terms of the 1997 Option Plan, the Board of Directors or
the Committee may determine and designate those officers and employees who are
to be granted stock options under the 1997 Option Plan and the number of shares
to be subject to such options and, as hereinafter described, the nature and
terms of the options to be granted. The Board of Directors or the Committee
shall also, subject to the express provisions of the 1997 Option Plan, have
authority to interpret the 1997 Option Plan and to prescribe, amend and rescind
the rules and regulations relating to the 1997 Option Plan.
14
<PAGE> 17
Grant of Options
Officers, directors, consultants and employees of the Company or any of
its subsidiaries or affiliates are eligible to participate in the 1997 Option
Plan.
The exercise price for incentive stock options granted under the 1997
Option Plan will be the fair market value of the Company's Common Stock on the
date of grant of the stock option (or, in the case of incentive stock options
granted to any individual who owns stock possessing more than 10% of the total
combined voting power of all voting stock of the Company [a "Principal
Stockholder"], 110% of such fair market value). The exercise price for
Non-Qualified Stock Options granted under the 1997 Option Plan will be not less
than such fair market value. The option price, as well as the number of shares
subject to such option, shall be appropriately adjusted by the Committee in the
event of stock splits, stock dividends, recapitalizations, and certain other
events involving a change in the Company's capital.
Exercise of Stock Options
Stock options granted under the 1997 Option Plan shall expire not later
than ten years from the date of grant or, in the case of any incentive stock
option granted to a Principal Stockholder, five years from the date of grant or
such shorter period as the Committee may determine.
Stock options granted under the 1997 Option Plan (an "Option") may
become exercisable in one or more installments in the manner and at the time or
times specified by the Committee. Subject to this power of the Committee, and
except in the manner described below upon the death of a person to whom an
Option is granted (an "optionee"), an Option may be exercised as follows: up to
one-third of the subject shares on or after the first anniversary of the date of
grant of such Option; up to two-thirds of the subject shares on or after the
second anniversary of the date of grant of such Option; and up to all of the
subject shares on and after the third such anniversary of the date of the grant
of such Option but in no event later than the expiration of the term of the
Option.
Upon the exercise of an Option, optionees may pay the exercise price in
cash, by certified or bank cashiers check or, at the option of the Company, in
shares of Common Stock of the Company valued at its fair market value on the
date of exercise, or a combination thereof. Withholding and other employment
taxes applicable to the exercise of an Option shall be paid by the optionee at
such time as the optionee has recognized gross income under the Code resulting
from such exercise. These taxes may, at the option of the Company, be paid in
shares of Common Stock.
An Incentive Stock Option shall be exercisable during the optionee's
lifetime only by the Optionee and shall not be exercisable by the optionee
unless, at all times since the date of grant and at the time of exercise, such
optionee is an employee of the Company, or any subsidiary or affiliate, except
that, upon termination of all employment (other than by death or by total
disability followed by death in the circumstances provided below) with the
Company, any subsidiary or any affiliate, the optionee may exercise an incentive
stock option at any time within three months thereafter but only to the extent
such Option is exercisable on the date of such termination.
In the event of the death of an optionee (i) while an employee of the
Company, any parent corporation of the Company or any subsidiary, or (ii) within
three months after termination of all employment with the Company, any parent
corporation of the Company and any subsidiary (other than for total disability)
or (iii) within one year after termination on account of total disability of all
employment with the Company, any parent corporation of the Company and any
Subsidiary, such optionee's estate or any person who acquires the right to
exercise such option by bequest or inheritance or by reason of the death of the
optionee may exercise such optionee's Option at any time within the period of
three years from the date of death. In the case of clauses (i) and (iii) above,
such Option shall be exercisable in full for all the remaining shares covered
thereby, but in the case of clause (ii) such Option shall be exercisable only to
the extent it is exercisable on the date of such termination.
To the extent the aggregate market value of the Common Stock
(determined as of the date of grant) with respect to which any Options granted
are intended to be designated as incentive stock options under the 1997 Option
Plan which may be exercisable for the first time by the optionee in any calendar
year exceeds $100,000, such options shall not be considered incentive stock
options.
Options granted under the 1997 Option Plan may not be transferred by
the holder other than by will or the laws of descent and distribution and may be
exercised during the holder's lifetime only by the holder.
15
<PAGE> 18
Change in Control
In the event of a Change in Control (as defined in the 1997 Option
Plan), (a) all Options outstanding on the date of such Change in Control shall,
for a period of sixty (60) days following such Change in Control, become
immediately and fully exercisable, and (b) an optionee will be permitted to
surrender for cancellation within sixty (60) days after such Change in Control
any Option or portion of an Option which was granted more than six (6) months
prior to the date of such surrender, to the extent not yet exercised, and to
receive a cash payment in an amount equal to the excess, if any, of the fair
market value (on the date of surrender) of the shares of Common Stock subject to
the Option or portion thereof surrendered, over the aggregate purchase price for
such shares under the Option.
Federal Income Tax Consequences
Incentive stock options granted under the 1997 Option Plan are intended
to be qualified incentive stock options in accordance with the provisions of
Section 422 of the Code. All other options granted under the 1997 Option Plan
are non-qualified options not entitled to special tax treatment under Section
422 of the Code. Generally, the grant of an incentive stock option will not
result in taxable income to the recipient at the time of the grant, and the
Company will not be entitled to an income tax deduction at such time. The grant
of non-qualified options will not result in taxable income to the recipient at
the time of the grant to the extent that it is granted at 100% of the fair
market value of the Company's Common Stock at such time. So long as such option
does not result in taxable income to the recipient at the time of the grant, the
Company will not be entitled to an income tax deduction.
Upon the exercise of an incentive stock option granted under the 1997
Option Plan, the recipient will not be treated as receiving any taxable income,
and the Company will not be entitled to an income tax deduction. Upon the
exercise of a non-qualified option, an employee who is not a director or officer
of the Company will be treated as receiving compensation, taxable as ordinary
income, in an amount equal to the excess of the fair market value of the
underlying shares of the Company's Common Stock at the time of exercise, over
the exercise price. The date of recognition and determination of the ordinary
compensation income attributable to shares received upon exercise of an option
by an officer of the Company, while he or she is subject to Section 16(b) of the
Securities Exchange Act of 1934, is generally delayed until six months after
such exercise, unless that person elects to be taxed as of the date of exercise.
The Company will receive an income tax deduction for the amount treated as
compensation income to the recipient at the time and in the amount that the
recipient recognizes such income.
Upon subsequent disposition of the shares subject to the option, any
differences between the tax basis of the shares and the amount realized on the
disposition is generally treated as long-term or short-term capital gain or
loss, depending on the holding period of the shares of Common Stock; provided,
that if the shares subject to an incentive stock option are disposed of prior to
the expiration of two years from the date of grant and one year from the date of
exercise, the gain realized on the disposition will be treated as ordinary
compensation income to the optionee.
BOARD POSITION AND REQUIRED VOTE
Each outstanding share of Common Stock will be entitled to one vote for
or against the proposal to adopt the 1997 Option Plan. The proposal will be
adopted only if it receives the affirmative vote of a majority of the
outstanding shares of Common Stock. The Board of Directors urges you to vote FOR
the proposal. Proxies received will be voted in favor of the proposal unless
otherwise instructed.
16
<PAGE> 19
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors recommends that the shareholders approve the
appointment of Grant Thornton LLP as the Company's independent public
accountants to examine the financial statements of the Company for the fiscal
year ending May 31, 1998. Grant Thornton LLP acted as the Company's independent
public accountants for the fiscal years ended May 31, 1992 through May 31, 1997
and has been selected by the Board of Directors to continue to act as the
Company's independent public accountants for the Company's 1998 fiscal year.
A representative of Grant Thornton LLP plans to be present at the
Annual Meeting with the opportunity to make a statement, if he desires to do so,
and will be available to respond to appropriate questions.
FINANCIAL STATEMENTS AND INCORPORATION BY REFERENCE
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1997 has been provided to all stockholders as of the Record Date.
Stockholders are referred to the report for financial and other information
about the Company, but such report, other than the Selected Financial Data,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Financial Statements, is not incorporated in this proxy statement
and is not a part of the proxy soliciting material.
MISCELLANEOUS INFORMATION
As of the date of this Proxy Statement, the Board of Directors does not
know of any business other than that specified above to come before the meeting,
but, if any other business does lawfully come before the meeting, it is the
intention of the persons named in the enclosed Proxy to vote in regard thereto
in accordance with their judgment.
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by use of the mails, certain officers and
regular employees of the Company may solicit proxies by telephone, telegraph or
personal interview. The Company may also request brokerage houses and other
custodians and nominees and fiduciaries, to forward soliciting material to the
beneficial owners of stock held of record by such persons, and may make
reimbursement for payments made for their expense in forwarding soliciting
material to such beneficial owners.
Stockholder proposals with respect to the Company's next Annual Meeting
of Stockholders must be received by the Company no later than June 1, 1998 to be
considered for inclusion in the Company's next Proxy Statement.
By Order of the Board of Directors,
JOSEPH A. GIACALONE
Secretary
Dated: Westbury, New York
October 15, 1997
17
<PAGE> 20
EXHIBIT A
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
The following sets forth the changes to Article IV of the Company's
Certificate of Incorporation if the proposed amendment is approved:
"ARTICLE IV. CAPITAL STOCK. The authorized capital stock of the
Corporation shall consist of 110,000,000 shares of Common Stock, $.001 par value
per share, (hereinafter referred to as either the "Common Shares" or "Common
Stock") and 1,000,000 shares of Preferred Stock, $.01 par value per share
(hereinafter referred to as either "Preferred Shares" or "Preferred Stock")."
A-1
<PAGE> 21
EXHIBIT B
VASOMEDICAL, INC.
1997 STOCK OPTION PLAN
SECTION 1. GENERAL PROVISIONS
1.1. NAME AND GENERAL PURPOSE
The name of this plan is the Vasomedical, Inc. 1997 Stock Option Plan
(hereinafter called the "Plan"). The purpose of the Plan is to enable
Vasomedical, Inc. (the "Company") and its subsidiaries and affiliates to foster
and promote the interests of the Company by attracting and retaining directors,
officers, consultants and employees of the Company who contribute to the
Company's success by their ability, ingenuity and industry, to enable such
officers and employees of the Company to participate in the long-term success
and growth of the Company by giving them a proprietary interest in the Company
and to provide incentive compensation opportunities competitive with those of
competing corporations.
1.2 DEFINITIONS
a. "Affiliate" means any person or entity controlled by or
under common control with the Company, by virtue of the
ownership of voting securities, by contract or
otherwise.
b. "Board" means the Board of Directors of the Company.
c. "Change in Control" means a change of control of the
Company, or in any person directly or indirectly
controlling the Company, which shall mean:
(a) a change in control as such term is presently
defined in Regulation 240.12b-(f) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
or
(b) if any "person" (as such term is used in Section
13(d) and 14(d) of the Exchange Act) other than the
Company or any "person" who on the date of this
Agreement is a director or officer of the Company,
becomes the "beneficial owner" (as defined in Rule
13(d)-3 under the Exchange Act) directly or indirectly,
of securities of the Company representing twenty
percent (20%) or more of the voting power of the
Company's then outstanding securities; or
(c) if during any period of two (2) consecutive years
during the term of this Plan, individuals who at the
beginning of such period constitute the Board of
Directors, cease for any reason to constitute at least
a majority thereof.
d. "Code" means the Internal Revenue Code of 1986, as
amended.
e. "Committee" means the Committee referred to in Section
1.3 of the Plan.
f. "Common Stock" means shares of the Common Stock, par
value $.001 per share, of the Company.
g. "Company" means Vasomedical, Inc., a corporation
organized under the laws of the State of Delaware (or
any successor corporation).
h. "Fair Market Value" means the market price of the
Common Stock on the NASDAQ consolidated reporting
system on the date of the grant or on any other date on
which the Common Stock is to be valued hereunder. If no
sale shall have been reported on the NASDAQ
consolidated reporting system on such date, Fair Market
Value shall be determined by the Committee in
accordance with the Treasury Regulations applicable to
incentive stock options under Section 422 of the Code.
B-1
<PAGE> 22
i. "Incentive Stock Option" means an Incentive Stock
Option as described in Section 2.1 of the Plan.
j. "Non-Employee Director" shall have the meaning set
forth in Rule 16(b) promulgated by the Securities and
Exchange Commission ("Commission").
k. "Non-Qualified Stock Option" means a Non-Qualified
Stock Option as described in Section 2.1 of the Plan.
l. "Option" means any option to purchase Common Stock
under Section 2 of the plan.
m. "Participant" means any director, officer, consultant
or employee of the Company, a Subsidiary or an
Affiliate who is selected by the Committee to
participate in the Plan.
n. "Subsidiary" means any corporation in which the Company
possesses directly or indirectly 50% or more of the
combined voting power of all classes of stock of such
corporation.
o. "Total Disability" means accidental bodily injury or
sickness which wholly and continuously disabled an
optionee. The Committee, whose decisions shall be
final, shall make a determination of Total Disability.
1.3 ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee appointed by the Board
consisting of two or more members of the Board all of whom shall be Non-Employee
Directors. The Committee shall serve at the pleasure of the Board and shall have
such powers as the Board may, from time to time, confer upon it.
Subject to this Section 1.3, the Committee shall have sole and complete
authority to adopt, alter, amend or revoke such administrative rules, guidelines
and practices governing the operation of the Plan as it shall, from time to
time, deem advisable, and to interpret the terms and provisions of the Plan.
The Committee shall keep minutes of its meetings and of action taken by
it without a meeting. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by all of the members of the Committee
without a meeting, shall constitute the acts of the Committee.
1.4 ELIGIBILITY
Stock options may be granted only to officers, directors, consultants
and employees of the Company or a Subsidiary or Affiliate. Subject to Section
2.3, any person who has been granted any Option may, if he is otherwise
eligible, be granted an additional Option or Options.
1.5 SHARES
The aggregate number of shares reserved for issuance pursuant to the
Plan shall be 1,800,000 shares of Common Stock, or the number and kind of shares
of stock or other securities which shall be substituted for such shares or to
which such shares shall be adjusted as provided in Section 1.6. No individual
may be granted options to purchase more than an aggregate of 300,000 shares of
Common Stock pursuant to the Plan.
The aggregate number of shares may be set aside out of the authorized
but unissued shares of Common Stock or out of issued shares of Common Stock
acquired for and held in the Treasury of the Company, not reserved for any other
purpose. Shares subject to, but not sold or issued under, any Option terminating
or expiring for any reason prior to its exercise in full will again be available
for Options thereafter granted during the balance of the term of the Plan.
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1.6 ADJUSTMENTS DUE TO STOCK SPLITS, MERGERS, CONSOLIDATION, ETC.
If, at any time, the Company shall take any action, whether by stock
dividend, stock split, combination of shares or otherwise, which results in a
proportionate increase or decrease in the number of shares of Common Stock
theretofore issued and outstanding, the number of shares which are reserved for
issuance under the Plan and the number of shares which, at such time, are
subject to Options shall, to the extent deemed appropriate by the Committee, be
increased or decreased in the same proportion, provided, however, that the
Company shall not be obligated to issue fractional shares.
Likewise, in the event of any change in the outstanding shares of
Common Stock by reason of any recapitalization, merger, consolidation,
reorganization, combination or exchange of shares or other corporate change, the
Committee shall make such substitution or adjustments, if any, as it deems to be
appropriate, as to the number or kind of shares of Common Stock or other
securities which are reserved for issuance under the Plan and the number of
shares or other securities which, at such time are subject to Options.
In the event of a Change in Control, at the option of the Board or
Committee, (a) all options outstanding on the date of such Change in Control
shall, for a period of sixty (60) days following such Change in Control, become
immediately and fully exercisable, and (b) an optionee will be permitted to
surrender for cancellation within sixty (60) days after such Change in Control
any option or portion of an option which was granted more than six (6) months
prior to the date of such surrender, to the extent not yet exercised, and to
receive a cash payment in an amount equal to the excess, if any, of the Fair
Market Value (on the date of surrender) of the shares of Common Stock subject to
the option or portion thereof surrendered, over the aggregate purchase price for
such Shares under the option.
1.7 NON-ALIENATION OF BENEFITS
Except as herein specifically provided, no right or unpaid benefit
under the Plan shall be subject to alienation, assignment, pledge or charge and
any attempt to alienate, assign, pledge or charge the same shall be void. If any
Participant or other person entitled to benefits hereunder should attempt to
alienate, assign, pledge or charge any benefit hereunder, then such benefit
shall, in the discretion of the Committee, cease.
1.8 WITHHOLDING OR DEDUCTION FOR TAXES
If, at any time, the Company or any Subsidiary or Affiliate is
required, under applicable laws and regulations, to withhold, or to make any
deduction for any taxes, or take any other action in connection with any Option
exercise, the Participant shall be required to pay to the Company or such
Subsidiary or Affiliate, the amount of any taxes required to be withheld, or, in
lieu thereof, at the option of the Company, the Company or such Subsidiary or
Affiliate may accept a sufficient number of shares of Common Stock to cover the
amount required to be withheld.
1.9 ADMINISTRATIVE EXPENSES
The entire expense of administering the Plan shall be borne by the
Company.
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1.10 GENERAL CONDITIONS
a. The Board or the Committee may, from time to time, amend,
suspend or terminate any or all of the provisions of the Plan,
provided that, without the Participant's approval, no change may
be made which would prevent an Incentive Stock Option granted
under the Plan from qualifying as an Incentive Stock Option
under Section 422 of the Code or result in a "modification" of
the Incentive Stock Option under Section 424(h) of the Code or
otherwise alter or impair any right theretofore granted to any
Participant ; and further provided that, without the consent and
approval of the holders of a majority of the outstanding shares
of Common Stock of the Company present at a meeting at which a
quorum exists, neither the Board nor the Committee may make any
amendment which (i) changes the class of persons eligible for
options; (ii) increases (except as provided under Section 1.6
above) the total number of shares or other securities reserved
for issuance under the Plan; (iii) decreases the minimum option
prices stated in Section 2.2 hereof (other than to change the
manner of determining Fair Market Value to conform to any then
applicable provision of the Code or any regulation thereunder);
(iv) extends the expiration date of the Plan, or the limit on
the maximum term of Options; or (v) withdraws the administration
of the Plan from a committee consisting of two or more members,
each of whom is a Non-Employee Director.
b. With the consent of the Participant affected thereby, the
Committee may amend or modify any outstanding Option in any
manner not inconsistent with the terms of the Plan, including,
without limitation, and irrespective of the provisions of
Sections 2.3(c) and 2.4(b) below, to accelerate the date or
dates as of which an installment of an Option becomes
exercisable.
c. Nothing contained in the Plan shall prohibit the Company or any
Subsidiary or Affiliate from establishing other additional
incentive compensation arrangements for employees of the Company
or such Subsidiary or Affiliate.
d. Nothing in the Plan shall be deemed to limit, in any way, the
right of the Company or any Subsidiary or Affiliate to terminate
a Participant's employment with the Company (or such Subsidiary
or Affiliate) at any time.
e. Any decision or action taken by the Board or the Committee
arising out of or in connection with the construction,
administration, interpretation and effect of the Plan shall be
conclusive and binding upon all Participants and any person
claiming under or through any Participant.
f. No member of the Board or of the Committee shall be liable for
any act or action, whether of commission or omission, (i) by
such member except in circumstances involving actual bad faith,
nor (ii) by any other member or by any officer, agent or
employee.
1.11 COMPLIANCE WITH APPLICABLE LAW
Notwithstanding any other provision of the Plan, the Company shall not
be obligated to issue any shares of Common Stock, or grant any Option with
respect thereto, unless it is advised by counsel of its selection that it may do
so without violation of the applicable Federal and State laws pertaining to the
issuance of securities and the Company may require any stock certificate so
issued to bear a legend, may give its transfer agent instructions limiting the
transfer thereof, and may take such other steps, as in its judgment are
reasonably required to prevent any such violation.
1.12 EFFECTIVE DATES
The Plan was adopted by the Board on August 7, 1997, subject to
approval by the stockholders of the Company. The Plan shall terminate on August
6, 2007.
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SECTION 2. OPTION GRANTS
2.1 AUTHORITY OF COMMITTEE
Subject to the provisions of the Plan, the Committee shall have the
sole and complete authority to determine (i) the Participants to whom Options
shall be granted; (ii) the number of shares to be covered by each Option; and
(iii) the conditions and limitations, if any, in addition to those set forth in
Sections 2 and 3 hereof, applicable to the exercise of an Option, including
without limitation, the nature and duration of the restrictions, if any, to be
imposed upon the sale or other disposition of shares acquired upon exercise of
an Option.
Stock options granted under the Plan may be of two types: an incentive
stock option ("Incentive Stock Option"); and a non-qualified stock option
("Non-Qualified Stock Option").
It is intended that the Incentive Stock Options granted hereunder shall
constitute incentive stock options within the meaning of Section 422 of the Code
and shall be subject to the tax treatment described in Section 422 of the Code.
Anything in the Plan to the contrary notwithstanding, no provision of
the Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or, without the consent of the
optionee, any Incentive Stock Option under Section 422 of the Code.
The Committee shall have the authority to grant Incentive Stock
Options, or to grant Non-Qualified Stock Options, or to grant both types of
Options. To the extent that any Option does not qualify as an Incentive Stock
Option, in whole or in part, it shall constitute a separate Non-Qualified Stock
Option to the extent of such disqualification.
2.2 OPTION EXERCISE PRICE
The price of stock purchased upon the exercise of Options granted
pursuant to the Plan shall be the Fair Market Value thereof at the time that the
Option is granted.
If an employee owns or is deemed to own (by reason of the attribution
rules applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of the stock of the Company or any parent
corporation of the Company or Subsidiary and an Option granted to such employee
is intended to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code, the exercise price shall be no less than 110% of the
Fair Market Value of the Common Stock on the date the Option is granted. The
purchase price is to be paid in full in cash, certified or bank cashier's check
or, at the option of the Company, Common Stock valued at its Fair Market Value
on the date of exercise, or a combination thereof, when the Option is exercised
and stock certificates will be delivered only against such payment.
2.3 INCENTIVE STOCK OPTION GRANTS
Each Incentive Stock Option will be subject to the following
provisions:
a. Term of Option
An Incentive Stock Option will be for a term of not more than
ten years from the date of grant, except in the case of an
employee described in the second paragraph of Section 2.2 above
in which case an Incentive Stock Option will be for a term of
not more than five years from the date of the grant.
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b. Annual Limit
To the extent the aggregate Fair Market Value of the Common
Stock (determined as of the date of grant) with respect to which
any options granted hereunder are intended to be designated as
Incentive Stock Options under the Plan (or any other incentive
stock option plan of the Company or any Subsidiary) which may be
exercisable for the first time by the optionee in any calendar
year exceeds $100,000, such options shall not be considered
incentive stock options.
c. Exercise
Subject to the power of the Committee under Section 1.10(b)
above and except in the manner described below upon the death of
the optionee, an Incentive Stock Option may be exercised as
follows: up to one-third of the subject shares on or after the
first anniversary of the date of grant of such Option; up to
two-thirds of the subject shares on or after the second
anniversary of the date of grant of such Option and up to all of
the subject shares on and after the third such anniversary of
the date of the grant of such Option but in no event later than
the expiration of the term of the Option.
An Incentive Stock Option shall be exercisable during the
optionee's lifetime only by the optionee and shall not be
exercisable by the optionee unless, at all times since the date
of grant and at the time of exercise, such optionee is an
employee of the Company, any parent corporation of the Company
or any Subsidiary, except that, upon termination of all
employment (other than by death or by Total Disability followed
by death in the circumstances provided below) with the Company,
any parent corporation of the Company and any Subsidiary or
Affiliate, the optionee may exercise an Incentive Stock Option
at any time within three months thereafter but only to the
extent such Option is exercisable on the date of such
termination.
Upon termination of all employment by Total Disability, the
Optionee may exercise such options at any time within one year
thereafter, but only to the extent such options are exercisable
on the date of such termination.
If termination of employment is the result of the optionee
having reached normal retirement age, option grants continue to
be exercisable for five years after retirement but in no event
later than the expiration of the term of the Option.
In the event of the death of an optionee (i) while an employee
of the Company, any parent corporation of the Company or any
Subsidiary or Affiliate, or (ii) within three months after
termination of all employment with the Company, any parent
corporation of the Company and any Subsidiary or Affiliate
(other than for Total Disability) or (iii) within one year after
termination on account of Total Disability of all employment
with the Company, any parent corporation of the Company and any
Subsidiary, such optionee's estate or any person who acquires
the right to exercise such option by bequest or inheritance or
by reason of the death of the optionee may exercise such
optionee's Option at any time within the period of three years
from the date of death. In the case of clauses (i) and (iii)
above, such Option shall be exercisable in full for all the
remaining shares covered thereby, but in the case of clause (ii)
such Option shall be exercisable only to the extent it was
exercisable on the date of such termination.
Notwithstanding the foregoing provisions regarding the exercise
of an Option in the event of death, Total Disability or other
termination of employment, in no event shall an Option be
exercisable in whole or in part after the termination date
provided in the Option.
d. Transferability
An Incentive Stock Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent
and distribution.
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2.4 NON-QUALIFIED STOCK OPTION GRANTS
Each Non-Qualified Stock Option will be subject to the following
provisions:
a. Term of Option
A Non-Qualified Stock Option will be for a term of not more than
ten years from the date of grant.
b. Exercise
The exercise of a Non-Qualified Stock Option shall be subject to
the same terms and conditions as provided under Section 2.3(c)
above, except that upon termination of all employment by Total
Disability, the Optionee may exercise such options at any time
within three years after termination on account of Total
Disability of all employment with the Company, or any Subsidiary
or Affiliate.
c. Transferability
A Non-Qualified Stock Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent
and distribution, except as may be permitted by the Board or
Committee.
2.5 AGREEMENTS
In consideration of any Options granted to a Participant under the
Plan, each such Participant shall enter into an Option Agreement with the
Company providing, consistent with the Plan, such terms as the Committee may
deem advisable.
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VASOMEDICAL,
INC.
The undersigned hereby appoints
Anthony Viscusi and E. Donald Shapiro, or either of
them, attorneys and Proxies with full power of
substitution in each of them, in the name and stead
of the undersigned to vote as Proxy all the stock of
the undersigned in VASOMEDICAL, INC., a Delaware
corporation, at the Annual Meeting of Stockholders
scheduled to be held on December 4, 1997 and any
adjournments thereof.
The Board of Directors recommends a vote FOR the following proposals:
1. Election of the following nominees, as set forth in the proxy statement:
Abraham E. Cohen John C.K. Hui
[ ] FOR all nominees listed above [ ] WITHHOLD authority to vote
(Instruction: To withhold authority to vote for any individual nominee,
print the nominee's name on the line provided below)
2. To amend the Certificate of Incorporation to increase the authorized shares
of Common Stock from 85,000,000 to 110,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To adopt the 1997 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the appointment by the Board of Directors of Grant Thornton LLP
as the Company's independent certified public accountants for fiscal 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Upon such other business as may properly come before the meeting or any
adjournment thereof.
(Continued and to be signed on reverse side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE SHARES REPRESENTED HEREBY SHALL BE VOTED BY PROXIES, AND EACH OF THEM, AS
SPECIFIED AND, IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING. SHAREHOLDERS MAY WITHHOLD THE VOTE FOR ONE OR MORE
NOMINEE(S) BY WRITING THE NOMINEE(S) NAME(S) IN THE BLANK SPACE PROVIDED ON THE
REVERSE HEREOF. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE
PROPOSALS SET FORTH ON THE REVERSE HEREOF.
Dated: _____________, 1997
_______________________________________[L.S.]
_______________________________________[L.S.]
(Note: Please sign exactly as your
name appears hereon. Executors,
administrators, trustees, etc. should so
indicate when signing, giving full title as
such. If signer is a corporation, execute in
full corporate name by authorized officer.
If shares are held in the name of two or
more persons, all should sign.)
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
