<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Versus Technology, Inc.
..............................................................................
(Name of Registrant as Specified In Its Charter)
..............................................................................
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
...........................................................................
4) Proposed maximum aggregate value of transaction:
...........................................................................
5) Total fee paid:
...........................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
..........................................................
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
..........................................................
4) Date Filed:
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<PAGE 2>
VERSUS TECHNOLOGY, INC.
A Delaware Corporation
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on April 23, 1999
To the Shareholders of Versus Technology, Inc.:
The Annual Meeting of the Shareholders of VERSUS TECHNOLOGY, INC.
(the "Company") will be held at the Park Place Hotel, 300 East
State Street, Traverse City, Michigan 49684, on Friday, April 23,
1999, at 9:00 a.m. EDT for the following purposes:
1. To elect four (4) directors of the Company to serve
until the next succeeding Annual Meeting of Shareholders
and until their successors have been elected and have
qualified.
2. To approve an amendment to Article 4 of the Company's
Certificate of Incorporation to provide for a one-for-
ten reverse split of the Company's capital stock.
3. To approve the 1999 Employee Incentive Stock Option
Plan.
4. To transact such other business as may properly come
before the meeting or any adjournments.
Only Shareholders of record at the close of business on the 9th
day of March, 1999, are entitled to notice of and to vote at this
meeting.
The Company's 1998 Annual Report to Shareholders is enclosed.
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
By Order of the Board of Directors
Andrea Beadle, Corporate Secretary
March 18, 1999
<PAGE 3>
VERSUS TECHNOLOGY, INC.
Corporate Headquarters:
2600 Miller Creek Road
Traverse City, Michigan 49684
Telephone Number: (616) 946-5868
PROXY STATEMENT
General
This Proxy Statement is furnished to the Shareholders of Versus
Technology, Inc. ("Versus" or the "Company") in connection with
the solicitation of proxies by order of the Board of Directors of
the Company for the Annual Meeting of Shareholders to be held on
April 23, 1999, at 9:00 a.m., Eastern Daylight Time, at the Park
Place Hotel, 300 East State Street, Traverse City, Michigan
49684, for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders.
The approximate date on which this Proxy Statement, the enclosed
Proxy and the Company's 1998 Annual Report to Shareholders will
be first sent or given to Shareholders is March 18, 1999.
The enclosed Proxy is being solicited on behalf of the Board of
Directors of the Company, and all costs of solicitation will be
borne by the Company. Such costs include preparation, printing
and mailing of the Notice of Annual Meeting of Shareholders, Form
of Proxy, Proxy Statement, and Annual Report, which are herein
enclosed. The solicitation will be conducted principally by
mail, although Directors, officers, and regular employees of the
Company may solicit Proxies personally or by telephone, E-mail,
or facsimile. Such persons will not receive special compensation
for such services. Arrangements will be made with brokerage
houses and other custodians, nominees, and fiduciaries for proxy
material to be sent to their principals, and the Company will
reimburse such persons for their reasonable expenses in so doing.
You are requested to mark, sign, and complete the accompanying
Proxy and return it in the envelope provided. Proxies in such
form, if duly signed and received in time for the voting, will be
voted in accordance with the directions of each Shareholder. The
proxy holders identified on the Proxy have been selected by the
Board of Directors. The proxy holders shall have the
discretionary authority to vote for the election of Directors and
distribute such votes among the nominees standing for election
(except as otherwise instructed by a Shareholder in the
accompanying Proxy), for adoption of the amendment to the
Company's Certificate of Incorporation described herein, for
approval of the 1999 Employee Incentive Stock Option Plan, and on
any other matters that may properly come before the Annual
Meeting of Shareholders.
<PAGE 4>
If the enclosed Proxy is executed and returned, it may,
nevertheless, be revoked at any time before it has been exercised
upon written notice to the Secretary of the Company. The Proxy
shall also be deemed revoked if a Shareholder is present at the
Meeting and elects to vote in person.
Each holder of the Company's common stock, par value $.01 (the
"Common Stock") at the close of business on March 9, 1999 (the
"Record Date"), is entitled to one vote per share on each matter
that comes before the meeting. With respect to the election of
Directors, a vote of a plurality of the number of shares voting
is required for election. With respect to the amendment to the
Company's Certificate of Incorporation, a majority of the issued
and outstanding shares entitled to vote is required for approval
of the amendment. With respect to the 1999 Employee Incentive
Stock Option Plan, a vote of the majority of the number of shares
voting is required for approval. Abstentions will be counted as
votes cast, but Proxies submitted by brokers with a "not voted"
direction will not be counted as votes cast with respect to each
matter to be voted upon where such instruction is given.
At the close of business on March 9, 1999, there were outstanding
38,507,575 shares of Common Stock, the only class of stock
outstanding.
<PAGE 5>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to the Common Stock
beneficially owned (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) by any person who,
as of March 9, 1999, to the knowledge of the Board of Directors
of the Company, owned beneficially more than 5% of the
outstanding Common Stock of the Company (to date, the Company has
not issued any shares of Preferred Stock):
Name and Address of Amount and Nature of Percentage of Class
Beneficial Owner Beneficial Ownership Outstanding
Gary T. Gaisser 6,536,123(1) 16.6%
c/o Versus Technology, Inc.
2600 Miller Creek Road
Traverse City, MI 49684
Anthony B. Low-Beer 5,602,500(2) 14.5%
c/o Brimberg & Co.
45 Rockefeller Plaza,
Suite 2570
New York, NY 10111
William Harris Investors 3,390,000(3) 8.8%
2 North LaSalle Street,
Suite 400
Chicago, IL 60602
(1) This total includes 750,000 shares that are currently acquirable by
Mr. Gaisser upon exercise of an outstanding option issued by the Company. It
also includes 36,000 shares that vest and become acquirable on April 24, 1999,
by Mr. Gaisser upon exercise of an outstanding option issued by the Company.
(2) As reported on Schedule 13D filed May 7, 1998. Of these shares,
2,160,000 are held in managed accounts over which Mr. Low-Beer shares
dispositive power.
(3) As reported on Schedule 13G filed February 16, 1999.
<PAGE 6>
Security Ownership of Management
The following table sets forth as of March 9, 1999, the
beneficial ownership of the Company's Common Stock by all
Directors, nominees and named executive officers of and by all
the Directors, nominees and executive officers of the Company as
a group:
Name of Beneficial Position(s) with the Amount and Nature Percentage
Owner Company(1) of Beneficial of Class
Ownership(1) Outstanding
Gary T. Gaisser President, Chief 6,536,123(2) 16.6%
Executive Officer,
and Director
Samuel Davis Chairman of the Board 843,000(3) 2.2%
Julian C. Schroeder Director 625,582(4) 1.6%
David L. Gray Director 128,000(5) 0.3%
All executive officers 8,628,480(6) 21.4%
and directors as a group
(7 persons)
(1) Each director has sole voting and investment power as to all shares
reflected as beneficially owned by him, except as otherwise noted. Messrs.
Gaisser, Davis, Schroeder, and Gray are all of the Company's present
Directors.
(2) This total includes 750,000 shares that are currently acquirable by
Mr. Gaisser upon exercise of an outstanding option issued by the Company. It
also includes 36,000 shares that vest and become acquirable on April 24, 1999,
by Mr. Gaisser upon exercise of an outstanding option issued by the Company.
(3) This total includes 100,000 shares that are currently acquirable by
Mr. Davis upon exercise of an outstanding option issued by the Company. It
also includes 200,000 shares that vest and become acquirable on April 23,
1999, and 73,000 shares that vest and become acquirable on April 24, 1999, by
Mr. Davis upon exercise of outstanding options issued by the Company.
(4) This total includes 217,582 shares currently acquirable under the
terms of warrants issued by the Company. It also includes 73,000 shares that
vest and become acquirable on April 24, 1999, by Mr. Schroeder upon exercise
of an outstanding option issued by the Company.
(5) This total includes 73,000 shares that vest and become acquirable on
April 24, 1999, by Mr. Gray upon exercise of an outstanding option issued by
the Company.
(6) This total includes 1,791,697 shares acquirable currently or within
sixty days under outstanding warrants and options.
<PAGE 7>
PROPOSAL ONE
ELECTION OF DIRECTORS
General
The Shareholders are being asked to elect four Directors, who
will comprise the entire Board of Directors of the Company, to
serve for the ensuing year and until their successors are duly
elected and qualified. The nominees are all current members of
the Board of Directors who were elected by the Shareholders at
the previous Annual Meeting of Shareholders, except for Mr. Gray,
who was elected in April of 1998 by the Board of Directors acting
pursuant to the Company's By-laws. In the event that any nominee
for Director should become unavailable, which event the Board of
Directors does not anticipate, it is intended that votes will be
cast pursuant to the enclosed Proxy for such substitute nominee
as may be nominated by the Board of Directors, unless otherwise
directed by the Shareholder in the Proxy.
The Board has established a Compensation Committee, presently
consisting of Mr. Davis, Mr. Schroeder, and Mr. Gray, which
administers the Company's stock option plans and reviews employee
compensation and benefits. The Compensation Committee met two
times during the fiscal year ended October 31, 1998.
The Board also established an Audit Committee, presently
consisting of Mr. Schroeder, Mr. Gray, and Mr. Davis. The Audit
Committee meets with the Company's officers and the independent
auditors to review the Company's annual audit and financial
statements. The Audit Committee met one time during the fiscal
year ended October 31, 1998.
The Board has not established a separate nominating committee as
nominations are considered and made by the Board as a whole. The
Board will consider nominees for the Board of Directors
recommended by Shareholders. Shareholders desiring to make such
recommendations should write directly to the Board at the
Company's executive offices at 2600 Miller Creek Road, Traverse
City, Michigan 49684.
The Board of Directors met three times during the fiscal year
ended October 31, 1998. During that fiscal year, each of the
incumbent Directors attended at least 75% of the aggregate of (1)
the total number of meetings of the Board of Directors held
during the period for which he has been a Director and (2) the
total number of meetings held by all Committees of the Board on
which he served during the period that he served.
<PAGE 8>
Information Concerning Directors and Nominees for Director
The Board of Directors presently consists of Gary T. Gaisser,
Samuel Davis, Julian C. Schroeder, and David L. Gray. The Board
has nominated Messrs. Gaisser, Davis, Schroeder, and Gray to
serve on the Board for a term of one year or until their
successors are elected and shall qualify.
The following information is furnished with respect to the
nominees for Directors of the Company:
Nominees for Director Age Position(s) with the Company
Gary T. Gaisser 47 Director, President, and Chief
Executive Officer
Samuel Davis 67 Chairman of the Board
Julian C. Schroeder 51 Director
David L. Gray 50 Director
Gary T. Gaisser has served as President and Chief Executive
Officer of the Company since January, 1995, and has served as a
Director of the Company since April, 1995. Prior to that, he was
President of Olmsted Engineering Co. ("Olmsted"), now a wholly
owned subsidiary of the Company. Mr. Gaisser had been with
Olmsted since 1988.
Samuel Davis has served as a Director of the Company since
August, 1997, and Chairman of the Board since April 24, 1998.
Since 1986, he has been President of Sam Davis & Associates, a
management-consulting firm which specializes in healthcare
strategy and organizational change. He is affiliated with the
Delta Consulting Group with whom he served as Senior Director.
Mr. Davis is the former President and CEO of the Mount Sinai
Hospital in New York City. He is Clinical Professor of the
School of Public Health of Columbia University and Distinguished
Service Professor of the Mount Sinai School of Medicine in New
York City.
Julian C. Schroeder has served as a Director of the Company since
August, 1994. As of March, 1997, Mr. Schroeder became Director,
International Fixed Income Research, with Schroder & Co., Inc., a
registered broker-dealer. He previously served with BDS
Securities, L.L.C., a registered broker-dealer, and its
predecessor, BDS Securities Corporation, a registered broker-
dealer, since 1989, and from 1995 to March, 1997, served as its
President. Mr. Schroeder is also a Director of Optical Coating
Laboratories, a manufacturer of thin-film products.
<PAGE 9>
David L. Gray, CPA, has served as a Director of the Company since
April, 1998. He is President and Director of Tortola
Enterprises, Inc., a management consulting firm, and has served
in this position since 1986. In this position, he serves as an
advisor to boards of directors and executive management of a
spectrum of operating businesses, both domestic and
international. He previously served as President of Sara Lee
Bakery Company and as President and CEO of Chef Pierre, Inc. Mr.
Gray also serves as a member of boards of directors for a number
of business enterprises and non-profit organizations, including
Gordon Food Service, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
ELECTION OF GARY T. GAISSER, SAMUEL DAVIS, JULIAN C. SCHROEDER
AND DAVID L. GRAY.
There is no family relationship between any officers or directors
nor are there any understandings among any officers or directors
and any other person(s) pursuant to which any such officer or
director was or is to be selected as such.
<PAGE 10>
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation paid to
the Chief Executive Officer of the Company during the fiscal
years ended October 31, 1998, 1997, and 1996. There were no
other executive officers of the Company who received combined
salary and bonuses for the year ended October 31, 1998, equaling
or exceeding $100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Name and Fiscal Salary Bonus Other Annual Securities All Other
Principal Year Compensation Underlying Compensation
Position Options
Gary T. Gaisser, 1998 $147,290 $9,690(1) 36,000 $3,727(5)
President, CEO,
and Director
Gary T. Gaisser 1997 $134,500 $ 200(2) $3,901(5)
$7,350(3)
Gary T. Gaisser 1996 $78,000 $400(4) 1,000,000
(1) Represents the fair market value of Common Stock received as
compensation for serving as a Director. Fifteen thousand shares were granted
October 31, 1997, representing service dates of May 9, 1997, through April 24,
1998.
(2) Represents two meetings of Directors at $100 per meeting during fiscal
1997. The Directors voted to forego the fee for the October 31, 1997, meeting
and all future meetings.
(3) Represents the fair market value of Common Stock received as
compensation for serving as a Director. Fifteen thousand shares were granted
December 30, 1996, representing service dates of May 10, 1996, through May 9,
1997.
(4) Represents $100 per meeting of Directors held during fiscal 1996.
(5) Represents the Company's contribution to Mr. Gaisser's 401(k) account
pursuant to the Company's 401(k) Profit Sharing Plan.
<PAGE 11>
Options
The options to purchase 1,000,000 shares, which had been granted
to Mr. Gaisser in 1996, are exercisable at $.375 a share, the
fair value of the stock at grant date. Twenty-five percent of
these options became exercisable on December 4, 1996, and an
additional twenty-five percent become exercisable on each
subsequent anniversary thereof. The options expire on June 4,
2006. Mr. Gaisser has exercised no options. These 1,000,000
options had an estimated value of $145,000 at October 31, 1998,
based upon the difference between the option exercise price and
the fair market value of the Company's Common Stock at October
31, 1998.
The options to purchase 36,000 shares, granted to Mr. Gaisser in
1998, are exercisable at $.515 a share, which is the average of
the bid and asked prices upon the date of grant. The options
vest and become exercisable on April 24, 1999. The options
expire on April 24, 2003. These options had no value at October
31, 1998, based upon the difference between the option exercise
price and the fair market value of the Company's Common Stock at
October 31, 1998.
No options were exercised by any executive officer in fiscal
1998.
Employment Agreement
As of July 1, 1996, the Company and Mr. Gaisser entered into an
Employment Agreement for a term of six years. Mr. Gaisser is
employed at an initial base salary of $130,000 per year and
receives a 10% annual increase during the term of the Employment
Agreement. Mr. Gaisser is entitled to such further increases as
shall be determined by the Board of Directors and is entitled to
participate in other compensation and benefit plans of the
Company.
The Employment Agreement may be terminated by the Company for
"just cause," which is defined as "willful misconduct,
embezzlement, conviction of a felony, habitual drunkenness or
excessive absenteeism not related to illness." The Employment
Agreement provides that if Mr. Gaisser is not elected or
appointed as President and Chief Executive Officer or as a member
of the Board of Directors, is removed from any such office, the
ownership and control of the Company changes, or if the principal
place of the business is changed to a location more than 20 miles
from Traverse City, Michigan without Mr. Gaisser's consent, then
<PAGE 12>
Mr. Gaisser may give notice of termination, effective at the end
of the month in which notice is given. In addition, if Mr.
Gaisser concludes that because of changes in the composition in
the Board of Directors or material changes in its policies
because of other events or occurrences of material fact, he feels
he can no longer properly and effectively discharge his
responsibilities, then Mr. Gaisser may resign from his position
upon the giving of sixty (60) days' prior written notice. In
each case, such resignation shall be deemed constructive
termination of Mr. Gaisser's employment by the Company, and Mr.
Gaisser shall be entitled to payment of the remaining amounts
payable to him under the Employment Agreement without any
requirement of mitigation of damages.
Except in the event of constructive termination, Mr. Gaisser has
agreed that during the term of the Employment Agreement and for
two years thereafter, he has agreed not to compete with the
Company. Upon any termination, Mr. Gaisser has agreed not to
disclose the Company's confidential information or to solicit any
employee of the Company for a two-year period.
Compensation of Directors
Effective April 24, 1998, each outside Director was awarded an
option to purchase 73,000 shares of the Company's Common Stock
annually for service on the Board from April 24, 1998 through
April 23, 1999. Inside Directors were awarded an option to
purchase 36,000 shares annually. The options vest and become
exercisable on April 24, 1999. The exercise price for all such
options is $0.515 per share, the average of the bid and asked
prices upon the date of grant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December, 1996, the Company moved its principal operating
facilities to a building that is owned by Traverse Software
Investment, LLC ("TSI"), a limited liability company controlled
by Gary T. Gaisser, the President, Chief Executive Officer and a
Director, of the Company. Versus and Olmsted are obligated under
two separate five-year lease agreements, which initially required
aggregate total annual rents of $111,000, increasing 4% annually
after the first year.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3 and 4 furnished to the
Company pursuant to Rule 16a-3(e) and written statements from
Directors and Executive Officers that no report on Form 5 is due,
no reporting person failed to file reports required under Section
16(a) of the Securities and Exchange Act of 1934 with respect to
the Company's securities.
<PAGE 13>
PROPOSAL TWO
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO RECAPITALIZE
THE COMPANY BY EFFECTING A ONE-FOR-TEN REVERSE STOCK SPLIT
The Board of Directors of the Company has unanimously approved,
and recommends that Shareholders approve, an amendment to the
Company's Certificate of Incorporation to effect a reverse split
of each share of the Company's capital stock and make (i) a
corresponding increase in the par value of such stock and (ii) a
corresponding reduction in the authorized number of shares of
such stock which the Company may issue (such actions collectively
being referred to as the "Reverse Split"). The Reverse Split, if
approved by Shareholders, would cause all issued and outstanding
shares of the Company's Common Stock to be split, on a reverse
basis, one-for-ten (Shareholders would receive one share of
Common Stock for every ten shares held prior to the Reverse
Split). Although the Company has not issued Preferred Stock to
date, the Reverse Split would have the effect of also reducing
the number of shares of Preferred Stock authorized for issuance.
If the Reverse Split is approved at the Annual Meeting, the
Company intends to file documents to effect the Reverse Split
with the Secretary of State of Delaware as soon as practicable,
and the Reverse Split will be effective on the date such
documents are filed (the "Effective Date"). As part of the
Reverse Split, Article 4 of the Certificate of Incorporation
would be amended to increase the par value of all classes of
stock from $0.01 per share to $0.10 per share and to decrease the
authorized number of shares of capital stock which the Company
may issue from 90,000,000 shares to 9,000,000 shares, 7,500,000
of which shall be Common Stock, and 1,500,000 of which shall be
Preferred Stock.
As described below, the primary objective of the Reverse Split is
to increase the per share market price of the Common Stock, which
may permit the Company to have the Common Stock listed on the
NASDAQ Small Cap Market, which the Board of Directors believes
would offer advantages to Shareholders as compared with trading
on the OTC Bulletin Board.
For several years, the per share market price of the Company's
Common Stock has been well below $1.00 per share. The Company's
Common Stock currently trades on the OTC Bulletin Board. In
order to meet the initial listing requirements of the NASDAQ
Small Cap Market, the Company's per share market price would
initially need to be at or above $4.00 and would need to remain
at or above $1.00 for continued listing. (The initial listing
requirements are more stringent than the continued listing
requirements.) The Company believes it meets all other
requirements for listing.
<PAGE 14>
The Company believes that NASDAQ listing of the Common Stock on
the Small Cap Market would have a number of beneficial effects
for the Company's Shareholders. The Company believes that
listing will result in current market price information for the
Common Stock being more readily available and news coverage of
the Company being more widespread. The Company also believes
that listing may have the effect of increasing investor interest
in the Common Stock, which may have a beneficial effect on the
trading market and prices for the Common Stock as well as the
Company's ability to issue additional securities or to secure
additional financing. Because of these anticipated positive
effects on the trading market of the Common Stock and the gain of
wider trading markets, the Company believes that volatility of
the Common Stock may be decreased as a result of listing.
In addition, stocks with low per share prices are subject to
additional federal and state regulatory requirements. Because
the market price of the Common Stock is less than $5 per share,
the Common Stock cannot be used as collateral for margin loans.
In addition, because the Common Stock is priced at less than $5
per share, it may be deemed a "penny stock" under federal
securities laws, and additional regulatory restrictions may
therefore apply. Although the Reverse Split is expected to raise
the per share market price of the Common Stock, there is no
assurance that the Company will meet all the requirements for
exemption from the definition of a "penny stock" in the future.
The Company intends to seek listing of the Common Stock on the
NASDAQ system promptly upon the approval by the Shareholders of
the Reverse Split. However, even if the Reverse Split is
approved, there can be no assurance that the Company's
application will be successful. In addition, while the Company
believes it currently meets the initial listing criteria for the
NASDAQ Small Cap Market (other than with respect to the minimum
bid price), even if the application is granted, there can be no
assurance that the Company will continue to meet NASDAQ's
continued listing criteria in the future (whether as a result of
failure to meet the minimum bid price requirement or other
requirements imposed by NASDAQ).
If the Reverse Split is not approved by Shareholders, the
Company's Common Stock will not be eligible to be traded on the
NASDAQ Small Cap Market because of the Company's per share stock
price, and it is anticipated that the Common Stock will continue
to trade on the OTC Bulletin Board.
For the foregoing reasons, the Board of Directors has determined
that a recapitalization through the Reverse Split would be in the
best interests of the Company and its Shareholders and recommends
Shareholders approve the Reverse Split.
<PAGE 15>
Effects of the Reverse Stock Split
General Effects. The principal effect of the Reverse Split would
be to decrease the number of outstanding shares of the Company's
Common Stock. Specifically, the 38,507,575 shares of Common
Stock issued and outstanding on the Record Date would, as a
result of the Reverse Split, be converted into approximately
3,850,757 shares of Common Stock (with the precise number
depending upon the extent of fractional shares resulting from the
Reverse Split, which will be converted to cash based upon the
average of the highest bid and lowest asked prices of Common
Stock on the day before the Effective Date of the Reverse Split).
The number of shares of Common Stock authorized for issuance by
the Company's Certificate of Incorporation following the Reverse
Split would be proportionately adjusted from 75,000,000 shares to
7,500,000 shares. Accordingly, after the Reverse Split, there
would be approximately 3,649,243 "new" (or post-Reverse Split)
shares of Common Stock ("New Shares") available for issuance by
the Company. (Of such 3,649,243 shares available, 456,720 are or
will become issuable upon the exercise of existing options and
warrants granted to date.)
As no Preferred Stock has been issued to date, the only effects
on such stock will be the decrease in the number of shares
authorized for issuance from 15,000,000 to 1,500,000 shares and
the increase in the par value from $0.01 to $0.10 per share.
Effect on Market for Common Stock. On January 26, 1999, the
average of the bid and asked prices of the Company's Common Stock
as quoted on the OTC Bulletin Board was $0.455 per share. By
decreasing the number of shares of Common Stock otherwise
outstanding without altering the aggregate economic interest in
the Company represented by such shares, the Board believes that
the per share market price for the Company's Common Stock will be
increased in excess of the minimum $4.00 bid price required for
initial listing of shares on the NASDAQ Small Cap Market. There
can be no assurance, however, that the minimum bid price will be
achieved or maintained.
Effect on Stock Options and Warrants. The total number of shares
of Common Stock issuable upon the exercise of options and
warrants to acquire such shares, and the exercise price thereof,
shall be proportionally adjusted to reflect the Reverse Split.
Effect under the Company's Option Plans. Following the
implementation of the Reverse Split, the number of options
issuable and issued will be adjusted accordingly.
<PAGE 16>
Changes in Shareholders' Equity. The Reverse Split is expected
to have no significant effect on the Company's stated capital,
which consists of the par value per share of Common Stock
multiplied by the number of such shares outstanding, from the
amount which would otherwise exist. Although the number of
shares outstanding would be reduced, stated capital would remain
virtually the same because the par value per share of post-
Reverse Split stock would be increased from $0.01 per share to
$0.10 per share. Total stated capital would be reduced only by
the new par value of $0.10 multiplied by the total number of
fractional shares which will be redeemed in cash.
Appraisal Rights. Pursuant to the Delaware General Corporate
Law, the Company's Shareholders are not entitled to appraisal
rights with respect to the Reverse Split.
Disadvantages. The Company believes that, as a result of the
Reverse Split, certain Shareholders may incur increased expenses
in selling odd-lot shares of the Company's Common Stock.
No Fractional Shares
No fractional shares of Common Stock will be issued as a result
of the Reverse Split, no certificates for any fractional shares
will be issued, and fractional share interests will not entitle
the holder thereof to exercise any right of a Shareholder with
respect thereto. In lieu of such fractional shares, any holder
of Common Stock (after aggregating all fractional shares of
Common Stock issuable to such holder) will, upon surrender of
such holder's stock certificate(s) representing Common Stock to
American Stock Transfer & Trust Company (the "Exchange Agent"),
be paid in cash the dollar amount (rounded to the nearest whole
cent), without interest, determined by multiplying such
fractional shares by the average of the highest bid and lowest
asked prices reported for the shares on the OTC Bulletin Board on
the day before the Effective Date of the Reverse Stock Split.
Procedures for Exchange of Certificates
As soon as practicable after the Effective Date, the Exchange
Agent will mail to the registered holders of Common Stock (i) a
Letter of Transmittal, and (ii) instructions for the use of the
Letter of Transmittal in effecting the surrender of the Common
Stock certificates for certificates representing New Shares.
Upon surrender of a certificate to the Exchange Agent, together
with a duly executed Letter of Transmittal and such other
documents as may reasonably be required by the Exchange Agent or
the Company, the holder of such certificate shall be entitled to
receive in exchange therefor a certificate representing the whole
number of New Shares that such holder has the right to receive.
<PAGE 17>
If any stock certificate has been lost, stolen or destroyed, the
Company may require the owner of such lost, stolen or destroyed
certificate to provide an appropriate affidavit and to deliver a
bond as indemnity against any claim that may be made against the
Exchange Agent or the Company with respect to such certificate.
SHAREHOLDERS SHOULD NOT SURRENDER THEIR STOCK CERTIFICATES FOR
EXCHANGE UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL FROM THE
EXCHANGE AGENT.
Federal Income Tax Consequences
The following summary of the federal income tax consequences of
the Reverse Split is based on current law, including the Internal
Revenue Code of 1986, as amended, and is for general information
only. The tax treatment for any Shareholder may vary depending
upon the particular facts and circumstances of such Shareholder.
Certain Shareholders, including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, non-
resident aliens, foreign corporations and persons who do not hold
Common Stock of the Company as a capital asset, may be subject to
special rules not discussed below. ACCORDINGLY, EACH SHAREHOLDER
SHOULD CONSULT HIS OR HER TAX ADVISOR TO DETERMINE THE PARTICULAR
TAX CONSEQUENCES TO HIM OR HER OF THE REVERSE SPLIT, INCLUDING
THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL OR FOREIGN
INCOME TAXES AND OTHER LAWS.
The receipt of whole New Shares (excluding fractional New Shares)
in the Reverse Split should be non-taxable for federal income tax
purposes. Consequently, a Shareholder receiving New Shares will
not recognize either gain or loss, or any other type of income,
with respect to whole New Shares received as a result of the
Reverse Split. In addition, the tax basis of such Shareholder's
shares of Common Stock prior to the Reverse Split will carry over
as the tax basis of the Shareholder's New Shares. The holding
period of the New Shares should also include the Shareholder's
holding period of the Common Stock prior to the Reverse Split,
provided that such Common Stock was held by the Shareholder as a
capital asset on the Effective Date.
Any Shareholder who receives cash in lieu of a fractional New
Share pursuant to the Reverse Split will recognize gain or loss
equal to the difference between the amount of cash received and
the portion of the aggregate tax basis in his or her shares of
Common Stock allocable to such fractional New Share. If the
shares of Common Stock were held as a capital asset on the
Effective Date, then the Shareholder's gain or loss will be a
capital gain or loss. Such capital gain or loss will be a long-
term capital gain or loss if the Shareholder's holding period for
the shares of Common Stock is longer than twelve months and a
short-term capital gain or loss if the Shareholder's holding
period is twelve months or less.
<PAGE 18>
Based on certain exceptions contained in regulations issued by
the Internal Revenue Service, the Company does not believe that
it or its Shareholders would be subject to backup withholding or
informational reporting with respect to cash distributed in lieu
of fractional New Shares.
Exchange of Shares
On or after the Effective Date, the Company will mail to each
Shareholder of record a letter of transmittal. Shareholders will
be able to receive a certificate representing New Shares and, if
applicable, cash in lieu of a fractional New Share only by
transmitting to the Exchange Agent such Shareholder's stock
certificate(s) for shares of Common Stock outstanding prior to
the Reverse Split, together with the properly executed and
completed letter of transmittal, and such evidence of ownership
of such shares as the Company may require. Shareholders will not
receive certificates for New Shares unless and until the
certificates representing their shares of Common Stock
outstanding prior to the Reverse Split are surrendered.
Shareholders should not forward their certificates to the
Exchange Agent until the letter of transmittal is received and
should surrender their certificates only with such letter of
transmittal.
Payment in lieu of a fractional New Share will be made to any
Shareholder entitled thereto promptly after receipt by the
Company or its Exchange Agent of a properly completed letter of
transmittal and stock certificate(s) for all of his or her shares
of Common Stock outstanding prior to the Reverse Split. There
will be no service charge payable by Shareholders in connection
with the exchange of certificates or in connection with the
payment of cash in lieu of the issuance of a fractional New
Share. These costs will be borne by the Company.
Financial Information
The information under the captions, "Management's Discussion and
Analysis" and "Financial Statements," contained in the Company's
1998 Annual Report to Shareholders delivered along with this
Proxy Statement, is hereby incorporated by reference.
Vote Required for Approval
The affirmative vote of the holders of a majority of the issued
and outstanding shares entitled to vote on the matter at the
Annual Meeting will be required to approve the Reverse Split
described in this Proposal Two.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RECAPITALIZATION
AMENDMENT.
<PAGE 19>
PROPOSAL THREE
APPROVAL OF THE 1999 EMPLOYEE
INCENTIVE STOCK OPTION PLAN
The Board of Directors has adopted and submitted to Shareholders
for their approval the 1999 Employee Incentive Stock Option Plan
(the "Plan"), which is attached. Pursuant to the Plan, a
Committee of the Board of Directors can determine to grant
options to employees of the Company for periods up to 10 years
from the date of grant of up to 3,200,000 options (without taking
into account the proposed Reverse Split) of the Company's Common
Stock. The Company has had, over the years, a number of plans
designed to provide incentive to employees.
On May 10, 1996, the Shareholders of the Company approved the
1996 Employee Incentive Stock Option Plan of 2,000,000 options to
grant to officers and executive personnel of the Company. Of
those 2,000,000 options, 1,000,000 were granted to Gary T.
Gaisser, President and Chief Executive Officer and Director, on
June 4, 1996. There remain in the 1996 plan 81,770 options, the
difference having been awarded to officers and executive
personnel through various grants approved by the Board of
Directors over the past year.
If all of the options and warrants presently outstanding were
exercised by their holders, the shares made available for option
grant under this Plan would constitute approximately 7.43% of the
Company's outstanding common shares.
The terms of the Plan will be patterned after the terms of the
1996 Employee Incentive Stock Option Plan except that all
personnel may participate. The purposes of the Plan are to give
all personnel an opportunity to acquire shares of the Common
Stock of the Company, to provide an incentive to all employees to
continue to promote the best interests of the Company and enhance
its long-term performance, and to provide an incentive for all
employees to join or remain with the Company and its
subsidiaries.
<PAGE 20>
The Plan would become effective on the date of adoption by
Shareholders and will continue for ten (10) years. Each option
granted under the Plan will have a duration of up to ten years
from the date of the grant of the option. Options granted under
the Plan must be granted at a price no lower than the current
fair market value of the Common Stock on the date of grant. In
the event an employee should, for any reason, terminate or be
terminated as an employee of the Corporation, the option expires
on the date of termination, but the Board in its sole discretion
may extend this period for up to three months. If an employee
should die while in the employment of the Company or become
disabled, the option would be exercisable for a period of one
year from either the date of death or the date of disability.
Neither of the above extension periods shall extend the option
beyond its initial 10-year term. The exact vesting schedules
will be determined by the Board of Directors at the time of
grant.
The tax consequences associated with the grant and exercise of
incentive stock options depend upon the provisions of Internal
Revenue Code, which may be changed during the course of the Plan.
As of the date of adoption of the Plan, the grant of an incentive
stock option does not constitute a taxable event. The exercise
of the incentive stock option will not constitute a taxable event
to the employee, nor will the Company receive a corresponding
deduction. However, the difference between the fair market value
of the Common Stock on the date of exercise and the exercise
price of the option will be treated as an item of adjustment for
alternative minimum tax purposes. Upon sale of stock acquired
through the exercise of an incentive stock option, the difference
between the amount realized and the value at the date of exercise
will ordinarily be taxed as capital gain. However, if the
employee disposes of a share acquired by exercise of an incentive
stock option within two years of the date of grant or within one
year of the date of exercise (a "disqualifying disposition"), the
difference between the exercise price and the value of the Common
Stock on the date of exercise will be taxable to the employee as
compensation and the Company will receive a corresponding tax
deduction.
In the event an employee exercises an option at a time when there
is no currently effective registration statement covering the
shares, the Company's obligation to deliver shares pursuant to
the option is subject to the employee providing an appropriate
representation of investment intent, and the shares delivered by
the Company may be restricted as to transfer in accordance with
applicable securities laws. However, it is anticipated that the
Company will file a registration statement on Form S-8 prior to
any option becoming first exercisable.
<PAGE 21>
Vote Required For Approval
A vote of the majority of the number of shares voting is required
for approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1999
EMPLOYEE INCENTIVE STOCK OPTION PLAN.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected BDO Seidman, LLP as the
independent certified public accountants to the Company for the
fiscal year ending October 31, 1999. The Company has been
informed that neither BDO Seidman, LLP, nor any of its partners,
has any direct financial interest or any material indirect
financial interest in the Company or its subsidiary, nor has any
of its partners acted in the capacity of promoter, underwriter,
voting trustee, director, officer or employee of the Company.
The Company has been advised by BDO Seidman, LLP that
representatives of that firm are expected to be present at the
Annual Meeting of Shareholders. These representatives will have
the opportunity to make a statement, if they so desire, and will
also be available to respond to appropriate questions from
Shareholders.
OTHER MATTERS
The Board of Directors is not aware at present of any other
matters which will or may come before the Annual Meeting of
Shareholders and which will require a vote of the Shareholders.
However, if any additional matters are properly presented at the
meeting, it is the intention of the persons named in the
accompanying Proxy to vote in accordance with their judgment on
such matters.
DEADLINES WITH RESPECT TO SHAREHOLDER PROPOSALS
FOR THE 2000 ANNUAL MEETING
The date by which proposals of Shareholders intended to be
presented at the Company's 2000 Annual Meeting (and in the Proxy
Statement and Proxy relating to that meeting) must be presented
to the Company is November 3, 1999.
At the Company's 2000 Annual Meeting, proxy holders will be
allowed to exercise their discretion in voting on any Shareholder
proposal not presented for inclusion in the Proxy Statement and
Proxy relating to that meeting if such proposal is not presented
to the Company by January 17, 2000.
By Order of the Board of Directors
Andrea Beadle, Corporate Secretary
<PAGE 22>
VERSUS TECHNOLOGY, INC.
1999 EMPLOYEE INCENTIVE STOCK OPTION PLAN
1. Purpose.
The purpose of this 1999 Employee Incentive Stock Option Plan
(the "Plan") is to give all personnel (hereinafter "employees")
of Versus Technology, Inc., a Delaware corporation (the
"Company"), and corporations with respect to which the Company
directly or indirectly controls 50% or more of the combined
voting power ("subsidiaries") an opportunity to acquire shares of
the common stock of the Company ("Common Stock"), to provide an
incentive for employees to continue to promote the best interests
of the Company and enhance its long-term performance, and to
provide an incentive for employees to join or remain with the
Company and its subsidiaries.
2. Administration.
a. Board of Directors. The Plan shall be administered by
the Board of Directors of the Company (the "Board"), which, to
the extent it shall determine, may delegate its powers with
respect to the administration of the Plan (except its powers
under Section 11(c)) to a committee (the "Committee") appointed
by the Board and composed of not less than three members of the
Board. If the Board chooses to appoint a Committee, references
hereinafter to the Board (except in Section 11(c)) shall be
deemed to refer to the Committee. Notwithstanding the preceding
provisions of this Section, no member of the Board may exercise
discretion with respect to, or participate in, the administration
of the Plan if, at any time within one year prior to such
exercise or participation, he or she has received stock, stock
options, stock appreciation rights or any other derivative
security pursuant to the Plan or any other plan of the Company or
any affiliate thereof as to which any discretion is exercised.
b. Powers. Within the limits of the express provisions of
the Plan, the Board shall determine:
1) The employees to whom awards hereunder shall be
granted;
2) The time or times at which such awards shall be
granted;
3) The form and amount of the awards; and
4) The limitations, restrictions and conditions
applicable to any such award.
<PAGE 23>
In making such determinations, the Board may take into
account the nature of the services rendered by such employees, or
classes of employees, their present and potential contributions
to the Company's success and such other factors as the Board in
its discretion shall deem relevant.
c. Interpretations. Subject to the express provisions of
the Plan, the Board may interpret the Plan, prescribe, amend and
rescind rules and regulations relating to it, determine the terms
and provisions of the respective awards and make all other
determinations it deems necessary or advisable for the
administration of the Plan.
d. Determinations. The determinations of the Board on all
matters regarding the Plan shall be conclusive. A member of the
Board shall only be liable for any action taken or determination
made in bad faith.
e. Nonuniform Determinations. The Board's determinations
under the Plan, including without limitation, determinations as
to the persons to receive awards, the terms and provisions of
such awards and the agreements evidencing the same, need not be
uniform and may be made by it selectively among persons who
receive or are eligible to receive awards under the Plan, whether
or not such persons are similarly situated.
3. Awards Under the Plan.
a. Form. Awards under the Plan shall be incentive stock
options (hereinafter "Incentive Stock Options" or "Option(s)").
b. Maximum Limitations. The aggregate number of shares of
Common Stock available for grant under the Plan is 3,200,000,
subject to adjustment pursuant to Section 7. Shares of Common
Stock issued pursuant to the Plan may be either authorized but
unissued shares or shares now or hereafter held in the treasury
of the Company. In the event that, prior to the end of the
period during which Incentive Stock Options may be granted under
the Plan, any Incentive Stock Option under the Plan expires
unexercised or is terminated, surrendered or cancelled, without
being exercised, in whole or in part, for any reason, the number
of shares theretofore subject to such Incentive Stock Option, or
the unexercised, terminated, forfeited or unearned portion
thereof, shall be added to the remaining number of shares of
Common Stock available for grant as an Incentive Stock Option
under the Plan, including a grant to a former holder of such
Incentive Stock Option, upon such terms and conditions as the
Board shall determine, which terms may be more or less favorable
than those applicable to such former Incentive Stock Option.
<PAGE 24>
c. Ten Percent Shareholder. Notwithstanding any other
provision herein contained, no employee may receive an Incentive
Stock Option under the Plan if such employee, at the time the
award is granted, owns (as defined in Section 424(d) of the
Internal Revenue Code, as amended [the "Code"]) stock possessing
more than 10% of the total combined voting power of all classes
of stock of the Company, its parent or any subsidiary, unless the
option price for such Incentive Stock Option is at least 110% of
the fair market value of the Common Stock subject to such
Incentive Stock Option on the date of grant and such Option is
not exercisable after the date five years from the date such
Option is granted.
4. Incentive Stock Options.
It is intended that Incentive Stock Options granted under the
Plan shall constitute Incentive Stock Options within the meaning
of Section 422 of the Code. Incentive Stock Options may be
granted under the Plan for the purchase of shares of Common
Stock. Incentive Stock Options shall be in such form and upon
such conditions as the Board shall from time to time determine,
subject to the following:
a. Option Prices. The option price of each Incentive Stock
Option shall be at least 100% of the fair market value of the
Common Stock subject to such Incentive Stock Option on the date
of grant.
b. Terms of Options. No Incentive Stock Option shall be
exercisable prior to the date one year, or after the date ten
years, from the date such Incentive Stock Option is granted. The
exact vesting schedules will be determined by the Board of
Directors at the time of grant.
c. Limitation on Amounts. The aggregate fair market value
(determined with respect to each Incentive Stock Option as of the
time such Incentive Stock Option is granted) of the Common Stock
with respect to which Incentive Stock Options are exercisable for
the first time by an employee during any calendar year (under
this Plan or any other plan of the Company or the parent or any
subsidiary of the Company) shall not exceed $100,000.
<PAGE 25>
5. Exercise.
a. Exercise. Incentive Stock Options shall be subject to
such terms and conditions, shall be exercisable at such time or
times, and shall be evidenced by such form of written incentive
stock option agreement between the optionee and the Company, as
the Board shall determine; provided, that such determinations are
not inconsistent with the other provisions of the Plan or with
Section 422 of the Code or regulations thereunder.
b. Manner of Exercise of Options and Payment for Common
Stock. Incentive Stock Options may be exercised by an optionee
by giving written notice to the Secretary of the Company stating
the number of shares of Common Stock with respect to which the
Incentive Stock Option is being exercised and tendering payment
therefor. At the time that an Incentive Stock Option granted
under the Plan, or any part thereof, is exercised, payment for
the Common Stock issuable thereupon shall be made in full in cash
or by certified check or, if the Board in its discretion agrees
to accept, in shares of Common Stock of the Company (the number
of such shares paid for each share subject to the Incentive Stock
Option, or part thereof, being exercised shall be determined by
dividing the option price by the fair market value per share of
the Common Stock on the date of exercise). As soon as reasonably
possible following such exercise, a certificate representing
shares of Common Stock purchased, registered in the name of the
optionee shall be delivered to the optionee.
6. Transferability.
No Incentive Stock Option may be transferred, assigned,
pledged or hypothecated (whether by operation of law or
otherwise), except as provided by will or the applicable laws of
descent or distribution, and no Incentive Stock Option shall be
subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other
disposition of an Incentive Stock Option or levy of attachment or
similar process upon the Incentive Stock Option not specifically
permitted herein shall be null and void and without effect. An
Incentive Stock Option may be exercised only by an employee
during his or her lifetime, or pursuant to Section 10(c), by his
or her estate or the person who acquires the right to exercise
such Incentive Stock Option upon his or her death by bequest or
inheritance.
<PAGE 26>
7. Adjustment Provisions.
The aggregate number of shares of Common Stock with respect
to which Incentive Stock Options may be granted, the aggregate
number of shares of Common Stock subject to each outstanding
Incentive Stock Option, and the option price per share of each
such Incentive Stock Option, may all be appropriately adjusted as
the Board may determine for any increase or decrease in the
number of shares of issued Common Stock resulting from a
subdivision or consolidation of shares, whether through
reorganization, recapitalization, stock split, stock distribution
or combination of shares, or the payment of a share dividend or
other increase or decrease in the number of such shares
outstanding effected without receipt of consideration by the
Company. Adjustments under this Section 7 shall be made
according to the sole discretion of the Board, and its decisions
shall be binding and conclusive.
8. Dissolution, Merger and Consolidation.
Upon the dissolution or liquidation of the Company, or upon a
merger or consolidation of the Company in which the Company is
not the surviving corporation, each Incentive Stock Option
granted hereunder shall expire as of the effective date of such
transaction; provided, however, that the Board shall give at
least 30 days' prior written notice of such event to each
optionee during which time he or she shall have a right to
exercise his or her wholly or partially unexercised Incentive
Stock Option (without regard to installment exercise limitations,
if any) and, subject to prior expiration pursuant to Section
10(b) or (c), each Incentive Stock Option shall be exercisable
after receipt of such written notice and prior to the effective
date of such transaction.
9. Effective Date and Conditions Subsequent to Effective Date.
The Plan shall become effective on the date of the approval
of the Plan by the Shareholders of the Company; provided,
however, that the adoption of the Plan is subject to such
Shareholder approval within twelve (12) months before or after
the date of adoption of the Plan by the Board. The Plan shall be
null and void and of no effect if the foregoing condition is not
fulfilled, and in such event each Incentive Stock Option granted
hereunder shall, notwithstanding any of the preceding provisions
of the Plan, be null and void and of no effect.
<PAGE 27>
No grant or award shall be made under the Plan more than 10 years
from the earlier of the date of adoption of the Plan by the Board
and Shareholder approval hereof; provided, however, that the Plan
and all Incentive Stock Options granted under the Plan prior to
such date shall remain in effect and subject to adjustment and
amendment as herein provided until they have been satisfied or
terminated in accordance with the terms of the respective grants
or awards and the related agreements.
10. Termination of Employment.
a. Each Incentive Stock Option shall, unless sooner expired
pursuant to Section 11(b) or (c) below, expire on the first to
occur of the tenth anniversary of the date of grant thereof and
the expiration date set forth in the applicable option agreement.
b. An Incentive Stock Option shall expire on the first to
occur of the applicable date set forth in paragraph (a) next
above and the date that the employment of the employee with the
Company terminates for any reason other than death or disability.
Notwithstanding the preceding provisions of this paragraph, the
Board, in its sole discretion, may, by written notice given to an
ex-employee, permit the ex-employee to exercise Incentive Stock
Options during a period following his or her termination of
employment, which period shall not exceed three months. In no
event, however, may the Board permit an ex-employee to exercise
an Incentive Stock Option after the expiration date contained in
the agreement evidencing such Incentive Stock Option.
Notwithstanding the preceding provisions of this paragraph, if
the Board permits an ex-employee to exercise Incentive Stock
Options during a period following his or her termination of
employment pursuant to such preceding provisions, such Incentive
Stock Options shall, to the extent unexercised, expire on the
date that such ex-employee violates (as determined by the Board)
any covenant not to compete in effect between the Company and the
ex-employee.
c. If the employment of an employee with the Company
terminates by reason of disability (as defined in Section
422(c)(6) of the Code and as determined by the Board) or by
reason of death, his or her Incentive Stock Options shall expire
on the first to occur of the date set forth in paragraph (a) of
this Section 10 and the first anniversary of such termination of
employment.
<PAGE 28>
11. Miscellaneous.
a. Legal and Other Requirements. The obligation of the
Company to sell and deliver Common Stock under the Plan shall be
subject to all applicable laws, regulations, rules and approvals,
including, but not by way of limitation, the effectiveness of a
registration statement under the Securities Act of 1933 if deemed
necessary or appropriate by the Company. Certificates for shares
of Common Stock issued hereunder may be legended as the Board
shall deem appropriate.
b. No Obligation To Exercise Options. The granting of an
Incentive Stock Option shall impose no obligation upon an
optionee to exercise such Incentive Stock Option.
c. Termination and Amendment of Plan. The Board, without
further action on the part of the Shareholders of the Company,
may from time to time alter, amend or suspend the Plan or any
Incentive Stock Option granted hereunder or may at any time
terminate the Plan, except that it may not, without the approval
of the Shareholders of the Company (except to the extent provided
in Section 8 hereof):
1) Materially increase the total number of shares of
Common Stock available for grant under the Plan except as
provided in Section 7;
2) Materially modify the class of eligible employees
under the Plan;
3) Materially increase benefits to any employee who is
subject to the restrictions of Section 16 of the Securities
Exchange Act of 1934; or
4) Effect a change relating to Incentive Stock Options
granted hereunder which is inconsistent with Section 422 of the
Code or regulations issued thereunder.
No action taken by the Board under this Section, either
with or without the approval of the Shareholders of the Company,
may materially and adversely affect any outstanding Incentive
Stock Option without the consent of the holder thereof.
d. Application of Funds. The proceeds received by the
Company from the sale of Common Stock pursuant to Incentive Stock
Options will be used for general corporate purposes.
<PAGE 29>
e. Right to Terminate Employment. Nothing in the Plan or
any agreement entered into pursuant to the Plan shall confer upon
any employee or other optionee the right to continue in the
employment of the Company or any subsidiary or affect any right
which the Company or any subsidiary may have to terminate the
employment of such employee or other optionee.
f. Rights as a Shareholder. No optionee shall have any
right as a Shareholder unless and until certificates for shares
of Common Stock are issued to him or her.
g. Leaves of Absence and Disability. The Board shall be
entitled to make such rules, regulations and determinations as it
deems appropriate under the Plan in respect of any leave of
absence taken by or disability of any employee. Without limiting
the generality of the foregoing, the Board shall be entitled to
determine (1) whether any such leave of absence shall constitute
a termination of employment within the meaning of the Plan, and
(2) the impact, if any, of any such leave of absence on awards
under the Plan theretofore made to any employee who takes such
leave of absence.
h. Fair Market Value. Whenever the fair market value of
Common Stock is to be determined under the Plan as of a given
date, such fair market value shall be:
1) If the Common Stock is traded on the over-the-counter
market, the average of the bid and asked prices for the Common
Stock at the close of trading for the 10 consecutive trading days
immediately preceding such given date;
2) If the Common Stock is listed on a national
securities exchange, the average of the closing prices of the
Common Stock on the Composite Tape for the 10 consecutive trading
days immediately preceding such given date; and
3) If the Common Stock is neither traded on the over-
the-counter market nor listed on a national securities exchange,
such value as the Board, in good faith, shall determine.
Notwithstanding any provision of the Plan to the
contrary, no determination made with respect to the fair market
value of Common Stock shall be inconsistent with Section 422 of
the Code or regulations thereunder.
<PAGE 30>
i. Notices. Every direction, revocation or notice
authorized or required by the Plan shall be deemed delivered to
the Company (1) on the date it is personally delivered to the
Secretary of the Company at its principal executive offices or
(2) three business days after it is sent by registered or
certified mail, postage prepaid, addressed to the Secretary at
such offices, and shall be deemed delivered to an optionee (1) on
the date it is personally delivered to him or her or (2) three
business days after it is sent by registered or certified mail,
postage prepaid, addressed to him or her at the last address
shown for him or her on the records of the Company.
j. Applicable Law. All questions pertaining to the
validity, construction and administration of the Plan and Stock
Options granted hereunder shall be determined in conformity with
the laws of the State of Michigan, to the extent not inconsistent
with Section 422 of the Code and regulations thereunder.
k. Elimination of Fractional Shares. If under any provision
of the Plan which requires a computation of the number of shares
of Common Stock subject to an Incentive Stock Option, the number
so computed is not a whole number of shares of Common Stock, such
number of shares of Common Stock shall be rounded down to the
next whole number.
<PAGE>
VERSUS TECHNOLOGY, INC.
2600 Miller Creek Road
Traverse City, Michigan 49684
PROXY SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned hereby appoints and constitutes Gary T. Gaisser and Julian C.
Schroeder and each of them, attorneys and proxies for the undersigned, with
full power of substitution to vote as if the undersigned were personally
present at the Annual Meeting of the Shareholders of Versus Technology, Inc.
(the "Company") to be held at the Park Place Hotel, 300 East State Street,
Traverse City, Michigan 49684, on Friday, April 23, 1999, at
9:00 a.m., Eastern Daylight Time, and at all adjournments thereof, the shares
of stock of said Company registered in the name of the undersigned. The
undersigned instructs all such proxies to vote such shares as follows upon the
following matters, which are described more fully in the accompanying Proxy
Statement:
(continued, and to be signed, on the other side)
<PAGE >
Please mark, date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Shareholders VERSUS TECHNOLOGY, INC. April 23, 1999
(see other side)
A /X/ Please mark your votes as in this example.
I authorize and instruct my Proxy to:
1. [ ] VOTE FOR all nominees for the Company's Board of Directors listed at
right:
Nominees:
--------
Gary T. Gaisser
Samuel Davis
Julian C. Schroeder
David L. Gray
except that I WITHHOLD AUTHORITY for the following nominees (if
any)_____________________________________________________________________
_________________________________________________________________________
[ ] VOTE WITHHELD from all nominees
2. VOTE with respect to the approval of an amendment to the Company's
Certificate of Incorporation to provide for a one-for-ten reverse
split of the Company's capital stock:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. VOTE with respect to the approval of the 1999 Employee Incentive Stock
Option Plan:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, to vote upon such other business as may properly
come before the meeting and all adjournments thereof.
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned Shareholder. If no direction is made, this Proxy will be
voted FOR Proposals 1, 2 and 3.
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
--------------------------------
Signature
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Signature if held jointly
Dated __________________, 1999
Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give 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.
