<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934 (AMENDMENT NO. __)
<TABLE>
<S> <C>
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-12
</TABLE>
VSI ENTERPRISES, INC.
-----------------------------------------------
(Name of Registrant as Specified in Its Charter)
NOT APPLICABLE
------------------------------------------------------------------
(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)(4) and
0-11.
<TABLE>
<S> <C>
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- 11:1
--------------------------------------
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:
---------------------------------------------------------------------------
</TABLE>
- ------------------------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
VSI ENTERPRISES, INC.
5801 GOSHEN SPRINGS ROAD
NORCROSS, GEORGIA 30071
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 21, 1997
The annual meeting of shareholders of VSI Enterprises, Inc. (the
"Company") will be held on Monday, April 21, 1997 at 9:00 a.m., at the
Company's offices, 5801 Goshen Springs Road, Norcross, Georgia 30071, for the
following purposes:
(1) To elect seven (7) directors to constitute the Board of Directors, to
serve for a term of one year and until their successors are elected and
qualified;
(2) To approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of common stock from 46,000,000
shares to 60,000,000 shares; and
(3) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on March 3, 1997 will
be entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
A Proxy Statement and a proxy solicited by the Board of Directors are
enclosed herewith. Please sign, date and return the proxy promptly. If you
attend the meeting, you may, if you wish, withdraw your proxy and vote in
person.
By Order of the Board of Directors,
Richard K. Snelling, Chairman of the Board
Norcross, Georgia
March 24, 1997
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR
VOTE MAY BE RECORDED AT THE MEETING IF YOU DO NOT ATTEND PERSONALLY.
<PAGE> 3
VSI ENTERPRISES, INC.
5801 GOSHEN SPRINGS ROAD
NORCROSS, GEORGIA 30071
ANNUAL MEETING OF SHAREHOLDERS
APRIL 21, 1997
_______________________
PROXY STATEMENT
_______________________
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of VSI Enterprises, Inc. (the "Company") for
the Annual Meeting of Shareholders to be held on Monday, April 21, 1997, and
any adjournments or postponements thereof, at the time and place and for the
purposes set forth in the accompanying notice of the meeting. The expense of
this solicitation, including the cost of preparing and mailing this Proxy
Statement, will be paid by the Company. In addition to solicitations by mail,
officers and regular employees of the Company, at no additional compensation,
may assist in soliciting proxies by telephone. The Company may also use the
services of a proxy solicitation firm in connection with the solicitation of
proxies. Although the exact cost of these services is not known at this time,
it is anticipated that the cost will not exceed $5,000. This Proxy Statement
and the accompanying proxy are first being mailed to shareholders on or about
March 24, 1997. The address of the principal executive offices of the Company
is 5801 Goshen Springs Road, Norcross, Georgia 30071.
Any proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the meeting and gives oral notice of his election to
vote in person, without compliance with any other formalities. In addition,
any proxy given pursuant to this solicitation may be revoked prior to the
meeting by delivering to the Secretary of the Company an instrument revoking it
or a duly executed proxy for the same shares bearing a later date. Proxies
which are returned properly executed and not revoked will be voted and will be
voted in accordance with the shareholder's directions specified thereon.
Where no direction is specified, proxies will be voted for the election of the
nominees named below to constitute the entire Board of Directors and for
adoption of the increase of number of authorized shares of Common Stock.
Abstentions and broker non-votes will not be counted as votes either in favor
of or against the proposal to increase the number of authorized shares of
Common Stock.
The record of shareholders entitled to vote at the annual meeting was
taken on March 3, 1997. On that date the Company had outstanding and entitled
to vote 40,954,739 shares of common stock, par value $.00025 per share (the
"Common Stock"), with each share of Common Stock entitled to one vote.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of March 1, 1997 by (i)
each person known by the Company to be the beneficial owner of more than five
percent (5%) of the outstanding Common Stock; (ii) each director of the
Company; (iii) the Named Executive Officers (as defined herein); and (iv) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES
NAME OF BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS(1)
- ---------------- ------------- -----------
<S> <C> <C>
Richard K. Snelling ....................... 1,186,267(2) 2.9%
Carleton A. Brown.......................... 195,000(3) *
Leo M. Cortjens............................ 260,927(4) *
Larry M. Carr.............................. 1,908,880(5) 4.6%
Andre van den Bogaert...................... 75,000(6) *
Edward S. Redstone......................... 2,497,500(7) 6.1%
Mark E. Munro.............................. 200,000(8) *
Bill R. Brewer............................. 177,977(9) *
Roger K. Tapke............................. 87,000(10) *
All Directors and Executive Officers
as a Group (9 persons)..................... 6,513,998 15.6%
</TABLE>
* Less than 1% of outstanding shares.
(1) "Beneficial Ownership" includes shares for which an individual, directly
or indirectly, has or shares voting or investment power or both and also
includes options which are exercisable within sixty days of the date of
this Proxy Statement. All of the listed persons have sole voting and
investment power over the shares listed opposite their names unless
otherwise indicated in the notes below. Beneficial ownership as reported
in the above table has been determined in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934. The percentages are based upon
40,954,739 shares outstanding, except for certain parties who hold options
to purchase shares which are exercisable within the next sixty days. The
percentages for those parties who hold presently exercisable options are
based upon the sum of 40,954,739 shares plus the number of options held by
them which are exercisable within the next sixty days, as indicated in the
following notes.
(2) Includes 238,212 shares of Common Stock subject to stock options which are
exercisable within the next sixty days and 433,919 shares of Common Stock
owned by SnellTel, a company controlled by Mr. Snelling. Also includes
100,000 shares of Common Stock owned by Richard K. and Barbara M. Snelling
Charitable Remainder Unitrust.
(3) Includes 75,000 shares of Common Stock subject to stock options which are
exercisable within the next sixty days.
(4) Includes 75,000 shares of Common Stock subject to stock options which are
exercisable within the next sixty days.
-2-
<PAGE> 5
(5) Includes 65,000 shares of Common Stock subject to stock options which are
exercisable within the next sixty days and 250,000 shares of Common Stock
subject to presently exercisable Common Stock Purchase Warrants.
(6) Includes 50,000 shares of Common Stock subject to stock options which are
exercisable within the next sixty days.
(7) Includes 35,000 shares of common stock subject to stock options which are
exercisable within the next sixty days, and 2,500 shares owned by Mr.
Redstone's spouse.
(8) Includes 100,000 shares of common stock owned by Mr. Munro's spouse.
Amount shown excludes 1,807,339 shares owned by Mark E. Munro Charitable
Remainder Unitrust, with respect to which Mr. Munro disclaims beneficial
ownership.
(9) Includes 87,000 shares of Common Stock subject to stock options which are
exercisable within the next sixty days.
(10) Mr. Tapke served as Vice President-Operations of the Company until June
1996 and remained as an employee of the Company until his resignation in
January 1997. His total of shares beneficially owned are excluded from
the total shares owned by all directors and executive officers as a group.
AGENDA ITEM ONE
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of seven directors. The
Company's By-Laws provide that the Board of Directors shall consist of not less
than three nor more than seven members, the precise number to be determined
from time to time by the Board of Directors. The number of directors has been
set at seven by the Board. Andre van den Bogaert is not standing for
reelection to the Board of Directors of the Company. B. R. Brewer has been
nominated by the Company to fill Mr. van den Bogaert's position on the Board.
The Board of Directors recommends the election of the seven nominees listed
below.
Each of the nominees has consented to being named in this Proxy Statement
and to serve as a director of the Company if elected. In the event that any
nominee withdraws or for any reason is not able to serve as a director, the
proxy will be voted for such other person as may be designated by the Board of
Directors, but in no event will the proxy be voted for more than seven
nominees. The affirmative vote of a majority of all votes cast at the meeting
by the holders of the Common Stock is required for the election of the seven
nominees standing for election. Management of the Company has no reason to
believe that any nominee will not serve if elected.
Each of the following persons has been nominated by management for
election to the Board of Directors to succeed themselves for a term of one year
and until their successors are elected and qualified:
Richard K. Snelling. Mr. Snelling, age 65, has been a director of the
Company since 1993 and currently serves as Chairman of the Board and Chief
Executive Officer. From 1956 to 1991, Mr. Snelling served with BellSouth
Corporation, a telecommunications company, including most recently as Executive
Vice President. From March 1992 to January 1993, Mr. Snelling served as a
founding director and the Chief Executive Officer of the Center for Advanced
Telecommunications Technology, a non-profit organization, and served as its
Chairman from January 1993 to February 1994. Mr. Snelling is a director of
Boston Technology, Inc., a central office based intelligent peripheral company,
and Digital Wireless, a spread spectrum wireless company.
-3-
<PAGE> 6
Bill R. Brewer, CPA. Mr. Brewer, age 50, joined the Company in June 1994
and serves as President, Chief Operating Officer, Chief Financial Officer and
Secretary. From 1976 to June 1994, Mr. Brewer served in various capacities
with BellSouth Corporation and its affiliates, including most recently as
Assistant Vice President - Controllers, where he functioned as chief accountant
and controller.
Leo M. Cortjens. Mr. Cortjens, age 43, has been a director of the Company
since June 1994 and has served as President of Corporate and Product
Development and Chief Technical Officer of the Company since August 1996. Mr.
Cortjens served as President and Chief Operating Officer of the Company from
September 1994 to August 1996, and as Vice President-Technology of the Company
from 1992 to September 1994. From 1990 to 1992, Mr. Cortjens served as a
Network Integration Sales Consultant for Harris Adacom, a data communications
company. From 1987 to 1990, Mr. Cortjens was a key accounts sales manager for
Harris Data Communications Division. From 1976 to 1987, he held various
management-level positions with Harris-Lanier, including Director of Technical
Marketing and Director of Software Development.
Carleton A. Brown. Mr. Brown, age 54, has been a director of the Company
since 1993. Mr. Brown has served as Senior Vice President of Global Sales and
Marketing of Intergram Corporation, an international unified messaging service,
since October 1996. From March 1995 to October 1996, Mr. Brown served as
President of ADC Video Systems, Inc. (formerly American Light Wave Systems,
Inc.), a telecommunications subsidiary of ADC Telecommunications, Inc. From
May 1994 to March 1995, Mr. Brown served as Vice President of Amoco Technology
Company, a technology-based subsidiary of Amoco Corporation, a petroleum and
chemical company. He served as Senior Vice President and Group Executive of
Teleport Communication Group, an alternate local exchange carrier, from 1992 to
May 1994. From 1991 to 1992, Mr. Brown served as President of Sigma Group,
Inc., a telecommunications consulting company. He served as President and
Chief Operating Officer of Alcatel Network Systems, Inc., a network
telecommunications equipment manufacturer, from 1990 to 1991. From 1988 to
1990, Mr. Brown served as President of the Southwest Division of MCI
Telecommunications Corporation, a telecommunications company, and from 1981 to
1988, he served as Vice President and General Manager of Wang Laboratories,
Inc.
Larry M. Carr. Mr. Carr, age 53, has been a director of the Company since
June 1994. Mr. Carr founded Nursefinders, Inc., a temporary services company
in the healthcare industry in 1974. Although Mr. Carr's interest in this
company has now been acquired by Adia Services, Inc., Mr. Carr still owns and
operates numerous Nursefinders franchises and assists in the administration and
management of several other franchises through an entity known as Nursefinders
Management Corporation. Mr. Carr is Chairman of the Board of Northwest
National Bank, located in Arlington, Texas, and several privately held
companies, including New Vandergriff Chevrolet, Inc., Professional Telephone
Answering Services, Inc. and Taconic Partners, Inc. In addition, Mr. Carr is a
director of One Hour Acceptance Corp. and sits on the Advisory Board of the
North Central Texas Cancer Research Foundation. In connection with the
extension of credit to the Company by Mr. Carr in July 1994, the Company has
agreed to take any and all necessary or appropriate action to nominate and
elect Mr. Carr as a director of the Company until the maturity of said credit
facility. The credit facility, as amended, is due in full in June 1996. See
"Executive Compensation - Compensation Committee Interlocks and Insider
Participation."
Mark E. Munro. Mr. Munro, age 34, has been a director of the Company
since November 1996 and served as President - Sales/Marketing and Distribution
of the Company from October 1996 to February 1997. Mr. Munro has served as
President of Eastern Telecom, Inc., a telecommunications company acquired by
the Company in October 1996, since 1987.
Edward S. Redstone. Mr. Redstone, age 68, has been a director of the
Company since July 1996. Mr. Redstone has been a private investor since 1994.
From 1984 to 1994, he served as Chairman of the Board of Martha's Vineyard
National Bank.
-4-
<PAGE> 7
There are no family relationships between any director or executive
officer and any other director or executive officer of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than 10% of
the outstanding Common Stock of the Company to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater than 10%
shareholders are also required to furnish the Company with copies of all forms
they file under this regulation. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and
representations that no other reports were required, during the year ended
December 31, 1996, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% shareholders were complied with.
Although it is not the Company's obligation to make filings pursuant to
Section 16 of the Securities Exchange Act of 1934, the Company has adopted a
policy requiring all Section 16 reporting persons to report monthly to the
Chief Financial Officer of the Company as to whether any transactions in the
Company's securities occurred during the previous month.
MEETINGS OF THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
The Board of Directors held 11 meetings during the year ended December 31,
1996. Each director attended at least 75% or more of the aggregate number of
meetings held by the Board of Directors and the committees on which he served.
The Company's Board of Directors has four standing committees -- the Executive
Committee, the Audit Committee, the Compensation Committee and the Stock Option
Committee. The Board of Directors does not have a standing nominating
committee, such function being reserved to the full Board of Directors.
The Executive Committee presently consists of Richard K. Snelling, Larry
M. Carr and Edward S. Redstone. The Executive Committee exercises the
authority of the Board of Directors in accordance with the By-Laws of the
Company between meetings of the Board. The Executive Committee did not hold
any meetings during the year ended December 31, 1996.
The Audit Committee presently consists of Carleton A. Brown, Larry M.
Carr, Andre van den Bogaert and Edward S. Redstone. The Audit Committee has
been assigned the principal functions of: (i) recommending the independent
auditors; (ii) reviewing and approving the annual report of the independent
auditors; (iii) approving the annual financial statements; and (iv) reviewing
and approving summary reports of the auditors' findings and recommendations.
The Audit Committee held one meeting during the year ended December 31, 1996.
The Compensation Committee presently consists of Carleton A. Brown, Larry
M. Carr, Andre van den Bogaert and Edward S. Redstone. The Compensation
Committee has been assigned the functions of approving and monitoring the
remuneration arrangements for senior management and establishing the targets
that determine awards payable under the Company's incentive compensation plan.
The Compensation Committee held one meeting during the year ended December 31,
1996.
The Stock Option Committee presently consists of Larry M. Carr, Andre van
den Bogaert and Edward S. Redstone. The Stock Option Committee has been
assigned the functions of administering the Company's Stock Option Plans and
Employee Stock Purchase Plan and granting options thereunder. The Stock Option
Committee held seven meetings during the year ended December 31, 1996.
-5-
<PAGE> 8
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
---- --- ------------
<S> <C> <C>
Richard K. Snelling 65 Chairman of the Board and Chief Executive Officer
Bill R. Brewer 50 President, Chief Operating Officer, Chief Financial
Officer and Secretary
Leo M. Cortjens 43 President of Corporate and Product Development and
Chief Technical Officer
John R. Evans 49 Vice President - Operations
</TABLE>
Executive officers are chosen by and serve at the discretion of the Board
of Directors of the Company. Executive officers will devote their full time to
the affairs of the Company. See "Election of Directors" for information with
respect to Richard K. Snelling, Bill R. Brewer and Leo M. Cortjens.
John R. Evans. Mr. Evans joined the Company in June 1996 and serves as
Vice President - Operations. From May 1995 to June 1996, Mr. Evans served as
Southeastern Sales Director of the Company. Mr. Evans served in various
capacities with BellSouth Corporation from 1974 to 1994, including most
recently as its Director of Broadband Planning.
-6-
<PAGE> 9
EXECUTIVE COMPENSATION
The following table provides certain summary information for the fiscal
years ended December 31, 1996, 1995 and 1994 concerning compensation paid or
accrued by the Company to or on behalf of the Company's Chief Executive Officer
and the other executive officers of the Company whose total annual salary and
bonus exceeded $100,000 during the year ended December 31, 1996 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
Summary Compensation Table LONG TERM
Annual Compensation COMPENSATION
------------------------------------------------------------------ ------------
OTHER NUMBER OF
NAME AND ANNUAL OPTIONS
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDED
- ------------------ ---- -------------------- -------------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Richard K. Snelling.............. 1996 $ --(1) $ -- $ -- 100,000
Chairman of the Board and 1995 124,000(1) 13,178 -- 151,546
Chief Executive Officer 1994 86,272(1) -- -- 200,000
Bill R. Brewer................... 1996 $100,703 $ 3,780 $ 923 25,000
President and Chief Operating 1995 91,099 10,452 -- 36,000
Officer 1994(2) 41,698 -- -- 75,000
Leo M. Cortjens.................. 1996 $131,280 $6,088 $1,192 11,000
President of Corporate and 1995 116,405 10,921 -- 75,000
Product Development 1994 108,451(3) -- -- 175,000
Roger K. Tapke(4)................ 1996 $ 96,836 $ 3,375 $1,730 --
1995 91,099 10,452 -- 36,000
1994 91,730 -- -- 100,000
</TABLE>
- ----------------------------
(1) In connection with his service as Chairman of the Board and Chief
Executive Officer of the Company, Mr. Snelling did not receive any cash
compensation in 1996; his 1996 compensation consisted of options to
purchase 51,546 shares of Common Stock granted in November 1995 at an
exercise price of $4.312 per share, which options were fully vested on
March 16, 1997. Mr. Snelling agreed to defer payment of his 1995 and 1994
compensation (base salary of $124,000 for 1995 and $138,750 for 1994)
until January of the following year, and to receive shares of Common Stock
in lieu of his deferred cash compensation. Accordingly, 104,421 shares of
Common Stock were issued to Mr. Snelling in January 1996 and 172,576
shares of Common Stock were issued to Mr. Snelling in January 1995.
Amounts for 1994 also include outside directors fees of $4,000 paid to Mr.
Snelling by the Company prior to June 10, 1994, when Mr. Snelling became
an executive officer of the Company, and wellness pay of $1,334 which has
been deferred at the election of Mr. Snelling.
(2) Mr. Brewer joined the Company in June 1994.
(3) Includes $7,000 paid to Mr. Cortjens in the form of Common Stock of the
Company. This compensation was awarded to Mr. Cortjens effective
September 8, 1994, with payment deferred until January 1995. Accordingly,
11,200 shares of Common Stock were issued to Mr. Cortjens in January 1995.
(4) Mr. Tapke served as Vice President - Operations of the Company until June
1996 and remained as an employee of the Company until his resignation in
January 1997.
-7-
<PAGE> 10
DIRECTORS' FEES
The Company's present policy is not to pay any cash compensation to
directors who are also employees of the Company for their services as
directors. Each non-employee director of the Company receives an
automatic grant of options to purchase 15,000 shares of Common Stock on each
January 5. Each non-employee director of the Company also receives $500 for
each Board meeting attended, plus reimbursement of travel and other expenses
incurred in connection with the performance of their duties.
In addition, all new non-employee directors of the Company receive a
one-time grant of an option to purchase 20,000 shares of Common Stock at an
exercise price equal to the fair market value of such stock on the date of
grant. Such options expire, unless previously exercised or terminated, ten
years from the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is currently
comprised of Carleton A. Brown, Andre van den Bogaert, Larry M. Carr and Edward
S. Redstone. None of the members of the Compensation Committee served as an
officer or employee of the Company or any of its subsidiaries during fiscal
1996. Except as set forth below, there were no material transactions between
the Company and any of the members of the Compensation Committee during fiscal
1996.
On June 30, 1994, Larry M. Carr, a director of the Company, purchased from
Technology Funding Secured Investors III ("Tech Funding") the secured note
under the secured credit facility between Tech Funding and the Company's
subsidiary, Videoconferencing Systems, Inc. ("VSI"). As a consequence, as of
June 30, 1994, VSI was indebted to Mr. Carr for $327,642 under this secured
credit facility, which included the amount previously due to Tech Funding, as
well as an additional $20,000 to cover Mr. Carr's transactional costs in
acquiring and refinancing the secured note. In addition, as consideration for
the purchase and refinancing of the secured note, the Company issued to Mr.
Carr 150,000 shares of Common Stock and 150,000 Common Stock Purchase Warrants.
The Common Stock Purchase Warrants are exercisable over a term of ten years at
an exercise price of $.40 per share. The secured note bears interest at the
greater of 12 1/2% or prime plus 2% and was originally due on December 31,
1994. In January 1995, the Company repaid $77,642 of the secured note in
exchange for the issuance of 194,105 shares of common stock to Mr. Carr. In
connection therewith, the maturity of the remaining balance on the secured note
($250,000) was extended to July 12, 1995. On June 5, 1995, the secured note was
cancelled and replaced with an unsecured note which bears interest the greater
of 12 1/2% per year or prime plus 2%. On June 5, 1996, the Company retired
the credit facility by issuing to Mr. Carr 244,817 shares of Common Stock,
including 27,202 shares issued with respect to accrued interest.
STOCK OPTION PLAN
The Company, by action of its Board of Directors, adopted the 1991 Stock
Option Plan (the "1991 Plan") for officers, directors and employees of the
Company or of a wholly-owned subsidiary of the Company. The 1991 Plan was
approved by the shareholders of the Company on October 10, 1991. In July 1992,
the 1991 Plan was amended to, among other things, provide for the automatic
grant of options to the Company's non-employee directors, to increase the
number of shares of Common Stock available for grant thereunder and to expand
the class of persons eligible to receive options under the 1991 Plan to include
employees of majority-owned subsidiaries of the Company. In November 1993, the
1991 Plan was further amended to expand the class of persons eligible to
receive options under the 1991 Plan and to increase the number of shares of
Common Stock available for grant thereunder. The 1991 Plan provides for the
grant of options to purchase up to an aggregate of 2,762,057 shares of the
Company's Common Stock. Under the terms of the 1991 Plan, the Stock Option
Committee of the Board of Directors may grant options to purchase
-8-
<PAGE> 11
shares of Common Stock to officers, directors and employees of the Company or of
a subsidiary of the Company.
The following table provides certain information concerning individual
grants of stock options under the Company's 1991 Stock Option Plan made during
the year ended December 31, 1996 to the Named Executive Officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
% OF TOTAL OPTIONS EXERCISE OR BASE PRICE APPRECIATION
GRANTED TO PRICE FOR OPTION TERM(1)
OPTIONS GRANTED EMPLOYEES IN FISCAL ($ PER EXPIRATION ----------------------
NAME (#) YEAR SHARE) DATE 5% 10%
---- ---------------- ------------------- ------------------ ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Richard K. Snelling... 100,000(2) 38.7% $2.310 11/11/06 $145,275 $368,154
Bill R. Brewer........ 25,000(3) 9.7% 2.310 11/11/06 36,319 92,039
Leo M. Cortjens....... 11,000(4) 4.3% 3.687 6/13/06 25,506 64,637
Roger K. Tapke........ -- -- -- -- -- --
</TABLE>
- -------------------------
(1) The dollar amounts under these columns represent the potential realizable
value of each grant of option assuming that the market price of the
Company's Common Stock appreciates in value from the date of grant at the
5% and 10% annual rates prescribed by the SEC and therefore are not
intended to forecast possible future appreciation, if any, of the price of
the Company's Common Stock.
(2) Options vest in full on January 1, 1998.
(3) Option is fully vested.
(4) Options vest as follows: 33 1/3% on each of June 13, 1997, 1998 and 1999.
-9-
<PAGE> 12
The following table provides certain information concerning options
exercised during fiscal 1996 and the value of unexercised options held by the
Named Executive Officers under the Company's Stock Option Plans as of December
31, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT FISCAL YEAR THE-MONEY OPTIONS AT
END FISCAL YEAR-END (A)
---------------------- ----------------------------------
SARES ACQUIRED VALUE EXER- UNEXER- EXER- UNEXER-
NAME ON EXERCISE(#) REALIZED($) CISABLE CISABLE CISABLE CISABLE
- ------------------- -------------- ----------- ---------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard K. Snelling.......... -- -- 186,666 284,880 $214,399 $127,801
Bill R. Brewer............... -- -- 87,000 49,000 80,194 47,513
Leo M. Cortjens.............. 75,000 187,500 75,000 111,000 85,550 95,850
Roger K. Tapke .............. 87,000 139,134 -- 49,000 -- 47,513
</TABLE>
- ------------------------
(a) Dollar values were calculated by determining the difference between the
fair market value of the underlying securities at year-end ($2.13 per
share) and the exercise price of the options.
CERTAIN TRANSACTIONS
Reference is made to "Executive Compensation - Compensation Committee
Interlocks and Insider Participation" for information regarding certain
transactions between the Company and Larry M. Carr, a director of the Company,
during fiscal 1996.
-10-
<PAGE> 13
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock against
the cumulative total return of the Nasdaq Stock Market Index and the Nasdaq
Electronics Components Stock Index for the period commencing on March 31, 1992
and ending December 31, 1996 (the "Measuring Period"). The graph assumes that
the value of the investment in the Company's Common Stock and each index was
$100 on March 31, 1992. The yearly change in cumulative total return is
measured by dividing the sum of the cumulative amount of dividends for each
fiscal year, assuming dividend reinvestment, and the change in share price
between the beginning and end of the Measuring Period, by (ii) the share price
at the beginning of the Measuring Period. The Company has not paid any cash
dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
VSI ENTERPRISES, INC., NASDAQ STOCK MARKET INDEX AND
NASDAQ ELECTRONICS COMPONENTS STOCK INDEX
<TABLE>
<CAPTION>
3/31/92 3/31/93 12/31/93 12/30/94 12/29/95 12/31/96
<S> <C> <C> <C> <C> <C> <C>
VSI Enterprises, Inc. $100 $ 66 $ 40 $ 30 $ 90 $ 50
NASDAQ Stock Market Index $100 $115 $130 $127 $179 $220
NASDAQ Elect. Components S.I. $100 $165 $189 $209 $346 $598
</TABLE>
* ON OCTOBER 20, 1993, THE COMPANY CHANGED ITS FISCAL YEAR END FROM MARCH 31
TO DECEMBER 31.
ASSUMES $100 INVESTED ON MARCH 31, 1992 IN VSI ENTERPRISES, INC.
COMMON STOCK, NASDAQ STOCK MARKET INDEX AND
NASDAQ ELECTRONICS COMPONENTS STOCK INDEX
-11-
<PAGE> 14
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
During the year ended December 31, 1996, the Compensation Committee of the
Board of Directors was comprised of four non-employee members of the Board.
The Compensation Committee is responsible for: (i) setting the Company's
compensation philosophy and policies; (ii) setting the terms and the
administration of compensation plans for officers of the Company; (iii) review
and approval of pay recommendations for the executive officers of the Company;
and (iv) initiation of all compensation actions for the Chief Executive Officer
of the Company.
The Company's compensation policies have been designed to align the
financial interests of the Company's management with those of its stockholders,
and reflect the nature of the Company by taking into account the Company's
operating environment and the expectations for growth and enhanced
profitability. Compensation for each of the Company's executive officers
consists of a base salary, discretionary performance bonus, stock options and
performance warrants. The Company does not currently provide executive
officers with other long term incentive compensation other than the ability to
contribute their earnings to the Company's 401(k) Plan.
The Compensation Committee's philosophy is that the predominant portion of
an executive's compensation should be based directly upon the value of
long-term incentive compensation in the form of stock options and performance
warrant awards. The Compensation Committee believes that providing executives
with the opportunities to acquire significant stakes in the growth and
prosperity of the Company (through grants of stock options and performance
warrants), while maintaining other elements of the Company's compensation
program at conservative levels, will enable the Company to attract and retain
executives with the outstanding management abilities and entrepreneurial spirit
which are essential to the Company's ongoing success. Furthermore, the
Compensation Committee believes that this approach to compensation motivates
executives to perform to their full potential.
At least annually, the Compensation Committee reviews salary
recommendations for the Company's executives (other than the Chief Executive
Officer) and then approves such recommendations, with any modifications it has
deemed appropriate. The annual salary recommendations are made under the
ultimate direction of the Chief Executive Officer, based on peer group and
national industry surveys of total compensation packages, as well as evaluations
of the individual executive's past and expected future performance. Similarly,
the Compensation Committee fixes the base salary of the Chief Executive Officer
based on a review of competitive compensation data, the Chief Executive
Officer's overall compensation package, and the Compensation Committee's
assessment of his past performance and its expectation as to his future
performance in leading the Company. Generally, such salaries have been below
levels paid to executives with comparable qualifications, experience and
responsibilities at other similarly situated companies.
The Compensation Committee also determines, based upon the recommendation
of the Chief Executive Officer, the annual bonus, if any, to be paid to
executive officers (other than the Chief Executive Officer). The amount of
each individual bonus is determined based upon an evaluation of such factors as
individual performance, increases in the Company's revenue, net income, net
income per share and market penetration, as well as improvements in operating
efficiencies. The assessment of performance achievement is considered in
relation to the maximum normal bonus opportunity, which is paid for achieving
outstanding levels of performance. The Compensation Committee applies similar
criteria in setting the amount of annual bonus, if any, earned by the Chief
Executive Officer.
Stock options represent a substantial portion of compensation for the
Company's executive officers, including the Chief Executive Officer. Stock
options are granted at the prevailing market price on the date
-12-
<PAGE> 15
of grant, and will only have value if the Company's stock price increases.
Generally, option grants vest in equal amounts over a period of three years
(although certain special types of grants may vest either immediately or over a
shorter period) and executives must be employed by the Company at the time of
vesting in order to exercise the options. Grants of stock options generally are
based upon the level of the executive's position with the Company and an
evaluation of the executive's past and expected future performance. The
Compensation Committee believes that dependence on stock options for a
significant portion of executives' compensation more closely aligns such
executives' interests with those of the Company's stockholders, since the
ultimate value of such compensation is linked directly to stock price.
At the request of the Chief Executive Officer and with the approval of the
Compensation Committee, no cash compensation was paid to the Chief Executive
Officer during the year ended December 31, 1996. Rather, Mr. Snelling received
options to purchase 51,546 shares of Common Stock granted in November 1995 at
an exercise price of $4.312 per share, which options were fully vested on March
16, 1997. This request was made by Mr. Snelling in order to tie his
compensation directly to the performance of the Company.
In the year ended December 31, 1996, the Company granted the Chief
Executive Officer options to purchase 100,000 shares of the Company's Common
Stock. These stock option awards were based upon an evaluation of individual
performance criteria and is consistent with the philosophy of providing
incentives based on the Company's future performance. During 1996, the Company
also granted to Leo M. Cortjens and to Bill R. Brewer, executive officers of
the Company, options to purchase an aggregate of 36,000 shares of Common Stock
of the Company.
The Compensation Committee continually evaluates the Company's
compensation policies and procedures with respect to executives. Although the
Compensation Committee believes that current compensation policies have been
successful in aligning the financial interests of executive officers with those
of the Company's stockholders and with Company performance, it continues to
examine what modifications, if any, should be implemented to further link
executive compensation with both individual and Company performance.
Andre van den Bogaert
Carleton A. Brown
Larry M. Carr
Edward S. Redstone
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the foregoing
Report of Compensation Committee on Executive Compensation and the Stockholder
Return Performance Graph shall not be incorporated by reference into any such
filings.
-13-
<PAGE> 16
AGENDA ITEM TWO
PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
At a meeting of the Board of Directors of the Company on February 25,
1997, the directors approved an amendment to Section 5.01 of the Company's
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
to increase the number of authorized shares of Common Stock of the Company from
46,000,000 to 60,000,000 shares. In connection therewith, the following
resolution will be introduced at the Annual Meeting:
RESOLVED: That Section 5.01 of the Certificate of Incorporation, as
heretofore added to or amended by certificates filed pursuant to law, is
amended to read in its entirety as follows:
"5.01 Authorized Shares. The aggregate number of shares which
the Company shall have authority to issue is Sixty Million Eight
Hundred Thousand (60,800,000). Sixty Million (60,000,000) shares
shall be designated 'Common Stock' and shall have a par value of
$.00025. Eight Hundred Thousand (800,000) shares shall be
designated 'Preferred Stock' and shall have a par value of $.00025.
All shares of the Company shall be issued for such consideration, as
expressed in dollars, as the Board of Directors may from time to
time determine."
The Board of Directors recommends that shareholders approve the proposed
amendment to the Company's Certificate of Incorporation because it considers
the proposal to be in the best long-term and short-term interests of the
Company, its shareholders and its other constituencies. The proposed increase
in the number of shares of authorized Common Stock will ensure that additional
shares of Common Stock will be available, if needed, for issuance in connection
with any possible future transactions approved by the Board of Directors,
including, among others, stock splits, stock dividends, acquisitions,
financings and other corporate purposes.
The Board of Directors believes that the availability of the additional
shares of Common Stock for such purposes without delay or the necessity for a
special shareholders' meeting (except as may be required by applicable law or
regulatory authorities or by the rules of any stock exchange on which the
Company's securities may then be listed) will be beneficial to the Company by
providing it with the flexibility required to consider and respond to future
business opportunities and needs as they arise. The availability of additional
authorized shares of Common Stock will also enable the Company to act promptly
when the Board of Directors determines that the issuance of additional shares
of Common Stock is advisable. It is possible that shares of Common Stock may
be issued at a time and under circumstances that may increase or decrease
earnings per share and increase or decrease the book value per share of shares
presently held.
In connection with the issuance in September 1996 of $5.0 million of 5%
Convertible Debentures due September 27, 1999 (the "Debentures"), the Company
agreed to amend its Certificate of Incorporation to increase the number of
shares of Common Stock which the Company is authorized to issue to at least
56,000,000 shares and to include in this Proxy Statement a resolution
requesting shareholder approval of the increase in authorized shares. The
Company currently has sufficient authorized and unissued shares of Common Stock
to satisfy all Debenture conversions. Because the conversion ratio is based on
the trading price of the Company's Common Stock, however, a significant
decrease in the price of the Company's Common Stock may result in the number of
shares issuable upon the conversion of Debentures exceeding the number of
shares available for issuance.
Although the Company will require additional capital or other financing to
fund its operations and continued growth, except as set forth above, the
Company does not have any immediate agreements, arrangements, commitments or
understandings with respect to the issuance of any of the additional shares of
Common Stock which would be authorized by the proposal to increase the number
of authorized shares.
On March 3, 1997, 40,954,739 shares of Common Stock were issued and
outstanding and an aggregate of 4,368,020 shares of Common Stock were reserved
for issuance under outstanding stock options, warrants and Debentures.
-14-
<PAGE> 17
It should be noted that the availability of additional shares could render
more difficult or discourage a takeover attempt. For example, additional
shares of Common Stock could be issued and sold to purchasers who oppose a
takeover bid which is not in the best long-term and short-term interests of the
Company, its shareholders and its other constituencies or could be issued to
increase the aggregate number of outstanding shares of Common Stock and thereby
dilute the interest of parties attempting to obtain control of the Company. In
connection with any issuance of shares of Common Stock, the Board of Directors
is required to determine that such issuance would be in the best long-term and
short-term interests of the Company, its shareholders and its other
constituencies. The Board of Directors is presently unaware of any specific
effort to accumulate the shares of Common Stock of the Company or obtain
control of the Company.
The approval of the holders of a majority of the issued and outstanding
shares of Common Stock of the Company is required for the adoption of the
proposed amendment to the Certificate of Incorporation. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS APPROVE THE PROPOSED AMENDMENT TO
THE CERTIFICATE OF INCORPORATION.
INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP has served as independent auditors of the Company for
the fiscal year ended December 31, 1996 and have been selected by the Board of
Directors to serve as independent auditors of the Company for the fiscal year
ending December 31, 1997. Representatives of Grant Thornton LLP are expected
to be present at the shareholders' meeting and will have the opportunity to
make a statement if they desire to do so and to respond to appropriate
questions.
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as filed with the Securities and Exchange Commission, is
available to shareholders who make written request therefor to the Company's
Investor Relations Department, 5801 Goshen Springs Road, Norcross, Georgia
30071. Copies of exhibits and basic documents filed with that report or
referenced therein will be furnished to shareholders of record upon request.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's 1998
annual meeting must be received at the Company's principal executive offices by
December 30, 1997 in order to be eligible for inclusion in the Company's proxy
statement and form of proxy for that meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
annual meeting. However, if other matters should come before the annual
meeting it is the intention of the persons named in the enclosed form of Proxy
to vote the Proxy in accordance with their judgment of what is in the best
interest of the Company.
By Order of the Board of Directors,
Richard K. Snelling, Chairman of the Board
Norcross, Georgia
March 24, 1997
-15-
<PAGE> 18
APPENDIX
VSI ENTERPRISES, INC.
5801 GOSHEN SPRINGS ROAD
NORCROSS, GEORGIA 30071
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS.
The undersigned hereby appoints Richard K. Snelling and Bill R. Brewer or
either of them, with power of substitution to each, the proxies of the
undersigned to vote the Common Stock of the undersigned at the Annual Meeting of
Shareholders of VSI ENTERPRISES, INC. to be held on Monday, April 21, 1997, at 9
a.m., at the Company's offices, 5801 Goshen Springs Road, Norcross, Georgia
30071, and any adjournments or postponements thereof:
1. To elect seven (7) directors for a term of one year and until their
successors are elected and have qualified.
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
(except as marked to the contrary below) nominees listed below
</TABLE>
BILL R. BREWER, CARLETON A. BROWN, LARRY M. CARR, LEO M. CORTJENS, MARK E.
MUNRO, EDWARD S. REDSTONE and RICHARD K. SNELLING
INSTRUCTION: To withhold authority to vote for any individual nominee, write the
nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. To approve an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of common stock from 46,000,000
shares to 60,000,000 shares;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on reverse side)
3. To vote in accordance with their best judgment with respect to any other
matters that may properly come before the meeting or any adjournments or
postponements thereof.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ABOVE PROPOSALS AND UNLESS
INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS PROXY
WILL BE SO VOTED.
Please date and sign this Proxy
exactly as name(s) appears on
the mailing label.
--------------------------------
--------------------------------
Print Name(s):
--------------------------------
NOTE: When signing as an
attorney, trustee, executor,
administrator or guardian,
please give your title as such.
If a corporation or partnership,
give full name by authorized
officer. If the case of joint
tenants, each joint owner must
sign.
Dated:
--------------------------------
<PAGE> 19
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ABOVE PROPOSALS AND UNLESS
INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS PROXY
WILL BE SO VOTED.
Please date and sign this Proxy
exactly as name(s) appears on
the mailing label.
--------------------------------
--------------------------------
Print Name(s):
-----------------
NOTE: When signing as an
attorney, trustee, executor,
administrator or guardian,
please give your title as such.
If a corporation or partnership,
give full name by authorized
officer. If the case of joint
tenants, each joint owner must
sign.
Dated:
--------------------------
