<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-b(e)
(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
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.
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: __________________________________________________
- --------------------
(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 MAY 19, 1998
The annual meeting of shareholders of VSI Enterprises, Inc. (the
"Company") will be held on Tuesday, May 19, 1998 at 10:00 a.m., at the Company's
offices, 5801 Goshen Springs Road, Norcross, Georgia 30071, for the following
purposes:
(1) To elect five (5) 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 effect, if and when the Board of Directors deems appropriate,
and for a period of time expiring at the Company's 1999 Annual Meeting of
Shareholders, a 1-for-4 reverse split of the Company's Common Stock;
(3) To approve an amendment to the Company's 1991 Stock Option Plan to
increase the number of shares of Common Stock available for grant thereunder
from 2,762,057 shares to 3,662,057 shares; and
(4) 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 April 1, 1998
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,
/s/ Richard K. Snelling
Richard K. Snelling, Chairman of the Board
Norcross, Georgia
April 15, 1998
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
MAY 19, 1998
-----------------------
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 Tuesday, May 19, 1998, 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 April
15, 1998. 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, for adoption of the
reverse stock split and for adoption of the amendment to the 1991 Stock Option
Plan. Abstentions and broker non-votes will not be counted as votes either in
favor of or against the proposal to effect the reverse stock split or the
proposal to amend the 1991 Stock Option Plan.
The record of shareholders entitled to vote at the annual meeting was
taken on April 1, 1998. On that date the Company had outstanding and entitled to
vote 47,170,492 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 9, 1998 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................................... 1,479,268(2) 3.1%
Julia B. North........................................ 150,000(3) *
Carleton A. Brown..................................... 200,000(4) *
Leo M. Cortjens....................................... 339,594(5) *
Larry M. Carr......................................... 2,188,479(6) 4.6%
Edward S. Redstone.................................... 3,414,441(7) 7.3%
All Directors and Executive Officers
as a Group (8 persons).............................. 7,472,634 15.5%
</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 47,034,970 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 47,034,970 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 438,213 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, L.P., an entity 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 150,000 shares of Common Stock subject to stock options which
are exercisable within the next sixty days.
(4) Includes 90,000 shares of Common Stock subject to stock options which
are exercisable within the next sixty days.
(5) Includes 153,667 shares of Common Stock subject to stock options which
are exercisable within the next sixty days.
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<PAGE> 5
(6) Includes 80,000 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.
(7) Includes 50,000 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.
AGENDA ITEM ONE
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of five 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
five by the Board. The Board of Directors recommends the election of the five
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 five
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 five
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 66, has been a director of the
Company since 1993 and currently serves as Chairman of the Board. Mr. Snelling
served as Chief Executive Officer of the Company from June 1994 to October 1997.
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 Comverse Technology, Inc.,
a manufacturer of computer and telecommunication systems.
Julia B. North. Ms. North, age 50, has served as President and Chief
Executive Officer and as a director of the Company since October 1997. Ms. North
served in various capacities with BellSouth Corporation from 1972 to October
1997, including most recently as President of its Consumer Services Division.
Ms. North is a director of Winn-Dixie Stores, Inc., a food retailer, and
ChoicePoint, Inc., a provider of risk management services.
Carleton A. Brown. Mr. Brown, age 55, has been a director of the
Company since 1993. Mr. Brown has served as Senior Vice President of Powerwave
Technologies, Inc., a supplier of RF power amplifiers, since January 1998. Mr.
Brown served as Senior Vice President of Global Sales and Marketing of Intergram
Corporation, an international unified messaging service, from October 1996 to
January 1998. 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
-3-
<PAGE> 6
and Group Executive of Teleport Communication Group, an alternate local exchange
carrier, from 1992 to May 1994.
Larry M. Carr. Mr. Carr, age 54, 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.
Edward S. Redstone. Mr. Redstone, age 69, 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.
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, 1997, 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 13 meetings during the year ended December
31, 1997. 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 or she
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 held one meeting
during the year ended December 31, 1997.
-4-
<PAGE> 7
The Audit Committee presently consists of Carleton A. Brown, Larry M.
Carr 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, 1997.
The Compensation Committee presently consists of Carleton A. Brown,
Larry M. Carr 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
three meetings during the year ended December 31, 1997.
The Stock Option Committee presently consists of Larry M. Carr 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 three
meetings during the year ended December 31, 1997.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
---- --- -------------
<S> <C> <C>
Julia B. North 50 President and Chief Executive Officer
John R. Evans 50 Vice President -- Operations
E. Anthony Godfrey, CPA 32 Chief Financial Officer and Secretary
Michael A. O'Brien 48 Group President -- INS and ETI
</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 Julia B. North.
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.
E. Anthony Godfrey, CPA. Mr. Godfrey joined the Company in 1991 and,
since November 1997, has served as its Chief Financial Officer and Secretary.
From 1993 until November 1997, Mr. Godfrey served as Controller of the Company.
Mr. Godfrey passed the Certified Public Accountants exam in 1996.
Michael A. O'Brien. Mr. O'Brien joined the Company in January 1997, and
has served as Group President for two of the Company's subsidiaries, VSI Network
Services, Inc., d/b/a Integrated Network Services and VSI Network Solutions,
Inc. d/b/a Easton Telecom, since December 1997. Mr. O'Brien served as Chief
Executive Officer of The Usability Center, a provider of implementation services
for technology companies, from 1995 to January 1997, and as President and Chief
Executive Officer of Audit Trail Systems, a provider of services and software to
major non-profit organizations, from 1993 to 1995.
-5-
<PAGE> 8
EXECUTIVE COMPENSATION
The following table provides certain summary information for the fiscal
years ended December 31, 1997, 1996 and 1995 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, 1997 (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>
Julia B. North .................... 1997(1) $ 32,000 $ -- $ -- 450,000
President and Chief Executive
Officer
Richard K. Snelling ............... 1997 $ --(2) $ -- $ -- --
Chairman of the Board 1996 --(2) -- -- 100,000
1995 124,000(2) 13,178 -- 151,546
Leo M. Cortjens (3) ............... 1997 $119,923 $12,500 $ 1,372 --
President -- Pacific Rim Sales 1996 131,280 6,088 1,192 11,000
1995 116,405 10,921 -- 75,000
</TABLE>
- ----------------------------
(1) Ms. North joined the Company in October 1997.
(2) Mr. Snelling served as Chief Executive Officer of the Company until
October 16, 1997. 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 1997 or 1996; his 1997 compensation
consisted of options to purchase 75,000 shares of common stock granted
in November 1996 at an exercise price of $2.31 per share, which options
were fully vested on January 1, 1998; and 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 compensation (base salary of $124,000) 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.
(3) Mr. Cortjens served as President of Corporate and Product Development
and Chief Technical Officer of the Company until January 20, 1998, when
he resigned those positions to assume the position of President --
Pacific Rim Sales of the Company.
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
-6-
<PAGE> 9
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, 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 1997. Except as set forth
below, there were no material transactions between the Company and any of the
members of the Compensation Committee during fiscal 1997.
On February 18, 1998, Edward S. Redstone, a director of the Company,
loaned $500,000 to the Company in order to provide the Company with short-term
liquidity. This loan was repaid in full on February 27, 1998, including accrued
interest of $1,045.
In connection with private placement transactions by the Company in
1997, Messrs. Carr and Redstone, along with Richard K. Snelling, a director of
the Company, purchased shares of common stock of the Company, as follows: Mr.
Carr purchased an aggregate of 274,599 shares in two separate transactions; Mr.
Redstone purchased an aggregate of 901,941 shares in two separate transactions;
and Mr. Snelling purchased an aggregate of 80,000 shares in one transaction.
Although these shares were sold at a discount to the then prevailing market
price, the shares were purchased by these directors on the same terms as the
shares were offered to other accredited investors. Based on the closing price of
the Company's common stock as reported on the Nasdaq SmallCap Market on the
dates of their respective purchases, Messrs. Carr, Redstone and Snelling
received discounts totaling $76,092, $249,011 and $24,800, respectively, for
their share purchases in 1997.
STOCK OPTION PLAN
The Company, by action of its Board of Directors, adopted the 1991
Stock Option Plan (the "1991 Plan") for officers, directors and employees of the
Company or of a wholly-owned subsidiary of the Company. The 1991 Plan was
approved by the shareholders of the Company on October 10, 1991. In July 1992,
the 1991 Plan was amended to, among other things, provide for the automatic
grant of options to the Company's non-employee directors, to increase the number
of shares of Common Stock available for grant thereunder and to expand the class
of persons eligible to receive options under the 1991 Plan to include employees
of majority-owned subsidiaries of the Company. In November 1993, the 1991 Plan
was further amended to expand the class of persons eligible to receive options
under the 1991 Plan and to increase the number of shares of Common Stock
available for grant thereunder. The 1991 Plan provides for the grant of options
to purchase up to an aggregate of 2,762,057 shares of the Company's Common Stock
(3,662,057 shares if the proposed amendment to the 1991 Plan is approved by the
Company's shareholders at the Annual Meeting). Under the terms of the 1991 Plan,
the Stock Option Committee of the Board of Directors may grant options to
purchase shares of Common Stock to officers, directors and employees of the
Company or of a subsidiary of the Company.
-7-
<PAGE> 10
The following table provides certain information concerning individual
grants of stock options under the Company's 1991 Stock Option Plan made during
the year ended December 31, 1997 to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS EXERCISE ANNUAL RATES OF STOCK
GRANTED TO OR BASE PRICE APPRECIATION FOR
OPTIONS EMPLOYEES PRICE OPTION TERM(1)
GRANTED IN FISCAL ($ PER EXPIRATION -----------------------
NAME (#) YEAR SHARE) DATE 5% 10%
---- --------- ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Julia B. North 150,000(2) 26.2 $1.312 10/16/07 $123,766 $313,648
300,000(3) 52.4 1.312 10/16/07 247,533 627,297
Richard K. Snelling -- -- -- -- -- --
Leo M. Cortjens -- -- -- -- -- --
</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) Option is fully vested.
(3) Options vest as follows: 100,000 shares on each of October 16, 1998,
1999 and 2000.
The following table provides certain information concerning the value of
unexercised options held by the Named Executive Officers under the Company's
Stock Option Plans as of December 31, 1997. No options were exercised by any of
the Named Executive Officers during 1997.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT FISCAL YEAR MONEY OPTIONS AT FISCAL
END YEAR-END (A)
-------------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Julia B. North....................... 150,000 300,000 $ -- $ --
Richard K. Snelling.................. 338,213 108,333 125,000 --
Leo M. Cortjens...................... 153,667 32,333 62,500 --
- ---------------------------
</TABLE>
(a) Dollar values were calculated by determining the difference between the
fair market value of the underlying securities at year-end ($1.25 per
share) and the exercise price of the options.
-8-
<PAGE> 11
CERTAIN TRANSACTIONS
Reference is made to "Executive Compensation - Compensation Committee
Interlocks and Insider Participation" for information regarding certain
transactions between the Company and each of Larry M. Carr, Edward S. Redstone
and Richard K. Snelling, directors of the Company, during fiscal 1997.
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, 1993
and ending December 31, 1997 (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, 1993. The yearly change in cumulative total return is measured
by dividing (i) the sum of (a) the cumulative amount of dividends for each
fiscal year, assuming dividend reinvestment, and (b) 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>
Measurement Period NASDAQ Stock NASDAQ Elect.
(Fiscal Year Covered) VSI Enterprises, Inc. Market Index Components S.I.
<S> <C> <C> <C>
3/31/93 100 100 100
12/31/93 61 113 115
12/30/94 45 110 127
12/29/95 137 156 210
12/31/96 76 192 363
12/31/97 45 235 381
</TABLE>
* ON OCTOBER 20, 1993, THE COMPANY CHANGED ITS FISCAL YEAR END FROM MARCH 31
TO DECEMBER 31.
ASSUMES $100 INVESTED ON MARCH 31, 1993 IN VSI ENTERPRISES, INC.
COMMON STOCK, NASDAQ STOCK MARKET INDEX AND
NASDAQ ELECTRONICS COMPONENTS STOCK INDEX
-9-
<PAGE> 12
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
During the year ended December 31, 1997, the Compensation Committee of the
Board of Directors was comprised of three 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 or her 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.
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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 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 Richard K. Snelling (Chief Executive Officer through
October 16, 1997) and with the approval of the Compensation Committee, no cash
compensation was paid to Mr. Snelling during the year ended December 31, 1997.
Rather, Mr. Snelling received options to purchase 75,000 shares of Common Stock
granted in November 1996 at an exercise price of $2.31 per share, which options
were fully vested on January 1, 1998. 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, 1997, the Company granted Julia B. North
(Chief Executive Officer effective October 16, 1997) options to purchase 450,000
shares of the Company's Common Stock. These stock option awards were made to Ms.
North as an inducement for her to join 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.
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.
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AGENDA ITEM TWO
PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION
TO EFFECT 1-FOR-4 REVERSE STOCK SPLIT
GENERAL
On March 17, 1998, the Company's Board of Directors unanimously approved,
and recommends that shareholders approve, an amendment to Section 5.01 of the
Company's Certificate of Incorporation to implement, if and when the Board deems
appropriate, a reverse split of the Common Stock of the Company at the ratio of
1-for-4, to be effective at the time a Certificate of Amendment is filed with
the Secretary of State of the State of Delaware (the "Reverse Split"). The
Reverse Split may be effected by the Board of Directors, at its discretion, for
a period of time expiring at the Company's 1999 Annual Meeting of Shareholders.
The proposal may be abandoned by the Board of Directors, without further action
by the shareholders, at any time before or after the Annual Meeting and prior to
the date and time at which the Reverse Split becomes effective (the "Effective
Date") if for any reason the Board of Directors deems it advisable to abandon
the proposal.
The Reverse Split will be effected by an amendment to the Certificate of
Incorporation in the form as set forth in full as Appendix A to this Proxy
Statement. The number of shares of Common Stock authorized by the amendment to
the Certificate of Incorporation will be 15,000,000 as a result of the proposed
Reverse Split. The effect of the proposed Reverse Split on the holders of Common
Stock will be as follows: holders of record of four or more shares of Common
Stock on the Effective Date will receive a number of whole new shares equal to
1/4 of the number of shares held on the Effective Date. No fractional shares
will be issued. In the event a shareholder holds a number of shares which is not
evenly divisible by four, such shareholder will receive cash in the amount to
which he is entitled in lieu of any fractional shares. Holders of record of
fewer than four shares of Common Stock on the Effective Date will have their
shares automatically converted into the right to receive cash in lieu of
fractional shares in the amount set forth below.
CASH PAYMENT IN LIEU OF FRACTIONAL SHARES
In lieu of issuing fractional shares resulting from the Reverse Split, the
Company will redeem all fractional shares for cash. The Company will value each
outstanding share of Common Stock held on the Effective Date of the Reverse
Split at a price per share ("Market Price") equal to the closing bid price of
the Common Stock on the trading day immediately preceding the Effective Date, as
reported on the Nasdaq SmallCap Market. No brokerage commission will be payable
by holders who receive cash in lieu of fractional shares. The Company will not
issue certificates representing fractional shares and will pay the Market Price
to redeem fractional shares resulting from the Reverse Split upon presentation
to the Company's transfer agent of the certificates representing such shares.
The holders of Common Stock prior to the Reverse Split will not have the right
to offer to the Company for cash redemption any shares other than fractional
shares resulting from the Reverse Split.
EFFECT OF REVERSE SPLIT
The Company has authorized capital stock of 60,800,000 shares, consisting
of 60,000,000 shares of Common Stock and 800,000 shares of Preferred Stock. The
authorized capital stock will be reduced to 15,800,000 shares by reason of the
proposed Reverse Split, consisting of 15,000,000 shares of Common Stock and
800,000 shares of Preferred Stock. As of April 1, 1998, the number of issued and
outstanding shares of Common Stock was 47,170,492 and no shares of Preferred
Stock were issued and outstanding. Based on the Company's best estimates, the
number of issued and outstanding shares of Common Stock will be reduced as a
result of the proposed Reverse Split from 47,170,492 shares to approximately
11,792,600 shares.
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By implementing the Reverse Split, management does not intend to take the
Company "private" by decreasing the number of shareholders of the Company below
300. Management currently believes that there are over 9,000 shareholders who
beneficially own shares of Common Stock of the Company. Management does not
believe that a 1-for-4 Reverse Split will result in a significant number of
shareholders being cashed out by virtue of holding less than one share after the
Reverse Split.
The Reverse Split, if adopted, will also increase the par value per share
of the Company's Common Stock from $.00025 to $.001. The increase in the par
value per share is intended to maintain the Company's capital stock accounts at
current levels.
If the Reverse Split is approved, the rights of the holders of the Common
Stock as shareholders will not be affected adversely. Except for the receipt of
cash in lieu of fractional interests, the Reverse Split will not affect any
shareholder's proportionate equity interest in the Company. The Certificate of
Incorporation does not provide for a preference to be given to the holders of
Common Stock in the event of liquidation, and as a result, there are no
liquidation rights or preferences to lose.
PURPOSE OF THE PROPOSED REVERSE SPLIT
The Board of Directors believes that the Reverse Split should enhance the
acceptability of the Company's Common Stock by the financial community and the
investment public. Many leading brokerage firms are reluctant to recommend
low-price stocks to their clients. Additionally, since brokers' commissions on
low-price stocks generally represent a higher percentage of the stock price than
commissions on higher priced stocks, the current share price of the Common Stock
can result in individual stockholder's paying transaction costs that are a
higher percentage of their total share value than would be the case if the
Company's share price were substantially higher. This factor may also limit
willingness of institutions to purchase the Company's stock. In addition, a
variety of brokerage house policies and practices tend to discourage individual
brokers within those firms from dealing in low priced stocks. Some of those
policies and practices pertain to the payment of brokers' commissions and to
time-consuming procedures that function to make the handling of low priced
stocks unattractive to brokers from an economic standpoint.
The Common Stock has been trading at a low price for several years, and
recently in the $1.00 per share range. With the shares trading in such a range,
small moves in absolute terms in the price-per-share of Common Stock translate
into disproportionately large swings in the price on a percentage basis, and
these swings tend to bear little relationship to the financial condition and
results of the Company. In the Board's view, these factors have resulted in an
unjustified, relatively low level of interest in the Company on the part of
investment analysts, brokers and professionals, and individual investors, which
tends to depress the market for the Common Stock. The Board has thus proposed
the Reverse Split as a means of increasing the per-share market price of the
Common Stock in the hope that these problems will thereby be addressed.
The decrease in the number of shares of Common Stock outstanding as a
consequence of the proposed Reverse Split should increase the per share price of
the Common Stock, which may encourage greater interest in the Common Stock and
possibly promote greater liquidity for the Company's shareholders. However, the
increase in the per share price of the Common Stock as a consequence of the
proposed Reverse Split may be proportionately less than the decrease in the
number of shares outstanding. In addition, any increased liquidity due to any
increased per share price could be partially or entirely offset by the reduced
number of shares outstanding after the proposed Reverse Split. Moreover, the
Reverse Split is expected to increase the number of "odd-lot" Common Stock
holdings (i.e., holdings of a number of shares that are not divisible by 100),
which may be more difficult to sell and may also result in increased selling
costs. Nevertheless, the proposed Reverse Split could result in a per share
price that adequately compensates for the adverse impact of the market factors
noted above. There can, however, be no assurance that the favorable effects
described above will occur, or that any increase in per share price of the
Common Stock resulting from the proposed reverse stock split will be maintained
for any period of time. Moreover, there can be no assurance that the market
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price of the Common Stock after the proposed Reverse Split will be four times
the market price before the proposed Reverse Split, or that such price will
either exceed or remain in excess of the current market price.
Finally, in order for the Company's Common Stock to continue to be eligible
for quotation on the Nasdaq SmallCap Market, the Common Stock must have a
minimum bid price per share of $1.00. The Company's Common Stock currently is
trading in the $1.00 per share range. Management believes that, if required to
maintain the Company's Nasdaq listing, the implementation of the Reverse Split
is in the best interests of the Company and its shareholders. A failure to meet
the continued inclusion requirements of Nasdaq will result in the removal of the
Company's Common Stock from Nasdaq listing. If the Company's shares are removed
from the Nasdaq SmallCap Market, the Company's shares would be eligible for
quotation on the Nasdaq Bulletin Board.
If necessary to maintain listing of the Common Stock on the Nasdaq SmallCap
Market or if the Board of Directors otherwise deems the Reverse Split to be in
the best interests of the Company, management presently intends to effect the
Reverse Split as soon as practicable subsequent to receiving the requisite
shareholder approval. The Company expects to notify shareholders of the
effectiveness of the Reverse Split by a press release.
WARRANTS, OPTIONS AND CONVERTIBLE DEBENTURES
The Company also has outstanding or is authorized to issue various warrants
and options exercisable to acquire up to an aggregate of approximately 2,570,000
shares of Common Stock at various exercise prices. The amount of Common Stock
issuable pursuant to these options and warrants will be reduced to one-fourth
the previous amounts and the per share exercise prices will be increased by a
factor of four.
The Company also has outstanding $3,000,000 of convertible debentures which
are convertible into shares of Common Stock at the option of the debenture
holders. As the amount of Common Stock issuable pursuant to conversions of the
debentures depends on the market price of the Common Stock at the time of
conversion, any increase in market price resulting from the Reverse Split will
have the effect of reducing the number of shares issuable upon conversions of
the debentures.
PROCEDURE FOR IMPLEMENTING THE REVERSE SPLIT
As soon as practicable after the Effective Date, the Company will send
letters of transmittal to all shareholders of record on the Effective Date for
use in transmitting stock certificates ("Old Certificates") to the transfer
agent, who will act as the exchange agent. Upon proper completion and execution
of the letter of transmittal and return thereof to the transfer agent, together
with the Old Certificates, each shareholder who holds of record fewer than four
shares on the Effective Date will receive cash in the amount to which he is
entitled. Until surrendered, each outstanding Old Certificate held by a
shareholder who holds of record fewer than four shares shall be deemed for all
purposes to represent only the right to receive the amount of cash to which the
holder is entitled.
Upon proper completion and execution of the letter of transmittal and
return thereof to the transfer agent, together with the Old Certificates,
holders of record of four or more shares on the Effective Date will receive new
certificates ("New Certificates") representing the number of whole shares of
Common Stock into which their shares of Common Stock have been converted as a
result of the Reverse Split. Holders of record of four or more shares on the
Effective Date whose shares are not evenly divisible by four will receive cash
in the amount to which they are entitled in lieu of any fractional shares. Until
surrendered, each outstanding Old Certificate held by a shareholder who holds of
record four or more shares shall be deemed for all purposes to represent the
number of whole shares and the right to receive the amount of cash, if any, to
which the holder is entitled.
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FEDERAL INCOME TAX CONSEQUENCES
The following discussion generally describes certain federal income tax
consequences of the proposed Reverse Split to shareholders of the Company. The
federal income tax consequences of the Reverse Split will vary among
shareholders depending upon whether they receive (1) solely cash for their
shares, (2) solely New Certificates, or (3) New Certificates plus cash for
fractional shares, in exchange for Old Certificates. In addition, the actual
consequences for each shareholder will be governed by the specific facts and
circumstances pertaining to his acquisition and ownership of the Common Stock.
Thus, the Company makes no representations concerning the tax consequences for
any of its shareholders and recommends that each shareholder consult with his
own tax advisor concerning the tax consequences of the Reverse Split, including
federal, state and local or other income tax. The Company has not sought and
will not seek an opinion of counsel or a ruling from the Internal Revenue
Service regarding the federal income tax consequences of the proposed Reverse
Split. However, the Company believes that because the Reverse Split is not part
of a plan to periodically increase a shareholder's proportionate interest in the
assets or earnings and profits of the Company, and because the cash payment to
be made in lieu of the issuance of fractional shares represents a mechanical
rounding off of the fractions in the exchange rather than separately bargained
for consideration, the proposed Reverse Split will have the following federal
income tax effects:
1. A shareholder will not recognize taxable gain or loss on the receipt of
New Certificates in exchange for Old Certificates in the Reverse Split. In the
aggregate, the shareholder's basis in the Common Stock represented by New
Certificates will equal his basis in the shares of Common Stock represented by
Old Certificates exchanged therefor (but not including the basis of any shares
of Common Stock represented by Old Certificates to which a fractional share
interest in Common Stock represented by a New Certificate is attributable), and
such shareholder's holding period for the New Certificates will include the
holding period for the Old Certificates exchanged therefor if the shares of
Common Stock represented by such certificates are capital assets in the hands of
such shareholder.
2. To the extent that a shareholder receives cash in the Reverse Split in
lieu of the issuance of a fractional share by the Company (whether or not in
addition to receiving New Certificates in exchange for Old Certificates), such
shareholder will generally be treated as having received a fractional interest
in a share of Common Stock represented by a New Certificate which is then
redeemed by the Company. Such shareholder generally will recognize taxable gain
or loss, as the case may be, equal to the difference, if any, between the amount
of cash received and such shareholder's aggregate basis in the pre-Reverse Split
shares of Common Stock to which such fractional share interest is attributable.
If such shares are a capital asset in the hands of such shareholder, the gain or
loss will be long-term gain or loss if the shares were held for more than one
year.
3. The proposed Reverse Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Company will not recognize any gain or loss as a result of
the proposed Reverse Split.
VOTE REQUIRED
The Reverse Split must be approved by the holders of a majority of the
issued and outstanding shares of the Company's Common Stock. THE BOARD OF
DIRECTORS RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS APPROVE THE REVERSE SPLIT.
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AGENDA ITEM THREE
PROPOSAL TO AMEND 1991 STOCK OPTION PLAN
GENERAL
The Company has, by action of its Board of Directors, adopted the 1991
Stock Option Plan (the "1991 Plan") for officers, directors, employees and
consultants 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.
The purpose of the 1991 Plan is to serve as an incentive and to encourage stock
ownership by selected directors, officers and employees of the Company and its
subsidiaries. The Board of Directors believes that the 1991 Plan promotes
personal interest in the welfare of the Company by allowing such persons to
continue to share in the success of the Company and encourages them to remain in
the service of the Company or its subsidiaries. Under the 1991 Plan, the Company
may grant incentive stock options as defined in Section 422 of the Code or
non-qualified stock options.
The 1991 Plan provides for the grant of options to purchase up to an
aggregate of 2,762,057 shares of the Company's $.00025 par value Common Stock.
Under the terms of the 1991 Plan, the Stock Option Committee of the Board of
Directors may grant options to purchase shares of Common Stock to officers,
directors and employees of the Company or of a subsidiary of the Company.
As of April 1, 1998, the Company had granted options to purchase shares of
Common Stock pursuant to the 1991 Plan as follows: (i) each Named Executive
Officer (Julia B. North: 450,000 shares; Richard K. Snelling: 471,546 shares;
and Leo M. Cortjens: 261,000 shares); (ii) all current executive officers as a
group: 566,582 shares; (iii) all current directors who are not executive
officers as a group: 691,546 shares; (iv) each nominee for election as a
director (Carleton A. Brown: 90,000 shares, Larry M. Carr: 80,000 shares; Julia
B. North: 450,000 shares; Edward S. Redstone: 50,000 shares; and R.K. Snelling:
471,546 shares); and (v) all employees, including all current officers who are
not executive officers, as a group: 1,760,000 shares.
DESCRIPTION OF PROPOSED AMENDMENT
On March 17, 1998, the Board of Directors of the Company adopted an
amendment to the 1991 Plan which would increase the number of shares of Common
Stock of the Company available for grant thereunder to 3,662,057 shares from
2,762,057 shares. As of April 1, 1998, no shares of Common Stock remained
available for grant under the 1991 Plan. The proposed increase in the number of
authorized shares would ensure the uninterrupted continuation of the 1991 Plan.
The Board of Directors recommends that shareholders vote FOR the proposed
amendment. The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting is necessary for the
approval of the amendment to the 1991 Plan.
DESCRIPTION OF 1991 PLAN
Effective Date. The effective date of the 1991 Plan is August 14, 1991. The
1991 Plan shall remain in effect until all shares subject to or which may become
subject to the 1991 Plan shall have been purchased pursuant to options granted
under the 1991 Plan, provided that options under the 1991 Plan must be granted
within ten (10) years from the effective date.
Shares Reserved for the 1991 Plan. The shares of the Company's Common Stock
to be sold to officers, directors and employees under the 1991 Plan may, at the
election of the Board of Directors, be either treasury shares or shares
originally issued for such purpose. The maximum number of shares which shall be
reserved and made available for sale under the 1991 Plan is currently 2,762,057.
Any shares subject to an option which for any reason expires or is terminated
unexercised may again be subject to an option under the 1991 Plan.
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<PAGE> 19
In the event of a subdivision or combination of the Company's shares, the
maximum number of shares that may thereafter be issued and sold under the 1991
Plan and the number of shares under option shall be proportionately increased or
decreased, the terms relating to the price at which shares under option will be
sold will be appropriately adjusted, and such other action will be taken as in
the opinion of the Board of Directors is appropriate under the circumstances. In
the case of a reclassification or other change in the Company's shares, the
Board of Directors will also make appropriate adjustments.
Persons Eligible to Participate in the 1991 Plan. Under the 1991 Plan,
options may be granted only to those persons who are officers, directors or
employees of the Company or of a subsidiary of the Company. In determining the
persons to whom options will be granted and the number of shares to be covered
by each option, the Stock Option Committee shall take into account the duties of
the respective officers, directors and employees, their present and potential
contributions to the success of the Company or of a subsidiary of the Company,
the anticipated number of years of effective service remaining, and any other
factors as they shall deem relevant in connection with accomplishing the
purposes of the 1991 Plan.
Administration of the 1991 Plan. The 1991 Plan is administered by the Stock
Option Committee (the "Committee") appointed by the Board of Directors of the
Company from among its members. Such Committee shall consist of not less than
three of the members of the Board of Directors who shall serve at the pleasure
of the Board.
Subject to the provisions of the 1991 Plan, the Committee has the authority
to administer the 1991 Plan, to select those persons to whom options will be
granted, to determine the terms and provisions of the respective stock option
agreements with optionee, including the number of shares to be optioned to each
such person, and to interpret, construe and implement the provisions of the 1991
Plan.
Exercise Price, Terms of Exercise and Payment For Shares. All Options. Each
option granted under the 1991 Plan will be represented by an Option Agreement
which shall set forth the terms particular to that option, including the number
of shares covered by the option, the exercise price, the term of the option
period and any vesting requirements.
Stock purchased pursuant to an Option Agreement shall be paid for in
accordance with the terms and conditions set forth in the Option Agreement. The
terms and conditions of payment may vary with respect to each optionee. Upon
receipt of payment, the Company shall, without transfer or issue tax, deliver to
the optionee (or other person entitled to exercise the option) a certificate or
certificates for such shares.
It is intended that funds received by the Company from the exercise of
options will be added to the general working capital of the Company and used for
general corporate purposes. Shares of Common Stock of the Company received in
payment for the exercise price of options may be, at the discretion of the Board
of Directors, either held as treasury shares or retired and returned to
authorized but unissued status.
Incentive Stock Options. The exercise price of incentive stock options
granted under the 1991 Plan will be determined by the Committee, but in no event
shall such price be less than 100% of the fair market value of the stock on the
date of the grant of the option. On March 25, 1998, the average of the closing
bid and asked price for the Common Stock, as reported on the Nasdaq System, was
$1.09 per share. In no event may incentive stock options be exercised later than
ten (10) years from the date of grant of the option.
Notwithstanding the foregoing, an optionee who owns, directly or
indirectly, more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company ("10% Owner") may not be granted an
incentive stock option at less than 110% of the fair market value of the Common
Stock on the date the option is granted. Any incentive stock option granted to a
10% Owner must by its terms be exercisable within five (5) years from the date
it is granted.
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The aggregate fair market value (determined at the time the option was
granted) of the shares with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year (under
all incentive stock option plans of the Company) shall not exceed $100,000.
Automatic Grant of Options to Non-Employee Directors. The 1991 Plan grants
to non-employee directors of the Company, without necessity of action by the
Board of Directors or the Stock Option Committee, as the case may be, an option
to purchase 20,000 shares of Common Stock on the date such non-employee director
first becomes a member of the Board of Directors of the Company, at an exercise
price equal to the fair market value of such stock on the date of grant. In
addition, the 1991 Plan grants to non-employee directors of the Company, without
necessity of action by the Board of Directors or the Stock Option Committee, as
the case may be, an option under the 1991 Plan to purchase 15,000 shares of
Common Stock on each January 5, at an exercise price equal to the fair market
value of such stock on the date of grant. Such options are exercisable from the
date of grant and thereafter until the date which is the tenth anniversary of
the date of grant, unless earlier terminated in accordance with the provisions
of the 1991 Plan. Options granted to non-employee directors under the 1991 Plan
conform in all respects to the terms of the 1991 Plan.
Termination of Employment, Assignment and Other Limitations. In the event
that an optionee during his or her lifetime ceases to be an officer, director or
employee of the Company or any subsidiary of the Company for any reason other
than death or total disability, any option or unexercised portion thereof which
is exercisable on the date the optionee ceases employment shall expire on the
date which is three (3) months following the date the optionee ceases to be an
officer, director or employee of the Company or of a subsidiary of the Company.
In the event of the death or total disability of an optionee while he is an
officer, director or employee of the Company or of a subsidiary of the Company,
the option may be exercised (to the extent the optionee would have been entitled
to do so) by a legatee or legatees of the optionee under his last will or by his
personal representative or representatives at any time within one year after
death or total disability.
No option shall be assignable or transferable by the optionee except by
will or by the laws of descent and distribution. During the lifetime of the
optionee, the option shall be exercisable only by him or her.
An optionee shall have no rights as a shareholder with respect to any
shares covered by an option until the date of issuance of the stock certificate
to the optionee for such shares. Except as otherwise specifically provided in
the 1991 Plan, no adjustments shall be made for dividends or other rights for
which the record date is prior to the date such stock certificate is issued.
Adjustment of Shares. In the event that dividends are payable in Common
Stock of the Company or in the event there are splits, subdivisions or
combinations of shares of Common Stock of the Company, the 1991 Plan provides
that a proportionate adjustment will be made in the number of shares available
for option under the 1991 Plan, and, as to options then outstanding, a
proportionate adjustment to the number of shares subject to the option and to
the purchase price per share.
After any merger of one or more corporations into the Company, any merger
of the Company into another corporation, any consolidation of the Company and
one or more corporations, or any other corporate reorganization of any form
involving the Company as a party thereto involving any exchange, conversion,
adjustment or other modification of the outstanding shares, each optionee shall,
at no additional cost, be entitled, upon any exercise of his option, to receive
(subject to any required action by stockholders), in lieu of the number of
shares as to which the option shall then be so exercised, the number and class
of shares of stock or other securities or any other property to which the
optionee would have been entitled pursuant to the terms of the agreement of
merger, consolidation or other reorganization if, at the time of the merger,
consolidation or other reorganization, the optionee had been a holder of record
of the number of shares equal to the number of shares as to which the option
shall then be so exercised.
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In the event of (i) the adoption of a plan of merger or consolidation of
the Company with any other corporation as a result of which the holders of the
Company's shares as a group would receive less than 50% of the voting capital
stock of the surviving or resulting corporation, (ii) the adoption of a plan of
liquidation or the approval of the dissolution of the Company, (iii) the
approval by the Board of Directors of an agreement providing for the sale or
transfer of substantially all of the assets of the Company, or (iv) the
acquisition of more than 20% of the outstanding shares by any person, in the
absence of a prior expression of approval of the Board of Directors, any option
granted under the 1991 Plan shall become immediately exercisable in full,
subject to any appropriate adjustments in the number of shares subject to option
and the option price, and shall remain exercisable for the remaining term of the
option, regardless of any provisions contained in the Option Agreement with
respect thereto limiting the exercisability of the option for any length of
time, subject to all of the terms of the 1991 Plan and of the Option Agreement
with respect thereto not inconsistent with the 1991 Plan. Notwithstanding the
foregoing, if a successor corporation, as contemplated in clause (i) or (iii) of
the preceding sentence, agrees to assume the outstanding options or to
substitute substantially equivalent options, then the outstanding options issued
under the 1991 Plan shall not be immediately exercisable, but shall remain
exercisable in accordance with the terms set out in the Option Agreement.
Amendment and Termination of the 1991 Plan. The Board of Directors may at
any time and from time to time terminate, modify or amend the 1991 Plan in any
respect, except that without shareholder approval the Board of Directors may not
(i) increase the number of shares for which options may be granted under the
1991 Plan, (ii) modify the requirements as to eligibility for participation,
(iii) increase the benefits accruing to eligible officers, directors and
employees, (iv) remove the administration of the 1991 Plan from the Committee,
(v) reduce the amount of any benefit or adversely change the terms and
conditions thereof, or (vi) cause incentive stock options issued under the 1991
Plan to fail to meet the requirements for incentive stock options under Section
422 of the Code or any subsequent Code sections with respect to incentive stock
options.
The termination or any modification or amendment of the 1991 Plan shall
not, without the consent of an optionee, affect his or her rights under an
option or right previously granted to him or her. With the consent of the
optionee affected, the Board of Directors may amend outstanding option
agreements in a manner not inconsistent with the 1991 Plan. Without employee
consent the Board of Directors may at any time and from time to time modify or
amend outstanding option agreements in such respects as it shall deem necessary
in order that options granted thereunder shall comply with the appropriate
provisions of the Code, and regulations thereunder which are in effect from time
to time respecting "Qualified Incentive Options."
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. All incentive options granted or to be granted
under the 1991 Plan which are designated as incentive stock options are intended
to be incentive stock options as defined in Section 422 of the Code.
Under the provisions of Section 422 of the Code, neither the holder of an
incentive stock option nor the Company will recognize income, gain, deduction or
loss upon the grant or exercise of an incentive stock option. An optionee will
be taxed only when the stock acquired upon exercise of his incentive stock
option is sold or otherwise disposed of in a taxable transaction. If at the time
of such sale or disposition the optionee has held the shares for the required
holding period (two years from the date the option was granted and one year from
the date of the transfer of the shares to the optionee), the optionee will
recognize long-term capital gain or loss, as the case may be, based upon the
difference between his exercise price and the net proceeds of the sale. However,
if the optionee disposes of the shares before the end of such holding period,
the optionee will recognize ordinary income on such disposition in an amount
equal to the lesser of:
(a) gain on the sale or other disposition; or
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(b) the amount by which the fair market value of the shares on the date of
exercise exceeded the option exercise price, with any excess gain being capital
gain, long-term or short-term, depending on whether or not the shares had
previously been held for more than one year on the date of sale or other taxable
disposition.
The foregoing discussion and the reference to capital gain or loss
treatment therein assume that the option shares are a capital asset in the hands
of the optionee. A sale or other disposition which results in the recognition of
ordinary income to the optionee will also result in a corresponding income tax
deduction for the Company.
The 1991 Plan permits an optionee to pay all or part of the purchase price
for shares acquired pursuant to exercise of an incentive stock option by
transferring to the Company other shares of the Company's Common Stock owned by
the optionee. Section 422 of the Code provides that an option will continue to
be treated as an incentive stock option even if an optionee exercises such
incentive stock option with previously acquired stock of the corporation
granting the option. Accordingly, except as noted below with respect to certain
"statutory option stock," an optionee who exercises an incentive stock option in
whole or in part by transferring to the Company shares of the Company's Common
Stock will recognize no gain or loss upon such exercise. The optionee's basis in
the shares so acquired will be equal to the optionee's cost basis in the shares
surrendered (plus, in the case of payment of the purchase price in a combination
of cash and surrendered shares, the amount of any cash paid).
Section 424(c)(3) of the Code provides that if "statutory option stock" is
transferred in connection with the exercise of an incentive stock option, and if
the holding period requirements under Section 422(a)(1) of the Code are not met
with respect to such statutory option stock before such transfer, then ordinary
income will be recognized as a result of the transfer of statutory option stock.
However, the incentive stock option stock acquired through the exchange of
statutory option stock will still qualify for favorable tax treatment under
Section 422 of the Code.
Incentive stock options offer two principal tax benefits: (1) the
possibility of converting ordinary income into capital gain to the extent of the
excess of fair market value over option price at the time of exercise, and (2)
the deferral of recognition of gain until disposition of the stock acquired upon
the exercise of the option.
At present, the maximum tax rate on capital gains is 20% for assets held
for more than 18 months and 28% for assets held for more than 12 months but not
more than 18 months, while the maximum tax rate on ordinary income is 39.6%.
Thus, the conversion of ordinary income into capital gain produces some tax
benefit for certain taxpayers. However, the benefit of income deferral generally
provided by incentive stock options is reduced for some taxpayers since the
excess of the fair market value of shares acquired through the exercise of an
incentive stock option over the exercise price is taken into account in
computing an individual taxpayer's alternative minimum taxable income. Thus, the
exercise of an incentive stock option could result in the imposition of an
alternative minimum tax liability.
In general, an option granted under the 1991 Plan which is designated as an
incentive stock option will be taxed as described above. However, in some
circumstances an option which is designated as an incentive stock option will be
treated as a non-qualified stock option and the holder taxed accordingly. For
example, a change in the terms of an option which gives the employee additional
benefits may be treated as the grant of a new option. Unless all the criteria
for treatment as an incentive stock option are met on the date the "new option"
is considered granted (such as the requirement that the exercise price of the
option be not less than the fair market value of the stock as of the date of the
grant), the option will be treated and taxed as a non-qualified stock option.
Non-Qualified Stock Options. All options granted or to be granted under the
1991 Plan which do not qualify as incentive stock options are non-statutory
options not entitled to special tax treatment under Section 422 of the Code.
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<PAGE> 23
A participant in the 1991 Plan will recognize taxable income upon the grant
of a non-qualified stock option only if such option has a readily ascertainable
fair market value as of the date of the grant. In such a case, the participant
will recognize taxable ordinary income in an amount equal to the excess of the
fair market value of the option as of such date over the price, if any, paid for
such option. No income would then be recognized on the exercise of the option,
and when the shares obtained through the exercise of the option are disposed of
in a taxable transaction, the resulting gain or loss would be capital gain or
loss (assuming the shares are a capital asset in the hands of the optionee).
However, under the applicable Treasury Regulations, the non-qualified stock
options issued under the 1991 Plan will not have a readily ascertainable fair
market value unless at the time such options are granted similar options of the
Company are actively traded on an established market. The Company presently has
no such actively traded options.
Upon the exercise of a non-statutory option not having a readily
ascertainable fair market value, the optionee recognizes ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the option exercise price for those shares. The Company is not
entitled to an income tax deduction with respect to the grant of a non-statutory
stock option or the sale of stock acquired pursuant thereto. The Company
generally is permitted a deduction equal to the amount of ordinary income the
optionee is required to recognize as a result of the exercise of a non-statutory
stock option.
The 1991 Plan permits the Committee to allow an optionee to pay all or part
of the purchase price for shares acquired pursuant to an exercise of a
non-statutory option by transferring to the Company other shares of the
Company's Common Stock owned by the optionee. If an optionee exchanges
previously acquired Common Stock pursuant to the exercise of a non-qualified
stock option, the Internal Revenue Service has ruled that the optionee will not
be taxed on the unrealized appreciation of the shares surrendered in the
exchange. In other words, the optionee is not taxed on the difference between
his or her cost basis for the old shares and their fair market value on the date
of the exchange, even though the previously acquired shares are valued at the
current market price for purposes of paying all or part of the option price.
General. The 1991 Plan is not qualified under Section 401(a) of the Code
and is not subject to the provisions of the Employee Retirement Income Security
Act of 1974.
The preceding discussion is based upon federal tax laws and regulations in
effect on the date of this Proxy Statement, which are subject to change, and
upon an interpretation of the statutory provisions of Section 422 of the Code,
its legislative history and related income tax regulations. Furthermore, the
foregoing is only a general discussion of the federal income tax consequences of
the 1991 Plan and does not purport to be a complete description of all federal
income tax aspects of the 1991 Plan. Option holders may also be subject to state
and local taxes in connection with the grant or exercise of options granted
under the 1991 Plan and the sale or other disposition of shares acquired upon
exercise of the options.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS
APPROVE THE PROPOSED AMENDMENT TO THE 1991 PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has served as independent auditors of the Company for
the fiscal year ended December 31, 1997. The Company has not selected its
independent accountants for the fiscal year ending December 31, 1998.
Representatives of Arthur Andersen 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.
On September 18, 1997, the Company dismissed its independent auditors,
Grant Thornton LLP, and on the same date authorized the engagement of the firm
of Arthur Andersen LLP as its independent auditors for
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the fiscal year ending December 31, 1997. Arthur Andersen LLP was formally
engaged by the Company on October 6, 1997. Each of these actions was approved by
the Board of Directors of the Company.
Except as described herein, the report of Grant Thornton LLP on the
consolidated financial statements of the Company for the fiscal years ended
December 31, 1996 and 1995 did not contain any adverse opinion or a disclaimer
of opinion, nor was qualified or modified as to uncertainty, audit scope or
accounting principles. Grant Thornton LLP previously reported on the
consolidated financial statements of the Company as of and for the year ended
December 31, 1995, prior to the restatement for the 1996 merger with Integrated
Network Services, Inc. ("INS"), which was accounted for as a pooling of
interests. Separate financial statements of INS included in the VSI Enterprises,
Inc. and subsidiaries consolidated financial statements as of and for the year
ended December 31, 1995 were audited and reported on separately by other
auditors. Grant Thornton LLP audited the combination of the Company's
consolidated financial statements as of and for the year ended December 31,
1995, after restatement for the 1996 merger with INS. Other than the reference
to the separate financial statements of INS included in VSI Enterprises, Inc.
and subsidiaries consolidated financial statements as of and for the year ended
December 31, 1995, the report of Grant Thornton LLP on the consolidated
financial statements of the Company as of and for the year ended December 31,
1995 did not contain any adverse opinion of disclaimer of opinion, nor was it
modified as to uncertainty, audit scope or accounting principles.
In connection with the audit of the fiscal years ended December 31, 1996
and 1995 and for the unaudited interim period through September 18, 1997, there
were no disagreements with Grant Thornton LLP on any matter of accounting
principle or practice, financial statement disclosure, or audit procedure or
scope which disagreement, if not resolved to the satisfaction of Grant Thornton
LLP, would have caused it to make reference to the subject matter of the
disagreement in its report. Further, during the fiscal years ended December 31,
1996 and 1995 and the unaudited interim period through September 18, 1997,
neither the Company nor any of its representatives sought the advice of Arthur
Andersen LLP regarding the application of accounting principles to a specific
completed or contemplated transaction or the type of audit opinion that might be
rendered on the Company's financial statements, which advice was an important
factor considered by the Company in reaching a decision as to the accounting,
auditing or financial reporting issue.
In connection with the audit of the fiscal years ended December 31, 1996
and 1995 and the unaudited interim period through September 18, 1997, Grant
Thornton LLP did not advise the Company that (i) the internal controls necessary
for the Company to develop reliable financial statements did not exist; (ii)
that information had come to its attention that led it to no longer be able to
rely on management's representations, or that made it unwilling to be associated
with the financial statements prepared by management; (iii) that there existed a
need to expand significantly the scope of its audit, or that information had
come to Grant Thornton LLP's attention during the fiscal periods, that if
further investigated may (a) materially impact the fairness or reliability of
either: a previously issued audit report or the underlying financial statements,
or the financial statements issued or to be issued covering the fiscal period
subsequent to the date of the most recent financial statements covered by an
audit report (including information that may prevent it from rendering an
unqualified audit report on those financial statements), or (b) cause Grant
Thornton LLP to be unwilling to rely on management's representations or be
associated with the Company's financial statements, and due to Grant Thornton
LLP's dismissal did not so expand the scope of its audit or conduct such further
investigation; or (iv) that information had come to Grant Thornton LLP's
attention that it concluded materially impacts the fairness or reliability of
either (a) a previously issued audit report or the underlying financial
statements, or (b) the financial statements issued or to be issued covering the
fiscal period subsequent to the date of the most recent financial statements
covered by an audit report (including information that, unless resolved to Grant
Thornton LLP's satisfaction, would prevent it from rendering an unqualified
audit report on those financial statements), and due to Grant Thornton LLP's
dismissal, the issue has not been resolved to Grant Thornton LLP's satisfaction
prior to its dismissal.
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<PAGE> 25
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997, 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 1999
annual meeting must be received at the Company's principal executive offices by
December 15, 1998 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,
/s/ Richard K. Snelling
Richard K. Snelling, Chairman of the Board
Norcross, Georgia
April 15, 1998
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<PAGE> 26
APPENDIX A
AMENDMENT TO CERTIFICATE OF INCORPORATION
OF VSI ENTERPRISES, INC.
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 Fifteen Million Eight Hundred
Thousand (15,800,000). Fifteen Million (15,000,000) shares shall be
designated 'Common Stock' and shall have a par value of $.001. Eight
Hundred Thousand (800,000) shares shall be designated 'Preferred Stock' and
shall have a par value of $.001. 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.
Effective with the filing of this Amendment, each one share of the
Company's Common Stock issued and outstanding on the Effective Date of this
Amendment shall be automatically changed without further action into
one-fourth (1/4) of a fully paid and nonassessable share of the Company's
Common Stock, provided that no fractional shares shall be issued pursuant
to such change. The Company shall pay to each shareholder who would
otherwise be entitled to a fractional share as a result of such change the
cash value of such fractional share based upon the closing bid price per
share of the Common Stock on the trading day preceding the Effective Date
of this Amendment as quoted by The Nasdaq SmallCap Market."
A-1
<PAGE> 27
APPENDIX B
VSI ENTERPRISES, INC.
5801 GOSHEN SPRINGS ROAD
NORCROSS, GEORGIA 30071
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE 1998
ANNUAL MEETING OF SHAREHOLDERS.
The undersigned hereby appoints Richard K. Snelling and Julia B. North 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 Tuesday, May 19, 1998, at
10:00 a.m., at the Company's offices, 5801 Goshen Springs Road, Norcross,
Georgia 30071, and any adjournments or postponements thereof:
1. To elect five (5) directors for a term of one year and until their
successors are elected and have qualified.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to vote for
below (except as marked all nominees listed below
to the contrary below)
CARLETON A. BROWN, LARRY M. CARR, JULIA B. NORTH, 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.
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2. To approve an amendment to the Company's Certificate of Incorporation
to effect, if and when the Board of Directors deems appropriate, and
for a period of time expiring at the Company's 1999 Annual Meeting of
Shareholders, a 1-for-4 reverse split of the Company's Common Stock;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve an amendment to the Company's 1991 Stock Option Plan to
increase the number of shares of Common Stock available for grant
thereunder from 2,762,057 shares to 3,662,057 shares; and
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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.
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Print Name(s):
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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. In the case of joint tenants, each
joint owner must sign.
Dated:
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