SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A1
Amended to set forth information in Part III.
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 30, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ___ to ___
Commission File Number 0-18793
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VITAL SIGNS, INC.
(Exact name of registrant as specified in its charter)
New Jersey 11-2279807
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
20 Campus Road, Totowa, New Jersey 07512; (201) 790-1330
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive office)
Securities registered pursuant o Section 12(b) of the Act: none.
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, no par value
Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting stock held by non-affiliates as of
December 1, 1996 was approximately $129,000,000.
Number of shares of Common Stock outstanding as of December 1,
1996:13,071,383.
<PAGE>
PART III
Item 10. Directors of the Registrant
The following table presents certain information regarding the directors of
the Company:
Director Expiration
Name and Age (A) Since of Term Business Experience (B)
Terence D. Wall, 55 1972 1997 President and Chief Executive
Officer of the Company. Mr.
Wall presently serves on the
Board of Directors of Exogen,
Inc. and EchoCath, Inc.
David J. Bershad, 56 1991 1997 Member of the law firm of
Milberg Weiss Bershad Hynes &
Lerach
Anthony J. Dimun, 53 1987 1997 Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary of
the Company; Principal Owner,
Strategic Concepts, Inc.
(financial and acquisition
advisory firm). Mr. Dimun
presently serves on the Board
of Directors of EchoCath,
Inc.
Joseph J. Thomas, 60 1992 1997 President of Thomas Medical
Products, Inc. (a subsidiary
of the Company) (1990 to
Present).
Toedtman, 51 1989 1997 Former Chairman and Chief
Executive Officer, GenRx,
Inc.(pharmaceutical company)
(1990 to January, 1996);
Consultant (1987 to Present).
Mr. Toedtman presently serves
on the Board of Directors of
NOXSO Corporation.
Barry Wicker, 56 1985 1997 Executive Vice President
(Sales and Marketing) of
the Company.
<PAGE>
(A) Ages are presented as of September 30, 1996.
(B) In each instance in which dates are not provided in connection with a
director's business experience, such director has held the position
indicated for at least the past five years. Messrs. Wall, Bershad and
Dimun have invested together (and serve together as Board members) in
Bionix, Inc. ("Bionix") and Messrs. Wall and Bershad have invested
together (and serve or served as Board members) in Sonokinetics Corp.
("Sonokinetics"). Further, the Company is a shareholder, and Messrs.
Wall and Dimun are shareholders (as well as Board members), of
EchoCath, Inc.
Item 11. Executive Compensation
Summary of Cash and Certain Other Compensation
The following table sets forth, for the fiscal years ended September
30, 1994, 1995 and 1996, the annual and long-term compensation of the Company's
Chief Executive Officer and the other executive officers of the Company during
the year ended September 30, 1996 (the "Named Officers"):
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Long Term
Annual Compensation Compensation
------------------------------------------------------ Common
Other Annual Shares Subject to All Other
Name and Principal Position Year Salary Bonus(A) Compensation (B) Options Granted Compensation (C)
Terence D. Wall............... 1996 $225,000 $10,835 $-- 120,000 $3,266
President and Chief Executive 1995 225,000 42,135 39,000 --- 4,110
Officer 1994 225,000 10,610 42,000 --- 3,710
Anthony J. Dimun.............. 1996 180,000 8,308 --- 120,000 3,088
Executive Vice President and 1995 180,000 33,758 --- --- 3,750
Chief Financial Officer 1994 180,000 8,533 --- --- 2,363
Barry Wicker.................. 1996 151,250 6,981 --- 80,000 2,844
Executive Vice President - Sales 1995 151,250 28,406 --- --- 3,191
1994 151,250 7,206 --- --- 2,575
Dennis Fenstermaker........... 1996 124,946 5,724 --- 3,764 2,870
Vice President-Manufacturing 1995 123,000 28,866 --- --- 2,982
and General Manager 1994 104,615 16,266 --- 1,512 2,212
</TABLE>
<PAGE>
(A) Reflects bonuses in the fiscal year earned, which may not correspond
with the fiscal year paid.
(B) It was necessary for Terence D. Wall and his family to relocate during
fiscal 1994 and 1995. The Company provided lodging to Mr. Wall and his
family at a house which the Company purchased several years ago for the
purpose of providing lodging for visiting out-of-state employees. Based
on an estimate of fair market rental value, the Company valued this
benefit at $36,000 for fiscal 1994 and $33,000 for fiscal 1995, which
amounts are included above. During the years set forth above, no other
Named Officer received perquisites (i.e., personal benefits) in excess
of 10% of such individual's reported salary and bonus.
(C) "Compensation" reported under this column for the year ended September
30,1996 includes: (i) contributions of $2,375,$2,375,$2,246 and $2,375,
respectively, for Messrs. Wall, Dimun, Wicker and Fenstermaker,
respectively, to the Company's 401(k) Plan on behalf of the Named
Officers to match pre-tax elective deferral contributions (included
under "Salary") made by each Named Officer to that Plan and (ii)
premiums of $891, $713, $598, and $495, respectively, with respect to
life insurance purchased by the Company for the benefit of Messrs.
Wall, Dimun, Wicker and Fenstermaker, respectively.
Stock Options
The following table contains information regarding the grant of stock
options to the Named Officers during the year ended September 30, 1996. In
addition, in accordance with rules adopted by the Securities and Exchange
Commission (the "SEC"), the following table sets forth the hypothetical gains or
"options spreads" that would exist for the respective options assuming rates of
annual compound price appreciation in the Company's Common Stock of 5% and 10%
from the date the options were granted to their final expiration date.
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants(A)(B)
<S> <C> <C> <C> <C> <C>
Number of Percent of Potential Realizable Value
Common Shares Total Options at Assumed Annual Rates of
Underlying Granted to Exercise Stock Price Appreciation for
Options Employees Price Expiration Option Term(C)
Name Granted in Fiscal 1996 Per Share Date 5% 10%
------- -------------- --------- ---- -- ---
Terence D. Wall 120,000(A) 29.3 $22.25 5/23/06 1,682,100 4,245,300
Anthony J. Dimun 120,000(B) 29.3 22.25 5/23/06 1,682,100 4,245,300
Barry Wicker 80,000(A) 19.6 22.25 5/23/06 1,121,400 2,830,200
Dennis Fenstermaker 3,764(C) 0.9 21.25 12/15/05 50,390 127,175
</TABLE>
<PAGE>
- -----------------
(A) Mr. Wall's and Mr. Wicker's options (the "New Options") were granted
pursuant to contractual arrangements in which these Named Officers agreed
to cancel a like amount of options granted in 1993 (the "Prior Options").
The New Options, which are subject to shareholder approval, were granted
at an exercise price ($22.25) that is $4.50 per share greater than the
exercise price of the Prior Options. The exercisability of the Prior
Options was subject to certain performance thresholds which did not appear
to be attainable at the time that the New Options were granted. The New
Options are subject to a five year vesting period, but (like the Prior
Options) will vest if a Change-in-Control Event (as defined) occurs.
(B) During fiscal 1996, Mr. Dimun was granted 120,000 stock options under the
Company's 1990 Employee Stock Option Plan (the "Employee Plan"). The
Employee Plan is administered by a committee of the Company's Board of
Directors. That committee determines which employees will receive options,
the number of options to be granted and the terms of option grants.
Options generally are granted at exercise prices equal to the fair market
value of the Company's Common Stock on the grant date, with vesting
typically over a five year period. The committee is authorized to
accelerate stock options in connection with a change in control. Of the
options granted to Mr. Dimun, 40,000 options were deemed vested as of the
date of grant and 80,000 options vest over a five year period.
(C) The options granted to Mr. Fenstermaker were granted under the Company's
Investment Plan (the "Investment Plan"). Pursuant to the Investment Plan,
eligible participants may purchase the Company's Common Stock during
specified window periods. For each share purchased, the Investment Plan
provides that the Company will grant the employee from one to three stock
options. The option-to-stock match in effect for the options granted
under the Investment Plan during the last fiscal year was two-for-one.
The exercise price is equal to the closing sale price of the Company's
Common Stock on NASDAQ on the last day of the window period. An employee
must continue to be employed for at least two years by the Company to
exercise stock options granted under the Investment Plan. If the employee
retains the shares purchased during the window period, the option can
be exercised at any time after the initial shares have been held for two
years. In general, if the employee sells any of the shares purchased
under the Investment Plan before the end of the two-year holding
period or directs the Company to stop making payroll deductions before
all shares that the employee committed to buy are fully paid for, the
employee will be required to wait five years from the option grant date
before options related to fully paid shares can be exercised and will
still have to be employed by the Company. The Board of Directors is
authorized to accelerate stock options related to fully paid shares in
connection with a change in control.
The following table provides data regarding stock options exercised by
the Named Officers during the year ended September 30, 1996 and the number of
shares of the Company's Common Stock covered by both exercisable and
non-exercisable stock options held by the Named Officers at September 30, 1996.
Also reported are the values for "in-the-money" options, which represent the
positive spread between the exercise prices of existing options and $20.50, the
closing sale price of the Company's Common Stock on September 30, 1996.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
<S> <C> <C> <C> <C>
Number of Number of
Number of Shares Underlying Value of Unexercised
Shares Value Unexercised Options In-the-Money Options at
on Exercise Realized (A) at Year-End Year-End
---------------- ------------- ------------------------------ -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ---------- -------------
Terence D. Wall --- --- --- 120,000 $--- $---
Anthony J. Dimun 10,000 $228,000 112,744 80,081 864,200 ---
Barry Wicker --- --- --- 80,000 --- ---
Dennis Fenstermaker --- --- 2,012 4,264 10,950 1,500
</TABLE>
(A) The amount realized represents the aggregate fair market value of the shares
acquired upon exercise of the options minus the aggregate exercise price.
<PAGE>
Arrangements with Directors
Joseph Thomas became a director of the Company upon the Company's
acquisition of Thomas Medical Products, Inc. ("TMP") on September 30, 1992. In
connection with the TMP acquisition, Mr. Thomas entered into an employment
agreement with TMP pursuant to which Mr. Thomas is entitled to receive a salary
of at least $100,000 per year (with a cost of living adjustment) during the
five-year term of his employment agreement. He was also granted stock options
under the Employee Plan. For the year ended September 30, 1996, Mr. Thomas
received a salary of $121,275 and a bonus of $27,562.
John Toedtman, a director of the Company, provided consulting services
to the Company during the year ended September 30, 1996. During that year, he
received $20,000 in consulting fees and had his out-of-pocket expenses
reimbursed by the Company.
Directors of the Company presently do not receive any cash fees for
serving in such capacity.
Messrs. Wall, Wicker, Dimun and Thomas have been granted options as
employees of either the Company or Thomas. Messrs. Bershad and Toedtman, the two
directors who are not employed by the Company or its subsidiaries, participate
in the Company's 1991 Director Stock Option Plan (the "Director Plan"). Under
the Director Plan, each outside director automatically receives options covering
4,000 shares (with an exercise price equal to fair market value on the date of
grant) on an annual basis and is entitled to receive additional options at the
discretion of the committee administering the Director Plan. During fiscal 1996,
Mr. Bershad and Mr. Toedtman each received options covering 4,000 shares of
Common Stock pursuant to the Director Plan. One half of the options granted
under the Director Plan vest immediately at the time of grant. Half of the
balance may be exercised commencing one year after the date of grant and the
remainder may be exercised commencing two years after the date of grant.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial
ownership of the Common Stock as of September 30, 1996, by each person who is
known by the Company to own beneficially more than five percent of the Common
Stock; (ii) trusts maintained for the benefit of the children of certain
directors of the Company; (iii) each Named Officer and director of the Company;
and (iv) all directors and executive officers of the Company as a group. Unless
otherwise indicated, each of the named shareholders possesses sole voting and
investment power with respect to the shares beneficially owned. Shares covered
by stock options are included in the table below only to the extent that such
options may be exercised by November 30, 1996.
Stockholder Number Percent
Terence D. Wall (2).......................... 4,343,614 33.3
Trusts for the benefit of the minor children
of Terence D. Wall (Anthony J. Dimun,
trustee)(3)............................. 2,386,782 18.3
Barry Wicker(4).............................. 367,986 2.8
Trusts for the benefit of the children of
Barry Wicker (Anthony J. Dimun,
trustee)(3)............................. 195,150 1.5
David J. Bershad(5).......................... 40,200 *
Anthony J. Dimun(3).......................... 2,818,432 21.4
Dennis Fenstermaker(6)....................... 8,663 *
Joseph J. Thomas(7).......................... 62,618 *
John Toedtman(8)............................. 31,784 *
All directors and executive officers as a 7,673,297 58.0
group (7 persons)(9)...................
- ------------------------
* Represents less than one percent.
(1) The business addresses of Mr. Wall, Mr. Dimun and the above-mentioned
trusts is c/o Vital Signs, Inc., 20 Campus Road, Totowa, New Jersey 07512.
(2) Includes 836,748 shares owned by Carol Vance Wall, Mr. Wall's wife and
15,797 shares held in the Company's 401(k) plan on Mr. Wall's behalf;
excludes shares held in trust for the benefit of the Walls' minor
children (which shares may not be voted or disposed of by Mr. Wall or
Carol Vance Wall) and shares held by a charitable foundation established
by Terence and Carol Wall.
(3) As trustee of the trusts maintained for the benefit of the minor
children of Terence D. Wall and the children of Barry Wicker, Anthony J.
Dimun has the power to vote and dispose of each of the shares held in such
trusts and thus is deemed to be the beneficial owner of such shares
under applicable regulations of the Securities and Exchange Commission.
Mr. Dimun is also deemed to be the beneficial owner of 1,000 shares held
in certain insurance trusts established by Mr. Wicker. He is also
deemed to be the beneficial owner of 60,800 shares held by the charitable
foundation described above. Accordingly, the shares reflected in the
table above as shares beneficially owned by Mr. Dimun include shares
held by Mr. Dimun for such trusts and foundation, 54,788 shares owned by
Mr. Dimun individually, 4,000 shares owned by his children (as to which
he disclaims beneficial ownership), 3,168 shares held in the Company's
401(k) plan on Mr. Dimun's behalf and 112,744 shares covered by options
exercisable by Mr. Dimun.
(4) Incudes 17,380 shares owned by Mr. Wicker's wife; excludes shares held in
trust for the benefit of Mr. Wicker's children and shares held in certain
insurance trusts (which shares may not be voted or disposed of by Mr.
Wicker or his wife).
(5) Includes 2,000 shares owned by Mr. Bershad's wife as to which Mr. Bershad
disclaims beneficial ownership; also includes 34,000 shares covered by
exercisable options.
(6) Includes 2,513 shares held in the Company's 401(k) plan on Mr.
Fenstermaker's behalf, 2,638 shares held in the Investment Plan on Mr.
Fenstermaker's behalf and 2,012 shares covered by exercisable options.
(7) Include 62,618 shares owned by Mr. Thomas and his wife.
(8) Includes 21,000 shares covered by exercisable options.
(9) Includes 169,756 shares covered by options exercisable by the Company's
executive officers and directors, 21,631 shares held in the Company's
401(k) plan and 2,638 shares held in the Investment Plan; also includes
shares held in trust by Mr. Dimun for Mr. Wall's children and Mr.
Wicker's children and pursuant to certain insurance trusts established
by Mr. Wicker and shares held by a charitable foundation established by
Terence and Carol Wall.
There were 13,062,701 shares of Common Stock outstanding on September 30, 1996.
<PAGE>
Item 13. Certain Relationships and Related Transactions
The Company has provided certain general and administrative services
to EchoCath, Inc. ("EchoCath") and, during the fiscal year ended September 30,
1995, billed EchoCath $78,050 for such services, which amount was paid by
EchoCath from the proceeds of its January 1996 initial public offering. The
Company did not provide a material amount of general and administrative services
to EchoCath during the year ended September 30, 1996. The Company and its chief
executive officer, Terence D. Wall, together own more than 15% of EchoCath's
outstanding common stock and together own more than 25% of the voting power of
EchoCath's outstanding common stock. Anthony J. Dimun, the Company's Chief
Financial Officer, owns a small equity position in EchoCath. Messrs. Wall and
Dimun are also directors and officers of EchoCath.
A subsidiary of the Company previously had the non-exclusive right to
distribute in the United States all of the orthopedic bioabsorbable products and
related instruments manufactured by Bioscience, Ltd. ("Bioscience"), a
subsidiary of Bionix, Inc. ("Bionix"). That distribution agreement was
terminated in April 1995. In connection with the Bioscience distribution
agreement, Bioscience borrowed $100,000 from the Company pursuant to a nine
percent interest bearing promissory note. In addition, in connection with the
termination of such agreement, Bioscience agreed to pay the Company's subsidiary
$87,000 upon return of certain inventory to Bioscience. During April 1996, the
entire amount owed by Bioscience to the Company and its subsidiary ($187,002)
was paid by Bioscience. The largest amount owed to the Company and its
subsidiary by Bioscience during fiscal 1996 did not exceed $200,000. Messrs.
Wall, Bershad and Dimun are directors, Mr. Wall is a principal shareholder and
officer, and Messrs. Bershad and Dimun are shareholders of Bionix.
During fiscal 1996, the Company established Cardiologics, L.L.C. and
entered into a joint venture agreement with the other equity owner of
Cardiologics to develop specialized cardio-vascular products. Approximately
$100,000 of research and development expense was incurred by the Company in
fiscal 1996 in connection with this project. In September 1996, the Company sold
its interest in Cardiologics to a private venture fund (the "Private Fund")
whose primary investor is Terence D. Wall. The Company received in exchange a
$1,000,000 promissory note personally guaranteed by Mr. Wall and a commitment
(which has been satisfied) to reimburse the Company for the $100,000 in research
and development expenses incurred by the Company. One half of the principal
amount of the note has been paid and the balance is due on April 1, 1997. The
note accrues interest at a rate of eight percent per annum.
The Company believes that the overall terms of the above-described
agreements with EchoCath, Bioscience and the Private Fund were no less favorable
to the Company than terms that would be available from similarly situated
unrelated parties.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to this
report to be signed on its behalf by the undersigned' hereunto duly authorized
this 28th day of January, 1997.
VITAL SIGNS, INC.
By:/s/Anthony J. Dimun
Anthony J. Dimun,
Executive Vice President
Signatures Title Date
President, Chief Executive January 28, 1997
/s/ Terence D. Wall* Office and Director
- -------------------------
Terence D. Wall
/s/ David J. Bershad* Director January 28, 1997
- -------------------------
David J. Bershad
Executive Vice President, January 28, 1997
Chief Financial Officer,
Treasurer (Chief Financial
and Accounting Officer)
/s/ Anthony J. Dimun and Director
- -------------------------
Anthony J. Dimun
/s/ Joseph J. Thomas* Director January 28, 1997
- -------------------------
Joseph J. Thomas
/s/ John Toedtman* Director January 28, 1997
- -------------------------
John Toedtman
/s/ Barry Wicker* Director January 28, 1997
- --------------------------
Barry Wicker
*By: /s/ Anthony J. Dimun
- -------------------------
Anthony J. Dimun
Attorney-in-Fact
