<PAGE>
<PAGE>
Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
VITAL SIGNS, INC.
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
<PAGE>
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
VITAL SIGNS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Vital
Signs, Inc. (the 'Company' or 'Vital Signs') will be held at the Company's
headquarters, 20 Campus Road, Totowa, New Jersey, on Wednesday July 9, 1997 at
10:00 a.m., to consider and act upon the following:
1. The election of six directors to serve for a period of one year and
thereafter until their successors shall have been duly elected and shall
have qualified.
2. The approval of certain replacement stock options granted to the
Company's Chief Executive Officer.
3. The approval of certain replacement stock options granted to an
Executive Vice President of the Company.
4. The approval of certain amendments to the Company's 1990 Employee
Stock Option Plan and Investment Plan to provide for a maximum number of
shares subject to options which may be granted to any individual during any
fiscal year.
5. The approval of certain amendments to the Company's 1990 Employee
Stock Option Plan and Investment Plan to revise the termination provisions
of such plans.
6. To consider and act upon any other matter which may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on June 5, 1997 as
the date for determining the stockholders of record entitled to receive notice
of, and to vote at, the Annual Meeting.
By Order of the Board of Directors
Anthony J. Dimun
Secretary
Totowa, New Jersey
June 10, 1997
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND THE
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
<PAGE>
<PAGE>
VITAL SIGNS, INC.
20 CAMPUS ROAD
TOTOWA, NEW JERSEY 07512
--------------------------
PROXY STATEMENT
--------------------------
The following statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Vital Signs, Inc. (the 'Company' or 'Vital
Signs'), a New Jersey corporation. Such proxies are to be used at the Company's
Annual Meeting of Stockholders to be held at the Company's headquarters, 20
Campus Road, Totowa, New Jersey, on July 9, 1997 commencing at 10:00 a.m. This
Proxy Statement and the enclosed form of proxy are first being sent to
stockholders on or about June 10, 1997.
STOCKHOLDERS ENTITLED TO VOTE
Only holders of record of the Company's Common Stock (the 'Common Stock')
at the close of business on June 5, 1997 (the record date fixed by the Board of
Directors) will be entitled to receive notice of, and to vote at, the Annual
Meeting. At the close of business on the record date, there were 12,989,207
shares of Common Stock outstanding and entitled to vote at the Meeting. Each
such share is entitled to one vote.
VOTING; REVOCATION OF PROXY; QUORUM AND VOTE REQUIRED
A form of proxy is enclosed for use at the Annual Meeting if a stockholder
is unable to attend in person. Each proxy may be revoked at any time before it
is exercised by giving written notice to the Secretary of the Meeting or by
submitting a duly executed, later-dated proxy. All shares represented by valid
proxies pursuant to this solicitation (and not revoked before they are
exercised) will be voted as specified in the form of proxy. If the proxy is
signed but no specification is given, the shares will be voted FOR the Board's
nominees for election to the Board of Directors, FOR approval of the replacement
stock options granted to Terence D. Wall (the Company's Chief Executive
Officer), FOR approval of the replacement stock options granted to Barry Wicker
(an Executive Vice President of the Company), FOR approval of the amendments to
the Company's 1990 Employee Stock Option Plan (the 'Employee Plan') and
Investment Plan (the 'Investment Plan') providing for a maximum number of shares
subject to options which may be granted during any fiscal year and FOR approval
of the amendments to the Employee Plan and the Investment Plan revising the
termination provisions of such plans. A majority of the shares outstanding on
the record date will constitute a quorum for purposes of the Annual Meeting.
Assuming that a quorum is present, the election of directors will be effected by
a plurality vote and approval of the replacement stock options, the amendments
to the Employee Plan and the Investment Plan relating to the maximum number of
shares subject to options which may be granted during any fiscal year and the
amendments to the Employee Plan and the Investment Plan revising the termination
provisions of such plans will require the affirmative vote of a majority of the
votes cast at the Annual Meeting. For purposes of determining the votes cast
with respect to any matter presented for consideration at the Annual Meeting,
only those votes cast 'for' or 'against' are included. Abstentions and broker
non-votes are counted only for the purpose of determining whether a quorum is
present at the Annual Meeting.
COSTS OF SOLICITATION
The entire cost of soliciting these proxies will be borne by the Company.
In following up the original solicitation of the proxies by mail, the Company
may make arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy materials to the beneficial owners of the
Common Stock and may reimburse them for their expenses in so doing. If
necessary, the Company may also use its officers and their assistants to solicit
proxies from the stockholders, either personally or by telephone or special
letter.
<PAGE>
<PAGE>
PRINCIPAL STOCKHOLDERS; BENEFICIAL OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth information regarding the beneficial
ownership of the Common Stock as of March 31, 1997 by (i) 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 director and each Named Officer (as defined
herein) of the Company; and (iv) all current executive officers and directors of
the Company as a group. Unless otherwise indicated, each of the named
stockholders 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 May 30,
1997.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
--------------------
STOCKHOLDER NUMBER PERCENT
----------- --------- -------
<S> <C> <C>
Terence D. Wall (1)(2)...................................................................... 4,055,915 31.2%
Trusts for the benefit of the minor children of Terence D. Wall (Anthony J. Dimun, trustee)
(1)(3).................................................................................... 2,386,782 18.4
Barry Wicker (4)............................................................................ 363,989 2.8
Trusts for the benefit of the children of Barry Wicker (Anthony J. Dimun, trustee) (1)(3)... 195,150 1.5
David J. Bershad (5)........................................................................ 46,240 *
Anthony J. Dimun (1)(3)..................................................................... 2,980,431 22.7
Dennis Fenstermaker (6)..................................................................... 8,663 *
Joseph J. Thomas............................................................................ 0 *
John Toedtman (7)........................................................................... 20,040 *
All directors and executive officers as a group (7 persons) (8)............................. 7,475,278 56.8
</TABLE>
- ------------
* 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 716,748 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 167,699 shares held in trust for the benefit of Mr. Wall and his
children, 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 167,699 shares held in a trust for the
benefit of Mr. Wall and his children and of 1,000 shares held in certain
insurance trusts established by Mr. Wicker. He is also deemed to be the
beneficial owner of 55,100 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) Includes 17,380 shares owned by Mr. Wicker's wife and 153 shares held in the
Company's 401(k) plan on Mr. Wicker's behalf; 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 38,000 shares covered by
exercisable options.
(footnotes continued on next page)
2
<PAGE>
<PAGE>
(footnotes continued from previous page)
(6) Includes 2,513 shares held in the Company's 401(k) plan on Mr.
Fenstermaker's behalf, 2,638 shares held in the Company's Investment Plan on
Mr. Fenstermaker's behalf and 2,012 shares covered by exercisable options.
(7) Includes 18,000 shares covered by exercisable options.
(8) Includes 170,756 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 Company's 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 12,989,207 shares of Common Stock outstanding on March 31, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and 10% shareholders to file with the Securities
and Exchange Commission certain reports regarding such persons' ownership of the
Company's securities. The Company is obligated to disclose any failures to file
such reports on a timely basis. One report was filed late with the Commission
with respect to a transfer by Terence D. Wall of 200,000 shares in May 1995 to a
trust for the benefit of Mr. Wall and his children and one report was filed late
with respect to a transfer by this trust of 32,301 shares to Mr. Wall in April
1996. These late filings were inadvertent, and the required filings were made
promptly after noting the failure to file.
ELECTION OF DIRECTORS
The holders of the Common Stock will elect six directors at the Annual
Meeting, each of whom will be elected for a one year term. Unless a stockholder
either indicates 'withhold authority' on his proxy or indicates on his proxy
that his shares should not be voted for certain nominees, it is intended that
the persons named in the proxy will vote for the election of the persons named
in the table below to serve until the expiration of their terms and thereafter
until their successors shall have been duly elected and shall have qualified.
Discretionary authority is also solicited to vote for the election of a
substitute for any of said nominees who, for any reason presently unknown,
cannot be a candidate for election.
The table below sets forth the names and ages (as of September 30, 1996) of
each of the nominees, the other positions and offices presently held by each
such person within the Company, the period during which each such person has
served on the Board of Directors of the Company, the expiration of their
respective terms and the principal occupations and employment of each such
person during the past five years.
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION
NAME AND AGE (A) SINCE OF TERM BUSINESS EXPERIENCE (A)
- --------------------------- -------- ---------- --------------------------------------------------------------
<S> <C> <C> <C>
Terence D. Wall, 55 1972 1997 President and Chief Executive Officer of the Company. Mr. Wall
presently serves on the Boards of Directors of Exogen, Inc.,
EchoCath, Inc. and Bionx Implants, Inc.
David J. Bershad, 56 1991 1997 Member of the law firm of Milberg Weiss Bershad Hynes &
Lerach. Mr. Bershad presently serves on the Board of
Directors of Bionx Implants, Inc.
</TABLE>
(table continued on next page)
3
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION
NAME AND AGE (A) SINCE OF TERM BUSINESS EXPERIENCE (A)
- --------------------------- -------- ---------- --------------------------------------------------------------
<S> <C> <C> <C>
Anthony J. Dimun, 53 1987 1997 Executive Vice President and Chief Financial Officer of the
Company (March 1991 to Present); Treasurer and Secretary of
the Company (December 1991 to Present); Senior Vice
President, First Atlantic Capital Ltd. (U.S. affiliate of an
international merchant banking group) (July 1989 to February
1991); Principal Owner, Strategic Concepts, Inc. (financial
and acquisition advisory firm) (January 1988 to Present).
Mr. Dimun presently serves on the Boards of Directors of
EchoCath, Inc. and Bionx Implants, Inc.
Joseph J. Thomas, 60 1992 1997 President of Thomas Medical Products, Inc. (a subsidiary of
the Company) (1990 to Present); President and General
Manager of Access Devices, Inc. (a catheter manufacturer)
(1982-1989); research and development positions with various
companies, including Johnson & Johnson (prior years).
John 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
(1996 to Present), Executive Vice President since 1985. From
1985 through November 1991, Mr. Wicker had primary
responsibility for Sales and Marketing; since then, he has
at various times served as either Chief Operating Officer or
Head of the Company's Sales Operations.
</TABLE>
- ------------
(A) 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 Bionx
Implants, Inc. ('Bionx') and Messrs. Wall and Bershad have invested
together (and serve or served as Board members) in Sonokinetics Corp.
Further, the Company is a shareholder, and Messrs. Wall and Dimun are
shareholders (as well as Board members) of EchoCath, Inc.
4
<PAGE>
<PAGE>
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 its other executive officers (the 'Named Officers'):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------
---------------------------------------------- COMMON SHARES
OTHER SUBJECT
ANNUAL TO OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (A) COMPENSATION (B) GRANTED(#) COMPENSATION (C)
- ----------------------------------------- ---- -------- --------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Terence D. Wall ......................... 1996 $225,000 $10,835 $-- 120,000 $3,266
President and Chief Executive Officer 1995 225,000 42,135 39,000 -- 4,110
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 Chief 1995 180,000 33,758 -- -- 3,750
Financial Officer 1994 180,000 8,533 -- -- 2,363
Barry Wicker ............................ 1996 151,250 6,981 -- 80,000 2,844
Executive Vice President -- Sales and 1995 151,250 28,406 -- -- 3,191
Marketing 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>
- ------------
(A) Reflects bonuses for the fiscal year for which the bonuses were granted,
which may not correspond with the fiscal year in which the bonuses were
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.
5
<PAGE>
<PAGE>
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
'option 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.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS (A)(B)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES
COMMON SHARES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED FOR OPTION TERM (C)
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION ----------------------------
NAME GRANTED IN FISCAL 1996 PER SHARE DATE 5% 10%
- ---- ------------- -------------- -------------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
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>
- ------------
(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 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 the vesting of stock options in connection with a
change in control. Of the options granted to Mr. Dimun during fiscal 1996,
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. 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
must be employed by the Company at that time. The Board of Directors is
authorized to accelerate stock options related to fully paid shares in
connection with a change in control.
6
<PAGE>
<PAGE>
The following table provides certain information with respect to the New
Options and the Prior Options:
<TABLE>
<CAPTION>
MARKET PRICE OF
COMMON STOCK
NUMBER OF NUMBER OF ON THE DATE DATE ON WHICH
SHARES SHARES THAT THE EXERCISE EXERCISE THE PRIOR
DATE ON WHICH UNDERLYING UNDERLYING NEW PRICE OF PRICE OF OPTIONS
NEW OPTIONS NEW PRIOR OPTIONS PRIOR NEW WOULD HAVE
NAME AND POSITION WERE GRANTED OPTIONS OPTIONS WERE GRANTED OPTIONS OPTIONS EXPIRED
- ------------------------------------ ------------- ---------- ---------- --------------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Terence D. Wall .................... May 23, 1996 120,000 120,000 $ 22.25 $17.75 $22.25 May 19, 2003
President and Chief
Executive Officer
Barry Wicker ....................... May 23, 1996 80,000 80,000 22.25 17.75 22.25 May 19, 2003
Executive Vice President
</TABLE>
Set forth below is a report of a special committee of the Board of
Directors (the 'Special Committee'):
The Special Committee has reviewed the description set forth above and
elsewhere herein of the Special Committee's deliberations regarding the
grant of New Options to Terence D. Wall and Barry Wicker. That description
accurately summarizes the Special Committee's analysis with respect to the
grant of the New Options. The Special Committee was and is convinced that
the factors which made it unlikely that the performance targets under the
Prior Options would be met were unrelated to performance by Messrs. Wall
and Wicker. Indeed, the Special Committee credits the leadership of Messrs.
Wall and Wicker as important factors in the Company's improved performance
subsequent to fiscal 1994. The Special Committee felt it important to
provide Messrs. Wall and Wicker with stock option incentives reflected in
the New Options.
By: The Special Committee
David J. Bershad
Joseph Thomas
John Toedtman
7
<PAGE>
<PAGE>
The following table provides data regarding stock options exercised by the
Named Officers during the year end September 30, 1996 and the number of shares
of the Company' 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.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
NUMBER OF OPTIONS AT YEAR-END YEAR-END
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
ON EXERCISE REALIZED (A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
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.
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. 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 TMP. 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.
THE BOARD OF DIRECTORS; COMMITTEES OF THE BOARD
The Board of Directors of the Company held five meetings during the year
ended September 30, 1996. The Board's Audit Committee, which is responsible for
reviewing significant audit and accounting principles, policies and practices
and for meeting with the Company's independent accountants, met three times
during the year ended September 30, 1996. The Audit Committee presently consists
of David J. Bershad and John Toedtman.
8
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The Board has formed a Nominating Committee, consisting of Terence D. Wall,
Anthony J. Dimun and John Toedtman. This Committee did not meet during the year
ended September 30, 1996, as all nominating matters were considered by the full
Board. The Nominating Committee is charged with the responsibility of
interviewing potential candidates for election to the Board and for nominating
individuals each year for election to the Board. The Nominating Committee has
not established any procedures for considering nominees recommended by
stockholders.
The Board has not formed a general Compensation Committee. It maintains a
Stock Option Committee, however, to administer the 1990 Employee Stock Option
Plan, the 1991 Director Stock Option Plan and the Vital Signs Investment Plan.
The Stock Option Committee presently consists of Terence D. Wall and Barry
Wicker and acted by unanimous consent during the Company's most recent fiscal
year.
Each member of the Company's Board was present for 75% or more of the
aggregate of the total meetings of the Board and each Board committee on which
he serves.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors does not maintain a Compensation Committee.
Accordingly, compensation decisions are made by the entire Board of Directors.
During the fiscal year ended September 30, 1996, the following individuals
served on the Board: Terence D. Wall, David J. Bershad, Anthony J. Dimun, Joseph
Thomas, John Toedtman and Barry Wicker. During that year, of the persons named,
Messrs. Wall, Dimun, Thomas and Wicker were officers and employees of the
Company or its subsidiaries.
RELATED PARTY TRANSACTIONS
The Company has provided certain general 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 Bionx Implants, Inc. ('Bionx'). 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 fiscal 1996, the
entire amount owed by Bioscience to the Company and its subsidiary ($187,000)
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 Bionx.
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 cardiovascular products. Approximately
$100,000 of research and development expense was incurred by the Company in
fiscal 1996 in conjunction 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. The note, which accrued
interest at a rate of eight percent per annum, has been paid in full.
Approximately $65,000 in expenses incurred by Cardiologics during the current
fiscal year are owed to the Company by Cardiologics.
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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.
BOARD REPORT ON EXECUTIVE COMPENSATION
Pursuant to rules adopted by the SEC designed to enhance disclosure of
corporate policies regarding executive compensation, the Company has set forth
below a report of its Board regarding compensation policies as they affect Mr.
Wall and the other Named Officers.
The Board of Directors views compensation of executive officers as having
three distinct parts, a current compensation program, a set of standard benefits
and a long-term benefit. The current compensation element focuses upon the
executive officer's salary and is designed to provide appropriate reimbursement
for services rendered. The Company's standard benefit package consists primarily
of the matching portion of the Company's 401(k) Plan and eligibility for bonuses
based upon performance of the specific individual and the Company. The long-term
benefit element has been reflected in the grants of stock options to specific
executive officers.
During the past three completed fiscal years, the three most senior
executive officers did not receive any salary increase. Traditionally, Mr.
Wall's salary has been set at levels which are perceived by the Board to be
below the salaries of chief executive officers of other comparable companies.
Mr. Wall, whose family continues to own more than half of the outstanding Common
Stock of the Company, has been willing to accept such salary levels primarily
because of the message his salary sends to other executive officers, employees
and shareholders. Furthermore, Mr. Wall's personal net worth ultimately depends
more on the performance of the Company than on any specific salary level. The
salaries of each of the other Named Officers are based upon experience with the
Company, contributions to the Company and the relationship of such individual's
responsibilities to the Chief Executive Officer's responsibilities.
Stock options granted to executive officers of the Company have
historically been granted at a price equal to fair market value. Accordingly,
such options will gain appreciable value if, and only if, the market value of
the Common Stock increases subsequent to the date of grant. The Board believes
that the issuance of stock options at fair market value provides incentives to
employees to maximize the Company's performance and to assure continued
affiliation with the Company.
During fiscal 1996, new stock options were granted to Terence D. Wall and
Barry Wicker, an Executive Vice President of the Company. Such grants were
approved by a Special Committee of the Board of Directors consisting of David J.
Bershad, Joseph Thomas and John Toedtman. A description of these grants, and the
factors considered by the Special Committee in making such grants, are presented
elsewhere herein.
The Board believes that an appropriate compensation program can help in
promoting strong earnings performance if it reflects an appropriate balance
between providing rewards to executive officers while at the same time
effectively controlling cash compensation costs. It is the Board's objective to
continue monitoring the Company's compensation program to assure that this
balance is maintained.
<TABLE>
<S> <C>
By: The Board of Directors
Terence D. Wall Joseph Thomas
David J. Bershad John Toedtman
Anthony J. Dimun Barry Wicker
</TABLE>
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STOCKHOLDER RETURN COMPARISON
Set forth below is a line-graph presentation comparing the cumulative
stockholder return on the Company's Common Stock, on an indexed basis, against
the cumulative total returns of the NASDAQ Market Index and the Media General
Medical Instruments and Supplies Group Index (consisting of 277 publicly traded
medical instrument and device companies) for the period from October 1, 1991
(October 1, 1991 = 100) through September 30, 1996.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
ON VITAL SIGNS, INC. COMMON STOCK,
NASDAQ MARKET INDEX AND MEDIA GENERAL MEDICAL INSTRUMENTS
AND SUPPLIES GROUP INDEX
[GRAPHIC]
Vital Signs, Inc. 100 136.62 98.59 71.27 117.88 117.06
MG Group Index 100 105.94 89.42 103.74 155.23 180.15
Nasdaq Market Index 100 98.34 127.89 135.34 164.32 191.84
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PROPOSALS FOR APPROVAL OF STOCK OPTIONS TO CERTAIN OFFICERS
On July 26, 1993, at the Annual Meeting of Shareholders, the shareholders
of the Company approved the adoption of an Executive Officer Stock Option Plan
and approved the grant to Terence D. Wall of options covering 120,000 shares of
the Company's Common Stock and the grant to Barry Wicker of options covering
80,000 shares of Common Stock (the 'Prior Options'). The exercisability of those
options was conditioned upon the Company's achieving certain performance
targets.
On May 23, 1996, a Special Committee of the Board of Directors (the
'Special Committee') was formed to consider the grant of New Options to replace
the Prior Options approved by the shareholders on July 26, 1993. The Special
Committee found that in light of the Company's performance during the year ended
September 30, 1994, it is unlikely that such options will ever vest. The Special
Committee noted that the purpose of the options was to provide incentives to
Messrs. Wall and Wicker. The poor performance of the Company during the year
ended September 30, 1994 was largely the result of industry trends which were
not anticipated at the time that the Prior Options were granted. The Special
Committee concluded that maintenance of the Prior Options would have the effect
of eliminating incentives to Messrs. Wall and Wicker that otherwise would have
been in effect had the earnings targets been attainable.
The Special Committee considered revising the earnings targets or granting
new options with revised earnings targets. The Special Committee considered the
accounting impact of performance based options and concluded that it was not in
the best interest of the Company to grant stock options that are based upon the
Company's reaching specific earnings targets.
The Special Committee ultimately granted stock options covering 120,000
shares of Common Stock to Mr. Wall, subject to the following terms and
conditions:
(a) The options vest as follows: 25% on the second anniversary of the
date of grant, 25% on the third anniversary of the date of grant, 25% on
the fourth anniversary of the date of grant and 25% on the fifth
anniversary of the date of grant, provided, however, that all such options
shall vest automatically in the event that a change in control event (as
defined in the Company's Employee Plan) occurs. There are no earnings
targets relating to these options.
(b) The exercise price of the options is $22.25, the closing sales
price of one share of the Company's Common Stock on May 23, 1996.
(c) The grant of the options was conditioned upon Mr. Wall's agreement
to cancel his stock option covering 120,000 shares of Common Stock granted
to him pursuant to the plan approved by shareholders at the July 1993
Annual Meeting of Shareholders. The grant was also conditioned on the
shareholders approving the grant of the New Options prior to the first
vesting date.
The Special Committee approved options to Mr. Wicker having terms which are
identical to the terms under which Mr. Wall's options were granted, except that
Mr. Wicker was granted options covering 80,000 shares of the Company's Common
Stock and are conditioned upon his cancellation of the option granted to him at
the July 26, 1993 Annual Meeting of Shareholders.
THE SHAREHOLDERS WILL VOTE SEPARATELY ON THE PROPOSALS TO GRANT MR. WALL
120,000 NEW OPTIONS AND TO GRANT MR. WICKER 80,000 NEW OPTIONS. THE BOARD OF
DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY VOTE IN FAVOR OF THESE
PROPOSALS.
PROPOSAL TO AMEND THE COMPANY'S 1990 EMPLOYEE
STOCK OPTION PLAN AND INVESTMENT PLAN TO PROVIDE
FOR A MAXIMUM NUMBER OF SHARES SUBJECT TO OPTIONS
WHICH MAY BE GRANTED IN ANY FISCAL YEAR
Section 162(m) of the Internal Revenue Code of 1986, as amended ('Section
162(m)'), precludes certain public corporations from deducting annual
compensation in excess of $1,000,000 payable to such entities' most highly paid
executive officers. Compensation resulting from the exercise of stock options
generally will be excluded from this prohibition on deductibility if the plans
providing for such options contain a limit on the number of stock options which
may be granted to such individuals in any fiscal year.
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Excluding the effect of Section 162(m), the Company generally is entitled
to deductions upon the exercise of stock options which do not constitute
'incentive stock options' within the meaning of the Internal Revenue Code. To
assure the Company's ability to continue to recognize such deductions, the Board
of Directors has adopted, subject to shareholder approval, a proposal which
would amend both the Company's Employee Plan and the Company's Investment Plan
to provide that notwithstanding any other provision under such plans, no
eligible participant of the Company or its subsidiaries may be granted stock
options under any of the Company's benefit plans in any one fiscal year covering
more than an aggregate of 250,000 shares of the Company's Common Stock. Such
limitation is subject to adjustment in the event of a stock dividend, stock
split, recapitalization or similar adjustment in the Company's capital
structure.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY VOTE
IN FAVOR OF THIS PROPOSAL.
PROPOSAL TO AMEND THE TERMINATION PROVISIONS OF THE COMPANY'S
1990 EMPLOYEE STOCK OPTION PLAN AND INVESTMENT PLAN
Under the Employee Plan, stock options cease to vest upon termination of
employment with the Company and cease to be exercisable within specified periods
after termination, depending on the basis for termination. Specifically, the
Employee Plan provides that options will terminate one year after termination
due to death or disability and three months after termination due to any other
reason. Similar provisions exist with respect to options granted pursuant to the
Company's Investment Plan.
The Board of Directors of the Company has adopted amendments to the
Employee Plan and the Investment Plan. Such amendments grant the Board of
Directors the discretion to provide, on a case by case basis, that options
granted to employees under such plans will continue to vest and remain
exercisable (through the expiration dates of such options) in the event that
upon ceasing to be an employee of the Company, such optionee continues to serve
the Company or any of its subsidiaries as either a director or a consultant. To
the extent that the Board of Directors exercises its discretion with respect to
any options that are 'incentive stock options', such options will be converted
into non-incentive stock options 90 days after termination of employment.
These amendments to the Employee Plan and the Investment Plan are subject
to shareholder approval. The Board of Directors believes that such amendments
are consistent with the purposes of the termination provisions of the applicable
plans, in that the Board should have the flexibility to provide that option
vesting and exercisability should cease only when an optionee's contributions to
the Company cease. The Board believes that there may be circumstances in which
an employee who continues to serve the Company as a director or consultant
should not suffer the consequence of losing options earned while serving the
Company as an employee. ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS OF THE COMPANY VOTE IN FAVOR OF THIS PROPOSAL.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Goldstein Golub Kessler & Company, P.C. ('GGK'), certified public
accountants, has been selected by the Board of Directors to audit and report on
the Company's financial statements for the year ending September 30, 1997. A
representative of that firm is expected to be present at the Annual Meeting and
will have an opportunity to make a statement if he so desires. The
representative is expected to be available to respond to appropriate questions
from stockholders. GGK audited the Company's financial statements for the past
five years and for several years prior to fiscal 1987.
OTHER MATTERS
At the time that this Proxy Statement was mailed to stockholders,
management was not aware that any matter other than the election of directors,
consideration of the proposed New Options, consideration of certain amendments
to the Company's Employee Plan and Investment Plan to provide for a maximum
number of shares subject to options which may be granted during any fiscal year
and consideration of certain amendments to the Employee Plan and Investment Plan
revising the termination provisions of such plans would be presented for action
at the Annual Meeting. If other
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matters properly come before the Meeting, it is intended that shares represented
by proxies will be voted with respect to those matters in accordance with the
best judgment of the persons voting them.
If a stockholder intends to present a proposal at the next Annual Meeting
of Stockholders, the proposal must be received by the Company in writing no
later than February 10, 1998 in order for such proposal to be eligible for
inclusion in the Company's Proxy Statement and form of proxy for next year's
meeting.
By Order of the Board of Directors
ANTHONY J. DIMUN, Secretary
Dated: June 10, 1997
A COPY OF AN ANNUAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 1996, INCLUDING
FINANCIAL STATEMENTS, ACCOMPANIES THIS PROXY STATEMENT. THE ANNUAL REPORT IS NOT
TO BE REGARDED AS PROXY SOLICITING MATERIAL OR AS A COMMUNICATION BY MEANS OF
WHICH ANY SOLICITATION IS TO BE MADE.
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APPENDIX 1
VITAL SIGNS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF SHAREHOLDERS.
JULY 9, 1997
The undersigned hereby appoints Anthony J. Dimun, Terence D. Wall and Barry
Wicker, and each of them, attorneys and proxies, with power of substitution in
each of them, to vote for and on behalf of the undersigned at the annual meeting
of the shareholders of the Company to be held on July 9, 1997, and at any
adjournment thereof, upon matters properly coming before the meeting, as set
forth in the related Notice of Meeting and Proxy Statement, both of which have
been received by the undersigned. Without otherwise limiting the general
authorization given hereby, said attorneys and proxies are instructed to vote as
follows:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A [X] Please mark your
votes as in this
example
<TABLE>
<CAPTION>
FOR the WITHHOLD
nominees listed at right AUTHORITY
(except as marked to to vote for the nominees
the contrary below) listed at right
<S> <C> <C> <C>
1. Election of [ ] [ ] Nominees: David J. Bershad
the Board's Anthony J. Dimun
nominees for Joseph Thomas
Director. John Toedtman
Terence D. Wall
Barry Wicker
</TABLE>
(INSTRUCTION: To withhold authority to vote for any
individual nominee, write the nominee's name in the space
provided below.)
---------------------------------------------------------
The Board of Directors recommends a vote "FOR" items 2 through 5.
FOR AGAINST ABSTAIN
2. The approval of the grant of stock options for [ ] [ ] [ ]
Terence D. Wall.
3. The approval of the grant of stock options for [ ] [ ] [ ]
Barry Wicker.
4. The approval of amendments to the 1990 Employee [ ] [ ] [ ]
Stock Option Plan and Investment Plan to provide
for a maximum number of shares subject to options
which may be granted during any fiscal year.
5. The approval of amendments to the 1990 Employee [ ] [ ] [ ]
Stock Option Plan and Investment Plan revising the
termination provisions of such plans.
6. Upon all such other matters as may properly come before the meeting and/or
any adjournment or adjournments thereof, as they in their discretion may
determine. The Board of Directors is not aware of any such other matters.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES OR SPACE PROVIDED IN THIS PROXY, THIS
PROXY WILL BE VOTED FOR EACH OF THE BOARD'S NOMINEES AND FOR THE APPROVAL OF
EACH OF THE ABOVE-MENTIONED PROPOSALS.
SIGNATURE _______________ DATE ________ SIGNATURE ________________ DATE ________
Signature if held jointly
NOTE: Please sign this proxy and return it promptly whether or not you expect to
attend the meeting. You may nevertheless vote in person if you attend.
Please sign exactly as your name appears hereon. Give full title if an
Attorney, Executor, Administrator, Trustee, Guardian, etc. For an account
in the name of two or more persons, each should sign, or if one signs, he
should attach evidence of his authority.
