SCHEDULE 14A
(RULE 14a-101)
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
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
RSI SYSTEMS, 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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions 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>
ANNUAL MEETING
RSI SYSTEMS, INC.
5593 West 78th Street
Edina, Minnesota 55439
TO THE SHAREHOLDERS OF RSI SYSTEMS, INC.:
You are cordially invited to attend our Annual Meeting of Shareholders
to be held on January 4, 2001, at 3:30 p.m. local time, at the Company's
headquarters in Edina, Minnesota.
The formal Notice of Meeting, Proxy Statement and form of proxy are
enclosed. Also enclosed is the Company's Annual Report to Shareholders for
fiscal year 2000.
Whether or not you plan to attend the meeting, please date, sign and
return the enclosed proxy in the envelope provided as soon as possible so that
your vote will be recorded.
Very truly yours,
/s/ Richard F. Craven
Richard F. Craven
Chairman of the Board
December 4, 2000
PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD PROMPTLY
TO SAVE THE COMPANY THE EXPENSE
OF ADDITIONAL SOLICITATION.
<PAGE>
RSI SYSTEMS, INC.
5593 West 78th Street
Edina, Minnesota 55439
----------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 4, 2001
----------------------------
TO THE SHAREHOLDERS OF RSI SYSTEMS, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of RSI
Systems, Inc. (the "Company") will be held on January 4, 2001 at 3:30 p.m. local
time, at the Company's headquarters, 5593 West 78th Street Edina, Minnesota
55439, for the following purposes:
1. To elect a Board of Directors to serve a one-year term or
until their respective successors are elected and qualified;
2. To consider and act upon a proposal to ratify the appointment
of Lund Koehler Cox and Arkema LLP, certified public
accountants, as independent auditors for the Company for the
year ending June 30, 2001.
3. To consider and act upon such other matters as may properly
come before the meeting or any adjournment thereof.
The close of business on November 17, 2000 has been fixed as the record
date for the determination of shareholders that are entitled to vote at the
meeting or any adjournments thereof.
By Order of the Board of Directors,
/s/ Richard F. Craven
Richard F. Craven
CHAIRMAN OF THE BOARD
December 4, 2000
--------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. NO ADMISSION
TICKET OR OTHER CREDENTIALS WILL BE NECESSARY. IF YOU DO NOT PLAN TO ATTEND THE
MEETING, PLEASE BE SURE YOU ARE REPRESENTED AT THE MEETING BY MARKING, SIGNING,
DATING AND MAILING YOUR PROXY CARD IN THE REPLY ENVELOPE PROVIDED.
--------------------------------------------------------------------------------
<PAGE>
RSI SYSTEMS, INC.
5593 West 78th Street
Edina, Minnesota 55439
----------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 4, 2001
INTRODUCTION
The Annual Meeting of Shareholders (the "Annual Meeting") of RSI
Systems, Inc. (the "Company") will be held on January 4, 2001, at 3:30 p.m.,
local time, at the Company's headquarters in Edina, Minnesota, or at any
adjournment or adjournments thereof, for the purposes set forth in the Notice of
Annual Meeting of Shareholders.
A proxy card is enclosed for your use. You are solicited on behalf of
the Board of Directors to SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE. No postage is required if mailed within the United States. The cost of
soliciting proxies, including the preparation, assembly and mailing of the
proxies and soliciting material, as well as the cost of forwarding such material
to the beneficial owners of the Company's Common Stock, will be borne by the
Company. Directors, officers and regular employees of the Company may, without
compensation other than their regular compensation, solicit proxies by
telephone, telegraph or personal conversation. The Company may reimburse
brokerage firms and others for expenses in forwarding proxy materials to the
beneficial owners of Common Stock.
Any shareholder giving a proxy may revoke it at any time prior to its
use at the Annual Meeting either by giving written notice of such revocation to
the Secretary of the Company, by filing a duly executed proxy bearing a later
date with the Secretary of the Company, or by appearing at the Annual Meeting
and filing written notice of revocation with the Secretary of the Company prior
to use of the proxy. Proxies will be voted as specified by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE PROPOSALS SET FORTH IN THE NOTICE OF MEETING.
The Company expects that this proxy material will be mailed to
shareholders on December 5, 2000.
-1-
<PAGE>
VOTING OF SHARES
Only holders of Common Stock of record at the close of business on
November 17, 2000 will be entitled to vote at the Annual Meeting. On November
17, 2000, the Company had 8,724,883 outstanding shares of Common Stock, each
such share entitling the holder thereof to one vote on each matter to be voted
on at the Annual Meeting. The presence at the Annual Meeting, either in person
or by proxy, of the holders of a majority of the outstanding shares of Common
Stock entitled to vote at the meeting is required for a quorum for the
transaction of business at the Annual Meeting. In general, shares of Common
Stock represented by a properly signed and returned proxy card will be counted
as shares present and entitled to vote at the Annual Meeting for purposes of
determining a quorum, without regard to whether the proxy card reflects
abstentions (or is left blank) or reflects a "broker non-vote" on a matter
(I.E., a card returned by a broker on behalf of its beneficial owner customer
that is not voted on a particular matter because voting instructions have not
been received and the broker has no discretionary authority to vote). Holders of
shares of Common Stock are not entitled to cumulate voting rights.
Except for the election of directors to the Board of Directors, all
other proposals that may come before the Annual Meeting described in this Proxy
Statement require the approval of a majority of the shares present and entitled
to vote, either in person or by proxy, on that matter. Directors shall be
elected by a plurality of the votes cast by holders of shares entitled to vote,
either in person or by proxy. Shares represented by a proxy card including any
broker non-votes on a matter will be treated as shares not entitled to vote on
that matter, and thus will not be counted in determining whether that matter has
been approved. Shares represented by a proxy card voted as abstaining on any of
the proposals will be treated as shares present and entitled to vote that were
not cast in favor of a particular matter, and thus will be counted as votes
against that matter.
ELECTION OF DIRECTORS
NOMINATION
The Restated Bylaws of the Company provide that the number of directors
shall be not less than three or more than seven, as may be designated by the
Board of Directors from time to time. The Board of Directors (the "Board") has
set its size at three and has nominated the individuals set forth below to serve
as directors of the Company for a one-year term or until their successors have
been elected and qualified. All of the nominees are members of the current
Board.
The Board recommends a vote FOR the election of each of the nominees
listed below. In the absence of other instructions, the proxies will be voted
FOR the election of the nominees named below. If, prior to the Annual Meeting,
the Board should learn that any nominee will be unable to serve by reason of
death, incapacity or other unexpected occurrence, the proxies that otherwise
would have been voted for such nominee will be voted for such substitute nominee
as selected by the Board. Alternatively, the proxies, at the Board's discretion,
may be voted for such fewer number of nominees as results from such death,
incapacity or other unexpected occurrence. The Board has no reason to believe
that any of the nominees will be unable to serve.
INFORMATION ABOUT NOMINEES
NAME OF NOMINEES AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
---------------- --- -------------------- --------------
Richard F. Craven 57 Chairman of the Board December 1993
Private Investor
Byron G. Shaffer 66 Private Investor September 1999
Feb 1995-Nov 1998
S. Albert Hanser 62 Private Investor September 1999
-2-
<PAGE>
RICHARD F. CRAVEN, a founder of the Company, has served as a director
since its inception in December 1993. Mr. Craven is a private investor and has
been involved as a manager, owner and developer in several real estate ventures.
He has been a licensed real estate broker and a licensed insurance agent since
1965. Mr. Craven is also a director of VideoLabs, Inc.
BYRON G. SHAFFER served as a director of the Company from 1995 to 1998.
Mr. Shaffer has been a private investor for the last 20 years and has also
served as a director of Mentor Corporation, a medical product manufacturer,
since 1976.
S. ALBERT HANSER has been Chairman of Hanrow Financial Group, Ltd., a
merchant banking firm. Mr. Hanser also has served as Chairman/CEO of Resource
Bank and Trust, Chairman of First Bank Systems' Merchant Bank and Executive Vice
President of Investment Banking at Dain Bosworth. In addition, he sits on a
number of industry, civic and charitable boards. Mr. Hanser graduated from Brown
University in 1959 and Wharton School of Finance in 1974. He received an
honorable discharge from the Air Force after serving in Military Intelligence.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The business and affairs of the Company are managed by the Board of
Directors, which held 3 meetings during fiscal 2000. All directors' terms will
expire at the 2000 Annual Meeting of Shareholders.
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee, which consists of Messrs., Craven,
Shaffer and Hanser, supervises the financial affairs of the Company and
generally reviews the results and scope of the audit and other services provided
by the Company's independent accountants and reports the results of their review
to the Board and to the Company's management. The audit committee held one
meeting during fiscal year 2000. The Compensation Committee, which consists of
Messrs., Craven, Shaffer and Hanser, has general responsibility for management
of compensation matters, including recommendations to the Board of Directors on
compensation arrangements for officers and incentive compensation for employees
of the Company. The Compensation Committee held one meeting during fiscal year
2000. All of the directors of the Company attended 75% or more of the aggregate
meetings of the Board and all such committees on which they served.
DIRECTOR COMPENSATION
The Board of Directors of the Company has established the following
compensation policies for directors of the Company. Non-employee directors
receive $100 for each meeting attended. Also, under the Company's 1994 Stock
Plan as amended, each non-employee director is granted, upon election to the
Board, an option to purchase 20,000 shares of Common Stock, exercisable at fair
market value on the date of grant and vesting in equal increments of 25% every
three months and expiring ten years from the date of grant. After the first year
a non-employee director is elected to the Board, such non-employee director if
reelected will also receive annually, at the time of the Annual Meeting of
Shareholders, an option to purchase 5,000 shares of Common Stock exercisable at
fair market value on the date of grant, vesting in equal increments of 25% every
three months and expiring ten years from the date of grant. Existing employee
directors receive no additional compensation for serving as directors.
-3-
<PAGE>
PRINCIPAL SHAREHOLDERS AND BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of December 4, 2000, the number
of shares of the Company's Common Stock beneficially owned by: (i) each director
of the Company; (ii) the Chief Executive Officer and other most highly
compensated executive officers of the Company whose salary and bonus exceeded
$100,000 in fiscal 2000 (the Named Executive Officers); (iii) each shareholder
who is known by the Company to beneficially own more than 5% of the outstanding
shares of Common Stock; and (iv) all executive officers and directors as a
group. Unless otherwise indicated, each person has sole voting and dispositive
power over such shares. Shares not outstanding but deemed beneficially owned by
virtue of the right of a person or member of a group to acquire them within 60
days are treated as outstanding only when determining the amount and percent
owned by such group or person. The address for all directors and officers of the
Company is 5593 West 78th Street, Edina, MN 55439.
NUMBER OF SHARES
NAME BENEFICIALLY OWNED OWNED PERCENTAGE
---- ------------------ ----------------
Eugene W. Courtney 20,000 (1) *
Richard F. Craven 1,963,824 (2) 22.4%
Byron G. Shaffer 469,000 (3) 5.3%
S. Albert Hanser 70,000 (4) *
Marti D. Miller 128,000 (5) 1.4%
James D. Hanzlik 108,000 (6) 1.2%
Donald C. Lies 315,000 (7) 3.5%
All Current Executive Officers and 2,758,824 (8) 30.3%
Directors as a Group (6 persons)
Alan C. Phillips and Delores V. Phillips 823,478 (9) 9.4%
Rev. Trust
--------------------------------------------------------------------------
* Indicates ownership of less than 1%.
(1) Includes 20,000 shares which may be acquired within 60 days upon the
exercise of stock options.
(2) Includes (i) 50,000 shares which may be acquired within 60 days upon
the exercise of stock options and warrants and (ii) 30,000 shares owned
by two of Mr. Craven's children. Richard Craven has disclaimed
beneficial ownership of shares beneficially owned by his son, Greg
Craven, and therefore Greg Craven's shares are excluded.
(3) Includes 62,500 shares which may be acquired within 60 days upon the
exercise of stock options and warrants.
(4) Includes 20,000 shares which may be acquired within 60 days upon the
exercise of stock options.
(5) Includes 128,000 shares which may be acquired within 60 days upon the
exercise of stock options.
(6) Includes 108,000 shares which may be acquired within 60 days upon the
exercise of stock options.
(7) Includes 315,000 shares which may be acquired within 60 days upon the
exercise of stock options.
(8) Includes 388,500 shares which may be acquired within 60 days upon the
exercise of stock options and warrants.
(9) This Trust is affiliated with Altron, Inc., the Company's third party
manufacturer.
-4-
<PAGE>
EXECUTIVE COMPENSATION AND OTHER BENEFITS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company for services rendered for the years ended June 30, 1998, 1999 and 2000
to (i) all persons who served as the Chief Executive Officer of the Company
during fiscal year 2000 and (ii) the other most highly compensated executive
officers of the Company whose salary and bonus exceeded $100,000 in fiscal year
2000 (the "Named Executive Officers"). Other than those individuals listed
below, no executive officer of the Company received cash compensation of more
than $100,000 in fiscal year 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
RESTRICTED
----------
NAME AND PRINCIPAL FISCAL ANNUAL COMPENSATION STOCK UNDERLYING
------------------- ------ ------------------- ----- ---------- ALL OTHER
POSITION YEAR SALARY($) BONUS($) AWARDS OPTIONS (#) COMPENSATION $
-------- ---- --------- -------- ------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Eugene W. Courtney 1998 0 0 0 0 0
CHIEF EXECUTIVE 1999 0 0 0 0 0
OFFICER AND PRESIDENT 2000 34,615 0 0 100,000 0
Richard F. Craven 1998 0 0 0 0 0
CHAIRMAN AND 1999 0 0 0 5,000 0
FORMER INTERIM CHIEF 2000 0 0 0 5,000 0
EXECUTIVE OFFICER AND
PRESIDENT
Marti D. Miller 1998 107,723 0 0 20,000 0
VICE PRESIDENT, 1999 129,969 0 0 40,000 0
ENGINEERING 2000 133,500 0 0 40,000 0
Mr. James D. Hanzlik 1998 89,885 0 0 20,000 4,200
CHIEF FINANCIAL 1999 102,625 0 0 40,000 4,800
OFFICER 2000 107,900 0 0 40,000 2,800
Donald C. Lies 1998 171,693 0 0 200,000 7,800
FORMER CHIEF 1999 194,769 0 0 150,000 7,800
EXECUTIVE OFFICER AND 2000 157,692 0 0 0 1,300
PRESIDENT
</TABLE>
-5-
<PAGE>
OPTION GRANTS AND EXERCISES
The tables below set forth information about the stock options held by
the Named Executive Officers and the potential realizable value of the options
held by such person on June 30, 2000. No stock options were exercised by the
Named Executive Officers of the Company during fiscal year 2000.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL OPTIONS
UNDERLYING GRANTED TO EMPLOYEES EXERCISE
NAME OPTIONS GRANTED (1) IN FISCAL YEAR 2000 PRICE ($/sh) EXPIRATION DATE
---- ------------------- ------------------- ------------ ---------------
<S> <C> <C> <C> <C>
Eugene W. Courtney 100,000(2) 22.6% .375 December 28, 2010
CHIEF EXECUTIVE
OFFICER AND PRESIDENT
Richard F. Craven 5,000(3) N/A (3) .5156 May 24, 2010
CHAIRMAN AND
FORMER INTERIM CHIEF
EXECUTIVE OFFICER AND
PRESIDENT
Marti D. Miller 40,000(4) 9.0% .375 December 28, 2010
VICE PRESIDENT,
ENGINEERING
James D. Hanzlik 40,000(5) 9.0% .375 December 28, 2010
CHIEF FINANCIAL
OFFICER
Donald C. Lies 0 N/A N/A N/A
FORMER CHIEF
EXECUTIVE OFFICER AND
PRESIDENT
</TABLE>
--------------------
(1) During fiscal year 2000, options to acquire an aggregate of 442,000
shares of Common Stock were granted to all employees and options to
acquire 45,000 shares of Common Stock were granted to non-employee
directors.
(2) 100,000 options were granted to Mr. Courtney on December 29, 1999. The
options become vested and exercisable in five equal annual installments
commencing on the date of the grant.
(3) 5,000 options were granted to Mr. Craven on May 25, 2000 for services
rendered on the Board of Directors. The options became vested and
exercisable in four equal quarterly installments commencing three
months from the date of the grant. Mr. Craven received no options for
services as Interim Chief Executive Officer and President.
(4) 40,000 options were granted to Mr. Miller on December 29, 1999. The
options become vested and exercisable in five equal annual installments
commencing on the date of the grant.
(5) 40,000 options were granted to Mr. Hanzlik on December 29, 1999. The
options become vested and exercisable in five equal annual installments
commencing on the date of the grant.
-6-
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE OPTIONS AT JUNE 30, 2000 (#) AT JUNE 30, 2000 ($)(1)
--------------- ----- ---------------------------- -----------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eugene W. Courtney 0 0 20,000 80,000 2,500 10,000
CHIEF EXECUTIVE
OFFICER AND
PRESIDENT
Richard F. Craven 0 0 41,250 3,750 0 0
CHAIRMAN AND FORMER (2) (2)
INTERIM PRESIDENT
AND CHIEF EXECUTIVE
OFFICER
Marti D. Miller 0 0 94,667 65,333 1,000 4,000
VICE PRESIDENT,
ENGINEERING
James D. Hanzlik 0 0 74,667 65,333 1,000 4,000
CHIEF FINANCIAL
OFFICER
Donald C. Lies 0 0 315,000 0 0 0
FORMER CHIEF
EXECUTIVE OFFICER
AND PRESIDENT
</TABLE>
--------------------
(1) Based on the June 30, 2000, closing bid price of the Company's Common
Stock of $.50 per share.
(2) Richard Craven has disclaimed beneficial ownership of shares
beneficially owned by his son, Greg Craven, and therefore Greg Craven's
shares are excluded.
EMPLOYEE AGREEMENTS
On September 7, 1999, Mr. Lies resigned from the Company. Under the
terms of a severance agreement, Mr. Lies was to be paid a severance salary of
$200,000 in 12 equal monthly installments beginning September 8, 1999. The
severance agreement precluded Mr. Lies from competing with the Company until
August 31, 2000. In March, 2000 the Company and Mr. Lies renegotiated this
agreement to lower the total amount of severance pay. As of March, 2000 the
Company had paid all obligations due to its previous President and CEO, which
amounted to approximately $118,000 in fiscal year 2000.
The Company has agreements in place with Mr. Miller and Mr. Hanzlik
that obligates the Company to pay six-months salary and benefits to either of
these individuals in the event of their involuntary termination.
-7-
<PAGE>
COMPENSATION OF DIRECTORS
The Board of Directors of the Company has established the following
compensation policies for non-employee directors of the Company. Non-employee
directors receive $100 for each meeting attended. Also, under the Company's 1994
Stock Plan, each non-employee director is granted, upon election to the Board,
an option to purchase 20,000 shares of Common Stock, exercisable at market value
on the date of grant, vesting in equal increments of 25% every three months and
expiring ten years from the date of grant. After the year of election, each
non-employee director will also receive annually an option to purchase 5,000
shares of Common Stock exercisable at market value on the date of grant, vesting
in equal increments of 25% every three months and expiring ten years from the
date of grant. During fiscal year 2000, options to acquire 45,000 shares of the
Company's Common Stock were granted to non-employee directors, exercisable at
market value on the date of grant, vesting in equal increments of 25% every
three months and expiring ten years from the date of grant. Directors who are
employees of the Company receive no additional compensation for serving as
directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Richard F. Craven, a director of the Company, is the father-in-law
of the owner/partner of Pointe Design, which is a Minneapolis, Minnesota based
company that designs and prints advertising and other marketing tools. The
Company has used Pointe Design's services to print marketing brochures and other
advertising media. Net purchases by the Company from Pointe Design totaled
$41,352, $148,371 and $108,405 during fiscal years 2000, 1999 and 1998
respectively. The Company believes its transactions with Pointe Design have been
on terms no less favorable than could have been obtained from unaffiliated third
parties on an arm's length basis.
In September 1999 the Company issued 134,000 shares of common stock
upon the exercise of a warrant held by Mr. Richard F. Craven. The Company
received proceeds of $134,000 upon the exercising of the warrant ($1.00 per
share). The shares have not been registered with the Securities and Exchange
Commission.
In November 1999 the Company sold 600,000 shares of common stock to
Company directors, Messrs. Richard F. Craven, Byron G. Shaffer, and S. Albert
Hanser. The Company received $475,000 in exchange for the 600,000 shares of
common stock ($1.00 and $.50 per share). The shares have not been registered
with the Securities and Exchange Commission.
In November 1999 and June 2000, the Company issued a total of 608,478
shares of common stock to its third party manufacturer as payment on trade debt
of $364,641 ($1.00 and $.40 per share). The shares have not been registered with
the Securities and Exchange Commission.
In June 2000, Mr. Richard F. Craven converted two $150,000 notes
payable and accrued interest due from the Company into common stock. The Company
issued 528,324 shares of common stock upon conversion of the notes payable
which, together with accrued interest at 10%, totaled $313,151. The notes
payable were converted into common stock at prices of $.53 and $.67 per share.
The shares have not been registered with the Securities and Exchange Commission.
In August 2000, the Company received $225,000 from a Richard F. Craven
in exchange for a demand note payable. On February 28, 2001, the maturity date
of the note, the principal amount of the note together with accrued interest at
10% per annum is convertible into common stock at a price of $.34 per share,
which was the market price of the Company's common stock on the date the note
was signed.
-8-
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has appointed Lund Koehler Cox and Arkema LLP (LKCA),
independent certified public accountants, as auditors of the Company for the
fiscal year ending June 30, 2001. Although it is not required to do so, the
Board wishes to submit the selection of LKCA to the shareholders for
ratification. Representatives of LKCA will be present at the Annual Meeting.
Such representatives will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
BOARD OF DIRECTORS' RECOMMENDATION
The Board recommends a vote FOR ratification of the appointment of Lund
Koehler Cox and Arkema, LLP, as auditors of the Company for the fiscal year
ending June 30, 2001. The affirmative vote of the holders of a majority of
shares of Common Stock of the Company present in person or by proxy at the
Annual Meeting, assuming a quorum is present, is necessary for approval. Unless
a contrary choice is specified, proxies solicited by the Board will be voted FOR
the ratification of Lund Koehler Cox and Arkema, LLP.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Proposals of shareholders intended to be presented in the proxy
materials relating to the next Annual Meeting must be received by the Company at
its principal executive offices on or before September 4, 2001.
OTHER BUSINESS
The management of the Company does not intend to present other items of
business and knows of no items of business that are likely to be brought before
the Annual Meeting except those described in this Proxy Statement. As to other
business, if any, that may properly come before the Annual Meeting, it is
intended that proxies solicited by the Board will be voted in accordance with
the judgment of the person or persons voting the proxies.
-9-
<PAGE>
SECTION 16(a) OF THE EXCHANGE ACT
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and all persons who
beneficially own more than 10% of the outstanding shares of the Company's Common
Stock, to file with the Securities and Exchange Commission (the "SEC") initial
reports of ownership and reports of changes in ownership of Company's Common
Stock and other equity securities of the Company. Executive officers, directors
and greater than 10% shareholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) reports they file. The following
officers failed to file the following forms (on a timely basis) for the fiscal
year ending June 30, 2000; Eugene W. Courtney (Form 3 and Form 5) James D.
Hanzlik (Form 5) Marti Miller (Form 5). Each of these forms were subsequently
filed by these individuals. Each of the late Forms 5 above contained one
transaction that was not reported on a timely basis. To the Company's knowledge,
based on review of the copies of such reports furnished to the Company, and
based on written representations by such persons that no other reports were
required, during the year ended June 30, 2000, except as described above, none
of the Company's directors, officers or beneficial owners of greater than 10% of
the Company's Common Stock failed to file on a timely basis the forms required
by Section 16 of the Exchange Act.
MISCELLANEOUS
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON
FORM 10-KSB (EXCLUSIVE OF EXHIBITS) FOR THE FISCAL YEAR ENDED JUNE 30, 2000 TO
EACH PERSON WHO WAS A SHAREHOLDER OF THE COMPANY AS OF NOVEMBER 17, 2000, UPON
RECEIPT FROM ANY SUCH PERSON OF A WRITTEN REQUEST FOR SUCH AN ANNUAL REPORT.
SUCH REQUEST SHOULD BE SENT TO, 5593 WEST 78TH STREET, EDINA, MN 55439; ATTN:
SHAREHOLDER INFORMATION.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard F. Craven
Richard F. Craven
CHAIRMAN OF THE BOARD
Edina, Minnesota
December 4, 2000
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[LOGO] RSI
VIDEO CONFERENCING
RSI SYSTEMS, INC.
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, JANUARY 4, 2001
3:30 P.M.
RSI SYSTEMS, INC.
5593 WEST 78TH STREET
EDINA, MN 55439
RSI SYSTEMS, INC.
[LOGO] RSI 5593 WEST 78TH STREET
VIDEO CONFERENCING EDINA, MN 55439 PROXY
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard F. Craven and Eugene W. Courtney, and
each of them, as Proxies, each with full power of substitution, and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of Common Stock of RSI Systems, Inc. held of record by the undersigned on
November 17, 2000 at the Annual Meeting of Shareholders to be held on January 4,
2001 at 3:30 p.m., or any adjournment, thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
SEE REVERSE FOR VOTING INSTRUCTIONS.
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[ARROW] PLEASE DETACH HERE [ARROW]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
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1. Election of directors: 01 Richard F. Craven [ ] Vote FOR [ ] Vote WITHHELD
02 Byron G. Shaffer all nominees from all nominees
03 S. Albert Hanser (except as marked)
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(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, | |
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) |___________________________________________|
2. Proposal to ratify the appointment of Lund Koehler Cox & Arkema LLP as
Independent Accountants for the Company for the Fiscal Year ending
June 30, 2001. [ ] For [ ] Against [ ] Abstain
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. [ ] For [ ] Against [ ] Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 2 AND 3 AND FOR ALL NOMINEES NAMED IN PROPOSAL 1 ABOVE.
Address Change? Mark Box [ ] Indicate changes below: Date ______________________________
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Signature(s) in Box
Please sign exactly as your name appears at
left. When shares are held by joint tenants,
both should sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate
name by President or other authorized officer.
If a partnership, please sign in partnership
name by authorized person.
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