SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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.
VASOMEDICAL, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
VASOMEDICAL, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
October 30, 2003
---------------
To our Stockholders:
An annual meeting of stockholders will be held at the Griffis Faculty Club,
Weill Cornell Medical College, 521 East 68th Street, New York, New York 10021 on
Thursday, October 30, 2003 beginning at 10:00 a.m. At the meeting, you will be
asked to vote on the following matters:
1. Election of five directors.
2. Ratification of the appointment by the Board of Directors of Grant
Thornton LLP as our independent certified public accountants for
fiscal year 2004.
3. Any other matters that properly come before the meeting.
The above matters are set forth in the proxy statement attached to this
notice to which your attention is directed.
If you are a stockholder of record at the close of business on September 2,
2003, you are entitled to vote at the meeting or at any adjournment or
postponement of the meeting. This notice and proxy statement are first being
mailed to stockholders on or about September 15, 2003.
By Order of the Board of Directors,
GREGORY D. CASH
Chief Executive Officer and President
Dated: September 22, 2003
Westbury, New York
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING
PRE-ADDRESSED POSTAGE-PAID ENVELOPE AS DESCRIBED ON THE ENCLOSED PROXY CARD.
YOUR PROXY, GIVEN THROUGH THE RETURN OF THE ENCLOSED PROXY CARD, MAY BE REVOKED
PRIOR TO ITS EXERCISE BY FILING WITH OUR CORPORATE SECRETARY PRIOR TO THE
MEETING A WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER
DATE, OR BY ATTENDING THE MEETING, FILING A WRITTEN NOTICE OF REVOCATION WITH
THE SECRETARY OF THE MEETING AND VOTING IN PERSON.
VASOMEDICAL, INC.
180 Linden Avenue
Westbury, New York 11590 USA
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
Thursday, October 30, 2003
---------------
Our Annual Meeting of Stockholders will be held on Thursday, October 30,
2003 at the Griffis Faculty Club, Weill Cornell Medical College, 521 East 68th
Street, New York, New York 10021 at 10:00 a.m. This proxy statement contains
information about the matters to be considered at the meeting or any
adjournments or postponements of the meeting.
ABOUT THE MEETING
What is being considered at the meeting?
You will be voting on the following:
-- election of five directors;
-- ratification of the appointment of our independent certified public
accountants.
In addition, our management will report on our performance during fiscal 2003
and respond to your questions.
Who is entitled to vote at the meeting?
You may vote if you owned stock as of the close of business on September 2,
2003. Each share of stock is entitled to one vote.
How do I vote?
You can vote in two ways:
-- by attending the meeting or
-- by completing, signing and returning the enclosed proxy card.
Can I change my mind after I vote?
Yes, you may change your mind at any time before the vote is taken at the
meeting. You can do this by (1) signing another proxy with a later date and
returning it to us prior to the meeting or filing with our corporate secretary a
written notice revoking your proxy, or (2) voting again at the meeting.
What if I return my proxy card but do not include voting instructions?
Proxies that are signed and returned but do not include voting
instructions will be voted FOR the election of the nominee directors and FOR the
appointment of our independent certified public accountants.
What does it mean if I receive more than one proxy card?
It means that you have multiple accounts with brokers and/or our transfer
agent. Please vote all of these shares. We recommend that you contact your
broker and/or our transfer agent to consolidate as many accounts as possible
under the same name and address. Our transfer agent is American Stock Transfer &
Trust Co. (718) 921-8200.
1
Will my shares be voted if I do not provide my proxy?
If you hold your shares directly in your own name, they will not be voted
if you do not provide a proxy. Your shares may be voted under certain
circumstances if they are held in the name of a brokerage firm. Brokerage firms
generally have the authority to vote customers' unvoted shares on certain
"routine" matters, including the election of directors. When a brokerage firm
votes its customer's unvoted shares, these shares are counted for purposes of
establishing a quorum. At our meeting, these shares will be counted as voted by
the brokerage firm in the election of directors and appointment of our
independent certified public accountants.
How many votes must be present to hold the meeting?
Your shares are counted as present at the meeting if you attend the meeting
and vote in person or if you properly return a proxy by mail. In order for us to
conduct our meeting, a majority of our outstanding shares as of September 2,
2003 must be present at the meeting. This is referred to as a quorum. On
September 2, 2003, there were 57,827,690 shares outstanding and entitled to
vote.
What vote is required to approve each item?
The affirmative vote of a majority of the votes cast at the Annual Meeting
is required for approval of the election of directors and the appointment of our
independent certified public accountants. A properly executed proxy marked
"ABSTAIN" with respect to any such matter will not be voted, although it will be
counted for purposes of determining whether there is a quorum.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information, including stock ownership, is submitted with
respect to our directors, the executive officers listed in the Summary
Compensation Table, all current executive officers and directors as a group,
and, based solely on filings with the Securities and Exchange Commission, except
as otherwise indicated, for each holder of more than five percent of the
outstanding shares of our common stock as of the Record Date.
Common Stock % of Outstanding
Name of Beneficial Owner Beneficially Owned (1)(2)(3) Shares
------------------------ --------------------------- ----------------
Alexander G. Bearn, MD 95,175 *
David S. Blumenthal, MD 133,078 *
Gregory D. Cash 100,000 *
Abraham E. Cohen 703,078 1.21%
D. Michael Deignan (5) 559,751 *
Joseph A. Giacalone 518,694 *
John C. K. Hui, PhD (4) 1,417,655 2.43%
Photios T. Paulson 141,333 *
Kenneth W. Rind, PhD 408,078 *
E. Donald Shapiro 621,428 1.07%
Anthony Viscusi 1,630,000 2.79%
Forrest R. Whittaker 68,333 *
Martin Zeiger 38,333 *
Directors and executive officers
as a group (12 persons) 5,875,187 9.74%
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* Less than 1% of the Company's Common Stock
(1) No officer or director owns more than one percent of the issued and
outstanding Common Stock of the Company unless otherwise indicated.
2
(2) Unless otherwise indicated, ownership represents sole voting and
investment power.
(3) Includes beneficial ownership of the following numbers of shares that
may be acquired within 60 days of September 2, 2003 pursuant to stock
options awarded under the Company's stock option plans:
Alexander G. Bearn 95,175 Photios T. Paulson 133,333
David S. Blumenthal 59,175 Kenneth W. Rind 58,078
Gregory D. Cash 100,000 E. Donald Shapiro 25,000
Abraham E. Cohen 438,078 Anthony Viscusi 515,000
D. Michael Deignan 533,333 Forrest R. Whittaker 68,333
Joseph A. Giacalone 330,833 Martin Zeiger 33,333
John C.K. Hui 628,333 Directors and executive officers as a group 2,484,673
(4) Includes 789,322 shares that are held in a trust for the benefit of
Dr. Hui's child. Dr. Hui and his wife are the trustees of this trust.
(5) Excludes 672 shares indirectly held by Mr. Deignan for his
grandchildren.
ELECTION OF DIRECTORS
Our certificate of incorporation and by-laws provides for a Board of
Directors consisting of not less than three nor more than eleven directors. Our
Board of Directors is divided into three classes, as nearly equal in number as
possible, whose terms of office expire in successive years. Our Board of
Directors consists of eleven directors as set forth below:
Class I Class II Class III
(To Serve Until the (To Serve Until the (To Serve Until the
Annual Meeting of Annual Meeting of Annual Meeting of
Stockholders in 2005) Stockholders in 2003) Stockholders in 2004)
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E. Donald Shapiro (1)(3) Abraham E. Cohen (5) Alexander G. Bearn, MD (3)
Anthony Viscusi (1)(2)(3)(4) John C.K. Hui, PhD David S. Blumenthal, MD (3)
Martin Zeiger (2)(4) Photios T. Paulson (1) Kenneth W. Rind, PhD (1)(4)
Forrest R. Whittaker (2)(3) Gregory D. Cash
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(1) Member of the Executive Committee; (2) Member of the Audit Committee; (3)
Member of the Compensation Committee; (4) Member of the Corporate Governance
Committee; and (5) Ex-officio member of all committees
Messrs. Cohen, Hui, Paulson and Whittaker, current directors in Class II,
are to be elected to serve until the 2006 Annual Meeting of Stockholders or
until their successors are duly elected and qualified and Mr. Cash, current
director in Class III, is to be elected to serve until the 2004 Annual Meeting
of Stockholders or until his successor is duly elected and qualified. Shares
represented by executed proxies in the form enclosed will be voted, unless
otherwise indicated, for the election as directors of the nominees named in
Classes II and III unless any such nominee shall be unavailable, in which event
such shares will be voted for a substitute nominee designated by the Board of
Directors. The Board of Directors has no reason to believe that any of the
nominees will be unavailable or, if elected, will decline to serve.
Our Board of Directors held six meetings during our fiscal year ended May
31, 2003. Each director attended or participated in at least 75% of such
meetings of the Board of Directors. During the fiscal year ended May 31, 2003,
there were
-- six meetings of the Audit Committee,
-- three meetings of the Compensation Committee, and
-- one meeting of the Executive Committee.
Our Audit Committee is involved in discussions with our independent public
accountants with respect to the quarterly and year-end audited financial
statements, our internal accounting controls and the professional services
furnished by our independent public accountants. Our independent public
accountants periodically meet alone with the Audit Committee and have
unrestricted access to the committee. See "Audit Committee Report." Our
Compensation Committee recommends executive compensation and the granting of
stock options to key employees. See "Compensation Committee Report on Executive
Compensation." Our Executive Committee was established to advise the Board of
Directors and make recommendations on matters relating to our business and
operations. Our Corporate Governance Committee, which was formed in October
2002, is responsible for establishing and maintaining procedures for receiving,
investigating and reporting of information and reports concerning alleged
violations of our Code of Business Ethics and Standards of Conduct.
3
Principal Occupations of Directors
The following is a brief account of the business experience for at least
the past five years of our directors:
Alexander G. Bearn, MD (80 years of age) has been a director since November
1994. Dr. Bearn is a physician, scientist and author who has had distinguished
careers in academe and industry. From 1997 through his retirement in 2001, Dr.
Bearn was the Executive Officer of the American Philosophical Society. Since
1966, Dr. Bearn has also been an adjunct professor at Rockefeller University. He
has also held positions as Chairman of the Department of Medicine of Cornell
University Medical College and Senior Vice President of Medical and Scientific
Affairs at Merck International. He serves on several boards, including the Board
..of Trustees of Rockefeller University, the Macy Foundation and the Howard
Hughes Medical Institute.
David S. Blumenthal, MD (53) has been a director since June 1994. Dr.
Blumenthal has been a practicing cardiologist in the State of New York since
1981 and is a Clinical Professor of Medicine at the Weill Cornell Medical
College.
Gregory D. Cash (46) was appointed President, Chief Executive Officer and
director on June 30, 2003 after serving as our President and Chief Operating
Officer since his employment in October 2002. From April 2001 to October 2002,
Mr. Cash served as Corporate Vice President of Datascope Corporation and
President of its wholly- owned subsidiary, Intervascular, Inc., a medical device
company. From October 1999 to April 2001, he was President and Chief Operating
Officer of Eminent Technology Partners, Inc., a regulatory and clinical trial
management company. Mr. Cash was Vice President and General Manager, Vascular
Therapies, for U.S. Surgical Corporation from 1997 to 1999. He previously spent
5 years with Boston Scientific Corporation, ultimately as Vice President,
Cardiology Sales and Marketing, Europe, prior to which he served 14 years at
Medtronic, Inc.
Abraham E. Cohen (67) has been our Chairman of the Board since June 1994
and a director since June 1993, and is presently an independent consultant. He
retired in 1992 as Senior Vice President of Merck & Co., Inc., a position he was
elected in 1985. From 1979 to 1989, Mr. Cohen was also President of Merck Sharp
& Dohme International, a division of Merck & Co., Inc. Mr. Cohen is a director
of the following public companies: Akzo Nobel Nv., Chugai Pharmaceutical Co.,
Ltd., Neurobiological Technologies, Inc. and Teva Pharmaceutical Industries,
Ltd.
John C.K. Hui, PhD (57), our Chief Technology Officer, has been a director
and Senior Vice President since February 1995. Dr. Hui has been an Assistant
Professor in the Department of Surgery at the State University of Stony Brook,
New York since 1978. He has also been a scientist in the medical department of
Brookhaven National Laboratories. Dr. Hui was president of and a principal
stockholder in Vasogenics, Inc. at the time of its acquisition by us in January
1995.
Photios T. Paulson (64) has been a director since April 2000 and served as
our Chief Executive Officer from October 2002 through June 2003. Mr. Paulson has
been an advisor to the health care industry and was Vice President of bioMerieux
N.A. Inc. from 1995 to 2002. Between 1992 and 1995, Mr. Paulson was Chairman of
bioMerieux Vitek Inc. Between 1987 and 1990, he was Senior Advisor, Health Care
Industry, for Prudential Securities. Mr. Paulson previously held senior
positions with Becton Dickinson and Company through 1987. Mr. Paulson is a
director of bioMerieux N.A. Inc. and Silliker Group Inc.
Kenneth W. Rind, PhD (68) has been a director since February 1995. Dr. Rind
has been Chairman of Oxford Venture Corporation, an independent venture capital
company, since 1981 and in 1998 was a founding General Partner of Israel
Infinity Venture Capital Fund. Previously, he was responsible for acquisitions
and venture capital investments at Xerox Development Corporation and in charge
of technology investment banking at Oppenheimer & Co., Inc. (now CIBC). He is a
director of several private companies.
4
E. Donald Shapiro (71) has been a director since June 1993, Vice Chairman
of the Company since January 2000 and was Dean Emeritus and Professor of The New
York Law School through 2002. Mr. Shapiro is formerly the Joseph Solomon
Distinguished Professor of Law and is a former Dean of The New York Law School,
as well as a Supernumerary Fellow of St. Cross College at Oxford University,
England. He has authored numerous books and articles in the field of medicine
and law and is a recipient of honors and awards both in the United States and
overseas. Mr. Shapiro is a director of the following public companies: Loral
Space and Communications, Inc., Kramont Realty Trust and Frequency Electronics,
Inc.
Anthony Viscusi (70) has been a director since June 1994 and was our
President and Chief Executive Officer from June 1994 through his retirement in
January 2000. Mr. Viscusi was Senior Vice President, Worldwide Marketing for the
AgVet division of Merck & Co., Inc. from 1987 to 1993. In 1961, Mr. Viscusi
joined the international human health division of Merck, in which he spent most
of his career in various general management positions, after having taught at
Columbia, Wesleyan and Princeton universities.
Forrest R. Whittaker (53) has been a director since April 2000. Mr.
Whittaker has been President of Teleflex Medical, a division of Teleflex, Inc.,
since April 2003. Prior thereto, Mr. Whittaker was President of the Respiratory
Division of Tyco Healthcare from June 2000 through March 2003. Mr. Whittaker was
President and CEO of Paidos Health Management Services, Inc. between 1993 and
2000 and President of Baxter Healthcare Corporation's V. Mueller Division from
1989 through 1993.
Martin Zeiger (66) has been a director since October 2001. Mr. Zeiger is an
independent consultant to the pharmaceutical industry. Mr. Zeiger was Senior
Vice President of Strategic Business Development for Barr Laboratories, a drug
manufacturer, from 1999 through August 2003. From 1987 through 1999, Mr. Zeiger
was Vice President and General Counsel for Rugby Laboratories, which was
ultimately acquired by Hoechst in 1995. Mr. Zeiger is a member of the Heritage
Board of Directors of the American Heart Association in New York and a founding
director of the Larry King Cardiac Foundation.
MANAGEMENT
Our Officers are:
Name Age Position Held With the Company
---- --- ------------------------------
Gregory D. Cash 46 President and Chief Executive Officer
John C. K. Hui, PhD 57 Senior Vice President and Chief Technology Officer
Thomas W. Fry 59 Chief Financial Officer
--------------
Thomas W. Fry (59), has been Chief Financial Officer since September 8,
2003. Mr. Fry served as Vice President, Finance and Administration of BEI
Medical Systems Company, Inc. from September, 1997 until December 2002. From
October, 1992 until November, 1997, Mr. Fry was Vice President, Finance and
Administration of its predecessor company of the same name which merged into BEI
Medical Systems Company, Inc. in November 1997. Mr. Fry was employed by
Disctronics Ltd. as Corporate Controller from 1989 to 1992, by Cavitron,
Inc./CUSA, a medical device, engineering and manufacturing company, as
Controller/CFO from 1986 to 1989, and by Cheeseborough-Ponds International as
Manager of Profit Planning and Manufacturing Controller from 1979 to 1986. Prior
to that time, Mr. Fry was employed by GTE from 1970 to 1979 in various
accounting and financial roles, including three years as the Controller of GTE
Sylvania in Caracus, Venezuela.
5
Executive Compensation
The following table sets forth the annual and long-term compensation of our
Chief Executive Officer and each of our most highly compensated officers other
than the Chief Executive Officer (the "named executive officers") for the fiscal
years ended May 31, 2003, 2002, and 2001.
Summary Compensation Table
Long Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
------------------------------------------------------- -------
Other Restricted Shares Covered Long Term
Name and Annual Stock By Option Incentive Plan All Other
Principal Position Year Salary Bonus Compensation Awards Grants Payout Compensation(5)
------------------ ---- ------ ----- ------------ ------ ------ ------ --------------
Photios T. Paulson (1) 2003 $148,308 - - - 215,000 - -
CEO
Gregory D. Cash (2) 2003 $131,718 - - - 300,000 - $4,444
President and COO
D. Michael Deignan (3) 2003 $100,000 - $160,000 - - - $6,628
Former President & CEO 2002 $240,000 - - - 200,000 - $10,626
2001 $240,000 $125,000 - - - - $4,311
John C.K. Hui 2003 $150,000 - - - - - $14,136
Senior VP/CTO 2002 $143,333 - - - 50,000 - $14,503
2001 $140,000 $37,485 - - - - $11,815
Joseph A. Giacalone (4) 2003 $140,120 - - - - - $11,868
Former CFO/Secretary 2002 $134,287 - - - 50,000 - $11,061
2001 $127,355 $34,840 - - - - $10,107
(1) The Board of Directors appointed Photios T. Paulson as Chief Executive
Officer in October 2002. Mr. Paulson resigned his position as an
officer on June 30, 2003 and remains a director and advisor to the
Company.
(2) The Board of Directors appointed Gregory D. Cash as President and
Chief Executive Officer in June 2003 after serving as President and
Chief Operating Officer since his employment in October 2002.
(3) The Board of Directors appointed D. Michael Deignan as President and
Chief Executive Officer in January 2000. Mr. Deignan's position as an
officer and director terminated on October 21, 2002. Mr. Deignan
serves as a consultant to the Company.
(4) Mr. Giacalone resigned as Chief Financial Officer and Secretary on
September 8, 2003.
(5) Represents premiums paid on medical, dental, life and disability group
benefit plans, as well as amounts matched in the Company's 401(k)
Plan.
Option/SAR Grants in Last Fiscal Year
The following table sets forth the number of options granted to our named
executive officers during the fiscal year ended May 31, 2003.
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
-------------------------------------------------------------------
Total Number
of Securities % of Total
Underlying Options/SARs Exercise
Options/SARs to Employees Price Expiration
Name Granted (#) in Fiscal Year ($/share) Date 5% 10%
---- ------------ -------------- -------- ---- -- ---
Photios T. Paulson 65,000 (2) 6% $.72 10/20/12 $29,432 $74,587
Photios T. Paulson 100,000 (3) 9% $.91 3/27/13 $57,229 $145,031
Photios T. Paulson 50,000 (4) 4% $.92 5/27/13 $28,929 $73,312
Gregory D. Cash 300,000 (1) 26% $.98 10/27/13 $184,895 $468,560
(1) Represents ten-year, non-qualified stock options under the 1999 Stock
Option Plan that vest as follows: 100,000 on the first anniversary of
the date of grant and the remaining 200,000 in equal monthly
installments thereafter. Such vesting is contingent upon continued
employment or service with us.
(2) Represents ten-year, non-qualified stock options under the 1999 Stock
Option Plan that vested immediately upon issuance.
(3) Represents ten-year, non-qualified stock options under the 1999 Stock
Option Plan that vest equally over three years commencing March 28,
2004. Such vesting is contingent upon continued employment or service
with us.
(4) Represents ten-year, non-qualified stock options under the 1999 Stock
Option Plan that vest equally over three years commencing May 28,
2004. Such vesting is contingent upon continued employment or service
with us.
6
Aggregated Option/SAR Exercises in Last Fiscal Year and F/Y-End Option Values
The following table sets forth information for each of the named executive
officers with respect to the value of options or warrants exercised during the
fiscal year ended May 31, 2003 and the value of outstanding and unexercised
options or warrants held as of May 31, 2003, based upon the market value of the
common stock of $1.08 per share on that date.
Value of Unexercised
Number of Options at In-the-Money Options
Shares Acquired Value Fiscal Year End at Fiscal Year End (2)
Name on Exercise (#) Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ----------- ----------- ------------- ----------- -------------
Gregory D. Cash - - - 300,000 $- $30,000
John C.K. Hui - - 611,667 33,333 $14,350 $-
Joseph A. Giacalone - - 314,167 33,333 $14,350 $-
Photios T. Paulson - - 116,667 178,333 $23,400 $25,000
D. Michael Deignan - - 516,667 333,333 $- $-
(1) Represents the difference between the closing price of the common stock and
the exercise price of the options on the date of exercise multiplied by the
number of shares acquired upon exercise. The calculation does not reflect
the effects of any income taxes that may be due on the value realized.
(2) Represents the difference between the closing market price of the common
stock at May 31, 2003 of $1.08 per share and the exercise price per share
multiplied by the number of in-the-money options at May 31, 2003.
Employment Agreements
We maintain employment agreements with Mr. Cash, expiring October 2004, and
with Dr. Hui, expiring January 2005. The employment agreements provide for an
annual base salary to Messrs. Cash and Hui of $250,000 and $150,000,
respectively. The employment agreements also provide, among other things, that
in the event there is a change in our control, as defined therein, or in any
person directly or indirectly controlling us, as also defined therein, the
employee has the option to terminate his employment agreement. Upon such
termination, the employee has the right to receive as a lump-sum payment certain
compensation remaining to be paid.
Equity Compensation Plan Information
The following chart summarizes the options and warrants outstanding and
available to be issued at May 31, 2003:
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Plan Category Number of Weighted-average Number of securities
securities to be exercise price of remaining available for
issued upon exercise outstanding future issuance under
of outstanding options and equity compensation plans
options and warrants warrants (excluding securities
reflected in column (a))
(a) (b) (c)
-----------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders 2,286,253 $1.83 173,168
-----------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders 3,904,500 $2.25 1,265,500
-----------------------------------------------------------------------------------------------------
Total 6,190,753 $2.10 1,438,668
-----------------------------------------------------------------------------------------------------
Stock Option and Other Plans
1995 Stock Option Plan
In May 1995, our stockholders approved the 1995 Stock Option Plan for our
officers and employees, for which we reserved an aggregate of 1,500,000 shares
of common stock. In December 1997, our Board of Directors terminated the 1995
Stock Option Plan with respect to new option grants. At May 31, 2003, 972,000
options had been granted, of which 571,000 are outstanding under the 1995 Option
Plan.
Outside Director Stock Option Plan
In May 1995, our stockholders approved an Outside Director Stock Option
Plan for our non-employee directors, for which we reserved an aggregate of
300,000 shares of common stock. On June 1, 1997, 1996 and 1995, options to
purchase an aggregate of 39,550 shares, 31,675 shares, and 77,418 shares of
common stock, respectively, at $1.77, $2.21, and $.78 per share, respectively,
7
were granted to outside directors. In December 1997, our Board of Directors
terminated the Outside Director Stock Option Plan with respect to new option
grants. At May 31, 2003, 85,059 options are outstanding under the Outside
Director Stock Option Plan.
1997 Stock Option Plan
In December 1997, our stockholders approved the 1997 Stock Option Plan (the
"1997 Plan") for our officers, directors, employees and consultants, for which
we have reserved, as amended, an aggregate of 2,800,000 shares of common stock.
The 1997 Plan provides that it will be administered by a committee of our Board
of Directors and that the committee will have full authority to determine the
identity of the recipients of the options and the number of shares subject to
each option. Options granted under the 1997 Plan may be either incentive stock
options or non-qualified stock options. The option price shall be 100% of the
fair market value of the common stock on the date of the grant (or in the case
of incentive stock options granted to any individual principal stockholder who
owns stock possessing more than 10% of the total combined voting power of all of
our voting stock, 110% of such fair market value). The term of any option may be
fixed by the committee but in no event shall exceed ten years from the date of
grant. Options are exercisable upon payment in full of the exercise price,
either in cash or in common stock valued at fair market value on the date of
exercise of the option. The term for which options may be granted under the 1997
Plan expires August 6, 2007. At May 31, 2003, 2,838,000 options had been granted
(including options previously granted but subsequently canceled), of which
1,630,194 are outstanding under the 1997 Plan.
1999 Stock Option Plan
In July 1999, our Board of Directors authorized the 1999 Stock Option Plan
(the "1999 Plan") for our officers, directors, employees and consultants, for
which we have reserved, as amended, an aggregate of 5,000,000 shares of common
stock. The 1999 Plan provides that it will be administered by a committee of our
Board of Directors and that the committee will have full authority to determine
the identity of the recipients of the options and the number of shares subject
to each option. Options granted under the 1999 Plan may be either incentive
stock options or non-qualified stock options. The option price shall be 100% of
the fair market value of the common stock on the date of the grant (or in the
case of incentive stock options granted to any individual principal stockholder
who owns stock possessing more than 10% of the total combined voting power of
all of our voting stock, 110% of such fair market value). The term of any option
may be fixed by the committee but in no event shall exceed ten years from the
date of grant. Options are exercisable upon payment in full of the exercise
price, either in cash or in common stock valued at fair market value on the date
of exercise of the option. The term for which options may be granted under the
1999 Plan expires July 12, 2009. At May 31, 2003, 4,297,100 options had been
granted, of which 3,704,500 are outstanding under the 1999 Plan.
401(k) Plan
In April 1997, we adopted the Vasomedical, Inc. 401(k) Plan to provide
retirement benefits for its employees. As allowed under Section 401(k) of the
Internal Revenue Code, the plan provides tax-deferred salary deductions for
eligible employees. Employees are eligible to participate in the next quarter
enrollment period after employment. Participants may make voluntary
contributions to the plan up to 100% of their compensation. In fiscal 2003 and
2002, the Company made discretionary contributions of approximately $35,000 and
$20,000, respectively, to match a percentage of employee contributions. No
Company contributions were made for the fiscal year ended May 31, 2001. For the
year ended May 31, 2003, a total of $3,736 was contributed for all officers as a
group.
Shareholder Rights Plan
In March 1995, our Board of Directors approved a Shareholder Rights Plan,
under which a dividend distribution of one Right for each outstanding share of
our common stock is authorized. Each Right will entitle stockholders of record
on May 9, 1995 to purchase one-half share of Common Stock at a 50% discount to
market price if a person or group acquires 20% or more of our outstanding stock.
At present, we are not aware of any such person or group seeking to acquire 20%
or more of our outstanding common stock.
Director's Compensation
It has been our policy to grant fees of $1,500 per meeting to each outside
director who attends a regularly scheduled or special meeting of its Board of
Directors. Through November 2002, Messrs. Cohen, Shapiro and Viscusi did not
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receive per-meeting fees but monthly fees of $2,500. Fees for committee meetings
are $1,000 per meeting if the meeting is held on a different day than the Board
meeting. In addition, we reimburse out-of-state directors for their cost of
travel and lodging to attend such meetings.
Our compensation structure for outside directors, as revised in October
2001, provides for the issuance of:
-- a one-time grant of 50,000 non-qualified stock options to outside directors
issued on the date of their initial appointment to our Board of Directors
at the closing price on the issue date and vesting in three equal annual
increments commencing on the first anniversary of the grant and contingent
upon their continued service on our Board; and
-- an automatic annual grant of 25,000 non-qualified stock options to outside
directors issued on the date of our Annual Meeting of Stockholders at the
closing price on the issue date and vesting in three equal annual
increments commencing on the first anniversary of the grant and contingent
upon their continued service on our Board.
Limitation on Liability of Officers and Directors
We have entered into indemnification agreements with each of our current
officers and directors pursuant to which we have agreed, among other things, to
indemnify these officers and directors to the fullest extent permitted by
Delaware law.
Compensation Committee Interlocks and Insider Participation
During fiscal 2003, our Compensation Committee consisted of Messrs. Bearn,
Blumenthal, Paulson (only until his appointment as Chief Executive Officer in
October, 2002), Shapiro, Viscusi, and Whittaker. None of these persons were our
officers or employees during fiscal 2003 or, except as otherwise disclosed, had
any relationship requiring disclosure in this Proxy Statement.
In accordance with rules promulgated by the Securities and Exchange Commission,
the information included under the caption "Compensation Committee Report on
Executive Compensation" will not be deemed to be filed or to be proxy-soliciting
material or incorporated by reference in any prior or future filings by the
Company under the Securities Act of 1933 or the Securities Exchange Act.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of our executive officers is generally determined by the
Compensation Committee of our Board of Directors, subject to applicable
employment agreements. Each member of the Compensation Committee is a director
who is not our employee or an employee of any of our affiliates. The following
report with respect to certain compensation paid or awarded to our executive
officers during fiscal 2003 is furnished by the directors who comprised the
Compensation Committee during fiscal 2003.
General Policies
Our compensation programs are intended to enable us to attract, motivate,
reward and retain the management talent required to achieve corporate objectives
and thereby increase shareholder value. It is our policy to provide incentives
to its senior management to achieve both short-term and long-term objectives and
to reward exceptional performance and contributions to the development of our
business. To attain these objectives, our executive compensation program
includes a competitive base salary, cash incentive bonuses and stock-based
compensation.
Stock options are granted to employees, including our executive officers,
by the Compensation Committee under our 1999 Stock Option Plan. The Committee
believes that stock options provide an incentive that focuses the executive's
attention on managing us from the perspective of an owner with an equity stake
in the business. Options are awarded with an exercise price equal to the market
value of common stock on the date of grant, have a maximum term of ten years and
generally become exercisable, in whole or in part, starting one year from the
date of grant. Among our executive officers, the number of shares subject to
options granted to each individual generally depends upon the level of that
officer's responsibility. The largest grants are awarded to the most senior
officers who, in the view of the Compensation Committee, have the greatest
potential impact on our profitability and growth. Previous grants of stock
options are reviewed but are not considered the most important factor in
determining the size of any executive's stock option award in a particular year.
From time to time, the Compensation Committee intends to utilize the
services of independent consultants to perform analyses and to make
recommendations to the Committee relative to executive compensation matters. No
compensation consultant has so far been retained.
9
Relationship of Compensation to Performance and Compensation of Chief Executive
Officer
The Compensation Committee annually establishes, subject to the approval of
the Board of Directors and any applicable employment agreements, the salaries
that will be paid to our executive officers during the coming year. In setting
salaries, the Compensation Committee takes into account several factors,
including competitive compensation data, the extent to which an individual may
participate in the stock plans maintained by us, and qualitative factors bearing
on an individual's experience, responsibilities, management and leadership
abilities, and job performance.
The Compensation Committee did not make any determination on executive
compensation to Mr. Deignan for fiscal 2003 since he was covered by a prior
employment agreement. However, in October 2002, Mr. Deignan's position as an
officer and director of the Company terminated. In accordance with the terms of
his employment agreement, Mr. Deignan receives his monthly base salary through
October 2003. In addition, Mr. Deignan received a consulting agreement, expiring
December 31, 2003, for which he receives monthly compensation of approximately
$2,850.
On October 21, 2002, the Board of Directors appointed Photios T. Paulson, a
director, to the position of Chief Executive Officer. During Mr. Paulson's
tenure through his resignation on June 30, 2003, the Compensation Committee
authorized a base annual salary of $240,000 and, in fiscal 2003, awarded Mr.
Paulson options under our 1999 Stock Option Plan to purchase an aggregate of
215,000 shares of common stock at prices ranging from $.72 to $.98 per share. Of
the options awarded, 65,000 options vested immediately upon issuance while the
balance vest in three equal annual installments commencing on the first
anniversary date of the issuance. The Compensation Committee determined that the
compensation payable to Mr. Paulson was appropriate in light of his
contributions to the Company.
Upon Mr. Paulson's resignation on June 30, 2003 as an officer of the
Company, the Board of Directors appointed Mr. Gregory D. Cash to the position of
President and Chief Executive Officer. Mr. Cash previously held the position of
President and Chief Operating Officer since his employment in October 2002.
Our Compensation Committee:
Alexander G. Bearn David S. Blumenthal E. Donald Shapiro, Chairman
Anthony Viscusi Forrest R. Whittaker
AUDIT COMMITTEE REPORT
The Board of Directors has appointed an Audit Committee consisting of three
non-employee directors. The current members of the Audit Committee satisfy the
independence requirements and other established criteria by the Nasdaq Stock
Market, Inc. and the Securities and Exchange Commission.
As required by its written charter, which sets forth its responsibilities
and duties, the Audit Committee has reviewed and discussed with the Company's
independent public accountants, the matters required to be discussed by
Statement of Auditing Standards No. 61, Communication with Audit Committees, as
amended.
The Audit Committee has also received and reviewed the written disclosures
and the letter from the independent public accountants required by Independence
Standard No. 1, Independence Discussions with Audit Committees, as amended, by
the Independence Standards Board, and has discussed with the independent public
accountants their independence.
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the financial statements referred to
above be included in the Company's Annual Report on Form 10-K for the year ended
May 31, 2003 for filing with the Securities and Exchange Commission.
10
Fees related to services performed by Grant Thornton LLP in fiscal 2003 are
as follows:
Audit and Accounting Fees $183,130
Financial Information System Design and Implementation -
All Other Fees 87,848
--------
Total $270,978
========
The Audit Committee has considered whether the performance of the above
services other than audit services is compatible with maintaining Grant Thornton
LLP's independence and concluded that it is.
Our Audit Committee:
Forrest R. Whittaker, Chairman
Anthony Viscusi
Martin Zeiger
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires our executive officers,
directors and persons who own more than ten percent of a registered class of our
equity securities ("Reporting Persons") to file reports of ownership and changes
in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission
(the "SEC") and the National Association of Securities Dealers, Inc. (the
"NASD"). These Reporting Persons are required by SEC regulation to furnish us
with copies of all Forms 3, 4 and 5 they file with the SEC and the NASD. Based
solely upon our review of the copies of the forms it has received, we believe
that all Reporting Persons complied on a timely basis with all filing
requirements applicable to them with respect to transactions during fiscal 2003.
11
PERFORMANCE GRAPH
The following graph sets forth the cumulative total return* to the
Company's stockholders during the five-year period ended May 31, 2003 as well as
an overall stock market index (NASDAQ Stock Market Index) and the Company's peer
group index (S&P Health Care Equipment):
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG VASOMEDICAL, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S & P HEALTH CARE EQUIPMENT INDEX
Cumulative Total Return *
5/98 5/99 5/00 5/01 5/02 5/03
----------------------------------------------
VASOMEDICAL, INC. 100.00 82.00 256.00 252.16 113.92 69.12
NASDAQ STOCK MARKET (U.S.) 100.00 141.04 193.32 120.24 92.53 91.95
S & P HEALTH CARE EQUIPMENT 100.00 123.89 138.20 136.11 147.89 153.48
* $100 invested on 5/31/98 in stock or index-including reinvestment of
dividends. Fiscal year ending May 31.
12
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors recommends that the stockholders approve the
appointment of Grant Thornton LLP as our independent public accountants to
examine our financial statements for the fiscal year ending May 31, 2004. Grant
Thornton LLP acted as our independent public accountants for the fiscal years
ended May 31, 1992 through May 31, 2003 and has been selected by the Board of
Directors to continue to act as our independent public accountants for our 2004
fiscal year.
A representative of Grant Thornton LLP plans to be present at the Annual
Meeting with the opportunity to make a statement, if he desires to do so, and
will be available to respond to appropriate questions.
FINANCIAL STATEMENTS AND INCORPORATION BY REFERENCE
A copy of our Annual Report to Stockholders for the fiscal year ended May
31, 2003 has been provided to all stockholders as of the Record Date.
Stockholders are referred to the report for financial and other information
about us, but such report, is not incorporated in this proxy statement and is
not a part of the proxy soliciting material.
MISCELLANEOUS INFORMATION
As of the date of this Proxy Statement, the Board of Directors does not
know of any business other than that specified above to come before the meeting,
but, if any other business does lawfully come before the meeting, it is the
intention of the persons named in the enclosed Proxy to vote in regard thereto
in accordance with their judgment.
We will pay the cost of soliciting proxies in the accompanying form. In
addition to solicitation by use of the mails, certain of our officers and
regular employees may solicit proxies by telephone, telegraph or personal
interview. We may also request brokerage houses and other custodians and
nominees and fiduciaries, to forward soliciting material to the beneficial
owners of stock held of record by such persons, and may make reimbursement for
payments made for their expense in forwarding soliciting material to such
beneficial owners.
Proposals of stockholders intended to be presented at the 2004 Annual
Meeting of Stockholders pursuant to SEC Rule 14a-8 must be received at our
principal office not later than May 14, 2004 to be included in the proxy
statement for that meeting.
In addition, in order for a stockholder proposal to be presented at our
meeting without it being included in our proxy materials, notice of such
proposal must be delivered to the Secretary of the company at our principal
offices no later than August 8, 2004. If notice of any stockholder proposal is
received after August 8, 2004, then the notice will be considered untimely and
we are not required to present such proposal at the 2004 Annual Meeting. If the
Board of Directors chooses to present a proposal submitted after August 8, 2004
at the 2004 Annual Meeting, then the persons named in proxies solicited by the
Board of Directors for the 2004 Annual Meeting may exercise discretionary voting
power with respect to such proposal.
By Order of the Board of Directors,
GREGORY D. CASH
Chief Executive Officer and President
Dated: September 22, 2003
Westbury, New York
13
VASOMEDICAL, INC.
The undersigned hereby appoints Anthony Viscusi and Martin
Zeiger, or either of them, attorneys and Proxies with full
power of substitution in each of them, in the name and stead
of the undersigned to vote as Proxy all the stock of the
undersigned in VASOMEDICAL, INC., a Delaware corporation, at
the Annual Meeting of Stockholders scheduled to be held on
October 30, 2003 and any adjournments thereof.
The Board of Directors recommends a vote FOR the following proposals:
1. Election of the following nominees, as set forth in the proxy statement:
Abraham E. Cohen Gregory D. Cash John C.K. Hui
Photios T. Paulson Forrest R. Whittaker
[ ] FOR all nominees listed above [ ] WITHHOLD authority to vote
(Instruction: To withhold authority to vote for any individual nominee,
print the nominee's name on the line provided below)
----------------------------------------------------
2. To ratify the appointment by the Board of Directors of Grant Thornton LLP
as the Company's independent certified public accountants for fiscal 2004.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Upon such other business as may properly come before the meeting or any
adjournment thereof.
(Continued and to be signed on reverse side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE SHARES REPRESENTED HEREBY SHALL BE VOTED BY PROXIES, AND EACH OF THEM, AS
SPECIFIED AND, IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING. STOCKHOLDERS MAY WITHHOLD THE VOTE FOR ONE OR MORE
NOMINEE(S) BY WRITING THE NOMINEE(S) NAME(S) IN THE BLANK SPACE PROVIDED ON THE
REVERSE HEREOF. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE
PROPOSALS SET FORTH ON THE REVERSE HEREOF.
Dated: _____________, 2003
------------------------------------------------------[L.S.]
------------------------------------------------------[L.S.]
(Note: Please sign exactly as your name appears hereon.
Executors, administrators, trustees, etc. should so indicate
when signing, giving full title as such. If signer is a
corporation, execute in full corporate name by authorized
officer. If shares are held in the name of two or more
persons, all should sign.)
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
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