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:
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[ ] 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:
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VASOMEDICAL, INC.
_______________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
October 27, 2005
_______________
To our Stockholders:
An annual meeting of stockholders will be held at the Flatotel, 135 West
52nd Street, New York, New York 10019 on Thursday, October 27, 2005, beginning
at 10:00 a.m. At the meeting, you will be asked to vote on the following
matters:
1. Election of four directors in Class I to hold office until the 2008
Annual Meeting of Stockholders.
2. Ratification of the appointment by the Board of Directors of Grant
Thornton LLP as our independent registered public accounting firm for
fiscal year 2006.
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
16, 2005, 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 27, 2005.
By Order of the Board of Directors,
/s/Thomas Glover
THOMAS GLOVER
President and Chief Executive Officer
Dated: September 27, 2005
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
_______________
PROXY STATEMENT
_______________
ANNUAL MEETING OF STOCKHOLDERS
Thursday, October 27, 2005
_______________
Our Annual Meeting of Stockholders will be held on Thursday, October 27,
2005, at the Flatotel, 135 West 52nd Street, New York, New York 10019 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 four directors in Class I;
-- ratification of the appointment of our independent registered public
accounting firm.
Who is entitled to vote at the meeting?
You may vote if you owned stock as of the close of business on September
16, 2005. Each share of stock is entitled to one vote.
How do I vote?
You can vote in three ways:
-- by attending the meeting
-- by telephone or internet as described on the enclosed proxy card, 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 registered public accounting firm.
1
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.
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 registered public accounting firm, but will not be counted for any
other matter to be voted on because these other matters are not considered
"routine" under the applicable rules.
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 16,
2005, must be present at the meeting. This is referred to as a quorum. On
September 16, 2005, there were 58,752,688 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
on the proposal is required for approval of the election of directors and the
appointment of our independent registered public accounting firm. 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.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Common Stock and Series D Convertible Preferred Stock
The following table sets forth the beneficial ownership of shares of our
Series D Convertible Preferred Stock and Common Stock as of September 12, 2005
of (i) each person known by us to beneficially own 5% or more of the shares of
outstanding common stock, based solely on filings with the Securities and
Exchange Commission, (ii) each of our executive officers and directors, and
(iii) all of our executive officers and directors as a group. Except as
otherwise indicated, all shares are beneficially owned, and investment and
voting power is held by the persons named as owners.
Convertible Common Stock % of
Preferred Stock Beneficially Common
Name of Beneficial Owner Owned Owned (4) Stock (5)
------------------------------------------------------ ---------------- ----------------- -----------------
Entities associated with
M.A.G. Capital, LLC (2) (3)......................... 25,000 8,142,219 13.8%
Mercator Momentum Fund, LP (3)...................... 6,250 1,940,944 3.3%
Mercator Momentum Fund III, LP (3).................. 3,850 1,195,621 2.0%
Monarch Pointe Fund, Ltd (3)........................ 14,900 4,627,210 7.8%
Alexander G. Bearn, MD.............................. 133,092 *
David S. Blumenthal, MD............................. 170,995 *
Abraham E. Cohen.................................... 763,092 1.3%
Thomas W. Fry....................................... 87,167 *
Thomas Glover....................................... 255,000 *
John C. K. Hui, PhD (6)............................. 1,446,822 2.4%
Photios T. Paulson.................................. 308,917 *
Kenneth W. Rind, PhD................................ 433,092 *
E. Donald Shapiro................................... 659,345 1.1%
Anthony Viscusi..................................... 1,667,917 2.8%
Forrest R. Whittaker................................ 112,917 *
Martin Zeiger....................................... 87,917 *
Directors and executive officers
as a group (12 persons)............................. 6,126,273 9.9%
__________
* 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) Includes beneficial ownership of Series D Convertible Preferred Stock owned
by M.A.G. Capital, LLC through its affiliates, all of the shares set forth
for Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP and Monarch
Pointe Fund, Ltd. are also included in the number of shares reflected for
M.A.G. Capital, LLC. David Firestone is the Managing Member of M.A.G.
Capital, LLC, which is the General Partner of Mercator Momentum Fund, LP
and Mercator Momentum Fund III, LP and is the Manager of Monarch Pointe
Fund, Ltd. M.A.G. Capital, LLC holds voting and investment power over the
shares held by Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP
and Monarch Pointe Fund, Ltd.
3
(3) Includes beneficial ownership of Series D Convertible Preferred Stock that
may be immediately converted into shares of common stock at minimum
conversion price of $0.40 per share.
Series D Converted into
Name of Beneficial Owner Preferred Stock Common Stock
--------------------------------- ----------------- --------------
Mercator Momentum Fund, LP....... 6,250 1,562,500
Mercator Momentum Fund III, LP... 3,850 962,500
Monarch Pointe Fund, Ltd (5)..... 14,900 3,725,000
(4) Includes beneficial ownership of the following numbers of shares that may
be acquired within 60 days of September 11, 2005 pursuant to warrants
awarded under the purchase agreement for the Series D Convertible Preferred
Stock and stock options awarded under our stock option plans:
M.A.G. Capital LLC 378,444 Thomas Glover 250,000
Mercator Momentum Fund, LP 378,444 John C. K. Hui, PhD 657,500
Mercator Momentum Fund III, LP 233,121 Photios T. Paulson 292,917
Monarch Pointe Fund, Ltd 902,210 Kenneth W. Rind, PhD 83,092
Alexander G. Bearn, MD 133,092 E. Donald Shapiro 62,917
David S. Blumenthal, MD 97,092 Anthony Viscusi 552,917
Abraham E. Cohen 498,092 Forrest R. Whittaker 112,917
Thomas W. Fry 79,167 Martin Zeiger 82,917
Directors and executive
officers as a group 2,902,620
(5) Applicable percentages are based on 58,752,688 common shares outstanding on
September 12, 2005, adjusted as required by rules promulgated by the
Commission.
(6) 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.
4
PROPOSAL ONE
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 2006) Stockholders in 2007)
----------------------------------------------------------------------------------------
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)
Thomas Glover Forrest R. Whittaker (2)(3)
_____________________
(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. Shapiro, Viscusi, Zeiger and Glover, current directors in Class I,
are to be elected to serve until the 2008 Annual Meeting of Stockholders or
until their successors are 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 Class I 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, 2005. Each director attended or participated in at least 75% of such
meetings of the Board of Directors. During the fiscal year ended May 31, 2005,
there were
-- six meetings of the Audit Committee;
-- four meetings of the Compensation Committee; and
-- three meetings 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 registered public accounting firm. Our independent
registered public accounting firm 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, including the nomination of directors. Our Corporate
Governance Committee 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.
5
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 (82 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, both of which he is
Emeritus, and the Howard Hughes Medical Institute.
David S. Blumenthal, MD (55) 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.
Abraham E. Cohen (69) 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.
Thomas Glover (51) has been President and Chief Executive Officer and a
director since October 2004. Prior to joining Vasomedical, Mr. Glover was the
acting President and CEO and advisor to Incappe, Inc. a privately held medical
device company. He was the President and CEO of Vasca, Inc. from 1999 to 2003
and served as Executive Vice President, Johnson and Johnson Professional, Inc.
from 1997 to 1999. From 1983 to 1996, Mr. Glover held several executive
positions with responsibility for U.S and international business for Davis and
Geck (American Cyanamid Company/American Hone Products). He is currently a
director of Incappe, Inc.
John C.K. Hui, PhD (59), 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 and Division of Cardiology 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 CEO and
president of and a principal stockholder in Vasogenics, Inc. at the time of its
acquisition by us in January 1995.
Photios T. Paulson (66) has been a director since April 2000 and has served
as our Chief Executive Officer from October 2002 through June 2003 and from
March to October 2004. Mr. Paulson has been an advisor to the health care
industry and was Vice President of bioMrieux N.A. Inc. from 1995 to 2002.
Between 1992 and 1995, Mr. Paulson was Chairman of bioMrieux 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 bioMrieux N.A. Inc. and
Silliker Group Inc.
6
Kenneth W. Rind, PhD (70) 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.
E. Donald Shapiro (73) has been a director since June 1993, Vice Chairman
of the Company since January 2000 and is Dean Emeritus and was Dean 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, Frequency
Electronics, Inc., and NSTOR Technologies, Inc.
Anthony Viscusi (72) 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 (55) 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 (68) 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 Executive Vice President and General Counsel for Rugby Laboratories. In 1993
Marion Merrill Dow acquired Rugby Laboratories. Mr. Zeiger was a Vice President
of Marion Merrill Dow, Inc. and its successor Hoechst Marion Roussell, Inc. 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.
7
MANAGEMENT
Our Officers are:
Name Age Position Held With the Company
---- --- ------------------------------
Thomas Glover 51 President and Chief Executive Officer
John C. K. Hui, PhD 59 Senior Vice President and Chief Technology
Officer
Thomas W. Fry 61 Chief Financial Officer
______________
Thomas W. Fry, 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 Chesebrough-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 Caracas, Venezuela.
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, 2005, 2004 and 2003.
Summary Compensation Table
Long Term Compensation
---------------------------------
Annual Compensation Awards Payouts
------------------------------ --------------------- ---------
Shares Long Term
Other Restricted Covered Incentive
Name and Annual Stock By Option Plan All Other
Principal Position Year Salary Bonus Compensation Awards Grants Payout Compensation(1)
------------------ ---- ------ ----- ------------ --------- --------- -------- ----------------
Photios T. Paulson (2) 2005 $114,583 -- -- -- 100,000 -- $6,006
Former CEO 2004 $20,833 -- -- -- 25,000 -- $106
2003 $148,308 -- -- -- 215,000 -- --
Thomas Glover (3) 2005 $161,667 -- -- -- 1,000,000 -- $4,166
President & CEO
John C. K. Hui 2005 $155,500 -- -- -- 50,000 -- $18,939
Senor VP,CTO 2004 $150,000 $25,000 -- -- -- -- $16,796
2003 $150,000 -- -- -- -- -- $14,136
Thomas W. Fry 2005 $155,500 -- -- -- 50,000 -- $2,147
CFO 2004 $109,712 $33,333 -- -- 100,000 -- $3,000
(1) Represents premiums paid on medical, dental, life and disability group
benefit plans, as well as amounts matched in the Company's 401(k)
Plan.
(2) The Board of Directors appointed Photios T. Paulson as Chief Executive
Officer in October 2002. Mr. Paulson resigned his position as an
officer on June 30, 2003 and was reappointed Chief Executive Officer
8
in March 2004 and resigned as of October 2004 upon the appointment of
Thomas Glover as President and Chief Executive Officer.
(3) Thomas Glover was appointed President and Chief Executive Officer on
October 4, 2004.
Option/SAR Grants in Last Fiscal Year
The following table sets forth the number of options granted to our named
executive officers during the fiscal year ended May 31, 2005.
Potential Realizable
Value at Assumed Annual
Rates of Price
Individual Grants Appreciation for Option
Term
----------------------------------------------------------- ---------------------------
Total
Number of
Securities % of Exercise
Underlying Options/SARs to or Base
Options/SAR Employees in Price Expiration
Name Granted (#) Fiscal Year (4) ($/Share) Date 5% 10%
---- ----------- --------------- -------- ---------- --------- ----------
Photios T. Paulson (1) 100,000 5.5% $1.11 7/12/14 $69,808 $176,906
Thomas Glover (2) 1,000,000 55.0% $1.09 10/3/14 $685,520 $1,737,190
John C. K. Hui (3) 50,000 2.8% $1.11 7/12/14 $34,904 $88,453
Thomas W. Fry (3) 50,000 2.8% $1.11 7/12/14 $34,904 $88,453
(1) Represents ten-year, non-qualified stock options under the 1999 Stock
Option Plan that vest equally over four years commencing on July 13,
2004, granted to Mr. Paulson as the Chief Executive Officer at that
time. Such vesting is dependent upon continued service to the Company.
(2) Represents ten-year, non-qualified stock options under the 1997 Stock
Option Plan and 1999 Stock Option Plan that vest equally over four
years commencing on October 4, 2004, granted to Mr. Glover upon his
appointment as the President and Chief Executive Officer. Such vesting
is dependent upon continued service to the Company.
(3) Represents ten-year, non-qualified stock options under the 1999 Stock
Option Plan that vest equally over four years commencing on July 13,
2004. Such vesting is dependent upon continued service to the Company.
(4) Percentages based upon 1,818,000 shares issued to employees and
officers of the Company during the fiscal year.
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, 2005 and the value of outstanding and unexercised
options or warrants held as of May 31, 2005, based upon the market value of the
common stock of $0.60 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
---- --------------- ------------ ------------------------- -------------------------
Photios T. Paulson -- -- 253,333 191,667 -- --
Thomas Glover -- -- -- 1,000,000 -- --
John C. K. Hui -- -- 645,000 50,000 -- --
Thomas W. Fry -- -- 33,333 116,667 -- --
(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, 2005 of $0.60 per share and the exercise price
per share multiplied by the number of in-the-money options at May 31,
2005.
9
Equity Compensation Plan Information
The following chart summarizes the options and warrants outstanding and
available to be issued at May 31, 2005:
Number of securities
Number of securities remaining available for
to be issued upon Weighted-average future issuance under equity
exercise of exercise price of compensation plans (excluding
outstanding options outstanding options securities reflected in
Plan Category and warrants and warrants column (a)
------------- -------------------- ------------------- ----------------------------
(a) (b) (c)
--- --- ---
Equity compensation plans
approved by security holders 2,320,545 $1.64 2,504,500
Equity compensation plans not
approved by security holders 4,424,999 $1.34 110,003
----------------------- --------------------- -------------------------------
Total 6,745,544 $1.41 2,614,503
======================= ===================== ===============================
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, 2005, 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,
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, 2005, 46,350 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
10
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, 2005, 2,991,168 options had been granted
(including options previously granted but subsequently cancelled), of which
1,703,195 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, 2005, 7,441,932 options had been
granted, (including options previously granted but subsequently cancelled), of
which 4,224,999 are outstanding under the 1999 Plan.
2004 Stock Option Plan and Stock Issuance Plan
In October 2004, our stockholders approved the 2004 Stock Option and Stock
Issuance Plan (the "2004 Stock Plan") for our officers, directors, employees and
consultants [and other independent advisors], for which we reserved an aggregate
of 2,500,000 shares of common stock. The 2004 Stock Plan is administered by a
committee of our Board of Directors, which has full authority to determine the
identity of the recipients of the options and the number of shares subject to
each option. The 2004 Stock Plan is divided into two separate equity programs:
an option grant program and a stock issuance program. Options granted under the
2004 Stock Plan shall be non-qualified or incentive stock options and the
exercise price is the fair market value of the common stock on the date of grant
except that for incentive stock options it shall be 110% of the fair market
value if the participant owns 10% or more of our common stock. Under the stock
issuance program, the purchase price per share shall be fixed by the Board of
Directors or committee but cannot be less than the fair market value of the
common stock on the issuance date. Payment for the shares may be made in cash or
check payable to us, or for past services rendered to us and all shares of
common stock issued thereunder shall vest upon issuance unless otherwise
directed by the board or committee. The number of shares issuable is also
subject to adjustments upon the occurrence of certain events, including stock
dividends, stock splits, mergers, consolidations, reorganizations,
recapitalizations, or other capital adjustments. As of May 31, 2005, no options
or shares have been granted under the 2004 Stock 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 year 2005,
11
2004 and 2003, the Company made discretionary contributions of approximately
$34,766, $35,535 and $35,000, respectively, to match a percentage of employee
contributions.
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. 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 also includes:
-- 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 2005, our Compensation Committee consisted of Messrs. Bearn,
Blumenthal, Shapiro, Viscusi, and Whittaker. None of these persons were our
officers or employees during fiscal 2005 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 2005 is furnished by the directors who comprised the
Compensation Committee during fiscal 2005.
12
Executive Compensation Objectives
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 stock option plans. 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.
Relationship of Compensation to Performance and Compensation of Chief Executive
Officer and Chief Financial 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.
Effective September 8, 2003, the Board of Directors appointed Thomas W. Fry
as Chief Financial Officer and entered into a two-year employment agreement with
him at a base annual salary of $150,000. On October 4, 2004, the Board of
Directors appointed Thomas Glover as its President and Chief Executive Officer
at a base annual salary of $260,000. The Compensation Committee determined that
the compensation payable to Messrs. Fry and Glover was appropriate in light of
their positions with the Company and based on the compensation level of
executives in similar positions.
Our Compensation Committee:
E. Donald Shapiro, Chairman
Alexander G. Bearn
David S. Blumenthal
Anthony Viscusi
Forrest R. Whittaker
13
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. We intend to comply
with future Audit Committee requirements as they become applicable to us.
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 on 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
registered public accounting firm 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, 2005 for filing with the Securities and Exchange Commission.
The Audit Committee has also received and reviewed the fees paid to Grant
Thornton LLP during the last fiscal year for audit and non-audit services, which
are set forth below and has considered whether the provision of the non-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
Audit Committee Financial Expert
The members of the Audit Committee have substantial experience in assessing
the performance of companies, gained as members of our Board of Directors and
Audit Committee, as well as by serving in various capacities in other companies
or governmental agencies. As a result, they each have an understanding of
financial statements. However, none of them keep current on all aspects of
generally accepted accounting principles. Accordingly, the Board of Directors
does not consider any of them to be a financial expert as that term is defined
in applicable regulations. Nevertheless, the Board of Directors believes that
they competently perform the functions required of them as members of the Audit
Committee and, given their backgrounds, it would not be in our best interests to
replace any of them with another person to qualify a member of the Audit
Committee as a financial expert.
Audit Fees
For fiscal 2005 and 2004, Grant Thornton LLP's audit and accounting fees
were approximately $257,000 and $179,000, respectively.
14
Tax Service Fees
Aggregate fees incurred in connection with tax services rendered by Grant
Thornton LLP for fiscal 2005 and 2004 were approximately $35,000 and $47,000,
respectively, incurred primarily for the preparation of federal and state tax
returns.
All Other Fees
Aggregate fees for all other services rendered by Grant Thornton LLP for
fiscal 2005 and 2004 were approximately $22,000 and $9,000, respectively,
incurred in connection with SEC and other related consulting services. Grant
Thornton had no financial information systems design and implementation fees
during fiscal 2005.
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 2005.
15
PERFORMANCE GRAPH
The following graph sets forth the cumulative total return* to the
Company's stockholders during the five-year period ended May 31, 2005 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
----------------------------------------------------------------------
5/00 5/01 5/02 5/03 5/04 5/05
VASOMEDICAL, INC. 100.00 98.50 44.50 27.00 29.00 15.00
NASDAQ STOCK MARKET (U.S.) 100.00 67.00 47.08 33.51 46.91 47.64
S & P HEALTH CARE EQUIPMENT 100.00 98.49 107.01 111.05 143.98 146.85
*$100 invested on 5/13/00 in stock or index-including reinvestment of dividends.
Fiscal year ending May 31.
16
PROPOSAL TWO
PROPOSAL TO APPOINTMENT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
General
The Board of Directors, upon the recommendation of the Audit Committee,
recommends that the stockholders approve the appointment of Grant Thornton LLP
as our Company's independent registered public accounting firm to audit our
financial statements for the fiscal year ending May 31, 2006.
Board Position and Required Vote
The proposal will be adopted only if it receives the affirmative vote of a
majority of the votes cast at the Annual Meeting on this proposal. The Board of
Directors recommends a vote FOR the ratification of the appointment of Grant
Thornton LLP as our independent registered public accounting firm.
FINANCIAL STATEMENTS AND INCORPORATION BY REFERENCE
A copy of our Annual Report to Stockholders for the fiscal year ended May
31, 2005 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 intending to be presented at the 2006 Annual
Meeting of Stockholders pursuant to SEC Rule 14a-8 must be received at our
principal office not later than May 30, 2006 to be included in the proxy
statement for that meeting.
By Order of the Board of Directors,
/s/Thomas Glover
THOMAS GLOVER
President and Chief Executive Officer
Dated: September 27, 2005
Westbury, New York
17
VASOMEDICAL, INC. The undersigned hereby appoints ABRAHAM E. COHEN and PHOTIOS
T. PAULSON, 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 27, 2005 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:
E. Donald Shapiro
Anthony Viscusi
Martin Zeiger
Thomas Glover
[ ] 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 2006.
[ ] 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: _____________, 2005
___________________________________________[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