SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 'SS' 240.14a-11(c) or 'SS' 240.14a-12
VITAL SIGNS, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
VITAL SIGNS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Vital
Signs, Inc. (the 'Company' or 'Vital Signs') will be held at the Company's
headquarters, 20 Campus Road, Totowa, New Jersey, on Tuesday, May 4, 2004 at
10:00 a.m. local time, to consider and act upon the following:
1. The election of three directors as described in the attached proxy
statement.
2. To consider and act upon any other matter which may properly come
before the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 7, 2004 as
the date for determining the shareholders of record entitled to receive notice
of, and to vote at, the Annual Meeting.
By Order of the Board of Directors
Jay Sturm
Secretary
Totowa, New Jersey
April 9, 2004
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. RETURNING THE PROXY
WILL NOT LIMIT YOUR RIGHT TO VOTE AT THE MEETING IF YOU LATER DECIDE TO ATTEND
IN PERSON.
VITAL SIGNS, INC.
20 CAMPUS ROAD
TOTOWA, NEW JERSEY 07512
---------------------
PROXY STATEMENT
---------------------
The following statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Vital Signs, Inc. (the 'Company' or 'Vital
Signs'), a New Jersey corporation. Such proxies are to be used at the Company's
Annual Meeting of Shareholders to be held at the Company's headquarters, 20
Campus Road, Totowa, New Jersey, on Tuesday, May 4, 2004 commencing at 10:00
a.m., local time. This Proxy Statement and the enclosed form of proxy are first
being sent to shareholders on or about April 9, 2004.
SHAREHOLDERS ENTITLED TO VOTE
Only holders of record of the Company's Common Stock (the 'Common Stock') at
the close of business on April 7, 2004 (the record date fixed by the Board of
Directors) will be entitled to receive notice of, and to vote at, the Annual
Meeting. At the close of business on the record date, there were 12,812,253
shares of Common Stock outstanding and entitled to vote at the Annual Meeting.
Each such share is entitled to one vote and there is no right to cumulate votes
in the election of directors.
VOTING; REVOCATION OF PROXY; QUORUM AND VOTE REQUIRED
A form of proxy is enclosed for use at the Annual Meeting if a shareholder
is unable to attend in person. Each proxy may be revoked at any time before it
is exercised by giving written notice to the Secretary of the Annual Meeting or
by submitting a duly executed, later-dated proxy. All shares represented by
valid proxies pursuant to this solicitation (and not revoked before they are
exercised) will be voted as specified in the form of proxy. If the proxy is
signed but no specification is given, the shares will be voted FOR election of
the Board's nominees to the Board of Directors.
A majority of the shares outstanding on the record date will constitute a
quorum for purposes of the Annual Meeting. Assuming that a quorum is present,
the election of directors will be effected by a plurality vote of the votes cast
at the Annual Meeting. For purposes of determining the votes cast with respect
to any matter presented for consideration at the Annual Meeting, only those
votes cast 'for' or 'against' are included. Abstentions and broker non-votes are
counted only for the purpose of determining whether a quorum is present at the
Annual Meeting.
COSTS OF SOLICITATION
The entire cost of soliciting these proxies will be borne by the Company. In
following up the original solicitation of the proxies by mail, the Company may
make arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy materials to the beneficial owners of the
Common Stock and may reimburse them for their expenses in so doing. If
necessary, the Company may also use its officers and their assistants to solicit
proxies from the shareholders, either personally or by telephone or special
letter.
PRINCIPAL SHAREHOLDERS; BENEFICIAL OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth information regarding the beneficial
ownership of the Common Stock as of March 15, 2004 by (i) each person who is
known by the Company to own beneficially more than five percent of the Common
Stock; (ii) trusts maintained for the benefit of the children of Terry D. Wall,
the Company's principal shareholder and chief executive officer; (iii) each
Named Executive Officer (as defined herein), director and nominee of the
Company; and (iv) all directors, nominees and current executive officers of the
Company as a group. Unless otherwise indicated, each of the named shareholders
possesses sole voting and investment power with respect to the shares
beneficially owned.
Shares covered by stock options are included in the table below only to the
extent that such options may be exercised by May 15, 2004.
SHAREHOLDER NUMBER PERCENT
----------- ------ -------
Terry D. Wall (1)(2)........................................ 4,285,926 33.2%
Trusts for the benefit of the minor children of Terry D.
Wall (Anthony J. Dimun, trustee) (1)(3)................... 2,420,327 18.9%
Anthony J. Dimun, individually and as trustee (1)(3)........ 2,553,509 19.9%
C. Barry Wicker (4)......................................... 326,265 2.5%
David J. Bershad (5)........................................ 108,551 *
David H. MacCallum (6)...................................... 2,500 *
Howard W. Donnelly (7)...................................... 3,750 *
Richard L. Robbins (8)...................................... 4,000 *
George A. Schapiro (9)...................................... 3,750 *
Frederick S. Schiff (10).................................... 14,161 *
Mark Felix (11)............................................. 11,000 *
Richard Gordon (12)......................................... 6,250 *
Alex Chanin................................................. 1,662 *
Joseph J. Thomas............................................ -- *
All directors, nominees and current executive officers as a
group (eleven persons) (13)............................... 4,756,815 36.3%
---------
* Represents less than one percent.
(1) The business address of Mr. Wall and the above-mentioned trusts is c/o
Vital Signs, Inc., 20 Campus Road, Totowa, New Jersey 07512. The business
address of Mr. Dimun is c/o Strategic Concepts, LLC, 46 Parsonage Hill
Road, Short Hills, New Jersey 07078.
(2) Includes 3,440,894 shares owned by Mr. Wall directly, 706,748 shares owned
by Carol Vance Wall, Mr. Wall's wife, 34,332 shares held in the Company's
401(k) plan on Mr. Wall's behalf and 103,952 shares covered by options
exercisable by Mr. Wall. Excludes shares held in trust for the benefit of
the Walls' minor children (which shares may not be voted or disposed of by
Mr. Wall or Carol Vance Wall) and shares held by a charitable foundation
established by Mr. Wall and Carol Vance Wall. Mr. Wall and Carol Vance Wall
have pledged 4,041,272 shares as collateral to a brokerage firm as security
for a loan made to them. Based on the closing sale price of the Common
Stock on January 1, 2004, the value of the shares held as collateral on
this loan represented more than 700% of the outstanding balance on this
loan as of January 1, 2004. Upon any default under this loan, the shares
collateralizing such loan may be sold in the market. The number of shares
so sold in the market may negatively impact the market price of the Common
Stock. Depending upon the number of shares sold and the number of shares
that could similarly be sold in connection with the loans described in the
next footnote, such sales could result in a change in control of the
Company.
(3) As trustee of the trusts maintained for the benefit of the minor children
of Terry D. Wall, Anthony J. Dimun has the power to vote and dispose of
each of the shares held in such trusts and thus is deemed to be the
beneficial owner of such shares under applicable regulations of the
Securities and Exchange Commission. Mr. Dimun is also deemed to be the
beneficial owner of 700 shares held in certain insurance trusts established
by Mr. Wicker. He is also deemed to be the beneficial owner of 79,700
shares held by the charitable foundation described above. Accordingly, the
shares reflected in the table above as shares beneficially owned by
Mr. Dimun include shares held by Mr. Dimun for such trusts and foundation,
20,644 shares owned by Mr. Dimun individually and 32,138 shares covered by
options exercisable by Mr. Dimun. The trusts established for the Walls'
children have pledged their shares as collateral to a financial institution
to secure loans made to them. The Company has agreed to register such
shares for resale, at the trusts' expense, in the event that such financial
institution acquires such shares upon a default and thereafter desires to
sell such shares. Based on the closing sale price of our common stock on
January 1, 2004, the value of the shares held as collateral on these loans
represented more than 400% of the outstanding balance on these
(footnotes continued on next page)
2
(footnotes continued from previous page)
loans as of January 1, 2004. Upon any default under these loans, the shares
collateralizing such loans may be sold in the market. The number of shares
so sold in the market may negatively impact the market price of the Common
Stock. Depending upon the number of shares sold and the number of shares
that could similarly be sold in connection with the loan described in the
immediately preceding footnote, such sales could result in a change in
control of the Company. Mr. Dimun resigned as a director of the Company in
February 2004.
(4) Includes 256,927 shares owned by Mr. Wicker directly, 13,454 shares held in
the Company's 401(k) plan on Mr. Wicker's behalf, and 55,884 shares covered
by options exercisable by Mr. Wicker. Excludes shares held in insurance
trusts maintained for the benefit of Mr. Wicker's children, which shares
may not be voted or disposed of by Mr. Wicker or his wife.
(5) Includes 24,167 shares owned by Mr. Bershad directly, 2,000 shares owned by
Mr. Bershad's wife as to which Mr. Bershad disclaims beneficial ownership,
and 82,384 shares covered by options exercisable by Mr. Bershad.
(6) These 2,500 shares are covered by options exercisable by Mr. MacCallum.
(7) These 3,750 shares are covered by options exercisable by Mr. Donnelly.
(8) These 4,000 shares are covered by options exercisable by Mr. Robbins.
(9) These 3,750 shares are covered by options exercisable by Mr. Schapiro.
(10) Includes 1,661 shares owned by Mr. Schiff and 12,500 shares covered by
options exercisable by Mr. Schiff.
(11) Includes 1,000 shares owned by Mr. Felix and 10,000 shares covered by
options exercisable by Mr. Felix. Mr. Felix's employment with the Company
ended on January 7, 2004.
(12) These 6,250 shares are covered by options exercisable by Mr. Gordon.
(13) Includes 276,532 shares covered by options exercisable by the Company's
current executive officers, directors and nominees, and 47,786 shares held
in the Company's 401(k) plan.
Percent of class is based on 12,816,230 shares of Common Stock outstanding
on March 15, 2004.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and 10% shareholders to file with the Securities
and Exchange Commission certain reports regarding such persons' ownership of the
Company's securities. The Company is required to disclose any failures to file
such reports on a timely basis. The Company is not aware of any such untimely
filings during the fiscal year ended September 30, 2003, except that Richard L.
Robbins and Howard W. Donnelly (each of whom is a director of the Company) filed
their initial reports of beneficial ownership late, Mr. Donnelly reported late
an option grant that occurred on May 29, 2003, David MacCallum (a director of
the Company) reported late an option grant that occurred on May 29, 2003, David
J. Bershad (a director of the Company) reported late an option exercise that
occurred on April 25, 2003 and option grants that occurred on May 6, 1999,
December 27, 2002 and August 29, 2003, and C. Barry Wicker (a director and
officer of the Company) reported late option grants that occurred on
February 2, 2000 and August 31, 2001. All of these late filings were
inadvertent, and the filings were made promptly after the failures to file were
noted.
INDEPENDENT BOARD MEMBERS
The following members of the Board of Directors have been determined to be
'independent directors' pursuant to the definition contained in
Rule 4200(a)(15) of the National Association of Securities Dealers' ('NASD')
Marketplace rules: Mr. Bershad, Mr. Donnelly, Mr. MacCallum, Mr. Robbins and
Mr. Schapiro.
3
PROPOSAL ONE
ELECTION OF DIRECTORS
Unless a shareholder either indicates 'withhold authority' on his proxy or
indicates on his proxy that his shares should not be voted for certain nominees,
it is intended that the persons named in the proxy will vote for the election of
the persons named in Table I below to serve until the expiration of their
respective terms and thereafter until their successors shall have been duly
elected and qualified. If elected, the nominees will serve for three year terms.
Discretionary authority is also solicited to vote for the election of a
substitute for any of said nominees who, for any reason presently unknown,
cannot be a candidate for election. Each of the nominees is currently a member
of the Company's Board of Directors.
Table I sets forth the names and ages (as of January 1, 2004) of the
nominees for election to the Board of Directors, the positions and offices
presently held by each such person within Vital Signs, the period during which
each such person has served on the Company's Board of Directors, the expiration
of their respective terms and the principal occupations and employment of each
such person during the past five years. Table II sets forth comparable
information with respect to those directors whose terms of office will continue
beyond the date of the Annual Meeting. Unless otherwise indicated, positions
have been held for more than five years.
TABLE I
NOMINEES FOR ELECTION AS DIRECTORS
EXPIRATION
DIRECTOR OF TERM
NAME AND AGE SINCE IF ELECTED BUSINESS EXPERIENCE(A)
------------ ----- ---------- ----------------------
David H. MacCallum, 65 2002 2007 Managing Partner of Outer Islands Capital
(private equity partnership) (April 2002 to
present); Managing Director-Global Head of
Health Care, Salomon Smith Barney (investment
banking firm) (1999 to November 2001);
Executive Vice President, Head of Healthcare,
ING Baring Furman Selz, LLC (investment
banking firm) (April 1998 to June 1999);
Managing Director for Life Sciences
Investment Banking, UBS Securities LLC
(investment banking firm) (1994 to
March 1998); Co-Head, Investment Banking,
Hambrecht & Quist LLC (investment banking
firm) (1983-1994).
Richard L. Robbins, 63 2003 2007 Senior Vice President, Financial Reporting of
Footstar, Inc.* (nationwide retailer of
footwear) (2003 to present); Partner, Robbins
Consulting LLP (financial, strategic and
management consulting firm) (July 2002 to
October 2003); Partner of Arthur Andersen LLC
(1978 to 2002).
George A. Schapiro, 57 2003 2007 General Management Consultant (1991 to
present); President/Chief Executive Officer
of Andros Incorporated (an original equipment
manufacturer of gas analysis subsystems for
medical and industrial instrumentation) (1976
to 1991).
---------
* On March 3, 2004, Footstar, Inc. announced that, in order to effect a
financial and operational restructuring, it and substantially all of its
subsidiaries filed voluntary petitions on March 2, 2004 with the U.S.
Bankruptcy Court for the Southern District of New York for reorganization
under Chapter 11 of the U.S. Bankruptcy Code.
4
TABLE II
CONTINUING DIRECTORS
DIRECTOR EXPIRATION
NAME AND AGE SINCE OF TERM BUSINESS EXPERIENCE(A)
------------ ----- ------- ----------------------
David J. Bershad, 62 1991 2006 Member of the law firm of Milberg Weiss Bershad
Hynes & Lerach LLP.
Howard W. Donnelly, 42 2002 2006 President/Chief Executive Officer of Alphaport,
Inc. (a hemodialysis device company)
(October 2002 to present); President of
Level 1, Inc., a medical device manufacturer
and a wholly-owned subsidiary of Smith
Industries (March, 1999 to April, 2002); Vice
President of Business Planning and
Development, Pfizer Medical Technology Group
(a healthcare company) (1997 to 1999).
Joseph J. Thomas, 67 1992 2005 President of Thomas Medical Products, Inc. (a
subsidiary of the Company) ('TMP') (1990 to
present).
Terry D. Wall, 62 1972 2005 President and Chief Executive Officer of the
Company.
C. Barry Wicker, 63 1985 2005 Executive Vice President -- Sales of the
Company.
---------
(A) In each instance in which dates are not provided in connection with a
director's business experience, such director has held the position
indicated for at least the past five years. Messrs. Wall, Bershad and Dimun
(a 5% or greater beneficial owner of the Company's Common Stock and a
former director of the Company) invested together in Bionx Implants, Inc.
and, until the merger of Bionx Implants, Inc. with an unrelated party in
March 2003, served together as Board members of that company. Messrs. Wall
and Bershad have invested together in OmniSonics Medical Technologies, Inc.
(formerly Sonokinetics, Inc.) and Messrs. Wall and Donnelly had served as
Board members of OmniSonics Medical Technologies, Inc. until November 2003.
Messrs. Wall, Dimun, MacCallum, Bershad and Thomas are investors in X-Site
Medical, LLC and serve as Board members of X-Site Medical, LLC. (See
'Certain Relationships and Related Transactions'). Omnisonics Medical
Technologies, Inc. and X-Site Medical, LLC are private companies.
5
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth, for the fiscal years ended September 30,
2001, 2002 and 2003, the annual and long-term compensation of the Company's
Chief Executive Officer and the other individuals who served as executive
officers of the Company at the end of fiscal 2003 and received greater than
$100,000 in salary and bonus during fiscal 2003 (the 'Named Executive
Officers'):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------------------------
-------------------------------------------- COMMON SHARES
OTHER SUBJECT
ANNUAL TO OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(A) COMPENSATION(B) GRANTED (#) COMPENSATION(C)
--------------------------- ---- ------ -------- --------------- ----------- ---------------
Terry D. Wall ..................... 2003 $225,000 $10,735 $ 6,000 -- $4,279
President and Chief Executive 2002 225,000 46,735 6,000 -- 3,443
Officer 2001 225,000 31,035 6,000 7,758 4,902
Mark Felix (D) .................... 2003 175,000 8,077 6,000 2,000 2,211
Executive Vice President, Global 2002 94,231 3,365 3,231 25,000 284
Planning
Frederick Schiff (E) .............. 2003 207,885 7,962 5,500 53,324 68
Executive Vice President and
Chief Financial Officer
Joseph J. Thomas (F) .............. 2003 168,451 484,355 17,592 -- 3,417
President, Thomas Medical 2002 162,240 257,690 17,541 -- 2,575
Products 2001 156,000 208,104 -- -- 2,433
Barry Wicker ...................... 2003 151,250 7,331 6,000 -- 4,398
Executive Vice President -- Sales 2002 151,250 31,530 6,000 -- 2,882
2001 151,250 20,993 6,000 9,638 3,554
---------
(A) Reflects bonuses in the fiscal year earned, which may not correspond with
the fiscal year paid. Bonuses earned in fiscal 2003 were awarded under the
Company's Well-Pay Policy and in conjunction with the Company's performance
incentive program. The Well-Pay Policy covers all Company personnel working
in the Company's headquarters in Totowa, New Jersey and in certain of the
Company's subsidiaries. Under the Policy, an additional day's pay is earned
by any employee having perfect attendance for the preceding month. In
addition, payments of $200 to $400 are earned by employees having perfect
attendance for one or more consecutive years.
(B) Comprised entirely of monthly car allowances.
(C) 'Compensation' reported under this column for the year ended September 30,
2003 includes: (i) contributions of $2,001, $2,039, $0, $3,417 and $2,996,
respectively, for Messrs. Wall, Felix, Schiff, Thomas and Wicker
respectively, to the Company's 401(k) Plan on behalf of the Named Executive
Officers to match pre-tax elective deferral contributions (included under
'Salary') made by each Named Executive Officer to that Plan and (ii)
premiums of $2,278, $172, $68, $0 and $1,402 respectively, with respect to
life insurance purchased by the Company for the benefit of Messrs. Wall,
Felix, Schiff, Thomas and Wicker, respectively.
(D) Mr. Felix joined the Company in 2002. Mr. Felix's employment with the
Company ended on January 7, 2004.
(E) Mr. Schiff joined the Company in November 2002.
(F) Effective October 1, 2001, Mr. Thomas and TMP entered into a three year
employment agreement, pursuant to which Mr. Thomas was paid a base salary
of $168,730 in fiscal 2003, increased annually by the same percentage
increase as salaries generally increase for employees of the Company. For
purposes of calculating the increase for fiscal 2003, that figure was 4%.
Mr. Thomas is guaranteed an annual bonus of $212,450 during the term. He is
also entitled to receive an additional bonus
(footnotes continued on next page)
6
(footnotes continued from previous page)
based on TMP's performance. Mr. Thomas' wife is also an employee of TMP and
TMP has entered into a similar agreement with her. Her base salary for
fiscal 2003 was $77,561 and her guaranteed annual bonus is $77,757. On
November 30, 2001, pursuant to unsecured promissory notes bearing interest
at 5.5% per annum, the Company loaned Mr. Thomas the sum of $637,350 and
loaned his wife $233,370. The notes are due on November 30, 2004. See
'Certain Relationships and Related Transactions.'
STOCK OPTIONS
The following table contains information regarding the grant of stock
options to the Named Executive Officers during the year ended September 30,
2003. In addition, in accordance with rules adopted by the Securities and
Exchange Commission (the 'SEC'), the following table sets forth the hypothetical
gains or 'options spreads' that would exist for the respective options assuming
rates of annual compound price appreciation in the Company's Common Stock of 5%
and 10% from the date the options were granted to their final expiration date.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
NUMBER OF % OF TOTAL
SECURITEIS OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED(#) FISCAL YEAR BASE PRICE DATE
---- ---------- ----------- ---------- ----
Terry Wall............ $-- -- $-- --
Mark Felix............ 2,000 0.69% 30.09 12/27/2012
Frederick Schiff...... 50,000 17.3% 30.78 11/08/2012
Frederick Schiff...... 3,324 1.15% 30.09 12/27/2012
Joseph Thomas......... -- -- -- --
Barry Wicker.......... -- -- -- --
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
FOR OPTION TERM
-------------------------------------------------------
NAME 5%($) 10%($)
---- ----- ------
Terry Wall............ $ -- $ --
Mark Felix............ 37,847 95,911
Frederick Schiff...... 967,869 2,452,770
Frederick Schiff...... 62,902 159,405
Joseph Thomas......... -- --
Barry Wicker.......... -- --
The following table provides data regarding the number and value of shares
of the Company's Common Stock covered by both exercisable and non-exercisable
stock options held by the Named Executive Officers at September 30, 2003. The
closing sales price of the Company's Common Stock on September 30, 2003 was
$29.07. None of the Named Executive Officers exercised stock options during
fiscal 2003.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
YEAR-END(#) YEAR-END($)
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Terry D. Wall................................. 103,952 -- $681,502 $ --
Mark Felix.................................... 5,000 22,000 -- --
Frederick Schiff.............................. -- 53,324 -- --
Joseph Thomas................................. -- -- -- --
Barry Wicker.................................. 55,884 -- 373,627 --
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about the Company's Common Stock that
may be issued upon the exercise of options, warrants and rights under all of the
Company's equity compensation plans existing as of September 30, 2003,
consisting of the Company's 2002 Stock Incentive Plan, prior
7
Investment Plan, 1991 Director Stock Option Plan and 1990 Employee Stock Option
Plan. No additional options will be granted under the 1991 Director Stock Option
Plan or 1990 Employee Stock Option Plan, as these plans have expired. The prior
Investment Plan expired in January 2004 and a new Investment Plan was approved
by the shareholders at the last Annual Meeting (the 2003 Investment Plan).
(a)
NUMBER OF (c)
SECURITIES TO NUMBER OF SECURITIES
BE ISSUED UPON (b) REMAINING AVAILABLE FOR
EXERCISE WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
OF OUTSTANDING EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
------------- ------------------- ------------------- ------------------------
Equity Compensation Plans Approved
by Shareholders................. 493,159 $24.65 1,506,841
Equity Compensation Plans Not
Approved by Shareholders........ 144,700 $29.08 --
-------- ----------
TOTAL......................... $637,859 $1,506,841
-------- ----------
-------- ----------
ARRANGEMENTS WITH DIRECTORS
Joseph Thomas became a director of the Company upon the Company's
acquisition of TMP on September 30, 1992. Mr. Thomas continues to be employed by
the Company as the President of TMP. For further information concerning
Mr. Thomas' employment agreement and for information concerning loans made by
the Company to Mr. Thomas and his wife, see footnote (F) to the Summary
Compensation Table.
The Company's 2002 Stock Incentive Plan provides that each non-employee
director will automatically receive options covering 4,000 shares of Common
Stock (with an exercise price equal to fair market value on the date of grant)
on an annual basis and is entitled to receive additional options at the
discretion of the committee administering the 2002 Stock Incentive Plan. One
half of the automatic option grants made to non-employee directors under the
2002 Stock Incentive Plan vest immediately at the time of grant. Half of the
balance may be exercised commencing one year after the date of grant and the
remainder may be exercised commencing two years after the date of grant. During
fiscal 2003, Mr. MacCallum was granted options to purchase 5,000 shares at
$25.52 per share, Mr. Robbins was granted options to purchase 3,000 shares at
$29.00 per share and options to purchase 5,000 shares at $25.52 per share, Mr.
Shapiro was granted options to purchase 2,500 shares at $29.00 per share and
options to purchase 5,000 shares at $25.52 per share, Mr. Donnelly was granted
options to purchase 2,500 shares at $29.00 per share and options to purchase
5,000 shares at $25.52 per share and Mr. Bershad was granted options to purchase
5,000 shares at $25.52 per share.
Directors of the Company presently do not receive any cash fees for serving
in such capacity.
SHAREHOLDER COMMUNICATION WITH THE BOARD
The Company's Board of Directors has established a procedure that enables
shareholders to communicate in writing with members of the Board. Any such
communication should be addressed to Vital Signs' Secretary and should be sent
to such individual at the Company's headquarters office, 20 Campus Road, Totowa,
New Jersey 07512. Any such communication must state, in a conspicuous manner,
that it is intended for distribution to the entire Board of Directors. Under the
procedures established by the Board, upon the Secretary's receipt of such a
communication, the Secretary will send a copy of such communication to each
member of the Board, identifying it as a communication received from a
shareholder. Absent unusual circumstances, at the next regularly scheduled
meeting of the Board held more than two days after such communication has been
distributed, the Board will consider the substance of any such communication.
8
Board members are encouraged, but not required by any specific Board policy,
to attend the Company's annual meeting of shareholders. Mr. Wall and Mr. Wicker
were the only directors who attended the 2003 Annual Meeting of Shareholders.
THE BOARD OF DIRECTORS; COMMITTEES OF THE BOARD
The Board of Directors of the Company held five meetings during the fiscal
year ended September 30, 2003. The Board's Audit Committee, which is responsible
for reviewing significant audit and accounting principles, policies and
practices and for meeting with the Company's independent accountants, met six
times during the year ended September 30, 2003. The Audit Committee presently
consists of Messrs. Robbins, Donnelly, and Schapiro.
The Board maintained a Stock Option Committee to administer the Company's
stock option plans and the Vital Signs Investment Plan until August 4, 2003. The
Stock Option Committee consisted of Messrs. Wall and Wicker and acted by
unanimous consent during the Company's most recent fiscal year. On August 4,
2003, the Board established a Compensation Committee, comprised of Messrs.
Bershad, Donnelly and MacCallum. The Compensation Committee assumed the
functions of the Stock Option Committee and is also responsible for determining
the compensation of the Company's chief executive officer and other executive
officers. Due to Mr. Bershad's other business obligations and the significant
time commitments they involve, Mr. Bershad stepped down from the Compensation
Committee on February 3, 2004.
Each member of the Company's Board was present for 75% or more of the
aggregate of the total meetings of the Board and each Board committee on which
he serves.
NOMINATING COMMITTEE MATTERS
On February 3, 2004, the Board established a Nominating Committee, comprised
of Messrs. Bershad, Donnelly, MacCallum, Robbins and Schapiro.
Nominating Committee Charter. The Board has adopted a Nominating Committee
charter to govern its Nominating Committee. A copy of the Nominating Committee's
charter is attached hereto as Appendix 1.
Independence of Nominating Committee Members. All members of the Nominating
Committee of the Board of Directors have been determined to be 'independent
directors' pursuant to the definition contained in Rule 4200(a)(15) of the
National Association of Securities Dealers' Marketplace Rules.
Procedures for Considering Nominations Made by Shareholders. The Nominating
Committee's charter describes procedures for nominations to be submitted by
shareholders and other third-parties, other than candidates who have previously
served on the Board or who are recommended by the Board. The charter states that
a nomination must be delivered to the Secretary of the Company at the principal
executive offices of the Company not later than the close of business on the
90th day nor earlier than the close of business on the 120th day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that if the date of the annual meeting is more than 30 days before or more than
60 days after such anniversary date, notice to be timely must be so delivered
not earlier than the close of business on the 120th day prior to such annual
meeting and not later than the close of business on the later of the 90th day
prior to such annual meeting or the close of business on the 10th day following
the day on which public announcement of the date of such meeting is first made
by the Company. The public announcement of an adjournment or postponement of an
annual meeting will not commence a new time period (or extend any time period)
for the giving of a notice as described above. The charter requires a nomination
notice to set forth as to each person whom the proponent proposes to nominate
for election as a director: (a) all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors
in an election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected), and (b) information that will enable
the Nominating Committee to determine whether the candidate or candidates
satisfy the criteria established pursuant to the charter for director
candidates.
9
Qualifications. The charter describes the minimum qualifications for
nominees and the qualities or skills that are necessary for directors to
possess. Each nominee:
must satisfy any legal requirements applicable to members of the Board;
must have business or professional experience that will enable such nominee
to provide useful input to the Board in its deliberations;
must have a reputation in the Company's industry for honesty and ethical
conduct;
must have a working knowledge of the types of responsibilities expected of
members of a board of directors of a public corporation; and
must have experience, either as a member of the board of directors of
another public or private company or in another capacity, that demonstrates
the nominee's capacity to serve in a fiduciary position.
Identification and Evaluation of Candidates for the Board. Candidates to
serve on the Board will be identified from all available sources, including
recommendations made by shareholders. The Nominating Committee's charter
provides that there will be no differences in the manner in which the Nominating
Committee evaluates nominees recommended by shareholders and nominees
recommended by the Committee or management, except that no specific process
shall be mandated with respect to the nomination of any individuals who have
previously served on the Board. The evaluation process for individuals other
than existing Board members will include:
a review of the information provided to the Nominating Committee by the
proponent;
a review of reference letters from at least two sources determined to be
reputable by the Nominating Committee; and
a personal interview of the candidate,
together with a review of such other information as the Nominating Committee
shall determine to be relevant.
Third Party Recommendations. In connection with the 2004 Annual Meeting, the
Nominating Committee did not receive any nominations from any shareholder or
group of shareholders which owned more than 5% of the Company's Common Stock for
at least one year.
AUDIT COMMITTEE MATTERS
The following report of the Audit Committee is not to be deemed 'soliciting
material' or deemed to be filed with the Securities and Exchange Commission or
subject to Regulation 14A of the Securities Exchange Act of 1934, except to the
extent specifically requested by the Company or incorporated by reference in
documents otherwise filed.
Audit Committee Charter. The Audit Committee has adopted a written charter
which is filed as Appendix 2 to this Notice of Annual Meeting of Shareholders
and Proxy Statement.
Independence of Audit Committee Members. The Common Stock is listed on the
Nasdaq National Market and the Company is governed by the listing standards
applicable thereto. Each of the members of the Audit Committee, Messrs. Robbins,
Donnelly and Schapiro, have been determined to be 'independent directors'
pursuant to the definition contained in Rule 4200(a)(15) of the National
Association of Securities Dealers' ('NASD') Marketplace Rules and under the
SEC's Rule 10A-3.
Audit Committee Report. In connection with the preparation and filing of the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
2003:
(1) the Audit Committee reviewed and discussed the audited financial
statements with the Company's management;
(2) the Audit Committee discussed with the Company's independent
auditors the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communications with Audit Committees);
10
(3) the Audit Committee received and reviewed the written disclosures
and the letter from the Company's independent auditors required by the
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees) and discussed with the Company's independent auditors any
relationships that may impact their objectivity and independence and
satisfied itself as to the auditors' independence;
(4) the Audit Committee commenced and completed an independent
investigation of accusations of accounting fraud and illegal activities
raised by the Company's former chief financial officer;
(5) the Audit Committee began the implementation of policies and
procedures for the anonymous reporting of allegations of financial
misconduct;
(6) the Audit Committee has retained an independent accounting firm to
provide internal audit services for the Company; and
(7) based on the review and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial statements be
included in the 2003 Annual Report on Form 10-K.
By: The Audit Committee of the Board of Directors
Richard L. Robbins, Howard W. Donnelly, George A. Schapiro
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On August 4, 2003, the Board established a Compensation Committee, which was
initially comprised of Messrs. Bershad, Donnelly and MacCallum. Due to Mr.
Bershad's other business obligations and the significant time commitments they
involve, Mr. Bershad stepped down from the Compensation Committee on
February 3, 2004. None of these persons is an officer, employee or former
officer of the Company. The Committee met two times during fiscal 2003 and did
not recommend any changes in the compensation of the Named Executive Officers
for fiscal 2004.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Thomas Medical Products, Inc. ('TMP'), a subsidiary of the Company, provides
product development and manufacturing services to X-Site Medical, LLC
('X-Site'), a company engaged in the development of specialized cardiovascular
products. Thomas Medical Products' sales to X-Site were approximately $363,000
during the fiscal year ended September 30, 2003, for these services. Amounts due
from X-Site are included in accounts receivable on the Company's consolidated
balance sheet and amounted to approximately $199,000 at September 30, 2003. The
Company believes that the rates charged to X-Site for such services are no less
favorable to the Company than those charged to similarly situated unrelated
parties. Mr. Wall (President, Chief Executive Officer and a director of the
Company) and his family limited partnership own 37.6% of X-Site. Mr. Dimun (a 5%
or greater beneficial owner of the Company's Common Stock), Mr. Bershad (a
director of the Company), through an investment limited partnership, Mr. Thomas
(a director of the Company) and Mr. MacCallum (a director of the Company) own
3.9%, 4.3%, 2.1% and less than 1% of X-Site, respectively.
11
REPORT OF THE COMPENSATION COMMITTEE
The following report is not to be deemed 'soliciting material' or deemed to
be filed with the Securities and Exchange Commission or subject to Regulation
14A of the Securities Exchange Act of 1934, except to the extent specifically
requested by the Company or incorporated by reference in documents otherwise
filed.
Pursuant to rules adopted by the SEC designed to enhance disclosure of
corporate policies regarding executive compensation, the Company has set forth
below a report of its Compensation Committee regarding compensation policies as
they affect Mr. Wall and the other Named Executive Officers.
The Compensation Committee views compensation of executive officers as
having three distinct parts, a current compensation program, a set of standard
benefits and a long-term benefit. The current compensation element focuses upon
the executive officer's salary and is designed to provide appropriate
reimbursement for services rendered. The Company's standard benefit package
consists primarily of the matching portion of the Company's 401(k) Plan and
eligibility for bonuses based upon performance of the Company. The long-term
benefit element has been reflected in the grants of stock options to specific
executive officers.
During the past three completed fiscal years, Mr. Wall and Mr. Wicker did
not receive any salary increase. Traditionally, Mr. Wall's salary has been set
at levels which are perceived by the Board to be below the salaries of chief
executive officers of other comparable companies. Mr. Wall, whose family
continues to own more than half of the outstanding Common Stock of the Company,
has been willing to accept such salary levels primarily because of the message
his salary sends to other executive officers, employees and shareholders.
Furthermore, Mr. Wall's personal net worth ultimately depends more on the
performance of the Company than on any specific salary level. The salaries of
each of the other Named Executive Officers are based upon prior experience,
experience with the Company, contributions to the Company and the relationship
of such individual's responsibilities to the Chief Executive Officer's
responsibilities.
Stock options granted to executive officers of the Company have historically
been granted at a price equal to fair market value. Accordingly, such options
will gain appreciable value if, and only if, the market value of the Common
Stock increases subsequent to the date of grant. The Compensation Committee
believes that the issuance of stock options at fair market value provides
incentives to employees to maximize the Company's performance and to assure
continued affiliation with the Company.
The Compensation Committee believes that an appropriate compensation program
can help in promoting strong earnings performance if it reflects an appropriate
balance between providing rewards to executive officers while at the same time
effectively controlling cash compensation costs. It is the Committee's objective
to continue monitoring the Company's compensation program to assure that this
balance is maintained.
By: The Compensation Committee of the Board of Directors
David H. MacCallum
Howard W. Donnelly
SHAREHOLDER RETURN COMPARISON
Set forth below is a line-graph presentation comparing the cumulative
shareholder return on the Company's Common Stock, on an indexed basis against
the cumulative total returns of the Nasdaq Market Index and the Media General
Medical Instruments and Supplies Group Index (consisting of 136 publicly traded
medical instrument and device companies) ('MG Group Index') for the period from
October 1, 1998 (October 1, 1998=100) through September 30, 2003.
12
The following graph is not to be deemed 'soliciting material' or deemed to
be filed with the Securities and Exchange Commission or subject to Regulation
14A of the Securities Exchange Act of 1934, except to the extent specifically
requested by the Company or incorporated by reference in documents otherwise
filed.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
ASSUMES INITIAL INVESTMENT OF $100
SEPTEMBER 2003
[PERFORMANCE GRAPH]
VITAL SIGNS, INC. MG GROUP INDEX NASDAQ MARKET INDEX
1998 100.00 100.00 100.00
1999 124.09 112.50 163.15
2000 162.61 132.89 216.67
2001 188.68 139.57 88.55
2002 184.10 116.89 69.59
2003 181.39 160.07 106.64
ASSUMES $100 INVESTED ON OCTOBER 1, 1998
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING SEPTEMBER 30, 2003
AUDIT FEES AND RELATED MATTERS
In accordance with the requirements of the Sarbanes-Oxley Act of 2002 (the
'Act') and the Audit Committee's charter, all audit and audit-related work and
all non-audit work performed by the Company's independent accountants,
Goldstein, Golub, Kessler, LLP ('GGK') and American Express Tax and Business
Services ('TBS'), is approved in advance by the Audit Committee, including the
proposed fees for such work. The Audit Committee is informed of each service
actually rendered that was approved through its pre-approval process.
GGK, certified public accountants, has a continuing relationship with TBS,
from which it leases auditing staff who are full time, permanent employees of
TBS and through which its partners provide non-audit services. As a result of
this arrangement, GGK has no full time employees and, therefore, none of the
audit services performed were provided by permanent full-time employees of GGK.
GGK manages and supervises the audit and audit staff, and is exclusively
responsible for the opinion rendered in connection with its examination.
Audit Fees. Audit fees billed or expected to be billed to Vital Signs, Inc.
by GGK for the audit of the financial statements included in Vital Sign's Annual
Report on Form 10-K, and reviews of the financial statements included in Vital
Sign's Quarterly Reports on Form 10-Q, for the years ended September 30, 2003
and 2002 totaled approximately $264,000 and $341,000, respectively.
Audit-Related Fees. The Company was billed $0 and $0 by GGK and TBS for the
fiscal years ended September 30, 2003 and 2002, respectively, for assurance and
related services that are reasonably related to the performance of the audit or
review of the Company's financial statements and are not reported under the
caption Audit Fees above.
Tax Fees. The Company was billed an aggregate of $62,000 and $35,000 by TBS
for the fiscal years ended September 30, 2003 and 2002, respectively, for tax
services, principally advice regarding the preparation of income tax returns,
the routine examination by the Internal Revenue Service of our 1997, 1998 and
1999 Federal tax returns, tax advice and planning services related to income tax
returns.
13
All Other Fees. The Company was billed an aggregate of $189,000 and $189,000
by GGK for the fiscal years ended September 30, 2003 and 2002, respectively, for
permitted non-audit services, principally services related to the litigation
filed by Joseph Bourgart, a former chief financial officer of the Company,
described in Note 16 of our Consolidated Financial Statements contained in out
Annual Report on Form 10-K for the year ended September 30, 2003 and accounting
services related to our public offering (which was subsequently discontinued) in
fiscal 2002, as well as advice on various other accounting topics during both of
these years.
Other Matters. The Audit Committee of the Board of Directors has considered
whether the provision of the Audit-Related Fees, Tax Fees and All Other Fees are
compatible with maintaining the independence of the Company's principal
accountant.
Applicable law and regulations provide an exemption that permits certain
services to be provided by our outside auditors even if they are not
pre-approved. We did not rely on this exemption at any time since the
Sarbanes-Oxley Act was enacted.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
GGK has been selected by the Board of Directors to audit and report on the
Company's financial statements for the fiscal year ending September 30, 2004. A
representative of that firm is expected to be present at the Annual Meeting and
will have an opportunity to make a statement if he or she so desires. The
representative is expected to be available to respond to appropriate questions
from shareholders. GGK audited the Company's financial statements for more than
the past five years.
OTHER MATTERS
At the time that this proxy statement was mailed to shareholders, management
was not aware that any matter other than the election of directors would be
presented for action at the Annual Meeting. If other matters properly come
before the Annual Meeting, it is intended that shares represented by proxies
will be voted with respect to those matters in accordance with the best judgment
of the persons voting them.
If a shareholder of the Company wishes to have a proposal included in the
Company's proxy statement for the 2005 Annual Meeting of Shareholders, the
proposal must be received at the Company's principal executive offices by
December 10, 2004 and must otherwise comply with rules promulgated by the
Securities and Exchange Commission in order to be eligible for inclusion in the
proxy material for the 2005 Annual Meeting.
If a shareholder desires to bring business before the 2005 Annual Meeting
which is not the subject of a proposal complying with the SEC proxy rule
requirements for inclusion in the proxy statement, the shareholder must follow
procedures outlined in the Company's by-laws in order to personally present the
proposal at the 2005 Annual Meeting. A copy of these procedures is available
upon request from the Secretary of the Company.
One of the procedural requirements in the Company's by-laws is timely notice
in writing of the business that the shareholder proposes to bring before the
2005 Annual Meeting. Notice of business proposed to be brought before the 2005
Annual Meeting or notice of a proposed nomination to the Board of Directors must
be received by the Secretary of the Company no earlier than 120 days prior to
the date of the 2005 Annual Meeting and no later than the later of the 90th day
before the date of the 2005 Annual Meeting or the tenth day after the Company
publicly announces the date of the 2005 Annual Meeting.
By Order of the Board of Directors
Jay Sturm, Secretary
Dated: April 9, 2004
A COPY OF AN ANNUAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2003, INCLUDING
FINANCIAL STATEMENTS, ACCOMPANIES THIS PROXY STATEMENT. THE ANNUAL REPORT IS NOT
TO BE REGARDED AS PROXY SOLICITING MATERIAL OR AS A COMMUNICATION BY MEANS OF
WHICH ANY SOLICITATION IS TO BE MADE. COPIES OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K ARE AVAILABLE WITHOUT CHARGE BY CONTACTING THE COMPANY BY TELEPHONE AT
973-790-1330 OR BY WRITING TO: INVESTOR RELATIONS, VITAL SIGNS, INC., 20 CAMPUS
ROAD, TOTOWA, NEW JERSEY 07512.
14
APPENDIX 1
VITAL SIGNS, INC.
NOMINATING COMMITTEE CHARTER
PURPOSES OF THE NOMINATING COMMITTEE
The purposes of the Nominating Committee are:
to consider proposals made by shareholders and others to nominate specific
individuals to the board of directors of Vital Signs, Inc. (the 'Company');
to identify qualified individuals for membership on such board (the
'Board') ; and
to recommend to the Board the director nominees for election at each annual
meeting of shareholders and at each other meeting of shareholders at which
directors are to be elected.
MEMBERSHIP OF THE NOMINATING COMMITTEE
The Nominating Committee:
shall consist of not less than three members of the Board, the exact number
to be established by the Board from time to time;
shall consist solely of individuals who meet the independence standards set
forth in Securities and Exchange Commission rules and in the listing
standards applicable to the Company; and
shall consist solely of members who are appointed by, and who may be
removed by, the Board.
CRITERIA FOR NOMINATION TO THE BOARD OF DIRECTORS
Each individual nominated by the Nominating Committee to serve on the Board
of Directors shall, in the Nominating Committee's opinion, satisfy the following
criteria (the 'Minimum Criteria') together with such other criteria as shall be
established by the Nominating Committee:
such nominee shall satisfy any legal requirements applicable to members of
the Board;
such nominee shall have business or professional experience that will
enable such nominee to provide useful input to the Board in its
deliberations;
such nominee shall have a reputation in the Company's industry for honesty
and ethical conduct;
such nominee shall have a working knowledge of the types of
responsibilities expected of members of a board of directors of a public
corporation; and
such nominee shall have experience, either as a member of the board of
directors of another public or private corporation or in another capacity,
that demonstrates the nominee's capacity to serve in a fiduciary position.
PROCEDURES TO BE FOLLOWED WITH RESPECT TO THE SUBMISSION OF NAMES FOR
CONSIDERATION BY THE NOMINATING COMMITTEE
The following procedures (the 'Minimum Procedures') shall be utilized in
considering any candidate for election to the Board at an annual meeting, other
than candidates who have previously served on the Board or who are recommended
by the Board. A nomination must be delivered to the Secretary of the Company at
the principal executive offices of the Company not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that if the date of the
annual meeting is more than thirty (30) days before or more than sixty (60) days
after such anniversary date, notice to be timely must be so delivered not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such annual meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such annual meeting or the close of
business on
15
the tenth (10th) day following the day on which public announcement of the date
of such meeting is first made by the Company. In no event shall the public
announcement of an adjournment or postponement of an annual meeting commence a
new time period (or extend any time period) for the giving of a notice as
described above. Such notice shall set forth as to each person whom the
proponent proposes to nominate for election as a director (a) all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected),
and (b) information that will enable the Nominating Committee to determine
whether the candidate satisfies the Minimum Criteria and any Additional Criteria
(as defined below) established by the Nominating Committee.
In the event that a director is to be nominated at a special meeting of
shareholders or is to be elected by the Board, the Nominating Committee shall
develop procedures designed to conform, as nearly as practicable, to the
procedures applicable to elections of Board members at annual meetings.
The Nominating Committee may, but shall not be required to, develop other
procedures (the 'Additional Procedures') designed to supplement the Minimum
Procedures.
PROCESSES TO BE FOLLOWED IN CONSIDERING CANDIDATES
Candidates to serve on the Board shall be identified from such sources as
shall be available to the Nominating Committee, including without limitation
recommendations made by shareholders.
There shall be no differences in the manner in which the Nominating
Committee evaluates nominees recommended by shareholders and nominees
recommended by the committee or management, except that no specific process
shall be mandated with respect to the nomination of any individuals who have
previously served on the Board. The evaluation process shall include (i) a
review of the information provided to the Nominating Committee by the proponent,
(ii) a review of reference letters from at least two sources determined to be
reputable by the Nominating Committee and (iii) a personal interview of the
candidate, together with a review of such other information as the Nominating
Committee shall determine to be relevant.
DUTIES OF THE NOMINATING COMMITTEE
The Nominating Committee shall:
determine whether other criteria (the 'Additional Criteria'), beyond the
Minimum Criteria, should apply in nominating members of the Board, such
Additional Criteria to
reflect, at a minimum, all applicable laws, rules, regulations and listing
standards applicable to the Company, and
take into account a potential candidate's experience, areas of expertise
and other factors relative to the overall composition of the board of
directors;
determine whether the Minimum Procedures should be supplemented with
Additional Procedures relating to the information to be submitted to the
Nominating Committee regarding prospective candidates;
annually review the size, composition and needs of the Board and make
recommendations to the Board;
recommend to the Board the director nominees for election at the next
annual meeting of shareholders;
consider and recommend candidates for appointment to the Board to the
extent vacancies arise between annual meetings of shareholders;
consider director candidates submitted by shareholders and other
third-parties, in accordance with the Minimum Procedures and any Additional
Procedures adopted by the Nominating Committee; and
16
annually review the Nominating Committee charter and recommend to the Board
any changes it deems necessary or desirable.
MEETINGS OF THE NOMINATING COMMITTEE
The Nominating Committee shall meet as often as necessary to carry out its
responsibilities, but not less than once each year. At the discretion of the
chairperson of the Nominating Committee, but at least once each year for all or
a portion of a meeting, the members of the Nominating Committee shall meet in
executive session, without any members of management present.
ADDITIONAL AUTHORITY OF THE NOMINATING COMMITTEE
The Nominating Committee shall have the authority, in its discretion, to
retain outside counsel and other advisors.
17
APPENDIX 2
VITAL SIGNS, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee is a committee of the Board of Directors. Its primary
function is to assist the Board in fulfilling its oversight responsibilities by
reviewing the financial information which will be provided to the shareholders
and others, the systems of internal controls which management and the Board of
Directors have established, and the audit process. In doing so, it is the
responsibility of the Audit Committee to provide an open avenue of communication
between the Board of Directors, management, and the independent accountants.
The Company recognizes that management, including the Company's financial
staff, as well as the Company's outside auditors have more time, knowledge and
detailed information regarding the Company than do Committee members;
consequently, in carrying out its oversight responsibilities the Committee is
not providing any expert or special assurances as to the Company's financial
statements or any professional certifications as to the outside auditor's work.
ORGANIZATION
The Audit Committee shall be appointed annually by the Board of Directors.
The Audit Committee shall be composed of at least three, but not more than
five, independent directors.
Only independent directors may be members of the Audit Committee. The
determination of whether a director is an independent director shall be
based on applicable regulatory definitions.
At least one member of the Audit Committee shall be a financial expert
based on criteria set forth in the applicable regulations.
One of the members of the Audit Committee shall serve as Chairperson. It is
the responsibility of the Chairperson to schedule all meetings of the
Committee.
In meeting its responsibilities, the committee shall:
GENERAL
Have the power to conduct or authorize investigations into any matters
within the committee's scope of responsibilities. The committee shall have
unrestricted access to members of management and all information relevant
to its responsibilities.
Meet at least 4 times per year or more frequently as circumstances require.
The committee may ask members of management or others to attend the
meetings and provide pertinent information as necessary.
Report committee actions to the Board of Directors with such
recommendations, as the committee may deem appropriate.
Review and consider updates to the committee's charter.
Perform such other functions assigned by law, the Company's charter or
bylaws or the Board of Directors.
Meet with the Chief Financial Officer, the independent accountants, and
other members of management in separate executive sessions to discuss any
matters that the committee or these groups believe should be discussed
privately with the Audit Committee.
Engage independent counsel and other professionals, to the extent the Audit
Committee determines necessary to carry out its duties.
18
INTERNAL CONTROLS AND RISK ASSESSMENT
Review and evaluate the effectiveness of the Company's process for
assessing significant risks or exposures and the steps management has taken
to minimize such risks to the Company.
Consider and review with management, the independent accountants and the
Chief Financial Officer:
-- The effectiveness of or weakness in the Company's internal controls
including computerized information system control and security, the
overall control environment and accounting and financial controls.
-- Any related significant findings and recommendations of the
independent accountants and finance staff together with management's
responses thereto, including the timetable for implementation of
recommendations to correct weaknesses in internal controls.
Review with the Chief Financial Officer and the independent accountants the
coordination of audit effort to assure completeness of coverage of key
business controls and risk areas, reduction of redundant efforts, and the
effective use of audit resources.
Discuss with the Company's independent public accountants, and the Chief
Financial Officer, the status and adequacy of management information
systems and other information technology, including the significant risks
related thereto and major controls over such activities.
Review and adopt the attached Charter for Internal Audit Function of the
Company.
FINANCIAL REPORTING
Review filings with the SEC and other agencies containing the Company's
financial statements, including annual and interim reports and press
releases, and consider whether the information contained in these documents
is consistent with the information contained in the financial statements.
Review with management and the independent accountants at the completion of
the annual examination:
-- The Company's annual financial statements and related footnotes.
-- The independent accountant's audit of the financial statements.
-- Any significant changes required in the independent accountants' audit
plan.
-- Any serious difficulties or disputes with management encountered
during the course of the audit.
-- The existence of significant estimates and judgments underlying the
financial statements, including the rationale behind those estimates
as well as the details on material accruals and reserves.
-- Other matters related to the conduct of the audit which are to be
communicated to the committee under generally accepted auditing
standards.
-- Review and approve the Company's accounting principles.
Assess internal processes for determining and managing key financial
statement risk areas.
INDEPENDENT AUDITOR
Retain the independent accountants to be nominated, and review the
discharge of the independent accountants.
Approve the scope and approach of the annual audit with the independent
accountants.
Assess the independent auditor's process for identifying and responding to
key audit and internal control risks.
19
Review the independent auditor's identification of issues and business and
financial risks and exposures, including any disputes with management.
Confirm the independence of the independent auditor, including a review of
the nature of all services and related fees provided.
Approve the retention of the independent auditors for any non-audit
services.
COMPLIANCE WITH LAWS AND REGULATIONS
Review the Company's process for determining risks and exposures from
asserted and unasserted litigation and claims and from noncompliance with
laws and regulations.
Review with the Company legal matters that may have a material impact on
the Company's operations and the financial statements.
Establish procedures for the receipt, retention, and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters.
Establish procedures for the anonymous submission by employees regarding
questionable accounting or auditing matters.
20
CHARTER FOR INTERNAL AUDIT FUNCTION OF
VITAL SIGNS, INC.
PURPOSE:
Internal audit is a function established to independently examine and
evaluate the activities of the Company as a service to the Audit Committee of
the Board of Directors of the Company in particular and to management in
general. It is a control, which functions by examining and evaluating the
adequacy and effectiveness of internal controls. To this end, Internal audit
will furnish the Audit Committee and management with analysis, summaries and
recommendation concerning the system of disclosure controls and system of
internal; controls regarding finance, accounting, legal compliance and ethics
that management and the Board have established.
RESPONSIBILITY:
Internal audit responsibility is to review the policies, procedures and
management controls of the Company to ensure that the activities are properly
managed and to promote effective controls at reasonable cost. In discharging the
responsibility, Internal audit shall:
Review systems and operations to assess the extent to which organizational
objectives are achieved and the adequacy of controls over activities
leading to such achievement;
Evaluate the relevance, reliability and integrity of management and
financial information;
Appraise utilization of resources with regard to economy, efficiency and
effectiveness;
Assess the means of safeguarding assets and verify their existence;
Ascertain the extent of compliance with established policies, procedures
and instructions;
Recommend improvements in procedures and systems to prevent waste,
extravagance and fraud;
Advise on appropriate systems of controls and other accounting and
operational matters in a consulting capacity;
Draw attention to any failure to take remedial action; and
Carry out any ad hoc appraisals, inspections, investigations, examinations
or reviews requested by the Audit Committee or by senior management.
DUTIES:
Subject to the approval of the Audit Committee, Internal Audit is authorized
to:
Decide on the nature, scope and timing of the audits;
Enter all premises of the Company and have access to and inspect all
documents and records;
Require any officer of the Company to supply such information and
explanations as may be needed; and
Have discussions with line managers and employees of the Company at any
reasonable time.
REPORTING:
Subject to the overall guidelines and policies of the Audit Committee,
Internal Audit shall be solely responsible for the planning, implementation and
reporting of internal audits. For this purpose, Internal Audit shall:
Prepare an annual audit plan and budget in consultation with management for
submission to the Audit Committee for approval;
Conduct the audits in an effective, professional and timely manner;
Report to management as soon as practical on completion of each audit;
Report quarterly to the Audit Committee on the performance of the Company
during the period.
21
APPENDIX 3
PROXY
VITAL SIGNS, INC.
THIS PROXY FOR HOLDERS OF COMMON STOCK IS SOLICITED BY
THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 4, 2004
The shareholder of Vital Signs, Inc. (the "Company") whose signature
appears on the reverse side hereof hereby appoints Fred Schiff, Jay Sturm and
Richard Feigel, and each of them, attorneys and proxies of the undersigned, with
full power of substitution, to vote, as designated on the reverse side, the
number of votes which the undersigned would be entitled to cast if personally
present at the Annual Meeting of Shareholders of the Company to be held at the
Company's headquarters, 20 Campus Road, Totowa, New Jersey, on Tuesday, May 4,
2004, at 10:00 a.m. local time, or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF THIS PROXY IS EXECUTED BUT NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED "FOR" EACH OF THE BOARD'S NOMINEES FOR DIRECTOR.
The proposals set forth on the reverse side are more fully described in the
Vital Signs, Inc. Notice of Annual Meeting and Proxy Statement (the Proxy
Statement).
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
ANNUAL MEETING OF SHAREHOLDERS OF
VITAL SIGNS, INC.
May 4, 2004
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
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1. ELECTION OF DIRECTORS (for the terms described in the 2. The transaction of such other business as may properly
Proxy Statement): (to be elected by the holders of Common come before the meeting, and any adjournment thereof. The
Stock): Board is not currently aware of any such business.
NOMINEES: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED
TO EXECUTE AND RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY
[ ] FOR ALL NOMINEES [ ] David H. MacCallum TIME PRIOR TO ITS USE.
[ ] Richard L. Robbins
[ ] WITHHOLD AUTHORITY [ ] George A. Schapiro
FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instructions below)
The Board of Directors
Recommends a Vote "FOR
ALL NOMINEES".
INSTRUCTION: To withhold authority to vote for any individual
nominee(s), mark "FOR ALL EXCEPT" and fill in the
circle next to each nominee you wish to withhold,
as shown here: [X]
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To change the address on your account, please check the
box at right and indicate your new address in the
address space above. Please note that changes to the [ ]
registered name(s) on the account may not be submitted
via this method.
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-------------------- --------- ------------------- ----------
Signature of Shareholder Date: Signature of Shareholder Date:
-------------------- --------- ------------------- ----------
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as...................................'SS'