SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MEDTOX SCIENTIFIC, 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):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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;1
4) Proposed maximum aggregate value of transaction:
1 Set forth the amount on which the filing fee is
calculated and state how it was determined.
[ X ] Fee Paid Previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No:
3) Filing Party:
4) Date Filed:
<PAGE>
MEDTOX SCIENTIFIC, INC.
402 West County Road D
St. Paul, Minnesota 55112
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on September 11, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of the stockholders
("Annual Meeting") of MEDTOX SCIENTIFIC, INC., a Delaware corporation (the
"Company"), will be held at the Regal Minneapolis Hotel, located at 1313
Nicollet Mall, Minneapolis, Minnesota on Friday, September 11, 1998 at 2:00 p.m.
(CST) for the following purposes:
1. To elect five directors to serve on the Board of Directors of the
Company (the "Board of Directors") for the ensuing year; and
2. To consider and act upon a proposal to ratify and approve an amendment
to Article FOURTH of the Company's Certificate of Incorporation to increase its
number of authorized common stock from 60,000,000 shares to 75,000,000 shares;
and
3. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
In accordance with the provisions of the Bylaws of the Company, the
Board of Directors has fixed the close of business on August 1, 1998 as the
record date for the determination of the holders of the shares of Common Stock
entitled to notice of, and to vote at, the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement.
Stockholders are requested to date, sign and mail the enclosed Proxy as
promptly as possible, whether or not they expect to attend the meeting in
person.
By Order of the Board of Directors,
Harry G. McCoy
Chairman of the Board and President
St. Paul, Minnesota
August 10, 1998
<PAGE>
MEDTOX SCIENTIFIC INC.
402 West County Road D
St. Paul, Minnesota 55112
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
September 11, 1998
PROXIES
The enclosed proxy (the "Proxy") is solicited by and on behalf of the
Board of Directors of MEDTOX SCIENTIFIC, INC., a Delaware corporation (the
"Company"), for use at the Company's 1997 annual meeting of stockholders (the
"Annual Meeting") and at any and all adjournments thereof. Any stockholder has
the power to revoke his or her Proxy at any time before it is voted. A Proxy may
be revoked (1) by delivery of written notice of revocation to the Secretary of
the Company at its principal office, 402 West County Road D, St. Paul, Minnesota
55112, (2) by the execution of a subsequent Proxy and presentment of such
subsequent Proxy at the Annual Meeting or (3) by attendance at the Annual
Meeting and voting in person. This solicitation is being made by use of the
mails and the cost thereof will be borne by the Company. Shares represented by
valid Proxies will be voted in accordance with the instructions indicated
thereon. Unless otherwise directed, votes will be cast FOR the election of the
directors named and FOR Proposal 2 concerning the Amendment to the Company's
Certificate of Incorporation increasing the number of authorized shares.
The costs of solicitation of proxies will be borne by the Company. In
addition to use of mails, proxies may be solicited personally, or by telephone
by one or more of the regular personnel of the Company without additional
compensation. The Company expects to pay an independent proxy solicitor
approximately $15,000 as compensation for the solicitation of proxies. In
addition, the Company may reimburse brokers and other custodians, nominees and
fiduciaries for their expenses for sending proxy material to beneficial owners,
in accordance with Securities and Exchange Commission regulations.
The Company anticipates mailing proxy materials and the annual report
for its fiscal year ended December 31, 1997 (the "Annual Report") to
stockholders of record as of August 1, 1998 (the "Stockholders") on or about
August 10, 1998.
<PAGE>
OUTSTANDING VOTING STOCK
Only holders of record of the Company's Common Stock, par value $.15
per share (the "Common Stock"), at the close of business on August 1, 1998 are
entitled to vote on matters to be presented at the Annual Meeting. Each share of
Common Stock is entitled to one vote with respect to all such matters. The
number of shares of Common Stock outstanding and entitled to vote at the close
of business on August 1, 1998 was 57,956,527.
VOTE AND QUORUM REQUIREMENTS
The presence in person or by Proxy of Stockholders of a majority of the
outstanding shares of Common Stock is required for there to exist the quorum
needed to transact business at the Annual Meeting. If, initially, a quorum
should not be present, the Annual Meeting may be adjourned from time to time
until a quorum is obtained.
A plurality of the votes cast is required to elect the Directors. The
affirmative vote of a majority of the outstanding shares of common stock is
required for approval of the proposed amendment to the Certificate of
Incorporation of the Company. In the election of Directors, any action other
than a vote for a nominee will have the practical effect of voting against the
nominee. Abstentions and "broker non-votes" (as defined below) are counted for
purposes of determining whether a quorum is present, but do not represent votes
cast with respect to any proposal. "Broker non-votes" are shares held by a
broker or nominee for which an executed proxy is received by the Company, but
are not voted as to one or more proposals because instructions have not been
received from the beneficial owners or persons entitled to vote and the broker
or nominee does not have discretionary voting power.
An independent party will receive and tabulate all proxies and ballots,
and such independent party and certain other team members of the Company will
act as voting inspectors at the Annual Meeting.
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information available to the Company as
of July 15, 1998 regarding the beneficial ownership of the Common Stock by (i)
each person known by the Company to beneficially own more than Five Percent (5%)
of the outstanding Common Stock, (ii) each of the Directors and nominees for
Director of the Company, (iii) the Chief Executive Officer and all executive
officers whose compensation was $100,000 or greater during 1997, and (iv) all
executive officers, Directors and nominees for Directors of the Company as a
group:
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Percent of Common
Name Beneficially Owned Stock Outstanding
<S> <C> <C>
Executive Officers and Directors:
Harry G. McCoy, Pharm. D.
Chairman and President 3,721,301 (1) 6.36 %
Richard J. Braun
Chief Executive Officer and Director 614,334 (2) 1.05 %
Samuel C. Powell, Ph.D., Director 1,121,090 (3) 1.93 %
Louis Perlman, Director(4) 1,081,111 (5) 1.86 %
James W. Hansen, Director 83,333 (6) *
Miles E. Efron, Director 77,777 (7) *
Peter J. Heath
Vice President of Finance, CFO and
Secretary (8) 248,575 (9) *
Michael A. Terretti (10)
Vice President of Sales and Marketing 284,720(11) *
All Directors and Executive Officers
As a Group (8 in number) 7,232,241(12) 12.12 %
</TABLE>
* Less than one percent (1%)
(1) Includes 554,334 shares of Common Stock issuable under options which
are or which will become exercisable within the next 60 days.
(2) Includes 554,334 shares of Common Stock issuable under options which
are or which will become exercisable within the next 60 days.
(3) Includes 69,445 shares of Common Stock issuable under options and
32,679 shares of Common Stock issuable under Common Stock Purchase
Warrants which are or will become exercisable within the next 60 days.
(4) Mr. Perlman is not standing for election to the Board of Directors.
(5) Includes 51,111 shares of Common Stock issuable under options which are
or which will become exercisable within the next 60 days.
(6) Includes 33,333 shares of Common Stock issuable under options which are
or which will become exercisable within the next 60 days.
(7) Includes 27,777 shares of Common Stock issuable under options which are
or which will become exercisable within the next 60 days.
<PAGE>
(8) Mr. Heath resigned as Vice President of Finance, Chief Financial
Officer and Secretary effective July 31, 1998.
(9) Includes 232,384 shares of Common Stock issuable under options which
are or will become exercisable within the next 60 days.
(10) Mr. Terretti resigned as Vice President of Sales and Marketing on April
30, 1997.
(11) Includes 154,794 shares of Common Stock issuable under options which
are or will become exercisable within the next 60 days.
(12) Includes 1,710,191 shares of Common Stock issuable under options or
warrants which are or will become exercisable within the next 60 days.
ELECTION OF DIRECTORS
The Certificate of Incorporation provides that the Board of Directors
shall consist of not less than three nor more than twelve individuals, with the
exact number to be fixed from time to time by the majority vote of the Board of
Directors. The Board of Directors has fixed the number of Directors at five
individuals.
The Board of Directors intends to present for action at the Annual Meeting
the election of Harry G. McCoy, Pharm.D., Samuel C. Powell, Ph.D., Richard J.
Braun, James W. Hansen and Miles E. Efron to serve for the ensuing year and
until their respective successors are duly elected and qualified. Unless
otherwise instructed, the enclosed Proxy will be voted FOR the election of the
nominees listed below, except that the persons designated as proxies reserve
full discretion to cast their votes for another person recommended by the Board
of Directors in the unanticipated event that any nominee is unable or declines
to serve.
Directors will be elected by the plurality vote of the holders of
Common Stock entitled to vote at the Annual Meeting and present in person or by
Proxy.
The following table sets forth the name, age and the position with the
Company of the nominees for Directors:
<TABLE>
<CAPTION>
Director
Name of Nominee Age Since Position with the Company
<S> <C> <C> <C>
Harry G. McCoy, Pharm.D. 47 1996 Chairman of the Board of Directors and
President
Samuel C. Powell, Ph.D. 46 1986 Director
Richard J. Braun 53 1996 Chief Executive Officer and Director
James W. Hansen 43 1996 Director
Miles E. Efron 71 1997 Director
</TABLE>
<PAGE>
Harry G. McCoy, Pharm.D., was elected Chairman of the Board of Directors
and President in July 1996 and has served as a Director since January 1996. Dr.
McCoy founded MEDTOX in 1984, and served as both Clinical Director and member of
the MEDTOX Board of Directors until its acquisition by the Company in January
1996. Dr. McCoy continued as President of MEDTOX following its acquisition by
the Company. Dr. McCoy also has academic appointments with the University of
Minnesota and the University of North Dakota, and is Chairman and CEO of the
Nova Jazz Corporation, a Minnesota non-profit company.
Richard J. Braun was named as a Director and elected as Chief Executive
Officer in July 1996. From 1994 until joining the Company, Mr. Braun acted as a
private investor and provided management consulting services to the health care
and technology industries. From 1992 until 1994, Mr. Braun served as Chief
Operating Officer and as a Director of EBP, Inc., a NYSE company engaged in
managed care. From 1989 through 1991, Mr. Braun served as Executive Vice
President, Chief Operating Officer and Director of Reich and Tang L.P., a NYSE
investment advisory and broker dealer firm. Mr. Braun currently is a Director of
Enstar, Inc., a public company with investments in health care and computer
connectivity and networking.
Samuel C. Powell, Ph.D., served as Chairman of the Board of Directors
from November 1987 to June 1994 and has served as a Director of the Company
since September 1986. Dr. Powell served as Chairman of the Board and Chief
Executive Officer of Granite Technological Enterprises, from January 1984 until
its acquisition by the Company in June 1986. Since 1987, he has been President
of Powell Enterprises, Burlington, North Carolina, offering financial and
management services to a variety of businesses and real estate ventures.
Additionally, Dr. Powell has been involved in local politics since 1985 as
Councilman for the City of Burlington, N.C. Dr. Powell has also been appointed
to serve on the North Carolina Board of Science and Technology from 1989 to
1995, and as a Board Member and Chairman of the N.C. State Alcoholism Research
Authority.
James W. Hansen was named as a Director in September 1996. Mr. Hansen
has, since November 1996, been Chairman, CEO and Treasurer of Videolabs, Inc.,
a NASDAQ traded, technology company and is CEO of Prevention First, a
development stage medical services provider. From 1986 to 1992, Mr. Hansen was
Senior Vice President and General Manager of the Pension Division of Washington
Square Capital, a Reliastar company which is a NYSE traded financial services
company. Since 1992, Mr. Hansen has served as an Investor, Director, President
or Vice President of several private companies in medical services and
technology. He also serves as a Director of UBIQ, Inc., Videolabs, Inc. and
Prevention First and has taught in the MBA program at the University of St.
Thomas since 1984.
Miles E. Efron was named as a Director in January 1997. From 1988 to 1993,
Mr. Efron served as Chief Executive Officer of North Star Universal, a holding
company with interests in health care, food products and computer connectivity
and networking. Since 1993, Mr. Efron has served as Chairman of North Star
Universal. Mr. Efron currently serves on the Board of Directors of several
companies, none of which are related to the Company.
<PAGE>
Compliance With Section 16(a) Of The Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that the Company's directors and executive officers, and persons who
own more than ten percent (10%) of a registered class of the Company's equity
securities, file with the Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten percent beneficial owners are required
by Commission regulations to furnish the Company with copies of all reports they
file under Section 16(a).
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with
during the fiscal year ended December 31, 1997.
During the fiscal year ended December 31, 1997, the Board of Directors
held eight meetings (including regularly scheduled, telephonic and special
meetings). During that time, all members of the Board attended at least
Seventy-Five Percent (75%) of the meetings held subsequent to their appointment.
The Company has a stock option committee (the "Stock Option Committee")
which, by the terms of the Company's Stock Option Plans, is to consist of not
less than two members of the Board of Directors appointed by the Board of
Directors. The Stock Option Committee is comprised of James W. Hansen, Miles E.
Efron, and Samuel C. Powell. The Stock Option Committee determines the terms of
options granted, including, but not limited to, the exercise price, the number
of shares subject to the option and the terms and conditions of the option.
During the fiscal year ended December 31, 1997, the Stock Option Committee met
one time and all members of the committee attended at least Seventy-Five Percent
(75%) of the meetings held subsequent to their appointment.
The Company has an Audit Committee which is comprised of James W. Hansen,
Miles E. Efron and Louis Perlman. During the fiscal year ended December 31,
1997, the Audit Committee held one meeting.
The Company has a Compensation Committee which is comprised of James W.
Hansen, Miles E. Efron, and Samuel C. Powell. The Compensation Committee's
purpose is to determine the compensation of the Executive Officers of the
Corporation. During the fiscal year ended December 31, 1997, the Compensation
Committee held one meeting.
The Company does not have a Nominating Committee.
The Board of Directors recommends that Stockholders vote FOR the
election of the nominees to the Board of Directors.
<PAGE>
EXECUTIVE COMPENSATION
The following table and the narrative text discuss the compensation
paid during 1997 and the two prior fiscal years to the Company's President and
Chief Executive Officer and to the other executive officers whose annual salary
and bonuses exceeded $100,000 during 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
--------------------------------------------------
Annual Compensation Awards Payouts
Other
Annual Restricted Options/ LTIP All Other
Name and Principal Compen- Stock SAR's Payouts Compen
Position Year Salary Bonus sation(1) Awards(2) (#) (2) sation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harry G. McCoy 1997 $199,489 -- -- -- -- -- --
Chairman of the Board 1996 $166,648 -- -- -- -- -- --
and President (3) 1995 -- -- -- -- -- -- --
Richard J. Braun 1997 $193,479 -- -- -- -- --
Chief Executive 1996 $ 72,696 -- -- -- -- -- $3,195(5)
Officer(4) 1995 -- -- -- -- -- -- --
--
Peter J. Heath 1997 $119,235 -- -- -- -- -- $3,000
Vice President of 1996 $113,677 $30,000 -- -- 75,000 -- $1,400
Finance 1995 $101,541 -- -- -- 17,660 -- --
and Chief Financial
Officer
Michael A. Terretti 1997 $ 44,013 -- -- -- 154,794 -- $94,667
Vice President of 1996 $144,354 $25,000 -- -- 50,000 -- $4,200
Sales and Marketing(6) 1995 $132,952 -- -- -- 3,910 -- --
</TABLE>
(1) Other Annual Compensation for executive officers is not reported as it
is less than the required reporting threshold of the Securities and
Exchange Commission.
(2) Not applicable. No compensation of this type received.
(3) Dr. McCoy was appointed Chairman of the Board and President on July 3,
1996.
(4) Mr. Braun was appointed Chief Executive Officer on July 25, 1996.
(5) Includes $3,195 of premiums paid by the Company for a disability
insurance policy on Mr. Braun.
(6) Mr. Terretti resigned as Vice President of Sales and Marketing
on April 30, 1997. As part of Mr. Terretti's separation agreement,
he is to receive $142,000 payable over twelve months. During 1997,
Mr. Terretti received $94,667 pursuant to the separation agreement.
<PAGE>
Stock Options Granted During Fiscal Year
The following table sets forth information about the stock options
granted to the named executive officers of the Company during 1997.
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
Potential Realized
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
% of Total
Options
Number Granted to
of Employees Exercise
Options in Fiscal Price Expiration 5% ($) 10% ($)
Name Granted(3)Year(1) ($/Sh) Date (2) (2)
<S> <C> <C> <C> <C> <C> <C>
Michael A.
Terretti 154,794 100% .4375 04/30/07 42,588 107,931
</TABLE>
(1) In connection with Mr. Terretti's resignation as Vice President of
Sales and Marketing, Mr. Terretti received options to purchase 154,794
shares of common stock. 54,794 of the options are exercisable at
December 31, 1997. The remaining 100,000 options are not exercisable
until April 30, 1999 subject to certain terms and conditions of Mr.
Terretti's separation agreement. No other stock options to employees
were granted during the year ended December 31, 1997. 230,000
options to acquire common stock were granted to the non-employee
directors of the Company during 1997. No stock appreciation rights
were granted to the named executive officers during 1997.
(2) The potential realizable value of the options reported above was
calculated by assuming 5% and 10% annual rates of appreciation of the
Common Stock of the Company from the date of grant of the options until
the expiration of the options. These assumed annual rates of
appreciation were used in compliance with the rules of the Securities
and Exchange Commission and are not intended to forecast future price
appreciation of the Common Stock of the Company. The Company chose not
to report the present value of the options, which is an alternative
under Securities and Exchange Commission rules, because the Company
does not believe any formula will determine with reasonable accuracy a
present value based on unknown or volatile factors. The actual value
realized from the options could be substantially higher or lower than
the values reported above, depending upon the future appreciation or
depreciation of the Common Stock during the option period and the
timing of exercise of the options.
<PAGE>
Stock Options Exercised During Fiscal Year and Year-End Values of Unexercised
Options
The following table sets forth information about the stock options held
by the named executive officers of the Company at December 31, 1997.
<TABLE>
<CAPTION>
Number of
Shares Number of Unexercised Value of Unexercised In-the
Acquired Value Options at FY-End Money Options at FY-End
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable (1)
<S> <C> <C> <C> <C>
Harry G. McCoy - - - / - $0/$0
Richard J. Braun - - - / - $0/$0
Peter J. Heath - - 155,581/4,144 $0/$0
Michael A. Terretti - - 54,794/100,000 $0/$0
</TABLE>
- ----------------------------
(1) The closing price of the Common Stock of the Company at December 31,
1997 was $.3125 per share.
Long-Term Incentive Plans and Pension Plans
The Company does not contribute to any Long-Term Incentive Plan or
Pension Plan for its executive officers as those terms are defined in the rules
of the Securities and Exchange Commission. The Company relies on its stock
option plans to provide long-term incentives for executive officers. The Company
has three stock option plans, a 1983 Stock Option Plan for employees which
expired on June 23, 1993, the Equity Compensation Plan which was adopted by the
shareholders of the annual meeting in 1993 to replace the 1983 Incentive Stock
Option Plan, and a 1991 Non-Employee Director Plan for members of the Board of
Directors who are not employees of the Company.
Compensation of Directors
All directors who are not employees of the Company receive $500 per
month for their service as a director. All directors are also reimbursed for
expenses incurred in attending board of directors' meetings and participating in
other activities. In addition, each non-employee director receives incentive
stock options to purchase 15,000 shares of common stock at each annual
anniversary date of their election to the board of directors. In 1997, each
non-employee director also received incentive stock options to purchase 50,000
shares of common stock.
Employment Contracts
Harry G. McCoy, Chairman of the Board of Directors and President of the
Company, has an employment agreement with the Company covering the period ending
December 31, 1999, which by its term is extended thereafter in one-year
increments unless Dr. McCoy provides written notice of termination to the
Company at least sixty (60) days prior to the date of termination. The agreement
<PAGE>
may also be terminated by mutual consent or due to death or for "cause," or as
described below. The employment agreement provides for an annual salary of at
least $199,650 and certain fringe benefits. If Dr. McCoy's employment is
terminated by the Company other than for cause, or if Dr. McCoy chooses to
terminate the agreement voluntarily, following (i) a change in control; (ii) any
relocation to which Dr. McCoy has not agreed to of greater than fifty (50)
miles; or (iii) any material reduction in the level of Dr. McCoy's
responsibility, position, authorities or duties; or (iv) the Company breaches
any of its obligations under the Agreement, Dr. McCoy will be entitled to a
Severance Award. The Severance Award consists of Dr. McCoy's base salary, health
insurance and bonus plan payments for the greater of twelve (12) months or the
then remaining term of employment under the Agreement.
The employment agreement contains a Covenant Not to Compete whereby for
a period of twelve (12) months after the termination of employment with the
Company, Dr. McCoy agrees that he will not, directly or indirectly, either (a)
have any interest in, (b) enter the employment of, (c)act as agent, broker, or
distributor for or advisor or consultant to, or (d) provide information useful
in conducting the business of the Company to solicit customers or employees on
behalf of the Company to any person, firm, corporation or business entity which
is engaged, or which Dr. McCoy reasonably knows is undertaking to become
engaged, in the United States in the business of the Company.
Richard J. Braun, Chief Executive Officer, has the same employment
agreement with the Company as Dr. McCoy.
Compensation Committee and Decision Making
The compensation of executive officers of the Company for 1997 was
determined by the Compensation Committee which is currently comprised of James
W. Hansen, Miles E. Efron, and Samuel C. Powell. Stock options are awarded under
the Company's Equity Compensation Plan and Non-Employee Director Plan by the
Compensation Committee. All non-employee directors were eligible to receive
stock options under the Company's 1991 Non-Employee Director Plan, which is a
formula plan in accordance with the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
Report of the Compensation Committee on Executive Compensation
In General
The Committee has three primary goals for executive compensation at the
Company.
- Retaining good performers,
- Rewarding executives appropriately for performance, and
- Aligning executives' interests with those of stockholders.
<PAGE>
Currently, executive pay consists of three elements that are designed
to meet those objectives:
- Base salary is paid based primarily on job responsibilities and industry
job comparison. The Committee believes that base salaries at
approximately industry averages are essential to retaining good performers.
- Stock options, which allow executives to benefit when the market price of
the Company's stock increases.
- Bonuses to be paid upon the attainment of certain financial objectives and
individual circumstances when warranted.
Following is additional information regarding each of the above elements.
Base Salary
Base salary increases for executive officers have been modest and
consistent with job performance and increases in responsibility.
Bonus
There were no bonuses paid to the executive officers during 1997.
Stock Options
There were no stock options issued to the executive officers during
1997, with the exception of the 154,794 options that were granted to Mr.
Terretti as part of his separation agreement.
Summary
Currently, the Company's executive compensation program rewards the
following elements of performance.
- Individual performance is rewarded through continued employment with the
Company.
- Stock price performance is rewarded through increases in the
value of stock options.
- Financial performance of the Company is rewarded through payments of
bonuses upon the attainment of certain financial goals.
The Committee believes that the current program has been effective in
rewarding executives appropriately for performance, retaining good performers,
and aligning executives' interests with those of stockholders. While the
Committee is satisfied with the current compensation system, it reserves the
right to make changes to the program as are necessary to continue to meet its
stated goals in future years.
<PAGE>
Benefits also are offered to officers that are not based on
performance. Such benefits provide a safety net of protection in the event of
illness, disability, death, retirement, etc. Such a safety net is provided to
all full time employees of the Company.
Chief Executive Officer Pay
Amounts earned during 1997 by the Chief Executive Officer, Richard J.
Braun, are shown in the Summary Compensation Table. Achievements by the Company
which were deemed material to the Chief Executive Officer's compensation include
the attainment of profitability for 1997 for the first time in the Company's
history. For the year ended December 31, 1997, the Compensation Committee used,
in its deliberations on executive compensation, these criteria and other
accomplishments.
Submitted by the Compensation Committee of the Company's Board of Directors.
James W. Hansen
Miles E. Efron
Samuel C. Powell
<PAGE>
Performance Graph
The graph shown below is a line presentation comparing the Company's
cumulative five-year shareholder returns on an indexed basis with the S&P 500
Index and the S&P Health Care Index for the five-year period commencing on
December 31, 1992 and ending on December 31, 1997. The total return assumes that
dividends were reinvested quarterly and is based on a $100 investment on
December 31, 1992.
Comparative Five-Year Total Returns*
MEDTOX Scientific, Inc., S&P 500, S&P Health Care
(Performance results through 12/31/97)
(Comparative chart appears here. The plot points are below.)
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
TOX $100.00 $33.53 $35.93 $27.54 $5.99 $2.99
S&P 500 $100.00 $110.08 $111.53 $153.45 $188.68 $251.62
S&P Hcare $100.00 $91.61 $103.66 $163.46 $197.30 $283.46
- --------------------------------------------------------------------------------
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in MEDTOX common stock, S&P 500
Index, and S&P Health Care Index.
* Cumulative total return assumes reinvestment of dividends.
Source: Frank Russell Company
Factual material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained herein.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lease Agreement with Dr. Samuel C. Powell
In July 1986, the Company executed a lease agreement with Dr. Powell
providing for a lease to the Company of approximately 16,743 square feet of
space at 1238 Anthony Road, Burlington, North Carolina. Since 1986, the Company
has expanded the space rented under the lease to approximately 33,000 square
feet. Upon the expiration of the original lease, the Company entered into a new
lease with Dr. Powell for the same space and at the same base rental rate for a
term of one year ending on May 31, 1990. Effective June 1, 1990, the Company has
been leasing the space on a month-to-month basis. The Company is currently
leasing space at a rate of approximately $10,000 per month. The Company intends
to negotiate a new lease with Dr. Powell in the near future. The Company holds
certain rights of first refusal to lease additional space in the building if it
becomes available (the building contains a total of 42,900 square feet). The
total rent paid by the Company to Dr. Powell during the fiscal year ended
December 31, 1997 was approximately $122,000. The Company believes the rent
amount paid to Dr. Powell is consistent with market rates.
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Company's Certificate of Incorporation presently authorizes the
issuance of a total of 60,000,000 shares of common stock, par value $.15 per
share. Of such 60,000,000 presently authorized shares of common stock,
57,953,950 shares were issued and outstanding as of July 15, 1998. In addition,
an aggregate of 5,444,188 shares has been reserved for issuance as of July 15,
1998, as summarized in the following table:
Shares of Common Stock Reserved For Number of Shares Reserved
Common Stock Warrants
Series L 320,000
Series N 32,679
Series O 586,667
Common Stock Options
Incentive 3,861,905
Non-Employee Director 235,000
Non-Qualified 245,887
Qualified Employee Stock Purchase Plan 162,050
5,444,188
If the total of 5,444,188 shares were to be issued, the Company would not
have enough shares authorized for issuance. Accordingly, the Board of Directors
has approved an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of common stock from 60,000,000 to
75,000,000. The Company has no current intention of issuing the additional
authorized shares.
<PAGE>
The additional common stock, if so authorized, would allow the Company to
satisfy all of the potential conversion and exercise rights of its contractual
obligations, and can be issued at the discretion of the Board of Directors
without any further action by the stockholders except as required by applicable
law or regulation. Shares of stock will be issued only upon determination by the
Board of Directors that a proposed issuance is in the best interests of the
Company. As noted above, the Company has no current intention of issuing the
additional authorized shares.
Accordingly, the Board of Directors has proposed that Article Fourth of
the Company's Certificate of Incorporation be amended to increase its capital
stock. As so amended, this provision of the Certificate of Incorporation would
read as set forth on Appendix A hereto.
The Board of Directors recommends a vote FOR the proposed amendment to
the Certificate of Incorporation. An affirmative vote by holders of a majority
of the outstanding shares of common stock entitled to vote at the annual meeting
is required to approve the amendment.
RELATIONSHIPS WITH AUDITORS
Effective May 27, 1998, the Company terminated Ernst & Young LLP as its
independent accounting firm. The termination of Ernst & Young LLP was approved
by the Audit Committee of the Board of Directors of the Company.
Ernst & Young LLP's report on the financial statements of the Company
for each of the last two fiscal years neither contained an adverse opinion or a
disclaimer of opinion, nor was qualified or modified as to uncertainty, audit
scope, or accounting principles.
During the Company's two most recent fiscal years and the interim
period through May 27, 1998, there were no disagreements or "reportable events"
with Ernst & Young LLP as described in Items 304(a)(1)(iv) and (v) of Regulation
S-K.
Accordingly, Ernst & Young LLP has not advised the Company of (i) the
absence of the internal controls necessary for the Company to develop reliable
financial statements, (ii) any information which would cause Ernst & Young LLP
to no longer rely on management's representations, or that Ernst & Young LLP was
unwilling to be associated with the financial statements prepared by management,
(iii) any need to expand significantly the scope of its audit, or any
information that if further investigated may (a) materially impact the fairness
or reliability of either a previously issued audit report or the underlying
financial statements or any financial statements for any fiscal period
subsequent to the date of the most recent financial statements covered by an
audit report or (b) cause it to be unwilling to rely on management's
representations or be associated with the Company's financial statements, or
(iv) any information that has come to the attention of Ernst & Young LLP that it
concluded materially impacts the fairness or reliability of either (a) a
previously issued audit report or the underlying financial statements or (b) any
financial statements issued or to be issued covering any fiscal period
subsequent to the date of the most recent financial statements covered by an
audit report.
<PAGE>
Effective June 3, 1998, the Company engaged Deloitte & Touche LLP as
its independent accounting firm. Neither the Company or any of its subsidiaries
has had any prior relationships with Deloitte & Touche LLP.
It is expected that representatives of Deloitte & Touche LLP will be
present at the Annual Meeting and available to respond to appropriate questions.
OTHER BUSINESS OF THE MEETING
Management is not aware of any matters to come before the Annual
Meeting other than those stated in the Proxy Statement. However, inasmuch as
matters of which management is not now aware may come before the meeting or any
adjournment thereof, the Proxies confer discretionary authority with respect to
acting thereon, and the persons named in such properly executed Proxies intend
to vote, act and consent in accordance with their best judgment with respect
thereto. Upon receipt of such Proxies (in the form enclosed) in time for voting,
the shares represented thereby will be voted as indicated thereon and in the
Proxy Statement.
DATES FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposal, relating to a proper subject, which a Stockholder may
intend to present for action at the Company's Annual Meeting of Stockholders in
1999, and which such Stockholder may wish to have included in the Company's
proxy materials for such meeting, in accordance with the provisions of Rule
14a-8 promulgated under the Exchange Act, must be received in proper form by the
Company addressed to Mr. Richard J. Braun, Chief Executive Officer, and sent by
registered mail, return receipt requested, and received at the Company's
principal executive office at 402 West County Road D, St. Paul, Minnesota 55112,
not later than May 9, 1999.
Any proposal, relating to a proper subject, which a stockholder may
wish to present for action at the Company's Annual Meeting of Stockholders in
1999, whether or not such Stockholder wishes to have such proposal included in
the Company's proxy materials for such meeting, must, pursuant to the Company's
By-laws, be the subject of a written notice delivered to the Company addressed
to Mr. Richard J. Braun, Chief Executive Officer, and sent by registered mail,
return receipt requested, and received at the Company's principal executive
office at 402 West County Road D, St. Paul, Minnesota 55112, not later than July
13, 1999, nor earlier than June 13, 1999.
By order of the Board of Directors,
HARRY G. McCOY
Chairman of the Board
and President
St. Paul, Minnesota
August 10, 1998
<PAGE>
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1997 MAY BE OBTAINED WITHOUT CHARGE BY ANY STOCKHOLDER TO WHOM THE PROXY
STATEMENT IS SENT, UPON WRITTEN REQUEST TO THE SECRETARY, MEDTOX SCIENTIFIC,
INC., 402 WEST COUNTY ROAD D, ST. PAUL, MINNESOTA 55112.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its Regional Offices located at 75
Park Place, New York, New York 10007, and the John C. Kluczynski Federal
Building, 230 South Dearborn Street, Chicago, Illinois 60604. Copies of such
material can be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 upon request and
payment of the prescribed fees. The Commission maintains a web site that
contains reports, proxy and information statements, and other information
regarding issues that are filed electronically with the Commission. The address
of the web site is HTTP://WWW.SEC.GOV.
The Company's Common Stock is listed on the American Stock Exchange
(the "AMEX"), and reports, proxy statements and other information filed by the
Company can be inspected at such exchange.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, each of which was previously filed by the
Company with the Commission pursuant to Section 13 of the Exchange Act, are
incorporated herein by reference:
a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
b) The Company's Report on Form 8-K dated June 3, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date of this Proxy Statement
and prior to the Annual Meeting of Shareholders to which this Proxy Statement
relates shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein or in any accompanying Proxy Statement Supplement modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement.
<PAGE>
The Company will provide without charge to each person to whom a Proxy
Statement is delivered upon written or oral request of each person, a copy of
any documents incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the documents that this Proxy Statement incorporates). Requests for such copies
should be directed to MEDTOX SCIENTIFIC, INC., Attention: Secretary, 402 West
County Road D, St. Paul, Minnesota 55112, (612) 636-7466.
<PAGE>
APPENDIX A
MEDTOX SCIENTIFIC, INC.
AMENDED AND RESTATED
SECTION OF CERTIFICATE OF INCORPORATION
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is SEVENTY-SIX MILLION (76,000,000) shares, SEVENTY-FIVE
MILLION of which shall be of a class designated as Common Stock with a par value
of FIFTEEN CENTS ($0.15) per share and ONE MILLION of which shall be of a class
designated as Preferred Stock with a par value of ONE DOLLAR ($1.00) per share.
All or any part of the authorized capital stock of the Corporation may be issued
and sold, from time to time by the corporation, without further action by
stockholders, for such consideration (but not less than the par value thereof)
and to such persons and on such terms and conditions as may, from time to time,
be fixed or determined by the Board of Directors. The voting powers,
designations, preferences and relative, participating, optional or other special
rights and the qualifications, limitations or restrictions thereof, of the
classes of stock of the corporation which are fixed by this Certificate of
Incorporation, and the authority vested in the Board of Directors to fix by
resolution or resolution providing for the issue of Preferred Stock the voting
powers, designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of Preferred Stock which are not fixed by the Certificate of
Incorporation, are as follows:
1. The Preferred Stock may be issued from time to time in one
or more series, each such series to have such distinctive designation
or title as may be fixed by the Board of Directors prior to the
issuance of any shares thereof. Each such series may differ from every
other series already outstanding as may be determined from time to time
by the Board of Directors prior to the issuance of any shares thereof,
in any or all of the following, but in no other, respects:
(a) The rate of dividend which the Preferred Stock of
any such series shall be entitled to receive, whether the
dividends of such series shall be cumulative or non-cumulative
and, if such dividends shall be cumulative, the date from
which they shall be cumulative.
(b) The right or obligation, if any, of the
corporation to redeem shares of Preferred Stock of any series
and the amount per share which the Preferred Stock of any such
series shall be entitled to receive in case of the redemption
thereof, and the right of the corporation, if any, to reissue
any such shares after the same shall have been redeemed.
(c) The amount per share which the Preferred Stock of
any such series shall be entitled to receive in case of the
voluntary liquidation, distribution or sale of assets,
dissolution or winding up of the corporation, or in case of
the involuntary liquidation, distribution or sale of assets,
dissolution or winding up of the corporation.
<PAGE>
(d) The right, if any, of the holders of Preferred
Stock of any such series to convert the same into other
classes of stock, and the terms and conditions of such
conversion.
(e) The voting power, if any, of the holders of
Preferred Stock of any series, and the terms and conditions
under which they may exercise such voting power.
(f) The terms of the sinking fund or fund of similar
nature, if any, to be provided for the Preferred Stock of any
such series.
The description of terms of the Preferred Stock of
each series in respect of the foregoing particulars shall be
fixed and determined by the Board of Directors by appropriate
resolution at or prior to the time of the authorization of the
issue of the original shares of each such series.
2. In case the stated dividends and the amounts payable on liquidation,
distribution or sale of assets, dissolution or winding up of the corporation are
not paid in full, the stockholders of all series of the Preferred Stock shall
share ratably in the payment of dividends, including accumulations, if any, in
accordance with the same which would be payable on such shares if all dividends
were declared and paid in full and in any distribution of assets other than by
way of dividends, in accordance with the sums which would be payable on such
distribution if all sums payable were discharged and paid in full.
3. The holders of the Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of funds
legally available therefor, preferential dividends in cash at, but not
exceeding the annual rate fixed for each particular series. The holders
of the Preferred Stock shall not be entitled to receive any dividends
thereon other than dividends referred to in this Subdivision 3.
4. So long as any of the Preferred Stock remains outstanding,
in no event shall any dividend whatever, whether in cash or other
property (other than shares of Common Stock), be paid or declared or
any distribution be made on the Common Stock, nor shall any shares of
the Common Stock be purchased, retired or otherwise acquired for a
consideration by the corporation unless (a) the full dividends of the
Preferred Stock for all past dividend periods from the respective date
or then current quarter-yearly dividend period shall have been paid or
declared and a sum set apart sufficient for the payment thereof, and
(b) if at any time the corporation is obligated to retire shares of any
series of the Preferred Stock pursuant to a sinking fund or a fund of a
similar nature, all arrears, if any, in respect of the retirement of
the Preferred Stock of all such series shall have been made good.
Subject to the foregoing provisions and not otherwise, such dividends
(payable in cash, stock or otherwise) as may be determined by the Board
of Directors may be declared and paid on the Common Stock from time to
time out of the remaining funds of the corporation legally available
therefor, and the Preferred Stock shall not be entitled to participate
in any such dividend, whether payable in cash, stock or otherwise.
5. In the event of any liquidation, distribution or sale of
assets, dissolution or winding up of the corporation, whether voluntary
or involuntary, before any distribution or payment shall be made to the
holders of Common Stock, the holders of the Preferred Stock of each
series shall be entitled to be paid in cash the applicable
<PAGE>
liquidation price per share fixed at the time of the original
authorization of issuance of shares of such respective series, together
with a sum, in the case of each share of the Preferred Stock, computed
at the annual dividend on such share became cumulative to the date
fixed for such distribution or payment date paid thereon. If such
payment shall have been made in full to the holders of the Preferred
Stock, the remaining assets and funds of the corporation shall be
distributed among the holders of the Common Stock according to their
respective shares.
6. Subject to the powers, preferences and rights and the qualifications,
limitations and restrictions thereof, with respect to each class of capital
stock of the corporation having any preference or priority over the Common
Stock, the holders of the Common Stock shall have and possess all rights
appertaining to capital stock of the corporation. Holders of Common Stock may
not act by written consent without a meeting.
<PAGE>
APPENDIX A
MEDTOX SCIENTIFIC, INC.
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 11, 1998
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned stockholder of MEDTOX Scientific, Inc. (the "Company")
hereby appoints Harry G. McCoy and Richard J. Braun, and each or either one of
them, the true and lawful attorneys, agents, and proxies of the undersigned with
full power of substitution for and in the name of the undersigned, to vote all
the shares of Common Stock of MEDTOX SCIENTIFIC, Inc. which the undersigned may
be entitled to vote at the Annual Meeting of Stockholders of the Company to be
held at the Regal Minneapolis Hotel, located at 1313 Nicollet Mall, Minneapolis,
Minnesota on or about Friday, September 11, 1998, at 2:00 P.M., Central Time,
and at any and all adjournments thereof, with all the powers which the
undersigned would possess if personally present, for the following purposes:
(Continued and to be signed on the other side)
<PAGE>
Please mark your
votes as in this
example
For Withheld FOR AGAINST ABSTAIN
( ) ( ) ( ) ( ) ( )
Nominees: Harry G. McCoy, Samuel 2. The adoption of an Amendment
C. Powell, Richard J. Braun, to the Certificate of Incorporation
James W. Hansen as set forth in the Proxy Statement.
and Miles E. Efron
1. Election of 3. Considering and acting upon any
Directors other matters which may properly
come before the meeting or any
adjournment thereof.
For, except vote withheld from the following nominees:
[ ] Please check box if you intend to attend the meeting in person.
This Proxy will be voted for the choices specified. If no choice is
specified with respect to the election of Directors, this Proxy will be voted
FOR the election of the Directors listed. If no choice is specified for Proposal
2, this Proxy will be voted FOR Proposal 2.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement dated August 10, 1998.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY IN THE ENVELOPE PROVIDED.
SIGNATURE(S)_________________________ Dated:______, 1998
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee, guardian,
please give your full title as such.
