SCHEDULE 14A INFORMATION
Proxy StatementPursuant 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 16, 1999
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 Sheraton Minneapolis Metrodome, located at 1330
Industrial Blvd., Minneapolis, Minnesota on Thursday, September 16, 1999 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 3,750,000 shares to 7,400,000
shares; and
3. To consider and act upon a proposal to ratify and approve an amendment to
Article FIFTH of the Company's Certificate of Incorporation to provide for
the classification of the Board of Directors into three classes of
directors with staggered terms of office; and
4. To consider and act upon an amendment to the Company's Employee Stock
Purchase Plan to increase from 25,000 to 150,000 the number of shares
authorized to be issued pursuant to that Plan; and
5. 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, 1999 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 9, 1999
<PAGE>
MEDTOX SCIENTIFIC INC.
402 West County Road D
St. Paul, Minnesota 55112
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
September 16, 1999
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 1998 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 Proposals 2, 3 and 4.
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, 1998 (the "Annual Report") to
stockholders of record as of August 1, 1999 (the "Stockholders") on or about
August 9, 1999.
<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, 1999 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, 1999 was 2,903,222.
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 amendments 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.
<PAGE>
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information available to the Company as
of July 20, 1999 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 1998, and (iv) all
executive officers, Directors and nominees for Directors of the Company as a
group:
<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 212,619 (1) 6.70 %
Richard J. Braun
Chief Executive Officer and Director 70,178 (2) 2.31 %
Samuel C. Powell, Ph.D., Director 73,241 (3) 2.41 %
James W. Hansen, Director 6,863 (4) *
Miles E. Efron, Director 5,358 (5) *
Kevin J. Wiersma
Vice President, Controller and Secretary 6,246 (6) *
All Directors and Executive Officers
as a Group (6 in number) 374,505 (7) 12.32 %
</TABLE>
* Less than one percent (1%)
1. Includes 54,271 shares of Common Stock issuable under options which are or
which will become exercisable within the next 60 days.
2. Includes 63,928 shares of Common Stock issuable under options which are or
which will become exercisable within the next 60 days.
3. Includes 4,994 shares of Common Stock issuable under options which are or
will become exercisable within the next 60 days.
4. Includes 4,363 shares of Common Stock issuable under options which are or
which will become exercisable within the next 60 days.
5. Includes 2,858 shares of Common Stock issuable under options which are or
which will become exercisable within the next 60 days.
6. Includes 6,046 shares of Common Stock issuable under options which are or
which will become exercisable within the next 60 days.
7. Includes 136,460 shares of Common Stock issuable under options which are or
will become exercisable within the next 60 days.
<PAGE>
PROPOSAL 1
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:
Director
Name of Nominee Age Since Class* Position with the Company
- --------------- --- ----- ----- -------------------------
Harry G. McCoy, Pharm. D. 48 1996 III Chairman of the Board of
Directors and President
Samuel C. Powell, Ph.D. 47 1986 I Director
Richard J. Braun 54 1996 III Chief Executive Officer
and Director
James W. Hansen 44 1996 II Director
Miles E. Efron 72 1997 I Director
- --------
* Class designations are contingent upon approval of Proposal 3 establishing a
classified Board of Directors.
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
<PAGE>
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.
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.
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, 1998.
<PAGE>
During the fiscal year ended December 31, 1998, the Board of Directors
held four 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, 1998, 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, until September 1998, Louis Perlman. During the fiscal
year ended December 31, 1998, 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, 1998, the Compensation
Committee held one meeting.
The Company does not have a Nominating Committee.
The Board of Directors recommends that Stockholders vote FOR
Proposal 1.
<PAGE>
EXECUTIVE COMPENSATION
The following table and the narrative text discuss the compensation
paid during 1998 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 1998.
<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 1998 $209,615 -- -- -- 50,000 -- --
Chairman of the Board 1997 $199,489 -- -- -- -- -- --
and President (3) 1996 $166,648 -- -- -- -- -- --
Richard J. Braun 1998 $209,615 -- -- -- 50,000 -- $9,060(5)
Chief Executive 1997 $193,479 -- -- -- -- -- $3,195(5)
Officer(4) 1996 $ 72,696 -- -- -- -- -- --
Kevin J. Wiersma 1998 $ 92,144 $ 11,700 -- -- 5,000 -- --
Vice President,
Controller and Secretary
(6)
Peter J. Heath 1998 $ 91,868 -- -- -- 12,500 -- $46,154
Vice President of Finance 1997 $119,235 -- -- -- -- -- $ 3,000
and Chief Financial 1996 $113,677 $30,000 -- -- 3,750 -- $ 1,400
Officer(7)
</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 $9,060 of premiums paid for by the Company for a disability
insurance policy on Mr. Braun for 1998 and $3,195 for 1997.
(6) Mr. Wiersma was appointed Vice President and Secretary on July 20,1998.
(7) Mr. Heath resigned as Vice President of Finance and CFO on July 31,
1998. As part of Mr. Heath's separation agreement, he is to receive
$90,000 payable over nine months. During 1998, Mr. Heath received
$46,154 pursuant to the separation agreement.
<PAGE>
Stock Options Granted During Fiscal Year
The following table sets forth information about the stock options
granted to the named executive officers of the Company during 1998.
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
Potential Realized
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Option Term
Individual Grants
% of Total
Options
Number Granted to
of Employees Exercise
Options in Fiscal Price Expiration 5% ($) 10%( $)
Name Granted Year ($/Sh) Date (2) (2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Harry G.
McCoy 50,000 25% $8.75 03/01/08 $275,141 $697,262
Richard J.
Braun 50,000 25% $8.75 03/01/08 $275,141 $697,262
Kevin J
Wiersma 5,000 2% $8.75 03/01/08 $27,514 $ 69,726
Peter J.
Heath (1) 10,000 5% $8.75 03/01/08 $55,028 $139,452
2,500 1% $8.75 07/31/03 $ 7,440 $ 37,659
</TABLE>
(1) Mr. Heath resigned as Vice President of Finance and Chief Financial
Officer on 7/31/98. 10,000 options to acquire shares were canceled
effective 7/31/98. The remaining 2,500 options to acquire shares were
fully vested at 12/31/98.
(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.
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, 1998.
<PAGE>
<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 - - 31,894/18,105 $0/$0
Richard J. Braun - - 31,894/18,105 $0/$0
Peter J. Heath - - 2,500/ - $0/$0
Kevin J. Wiersma - - 1,521/3,478 $0/$0
- ----------------------------
</TABLE>
(1) The closing price of the Common Stock of the Company at December 31,
1998 was $5.00 per share. (Share price adjusted to reflect reverse split.)
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's 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.
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, 2001, 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
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
<PAGE>
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 an employment agreement
with the Company with the same terms as Dr. McCoy.
Kevin Wiersma, Vice President and Controller has a severance agreement
with the Company covering the period December 31, 2000, which by its term is
extended thereafter in one-year increments unless either the Company or Mr.
Wiersma provides written notice to the other party at least six (6) months prior
to the end of the original term or each renewal period or unless the agreement
is otherwise terminated due to death, permanent disability, or for "cause." The
employment agreement provides for an annual salary of at least $95,000 and
certain fringe benefits. If Mr. Wiersma's employment with the Company terminates
during the term of the agreement involuntarily, other than an involuntary
termination on account of misconduct, he will be entitled to a Severance Award.
The Severance Award consists of payment of an amount equal to Mr. Wiersma's then
current annual salary plus certain health benefits over the course of the twelve
(12) month period following Mr. Wieresma's termination.
Three other key employees of the Company have severance agreements
similar to Mr. Wiersma's agreement.
Compensation Committee and Decision Making
The compensation of executive officers of the Company for 1998 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 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.
o Retaining good performers,
o Rewarding executives appropriately for performance, and
o Aligning executives' interests with those of stockholders.
Currently, executive pay consists of three elements that are designed
to meet those objectives:
o 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.
o Stock options, which allow executives to benefit when the market price of
the Company's stock increases.
o 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.
<PAGE>
Base Salary
Base salary increases for executive officers have been modest and
consistent with job performance and increases in responsibility.
Bonus
Kevin Wiersma received a bonus in 1998 as part of incentive
compensation for meeting certain performance-related goals.
Stock Options
In 1998, certain executive officers received incentive stock options to
purchase a total of 117,500 shares. The number of options granted to the
executive officers represented 59% of the total options granted in 1998 to all
employees.
Summary
Currently, the Company's executive compensation program rewards the
following elements of performance.
o Individual performance is rewarded through continued employment with
the Company.
o Stock price performance is rewarded through increases in the value of
stock options.
o 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.
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 1998 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, 1998, 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, 1993 and ending on December 31, 1998. The total return assumes that
dividends were reinvested quarterly and is based on a $100 investment on
December 31, 1993.
Comparative Five-Year Total Returns*
MEDTOX Scientific, Inc., S&P 500, S&P Health Care
(Performance results through 12/31/98)
(Comparative chart appears here. The plot points are below.)
1993 1994 1995 1996 1997 1998
- -------------------------------------------------------------------------------
TOX $100.00 $107.14 $ 82.14 $ 17.86 $ 8.93 $ 7.14
S&P 500 $100.00 $101.32 $139.40 $171.40 $228.59 $293.89
S&P Hcare $100.00 $113.15 $178.44 $215.38 $309.43 $446.04
- -------------------------------------------------------------------------------
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: Russell/Mellon, Analytical Services 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, 1998 was approximately $122,000. The Company believes the rent
amount paid to Dr. Powell is consistent with market rates.
PROPOSAL 2
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 3,750,000 shares of common stock, par value $.15 per
share. Of such 3,750,000 presently authorized shares of common stock, 2,903,236
shares were issued and outstanding as of July 20, 1999. In addition, an
aggregate of 454,196 shares has been reserved for issuance as of July 20, 1999,
as summarized in the following table:
Shares of Common Stock Reserved For Number of Shares Reserved
Subordinated notes 12% 28,750
Common Stock Options
Incentive 206,197
Non-Employee Director 11,416
Non-Qualified 203,405
Qualified Employee Stock Purchase Plan 4,428
454,196
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 3,750,000 to 7,400,000. The Company has no current intention
of issuing the additional authorized shares.
The additional common stock, if so authorized, would 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
<PAGE>
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 Proposal 2. 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.
PROPOSAL 3
APPROVAL OF A CLASSIFIED BOARD OF DIRECTORS
The Company's Board of Directors has unanimously approved and
recommended that the stockholders of the Company approve an amendment to Article
Fifth, Section 1, to the Certificate of Incorporation to provide for the
classification of the Board of Directors into three classes of directors with
staggered terms of office.
The Company's By-Laws now provide that all directors are to be elected
annually for a term of one year. Delaware law permits provisions in a
certificate of incorporation or by-law approved by stockholders that provide for
a classified board of directors. The proposed classified board amendment to the
Certificate of Incorporation and conforming amendments to the By-Laws, described
in Appendix B to this Proxy Statement, would provide that directors will be
classified into three classes, as nearly equal in number as possible. One class
(Class I) would hold office initially for a term expiring at the 2000 Annual
Meeting; another class (Class II) would hold office initially for a term
expiring at the 2001 Annual Meeting; and another class (Class III) would hold
office initially for a term expiring at the 2002 Annual Meeting. At each Annual
Meeting following this initial classification and election, the successors to
the class of directors whose terms expire at that meeting would be elected for a
term of office to expire at the third succeeding Annual Meeting after their
election and until their successors have been duly elected and qualified. See
"Election of Directors" as to the composition of each class of directors if this
proposal is adopted.
The proposed classified board amendment will significantly extend the
time required to effect a change in control of the Board of Directors and may
discourage hostile takeover bids for the Company. Currently, a change in control
of the Board of Directors can be made by stockholders holding a plurality of the
votes cast at a single Annual Meeting. If the Company implements a classified
board of directors, it will take at least two Annual Meetings for even a
majority of stockholders to make a change in control of the Board of Directors,
because only a minority of the directors will be elected at each meeting.
Under Delaware law, directors chosen to fill vacancies on a classified
board shall hold office until the next election of the class for which such
directors shall have been chosen, and until their successors are elected and
qualified. Delaware law also provides that, unless the certificate of
<PAGE>
incorporation provides otherwise, directors serving on a classified board of
directors may be removed only for cause. The Company's Certificate of
Incorporation does not provide otherwise. Accordingly, if the classified board
proposal is approved by the stockholders, conforming By-Law provisions,
substantially in the form attached as Appendix B to this Proxy Statement, will
be implemented. Presently, all directors of the Company are elected annually and
all of the directors may be removed, with or without cause, by a majority vote
of the outstanding shares of the Common Stock. Cumulative voting is not
authorized by the Certificate of Incorporation.
The classified board proposal is designed to assure continuity and
stability in the board of directors' leadership and policies. While management
has not experienced any problems with such continuity in the past, it wishes to
ensure that this experience will continue. The Board of Directors also believes
that the classified board proposal will assist the Board of Directors in
protecting the interests of the Company's stockholders in the event of an
unsolicited offer for the Company.
Because of the additional time required to change control of the Board
of Directors, the classified board proposal will tend to perpetuate present
management. Without the ability to obtain immediate control of the Board of
Directors, a takeover bidder will not be able to take action to remove other
impediments to its acquisition of the Company, including, as discussed above,
the redemption of the Company's stockholder rights, the terms of which create
obstacles to an acquisition of the Company and empower the Board of Directors to
effect such a redemption. Because the classified board proposal will increase
the amount of time required for a takeover bidder to obtain control of the
Company without the cooperation of the Board of Directors, even if the takeover
bidder were to acquire a majority of the Company's outstanding stock, it will
tend to discourage certain tender offers, perhaps including some tender offers
that stockholders may feel would be in their best interests. The classified
board proposal will also make it more difficult for the stockholders to change
the composition of the Board of Directors even if the stockholders believe such
a change would be desirable.
The Board of Directors recommends a vote FOR Proposal 3. 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.
PROPOSAL 4
APPROVAL FOR AMENDMENT TO THE COMPANY'S
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
On March 13, 1986 the Company adopted, and on September 11, 1986 the
shareholders of the Company approved, and on November 20, 1996 the shareholders
amended, the Qualified Employee Stock Purchase Plan pursuant to which the
employees of the Company are given an opportunity to acquire Common Stock of the
Company (the "Stock") up to a certain percentage of each employee's compensation
through payroll deductions. The Board of Directors of the Company has approved
an amendment to the Qualified Employee Stock Purchase Plan, as set forth in the
form attached hereto as Appendix C (the "Qualified Plan"), which increases the
<PAGE>
number of shares of Common Stock subject to the Qualified Plan from 25,000 to
150,000 shares. The affirmative vote of a majority of the shares of Common Stock
present, or represented, and entitled to vote at the Annual Meeting is required
for approval of the amendment to the Qualified Plan.
The ability to offer the Company's employees an opportunity to acquire
shares of the Common Stock of the Company through payroll withholding at a 15%
discount from fair market value provides another means by which the Company may
compensate its employees and provide competitive compensation levels without
increasing its cash requirements. By providing competitive compensation levels
the Company can attract and retain competent personnel. Further, the Board
believes that an employee stock ownership plan, such as the Qualified Plan,
provides an incentive to employees to promote the best interests of the Company
because they have an opportunity to acquire a proprietary interest in the
Company and ultimately to benefit from appreciation in the value of the Stock.
The Board of Directors recommends a vote FOR Proposal 4.
Description of Plan
The following description of the Qualified Plan is merely a summary of
the plan and is qualified in its entirety by reference to the full text of the
Qualified Plan. If any part of the description of the Qualified Plan contained
in this document states anything different from the formal legal documents
governing the Qualified Plan, the formal legal plan documents will be considered
correct.
The Qualified Plan is not generally subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan
is not a qualified plan under Section 401 of the Code.
Nature and Purpose. The Plan allows eligible employees to purchase
shares of the Common Stock of the Company through payroll deductions at a price
equal to 85% of the lesser of the fair market value of the stock on the date of
the Company's receipt of the subscription or the date of the employee's exercise
of the right to purchase such shares. As amended, the maximum number of shares
that each eligible employee may subscribe for under the Qualified Plan shall be
subject to such limitations as from time to time established by the
Administrative Committee, which limitations shall apply equally to all
participants. The receipt of an approved subscription form by the Company from
an eligible employee shall be treated as the grant of a right to purchase the
shares subscribed for, and the accrual of a sufficient amount in such employee's
account to acquire a minimum of 100 shares of stock at the subscription price
shall be treated as the exercise of such purchase right.
The Qualified Plan is designed to attract and retain competent
personnel, to allow the Company to compete with other companies with respect to
compensation, to motivate Company employees to use their best efforts for the
benefit of the Company, and to provide employees an opportunity to acquire a
<PAGE>
proprietary interest in the Company thereby encouraging the promotion of the
Company's best interests and giving the employees an opportunity to share in
future growth of the Company.
Administration. The Qualified Plan is administered by a committee
appointed by the Board of Directors of the Company (the "Administration
Committee"). The Administration Committee is comprised of two or more
non-employee directors. In order to retain the services of qualified outside
directors, the Company has adopted a Non-Employee Director Stock Option Plan to
compensate directors for their service on the Board as well as on committees
thereof. The members of the Stock Option Committee are deemed to be the members
of the Administration Committee until otherwise designated by the Board. The
Administration Committee has the exclusive right to interpret, prescribe rules
and regulations for, and administer the Qualified Plan. In the event there is no
market for the Stock, the Administration Committee may determine the fair market
value of the Stock for purposes of the Qualified Plan. Also, the committee shall
be entitled to reduce employee's subscriptions in excess of prescribed amounts
under certain circumstances.
Securities to be Offered. The additional shares, if approved, would
authorize the Company to issue 150,000 shares of Stock under the Qualified Plan,
which represents an increase of 125,000 shares from the previously adopted
version of the plan. Of the 25,000 shares previously approved for issuance under
the plan, only 4,428 shares remain available for subscription under the plan as
of July 20, 1999. The Board believes that an increase in the number of shares
authorized under the Qualified Plan is warranted due to the limited number of
shares remaining available for subscription.
Subscription Amount. The Qualified Plan provides that the Administration
Committee shall establish from time to time the maximum number of shares that
may be acquired by any employee under the plan and such maximum shall apply
equally to all eligible employees. The plan allows an employee to subscribe for
less than the maximum number of shares and subsequently subscribe for additional
shares until he has subscribed for the maximum number of shares permitted. Each
new subscription shall be treated for all purposes under the plan as a separate
grant of a right to purchase the number of shares indicated on the subscription
form. However, in order to be able to subscribe for additional shares, an
employee must wait at least six months from the date of his last subscription,
or three months from the date of the withdrawal of a prior subscription, or
until all subscriptions outstanding to acquire shares under the Qualified Plan
have been paid in full.
Subscription Price/Purchase Price. The subscription price for Stock
acquired under the plan is 85% of the fair market value of the Stock on the day
the executed subscription form is received by the Company. The purchase price
for shares of Stock is the lesser of the subscription price or 85% of the fair
market value on the day the right to purchase is exercised. The Qualified Plan
includes a formula for determining the fair market value of the Stock on a given
date which expands upon the sources for determining the value of the Stock based
upon various possible markets for the Stock, including methods for determining
the fair market value of the Stock if it is traded on a national securities
exchange, quoted on the National Association of Securities Dealer Automated
Quotation ("NASDAQ") System or otherwise in the over-the-counter market, or if
<PAGE>
it is not traded or quoted at such time. Generally, the fair market value shall
be based upon the last sales price of the Stock on a given date if a minimum of
100 shares are sold on such date, or if no shares are sold on such date, based
upon the average of the high bid and low asked prices on such date, or if no
prices are available on such date, based upon the last sales price of the Stock
on the last prior date on which a minimum of 100 shares were sold. If the Stock
is not traded on an exchange or quoted by NASDAQ or in the over-the-counter
market, then the Administrative Committee shall be permitted to determine in
good faith the fair market value by any appropriate method. The closing price of
the Common Stock of the Company on the American Stock Exchange on July 20, 1999
was $8.875 per share.
Limitations on Subscriptions. Employees who own stock possessing 5% or
more of the total combined voting power or value of all classes of stock of the
Company are not eligible to subscribe for Stock under the Qualified Plan.
Further, no employee may subscribe to purchase Stock under all stock purchase
plans of the Company at a rate which exceeds $25,000 of the fair market value of
such stock for any calendar year in which such subscription is outstanding under
the Qualified Plan.
Payroll Deductions. The subscription price under the Qualified Plan
must be paid by payroll deduction from the employee's compensation. The plan
allows the Administration Committee to establish procedures and limitations
regarding payroll deductions; provided, however, that no payment period may be
structured so that the date of exercise of the purchase rights exceeds more than
twenty-seven (27) months from the date of grant of the purchase rights. Payroll
deductions shall begin when specified by the employee in the subscription form
or as soon as practicable thereafter but in no event later than two months after
the date specified by the employee.
Issuance of Stock. The Stock will only be issued by the Company when
the employee has completed paying for at least 100 shares (or any lesser amount
of shares under subscription) at the subscription price. If the purchase price
is less than the subscription price, the employee shall not be entitled to
acquire more shares than that number for which he subscribed. The plan provides
that the employee shall not be deemed to own the stock subscribed for until
issuance of the stock certificate representing such shares.
Withdrawal of Subscription. An employee may withdraw his subscription
at any time for any shares for which the right to purchase has not yet been
exercised and receive a refund of the balance in his account. An employee who
withdraws a subscription, however, shall not be entitled to subscribe for
additional shares until at least three (3) months after the last such
withdrawal.
Termination of Employment. Upon termination of a participating
employee's services because of death, permanent disability or retirement at age
55 or thereafter, the employee (or his estate) may prepay any subscription for
Stock within three (3) months thereafter in the case of permanent disability or
retirement, or within twelve (12) months thereafter in the case of death. If the
<PAGE>
participating employee's services are terminated for any other reason, the
employee will only be entitled to receive back the balance of his subscription
account.
Transferability. Neither the right of an employee to purchase shares
under the Qualified Plan, nor his account balance, may be transferred by the
employee by way of assignment, pledge or otherwise, except that, in the event of
death of the employee, such rights may be transferred by will or the laws of
descent and distribution.
Termination of Plan. The Qualified Plan became effective on September
11, 1986 following its approval by the stockholders of the Company. The
amendment to the plan is subject to and will become effective upon approval by
the stockholders of the Company. The Board may terminate the Qualified Plan at
any time, and may amend the Qualified Plan from time to time, subject to any
approval of the stockholders of the Company that may be required in order that
the Qualified Plan shall continue to qualify under Section 423 of the Code. Upon
termination of the Qualified Plan, participating employees shall, at the
discretion of the Board, either be permitted to complete unpaid subscriptions in
a manner determined by the Administrative Committee or shall be entitled to
receive the balance in their subscription account in satisfaction of all rights
under the Qualified Plan.
Interpretation of Plan. The Qualified Plan is intended, and shall be
interpreted, to meet and comply with all the requirements of Section 423 of the
Code, and related provisions.
Federal Income Tax Consequences
The Qualified Plan is intended to provide employees with the
opportunity to receive the special tax treatment afforded by Section 423 of the
Internal Revenue Code.
Under existing law, the following description summarizes the principal
Federal Income Tax Consequences of the purchase and disposition of shares of
Stock under the Qualified Plan.
Purchase of Shares. An employee does not realize, and does not have to
report any income for the year in which he subscribes nor for the year in which
he pays for Stock under the Qualified Plan, even though his purchase price is
the lesser of 85% of the fair market value of the Stock on the date he
subscribes, or on the date the right to purchase is exercised.
Disposition of Shares. Section 423 of the Internal Revenue Code
establishes a holding period which is important in determining how any gain on
disposition of shares acquired under the Qualified Plan is to be taxed. The term
"disposition" generally includes every sale, exchange, gift or transfer of legal
title except transfers made as the result of an employee's death. The holding
period provided under Section 423 is the later of two (2) years after the date
the employee subscribed or twelve (12) months after the date the shares are
transferred to him. An employee may have a different holding period for each 100
share unit of Stock acquired under the Qualified Plan.
<PAGE>
The issue of shares of Stock in the joint names of employee and another
person is not considered a disposition. Similarly, the issue of shares in an
employee's name and the subsequent transfer of such shares into the joint names
of the employee and another person do not constitute a disposition.
Sale After End of Holding Period. When an employee sells his shares
after the specified holding period, he is required to report the following on
his Federal Income Tax Return for the year in which the sale occurs:
Ordinary Income: The employee must report ordinary income in the
amount of the lesser of:
(1) 15% of the fair market value of the Stock on the date of his
subscription, or on the date of purchase, whichever is lower, or
(2) any excess of the fair market value of the Stock on the
date of sale over the purchase price.
If the employee's purchase price exceeds the fair market value on the
date of sale, no amount is reported as ordinary income.
Capital Gain or Loss: If the fair market value of the Stock on the date
of sale exceeds the lesser of the fair market value on the date of subscription
or the date of purchase, the employee must report the amount of such excess as
long term capital gain. On the other hand, if the purchase price exceeds the
fair market value on the date of sale, such excess is a long term capital loss.
Sale Before End of Holding Period. When an employee sells his shares
prior to the end of the specified holding period, he is required to report the
following on his Federal Income Tax Return for the year in which the sale
occurs:
Ordinary Income: The employee must report the excess of the fair market
value of the Stock on the date of exercise over his purchase price as ordinary
income. The "date of exercise" is the date when an employee's account is
credited with sufficient funds to purchase 100 shares of Stock (or such lesser
number as remain under a subscription agreement). Consequently, the employee
will normally have a different date of exercise for each 100-share unit of Stock
issued under the Plan.
Capital Gain or Loss: If the fair market value of the Stock on the date
of sale exceeds the fair market value on the date the employee exercised his
right to receive such shares, he must report such excess as capital gain. On the
other hand, if the fair market value on the date of exercise exceeds the fair
market value on the date of sale, the employee may report the amount of such
excess as capital loss. Any such capital gain or loss will be long term capital
gain or loss if the Stock is sold more than six (6) months after the date of
<PAGE>
exercise, but will be short term capital gain or loss if the Stock is sold
within six (6) months after the date of exercise.
In the case of a disposition before the end of the holding period, the
Company receives a tax deduction equal to the amount of ordinary income
recognized by the employee.
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.
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.
<PAGE>
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
2000, 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 April 12, 2000.
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
2000, 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 less than
60 days or more than 90 days prior to the Annual Meeting date in 2000.
By order of the Board of Directors,
HARRY G. McCOY
Chairman of the Board
and President
St. Paul, Minnesota
August 9, 1999
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1998 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.
<PAGE>
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, 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.
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
<PAGE>
should be directed to MEDTOX SCIENTIFIC, INC., Attention: Secretary, 402 West
County Road D, St. Paul, Minnesota 55112, (651) 636-7466.
<PAGE>
APPENDIX A
MEDTOX SCIENTIFIC, INC.
AMENDED ARTICLE FOURTH
OF CERTIFICATE OF INCORPORATION
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is SEVEN MILLION FOUR HUNDRED FIFTY THOUSAND (7,450,000)
shares, SEVEN MILLION FOUR HUNDRED THOUSAND of which shall be of a class
designated as Common Stock with a par value of FIFTEEN CENTS ($0.15) per share
and FIFTY THOUSAND 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.
<PAGE>
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 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 B
MEDTOX SCIENTIFIC, INC.
AMENDED ARTICLE FIFTH, SECTION 1.
OF CERTIFICATE OF INCORPORATION
FIFTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and stockholders, it is
further provided:
1. The number of directors of the Corporation shall not be less than
three nor more than twelve, the exact number within said limits to be fixed from
time to time by the vote of a majority of the directors then in office. The
Board of Directors shall be divided into three classes, designated Class I,
Class II and Class III, as nearly equal in number as possible, and the term of
office of Directors of one class shall expire at each annual meeting of
stockholders, and in all cases as to each Director until his successor shall be
elected and shall qualify or until his earlier resignation, removal from office,
death or incapacity. Additional directorships resulting from an increase in
number of Directors shall be apportioned among the classes as equally as
possible. The initial term of office of Directors of Class I shall expire at the
annual meeting of stockholders in 2000; that of Class II shall expire at the
annual meeting in 2001; and that of Class III shall expire at the annual meeting
in 2002; and in all cases as to each director until his successor shall be
elected and shall qualify or until his earlier resignation, removal from office,
death or incapacity. At each annual meeting of stockholders the number of
Directors equal to the number of Directors of the class whose term expires at
the time of such meeting (or, if less, the number of Directors properly
nominated and qualified for election) shall be elected to hold office until the
third succeeding annual meeting of stockholders after their election.
In case of any vacancies, by reason of an increase in the number of
directors, resignation or otherwise, directors to fill such vacancies shall be
elected by a majority of the directors then in office, and any such director so
elected shall hold office until the next succeeding election of directors in the
Class to which such director is assigned.
MEDTOX SCIENTIFIC, INC.
AMENDMENTS TO ARTICLE III,
Sections 1 and 5 of Bylaws
[In the event that the classified Board proposal is approved by shareholders,
the following conforming amendments will be made to Article III, Sections 1 and
5 of the Bylaws]
Article III
Directors
1. The property, affairs and business of the corporation shall be
managed by its Board of Directors consisting of not less than three (3) nor more
than twelve (12) persons. The exact number of directors within the maximum and
minimum limitations specified shall be fixed from time to time by resolution of
the Board of Directors. The Board of Directors shall be divided into three
classes, designated Class I, Class II and Class III, as nearly equal in number
as
<PAGE>
possible, and the term of office of Directors of one class shall expire at each
annual meeting of stockholders, and in all cases as to each Director until his
successor shall be elected and shall qualify or until his earlier resignation,
removal from office, death or incapacity. Additional directorships resulting
from an increase in number of Directors shall be apportioned among the classes
as equally as possible. The initial term of office of Directors of Class I shall
expire at the annual meeting of stockholders in 2000; that of Class II shall
expire at the annual meeting in 2001; and that of Class III shall expire at the
annual meeting in 2002; and in all cases as to each director until his successor
shall be elected and shall qualify or until his earlier resignation, removal
from office, death or incapacity. At each annual meeting of stockholders the
number of Directors equal to the number of Directors of the class whose term
expires at the time of such meeting (or, if less, the number of Directors
properly nominated and qualified for election) shall be elected to hold office
until the third succeeding annual meeting of stockholders after their election.
Directors need not be stockholders.
5. At any special meeting of the stockholders, duly called as provided
in these Bylaws, any director or directors may by the affirmative vote of the
holders of a majority of all the shares of stock outstanding and entitled to
vote for election of directors be removed from office, but only for cause, and
his successor or their successors may be elected at such meeting; or the
remaining directors may, to the extent vacancies are not filled by such
election, fill any vacancy or vacancies created by such removal.
<PAGE>
APPENDIX C
MEDTOX SCIENTIFIC, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
WHEREAS, MEDTOX Scientific, Inc., a Delaware corporation (the
"Company"), adopted the Environmental Diagnostics, Inc. Qualified Employee Stock
Purchase Plan (the "Plan") to offer its employees the right to purchase its
Common Stock, $0.15 par value per share ("Stock"), on March 13, 1986;
WHEREAS, the Plan was approved by the Company's shareholders
on September 11, 1986;
WHEREAS, pursuant to Section 14 of the Plan, the Board of
Directors of the Company may amend or modify the Plan at any time, subject to
any required shareholder approval;
WHEREAS, the Company desires to amend and restate the Plan and
to increase the number of shares authorized under the Plan, subject to and
effective upon shareholder approval;
NOW, THEREFORE, pursuant to premises and covenants herein
contained, the Company does hereby amend and restate the Plan subject to and
effective upon shareholder approval which shall read as follows:
SECTION 1. EMPLOYEES ENTITLED TO PARTICIPATE.
An individual is eligible to participate in the Plan if (a) he
is regularly scheduled to work for more than twenty hours per week and five
months per calendar year; (b) he is employed by the Company or any other
corporation in which the Company owns or acquires, directly or indirectly, at
least 50% of the total combined voting power of all classes of stock, if such
corporation has been designed as a participating corporation by the
Administration Committee; and (c) he agrees to pay the subscription price by
payroll deduction. In accordance with the requirements of Section 423 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), all
employees granted subscriptions under the Plan shall have the same rights and
privileges hereunder, subject to the provisions of federal and state securities
laws that may effect transactions made pursuant to the Plan by certain employees
who may be deemed to be insiders of the Company.
It is intended that the Plan allow for broad-based employee
participation and not discriminate in favor of highly compensated employees.
Accordingly, the Plan shall be administered in compliance with Section 410(b) of
the Internal Revenue Code with regard to the broad-based participation
requirement and Section 401(a)(4) of the Internal Revenue Code with regard to
the nondiscrimination requirement. Accordingly, the Plan shall be interpreted in
accordance with such provisions as now written or as hereafter amended.
<PAGE>
SECTION 2. SUBSCRIPTION PRICE.
The subscription price hereunder shall be the lesser of (a)
85% of the fair market value of the Stock on the day the executed subscription
form is received by the Company, or (b) 85% of the fair market value of the
Stock on the day the right to purchase is exercised, as provided in Section 7(A)
below. For purposes of this Plan, the "fair market value" of the Stock shall be
determined as set forth below.
If the Stock is traded on a national securities exchange, then
the "fair market value" on a date shall be the closing price of the Stock on
such exchange based on the sale of a minimum of 100 shares of Stock; if less
than 100 shares are traded on such date, then the fair market value shall be the
average of the high bid and low asked prices on such date; or if no prices are
quoted on such date, then the fair market value shall be the closing price of
the Stock on such exchange based on the sale of a minimum of 100 shares of Stock
on the last prior date on which at least 100 shares were sold.
If the Stock is not traded on a national securities exchange,
but is quoted in the over-the-counter market as reported on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System on a
date, then the "fair market value" of the shares on such date shall be the last
sale price reported by the NASDAQ System or the NASDAQ National Market System,
as applicable, based on the sale of a minimum of 100 shares of Stock; if less
than 100 shares are traded on such date, then the fair market value shall be the
average of the high bid and low asked prices on such date as reported by NASDAQ
System or the NASDAQ National Market System, as applicable; or if no prices are
quoted on such date, then the fair market value shall be the last sale price of
the Stock as reported by NASDAQ based on the sale of a minimum of 100 shares of
Stock on the last prior date on which at least 100 shares were sold.
If the Stock is not traded on a national securities exchange
or reported by NASDAQ, if any broker-dealer makes a market for the Stock, then
the "fair market value" of the shares on a date shall be the average of the
highest and lowest quoted selling prices of the Stock on that date, said average
to be based on the sale of a minimum of 100 shares of Stock; if less than 100
shares are traded on such date, then the fair market value of the shares on such
date shall be the average of the high bid and low asked prices on such date in
such market; or if no prices are quoted on such date, then the fair market value
of the shares on such date shall be the average of the highest and lowest quoted
selling prices of the Stock based on the sale of a minimum of 100 shares of
Stock on the last prior date on which at least 100 shares were sold.
If the Stock is not traded in any established market and no
broker-dealer makes a market in the Stock, then the "fair market value" shall be
the fair value thereof as determined in good faith by the Administration
Committee pursuant to any appropriate method selected by the Committee.
<PAGE>
SECTION 3. NUMBER OF SHARES AUTHORIZED.
The total number of shares of Stock authorized to be issued
hereunder is 150,000 shares, which shall be newly issued shares. Additional
shares may be authorized to be issued hereunder from time to time by the Board
of Directors of the Company, provided that the stockholders of the Company
approve such increase within twelve (12) months before or after such action by
the Board of Directors.
SECTION 4. SUBSCRIPTIONS.
A. How to Subscribe.
Any eligible employee may subscribe hereunder by executing and
mailing or delivering to the Secretary of the Company or any representative
designated by him a subscription form approved by the Administration Committee.
The receipt of such subscription form by the Company shall constitute the grant
to the employee (and the acceptance by him) of a right to purchase the number of
shares indicated on the form at the subscription price and subject to the terms
and conditions contained herein, except that no such right shall be deemed to
have been granted (i) during any period in which the offering of Stock under
this Plan does not comply with the requirements of the Securities Act of 1933,
as amended, or any applicable state securities law, or (ii) if subscriptions
have been issued for the total number of shares authorized to be issued or
transferred hereunder.
B. Number of Shares for Which Employee May Subscribe.
The maximum number of shares which an eligible employee may
subscribe for under the Plan shall be subject to such limitations from time to
time established by the Administration Committee. The maximum number shall apply
equally to all eligible participants. An employee may subscribe for less than
the maximum number of shares and may successively subscribe for additional
shares until he has subscribed for the maximum number of shares permitted;
provided, however, that the receipt of each new subscription by the Company
shall be considered to be a separate grant of a right to purchase the number of
shares indicated on the subscription form for all purposes hereunder and shall
be subject to the waiting periods provided below.
C. Waiting Period.
An employee who has subscribed for less than the maximum
number of shares may not subscribe for additional shares unless (i) at least six
(6) months have elapsed since the date of receipt of his last prior subscription
form, (ii) such employee has withdrawn a prior subscription and at least three
(3) months have elapsed since the date of his last withdrawal, or (iii) all
prior subscriptions by the employee to acquire shares under the Plan have been
paid in full.
<PAGE>
D. Limitations on Subscriptions.
Notwithstanding any provision herein, an employee shall not be
entitled to subscribe hereunder if, immediately after receipt of the
subscription form by the Company, such employee owns stock possessing 5% or more
of the total combined voting power or value of all classes of stock of his
employer corporation or its parent or any subsidiary corporation. For purposes
of the preceding sentence, the rules of Section 424(d) of the Internal Revenue
Code shall apply in determining the stock ownership of an employee, and stock
which the employee may purchase under outstanding subscriptions hereunder or
under any other stock option plan shall be treated as stock owned by the
employee. Notwithstanding any provision herein, if the rights of an employee to
purchase stock under all stock purchase plans (to which Section 423 of the
Internal Revenue Code is applicable) of his employer corporation and its parent
and subsidiary corporations accrue (within the meaning of and subject to the
rules contained in Section 423(b)(8) of the Internal Revenue Code) at a rate
which exceeds $25,000 of fair market value of such stock (determined at the time
the subscription form is received by the Company) for any calendar year in which
such subscription is outstanding at any time, such employee's subscription shall
be reduced, in the manner prescribed by the Administration Committee, so that
the employee's rights do not accrue at a rate which exceeds $25,000 of fair
market value of such stock for such calendar year as described above.
SECTION 5. PAYMENT OF SUBSCRIPTION PRICE.
A. Payroll Deductions.
Payment of the subscription price under the Plan shall be made
by payroll deductions pursuant to such procedures and limitations as established
from time to time by the Administration Committee. Beginning on the date
specified in the subscription form, or as soon as practicable for the Company
thereafter, but in no event later than two months after the date specified,
deductions for payment of the subscription prices shall be made from each
regular payroll check for a participating employee until all of his
subscriptions have been paid or withdrawn, but in no event may the payment
period be structured so that the date of exercise of the purchase rights as
provided in Section 7(A) hereof exceeds twenty-seven (27) months from the date
of grant of such purchase rights. If local law prohibits payroll deductions for
such purpose, any alternative method approved by the Administration Committee
may be substituted. All payments shall be forwarded monthly to the Treasurer of
the Company.
B. Prepayment of Subscription Price.
No prepayment of subscription prices may be made except
as provided in Sections 9 and 14 below.
<PAGE>
SECTION 6. SUBSCRIPTION ACCOUNTS.
A subscription account shall be created for each participating
employee and all amounts withheld from his compensation shall be credited to
such account. Amounts credited to such accounts shall be available for the
general use of the Company. The Company will provide a statement at least once
each year of the remaining balance in each participating employee's account.
SECTION 7. ISSUANCE OF STOCK.
A. Completion of Payment for 100 Share Unit.
When the subscription account of any employee contains
an amount equal to at least 100 shares or any lesser number of shares under
subscription (on a first in first out basis) multiplied by 85% of fair market
value of the Stock on the day the executed subscription form is received by the
Company, the employee shall be deemed to have exercised the right to purchase
100 or such lesser number of shares. Thereafter the employee's account shall be
debited for the subscription price (as defined in Section 2) of such shares, and
the Company shall issue or cause to be transferred to the employee a certificate
for such shares within a reasonable time. If the fair market value on the day of
exercise is below that on the day the executed subscription was received by the
Company, the employee's subscription account shall be charged for only an amount
equal to 85% of the fair market value on such exercise date of the shares then
acquired and the balance in the account shall be held to pay for additional
shares under subscription, if any, or returned if no additional shares are then
under subscription. The number of shares purchased shall in every case be
determined solely by reference to the fair market value on the date the executed
subscription form is received by the Company, and may not be increased by reason
of any subsequent decline in fair market value.
B. Rights as Stockholders.
Nothing in this Plan shall confer upon any participating
employee any rights as a stockholder except the right to be issued a stock
certificate for fully-paid shares of Stock as provided herein, and until such
issuance, the participating employee shall not be deemed the owner of any such
shares for any purpose.
C. Extension of Time for Delivery.
The time of issuance and delivery of shares may be postponed
for such period as may be required to comply with registration requirements
under the Securities Act of 1933, as amended, listing requirements of any stock
exchange upon which Stock may be listed, if any, and the requirements under any
other law or regulation applicable to the issuance or transfer of such shares.
<PAGE>
SECTION 8. WITHDRAWAL OF SUBSCRIPTIONS.
Any employee may withdraw any subscription upon filing a
notice thereof with the person designated by and on the form approved by the
Administration Committee. Said subscription shall thereupon be canceled as to
all shares with respect to which the right to purchase has not been exercised as
provided in Section 7(A) above. If the employee withdraws all his subscriptions
hereunder, he will be entitled to receive the balance of his account within
thirty (30) days after the receipt of such notice. If an employee withdraws a
subscription, he shall not be entitled to subscribe for additional shares for
three (3) months after the last such withdrawal.
SECTION 9. TERMINATION OF EMPLOYMENT.
A. Death, Permanent Disability and Retirement.
If a participating employee's services are terminated before
his subscription is fully paid, because of death, permanent disability or
retirement at age 55 or thereafter, the employee (or, in the case of death, his
estate) may, at his option, within three (3) months thereafter in the case of
such permanent disability or retirement or within twelve months thereafter in
the case of death, prepay his subscription in whole or in part, or receive the
balance of his subscription account in satisfaction of all rights under the
Plan.
B. Other Termination of Service.
If a participating employee's services are terminated before
his subscription is fully paid, for any reason other than death, permanent
disability or retirement at age 55 or thereafter, the employee will be entitled
to receive only the balance of his subscription account. Such payment shall
constitute satisfaction of all his rights under this Plan, and all remaining
subscriptions hereunder shall be deemed withdrawn.
C. Temporary Absence.
Any employee whose name is taken off the regular payroll by
reason of leave of absence, temporary layoff, or through temporary disability,
may at his option (i) withdraw his subscriptions hereunder and receive the
amount to which he would be entitled if his services were terminated for any
reason as provided in subparagraph (B) hereof, or (ii) make regular periodic
payments to the Treasurer of the Company in an amount equal to the sum which
would have been withheld had he continued on the regular payroll.
<PAGE>
SECTION 10. RIGHTS NOT TRANSFERABLE.
Neither the right of an employee to purchase shares hereunder,
nor his account balance, shall be transferable by the employee (by way of
assignment, pledge, or otherwise) except by will or the laws of descent and
distribution, and neither such right nor such balance shall be liable for or
subject to the debts or liabilities of such employee. If any action is taken by
the employee to so transfer such right or balance, such action shall be deemed
to constitute a withdrawal of the subscription involved.
SECTION 11. ADMINISTRATION COMMITTEE.
This Plan shall be administered by an Administration Committee consisting
of two or more non-employee directors of the Company, who shall be appointed by
its Board of Directors. The Committee, or a majority thereof, shall have the
authority to interpret this Plan, to prescribe rules and regulations thereunder,
and to make all other determinations necessary or advisable for the Plan's
administration. The members of the Committee shall serve until their successors
have been appointed by the Board of Directors.
SECTION 12. ADJUSTMENTS.
In the event of a dividend payable in Common Stock of the
Company or a subdivision or combination of the Common Stock of the Company, the
number of shares offered under this Plan, and the number of shares offered by
options outstanding under the Plan, shall be increased or decreased
proportionately, as the case may be, without change in the aggregate
subscription price for such shares. In case the Company is reorganized or merged
or consolidated with another corporation, appropriate provisions shall be made
for the protection and continuation of any outstanding subscriptions under the
Plan by the substitution on an equitable basis determined by the Board of
Directors of appropriate stock or other securities of the reorganized, merged or
consolidated corporation which will be issuable in respect of the Stock.
SECTION 13. TAX ON ADDITIONAL COMPENSATION.
In the event that the issuance or disposition of any Stock
subscribed hereunder results in additional compensation to an employee under
federal, state or foreign laws which require that the tax thereon be withheld,
the Company and its subsidiaries will deduct from the employee's compensation
the amount required for such withholding. Until such tax is withheld or
otherwise paid by the employee to the Company, Stock paid for but unissued or
undelivered hereunder will be held by the Company in issued form as security for
the amount required to be withheld.
<PAGE>
SECTION 14. TERM OF PLAN.
This amended and restated Plan is subject to and shall become
effective upon approval by the stockholders of the Company. The Board of
Directors may terminate the Plan at any time, and may amend the Plan from time
to time, subject to any approval of the stockholders of the Company that may be
required in order that the Plan shall continue to qualify under Section 423 of
the Internal Revenue Code. Upon termination of the Plan, participating employees
shall, in the discretion of the Board of Directors, either be permitted to
complete unpaid subscriptions in a manner determined by the Administration
Committee or shall be entitled to receive the balance in their subscription
account in satisfaction of all rights under the Plan.
SECTION 15. INTERPRETATION OF THE PLAN.
It is intended that this Plan shall meet and comply with all
the requirements of Section 423 of the Internal Revenue Code, and related
Sections. The Plan and the terms used herein shall be interpreted by the
Administration Committee in such manner as to carry out such intention, and in
particular, the grant of a right to purchase shares hereunder shall be deemed to
constitute the grant of an option under Section 423 of the Internal Revenue
Code, and the exercise of the right to purchase hereunder shall be deemed to
constitute the exercise of an option under such Section.
IN WITNESS WHEREOF, the Company has caused these instruments to be
executed by its duly authorized officers and its corporate seal to be hereunto
affixed, all as of the day and year first above written.
MEDTOX SCIENTIFIC, INC.
ATTEST:
___________________________ By:________________________________
Secretary President
(Corporate Seal)
<PAGE>
APPENDIX D
MEDTOX SCIENTIFIC, INC.
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 16, 1999
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 Sheraton Minneapolis Metrodome, located at 1330 Industrial Blvd.,
Minneapolis, Minnesota on or about Thursday, September 16, 1999, 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 AGAINST ABSTAIN
For Withheld
Nominees: Harry G. McCoy, Samuel 2. The adoption of an Amendment
C. Powell, Richard J. Braun, to the Certificate of
James W. Hansen and Miles E. Efron Incorporation to increase the numberof
authorized common stock as set forth
in the Proxy Statement.
1. Election of Directors 3. The adoption of an Amendment
to the Certificate of Incorporation
to provide for the classification of
the Board of Directors as set forth
in the Proxy Statement.
4. The adoption of an
amendment to the Employee Stock
Purchase Plan as set forth in the
Proxy Statement
5. Considering and acting upon any
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 Proposals 2, 3
and 4, this Proxy will be voted FOR Proposals 2, 3 and 4.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement dated August 9, 1999.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY IN THE ENVELOPE PROVIDED.
SIGNATURE(S) ____________________________ Dated:______, 1999
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.
