SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement |_| Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
OAK TREE MEDICAL SYSTEMS, INC.
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
OAK TREE MEDICAL SYSTEMS, INC.
163-03 Horace Harding Expressway
Flushing, New York 11365
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 9, 1998
--------------------
TO: THE STOCKHOLDERS OF OAK TREE MEDICAL SYSTEMS, INC.
Please take notice that the Annual Meeting of Stockholders of Oak Tree
Medical Systems, Inc. (the "Company"), will be held at Hotel Inter-Continental
Miami, 100 Chopin Plaza, Miami, Florida 33131, on Monday, March 9, 1998 at 10:00
a.m. for the following purposes:
1. To elect two (2) directors of the Company's Board of Directors,
each to serve until the next annual meeting of stockholders and until their
respective successors have been duly elected and qualified.
2. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on February 6, 1998
as the record date for the purpose of determining the stockholders entitled to
notice of, and to vote at, the meeting. A list of the stockholders entitled to
vote at the meeting will be open to the examination of any stockholder of the
Company for any purpose germane to the meeting during ordinary business hours,
at the law firm of Greenberg Traurig, 1221 Brickell Avenue, Miami, Florida
33131, for the 10-day period prior to the meeting.
You are requested, whether or not you plan to be present at the meeting, to
mark, date, sign and return promptly the accompanying proxy in the enclosed
envelope to which no postage need be affixed if mailed in the United States. You
may revoke your proxy for any reason at any time prior to the voting thereof,
and if you attend the meeting in person you may withdraw the proxy and vote your
own shares.
By Order of the Board of Directors,
/S/ HENRY DUBBIN
----------------
HENRY DUBBIN
President
Dated: February 25, 1998
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF
OAK TREE MEDICAL SYSTEMS, INC.
163-03 Horace Harding Expressway
Flushing, New York 11365
----------------------
PROXY STATEMENT
----------------------
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of Oak Tree Medical Systems, Inc. (the "Company"), for use at the
Annual Meeting of Stockholders to be held at Hotel Inter-Continental Miami, 100
Chopin Plaza, Miami, Florida 33131, on Monday, March 9, 1998 at 10:00 a.m., and
at any adjournment or adjournments thereof. All proxies in the accompanying form
which are properly executed and duly returned will be voted in accordance with
the instructions specified therein. If no instructions are given, such proxies
will be voted (i) FOR the election of the nominees named below under the caption
"Election of Directors" and (ii) in the discretion of the proxies named on the
proxy card with respect to any other matters properly brought before the Annual
Meeting. The proxy may be revoked at any time prior to its exercise by written
notice to the Company, by submission of another proxy bearing a later date, or
by voting in person at the meeting. The approximate date of mailing of this
Proxy Statement and the accompanying proxy to stockholders is February 25, 1998.
VOTING SECURITIES -- RECORD DATE
Only holders of the Company's common stock, par value $.01 per share (the
"Common Stock"), of record at the close of business on February 6, 1998 (the
"Record Date"), will be entitled to notice of and vote at the meeting or any
adjournment or adjournments thereof. On that date, 4,569,025 shares of Common
Stock were issued and outstanding. Each outstanding share entitles the holder
thereof to one vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, the number of shares
of Common Stock (and the percentage of Common Stock) beneficially owned by (i)
each person known to the Company to be the beneficial owner of more than 5% of
the Common Stock, (ii) each director and nominee of the Company, (iii) each of
the Named Executives (as defined under "Executive Compensation"), and (iv) all
directors, nominees and executive officers of the Company as a group (based upon
information furnished by such persons). Under the rules of the Securities
Exchange Commission (the "Commission"), a person is deemed to be a beneficial
owner of a security if such person has or shares the power to vote or direct the
voting of such security or the power to dispose of or to direct the disposition
of such security. In general, a person is also deemed to be a beneficial owner
of any securities of which that person has the right to acquire beneficial
ownership within 60 days. Accordingly, more than one person may be deemed to be
a beneficial owner of the same securities.
<PAGE>
Name and Address of Number of Shares Percent
Beneficial Owner Beneficially Owned of Class
- ---------------- ------------------ --------
Burton Dubbin(1)............................ 425,000 8.6%
21394 Marina Cove Circle, Unit H11
North Miami Beach, FL 33180
Henry Dubbin(2)............................. 978,375 20.3%
10155 Collins Avenue, Suite 607
Bal Harbor, FL 33154
FYM, Inc.................................... 465,625 10.2%
1350 East Flamingo Road, #882
Las Vegas, NV 89119
William Kedersha............................ 22,500 *
2 Gannett Drive, Suite 215
White Plains, NY 10604
Nevada Minerals Corporation................. 728,375 15.9%
10155 Collins Avenue, Suite 607
Bar Harbour, FL 33154
Fred L. Singer(3)........................... 20,000 *
9240 West Bay Harbor Dr., Apt. 3-C
Bay Harbor Islands, FL 33154
Irene Stack(4).............................. 684,391 15.0%
16504 Stonehaven Road
Miami Lakes, FL 33014
All officers and directors as a group....... 998,375 20.7%
(2 persons)(5)
- ----------------------------
* Less than 1%.
(1) Includes 375,000 shares of Common Stock subject to currently exercisable
options.
(2) Includes (i) 728,375 shares of Common Stock that Mr. Dubbin beneficially
owns through Nevada Minerals Corporation, a corporation of which he is the
majority stockholder and president, and (ii) 250,000 shares of Common Stock
subject to currently exercisable options.
(3) Includes 15,000 shares of Common Stock subject to currently exercisable
options.
(4) Includes 465,625 shares of Common Stock that Mrs. Stack beneficially owns
through her wholly owned corporation, FYM, Inc.
(5) Includes 265,000 shares of Common Stock subject to currently exercisable
options and 728,375 shares of Common Stock held by Nevada Minerals
Corporation.
Change in Control
In September 1997, the Company entered into a letter of intent to acquire
certain companies controlled directly or indirectly by Pierce Neuman, M.D. The
assets of these companies consist primarily of 21 medical practice and MRI
centers located in the greater New York metropolitan area. The letter of intent
was further amended in December 1997. Collectively, the centers had revenues of
approximately $65 million and estimated pre-tax profits in excess of $19 million
in calendar year 1997. Pursuant to the proposed transaction, which shall
2
<PAGE>
take effect, if at all, upon execution of a definitive written agreement, Dr.
Neuman will own or control approximately 60% of the Company's outstanding shares
of Common Stock. There can be no assurance, however, that the Company will
successfully negotiate such definitive written agreement for the purchase of
these centers or meet its obligations of raising capital to complete the
acquisition or that all the other conditions to closing will be met by any of
the parties to the transaction.
Compliance with the Securities Exchange Act
The Company's executive officers and directors are required under the
Securities Exchange Act of 1934, as amended, to file reports of ownership and
changes in ownership of Common Stock with the Commission. To the Company's
knowledge, based solely on review of the copies of such reports furnished to the
Company, all Section 16(a) filing requirements during the fiscal year ended May
31, 1997 ("Fiscal 1997") have been complied with, except as follows: Mr. Henry
Dubbin did not file a Form 4 on a timely basis to report his disposition of
shares of Common Stock, and Mr. Singer did not file a Form 3 and a Form 4 on a
timely basis to report his appointment as a director of the Company and his
acquisition of shares of Common Stock, respectively.
ELECTION OF DIRECTORS
Nominees for Election
It is proposed to elect a Board of two directors to hold office until the
next annual meeting of stockholders and until their respective successors are
duly elected and qualified. All of the nominees set forth below are currently
members of the Board of Directors. Unless instructed otherwise, the enclosed
proxy will be voted FOR the election of the nominees named below. Voting is not
cumulative. While management has no reason to believe that the nominees will not
be available as candidates, should such a situation arise, proxies may be voted
for the election of such other persons as a director as the holders of the
proxies may, in their discretion, determine. The election of each nominee for
director requires a plurality of votes cast.
The Board of Directors recommends a vote FOR the election of the nominees
listed below.
The names and ages, along with certain biographical information (based
solely on information supplied by them), of the directors of the Company and
nominees for election as directors of the Company are as follows:
HENRY DUBBIN (age 82) has served as President of the Company since April
1997 and a director of the Company since May 1993. Mr. Dubbin also served as
Vice Chairman of the Board of Directors and Vice President of the Company from
May 1993 to April 1997. Mr. Dubbin currently is the President of Nevada Minerals
Corporation, a diversified company engaged in the mining business. From 1955 to
1992, Mr. Dubbin worked with Canaveral International, Inc., a diversified public
company, from which he retired as Chairman of the Board.
FRED L. SINGER (age 64) has served as a member of the Board of Directors
since April 1997 and as Vice President of the Company since August 1997. Since
1963, Mr. Singer has served as director, producer and cinematographer for
Coronado Productions, a/k/a Coronado Studios, a video production company.
All directors shall hold office until the next annual meeting of the
stockholders of the Company and until their successors have been duly elected
and qualified, or until their death, resignation or removal. Pursuant to the
By-Laws of the Company, the Board of Directors has set the number of directors
at two.
Information Concerning the Board of Directors
The Board of Directors of the Company currently has no committees.
3
<PAGE>
During Fiscal 1997, there were four meetings of the Board of Directors of
the Company, and no director attended fewer than 75% of the meetings of the
Board of Directors. The Board of Directors also acts from time to time by
unanimous written consent in lieu of meetings.
All officers and directors are reimbursed for any expenses incurred on
behalf of the Company. Directors, other than officers of the Company, are
reimbursed for expenses pertaining to attendance at meetings of the Company's
Board of Directors, including travel, lodging and meals.
EXECUTIVE OFFICERS
The directors and executive officers of the Company and their positions as
of the Record Date were as follows:
Name Age Position
---- --- --------
Henry Dubbin 82 President and Director
Fred L. Singer 64 Vice President and Director
Effective February 5, 1998, Gary Danziger resigned as Chief Operating
Officer, Vice President and a director of the Company. Mr. Danziger served as
Chief Operating Officer and Vice President of the Company from April 1997 and as
a member of the Board of Directors from July 1997.
Burton Dubbin, the son of Mr. Henry Dubbin, resigned as Vice President of
the Company in August 1997. Mr. Burton Dubbin had served as Vice President of
the Company from April 1997.
On April 16, 1997, Michael J. Gerber resigned his various positions with
the Company. Mr. Gerber was President and a director of the Company from
September 1995 and was Secretary of the Company from August 1996.
William Kedersha resigned as a director of the Company in March 1997 and as
Chief Executive Officer in April 1997. Mr. Kedersha served as Chief Executive
Officer and a director of the Company from September 1996 and prior to that he
served as a consultant to the Company from March 1996.
On August 29, 1996, Irwin Bosh Stack resigned his various positions with
the Company. Mr. Stack was the Chairman of the Board, Secretary and a director
of the Company from its incorporation in May 1986 until August 1996, and Chief
Operating Officer of the Company from May 1993 until August 1996.
The Company's officers are elected by, and serve at the pleasure of, the
Board of Directors, subject to the terms of any employment agreements. Mr. Henry
Dubbin has entered into an employment agreement with the Company. Mr. Burton
Dubbin is the son of Mr. Henry Dubbin. No other family relationships exist
between any directors or executive officers of the Company.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the annual
and long-term compensation for services in all capacities to the Company of
those persons who were the Chief Executive Officer during Fiscal 1997 and other
most highly compensated executive officers of the Company who earned over
$100,000 during the 1997, 1996 and 1995 fiscal years (collectively, the "Named
Executives").
4
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------
Annual Long-Term Compensation
Compensation
-----------------------------------------------------------------
Common
Restricted Stock
Fiscal Other Annual Stock Underlying
Name and Principal Position Year Salary Compensation Award(s) Options
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Henry Dubbin 1995 -0- -0- -0- 250,000
President 1996 -0- -0- -0- -0-
1997 $15,414 -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------
Irwin Bosh Stack 1995 $35,000 -0- -0- 250,000
Chairman of the Board, Chief 1996 -0- -0- -0- -0-
Operating Officer and Secretary(1) 1997 -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------
William Kedersha 1997 $76,192 -0- $55,547 375,000
Chief Executive Officers(2)
- ------------------------------------------------------------------------------------------------------------
Michael J. Gerber 1996 -0- -0- -0- 55,000
President(3) 1997 -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------
Gary Danziger(4) 1997 $120,641 $100,000 -0- 350,000
Chief Operating Officer
- ------------------------------------------------------------------------------------------------------------
Burton Dubbin(5) 1997 -0- -0- -0- 375,000
Vice President
============================================================================================================
</TABLE>
(1) Mr. Stack resigned all of his positions with the Company on August 29,
1996, and options to acquire 250,000 shares of Common Stock expired upon
his resignation.
(2) Mr. Kedersha resigned as a director of the Company in March 1997 and as
Chief Executive Officer of the Company effective April 30, 1997. Includes
the market value, as of May 30, 1997, of 22,500 shares of restricted stock
issued to Mr. Kedersha pursuant to his settlement agreement with the
Company. Options to acquire 375,000 shares of Common Stock were cancelled
as of May 1, 1997.
(3) Mr. Gerber resigned all of his positions with the Company on April 16,
1997. Options to acquire 5,000 shares of Common Stock expired on September
7, 1997, and the remaining options to acquire 50,000 shares of Common Stock
expired upon Mr. Gerber's resignation in April 1997.
(4) Mr. Danziger resigned all of his positions with the Company on February 5,
1998. Deferred compensation of $100,000 and options to acquire 350,000
shares of Common Stock were cancelled upon Mr. Danziger's resignation
effective February 5, 1998.
(5) Mr. Burton Dubbin resigned as Vice President of the Company on August 29,
1997.
The following tables set forth certain information concerning stock option
grants made during the Fiscal 1997 to the Named Executives and the fiscal
year-end value of such options.
5
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise
Name Options Employees Price Expiration Date
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gary Danziger 350,000 32% $1.00 February 5, 1998
- ----------------------------------------------------------------------------------------------------------
Burton Dubbin 375,000 34% $1.69 August 31, 2007
- ----------------------------------------------------------------------------------------------------------
William Kedersha 375,000 34% $1.69 May 1, 1997
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=================================================================================================================
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTIONS VALUES
- -----------------------------------------------------------------------------------------------------------------
Value of Unexercised In-
Shares Acquired on # of Unexercised Options the-Money Options at Fiscal
Exercise at Fiscal Year End Year End(1)
- ----------------------------------------- Value -------------------------------------------------------------
Name Realized Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Henry Dubbin 0 0 $0 250,000 0 $121,094 $0
- -----------------------------------------------------------------------------------------------------------------
Michael J. Gerber 0 0 $0 5,000 0 $4,122 $0
- -----------------------------------------------------------------------------------------------------------------
Gary Danziger 0 0 $0 350,000 0 $519,531 $0
- -----------------------------------------------------------------------------------------------------------------
Burton Dubbin 0 0 $0 0 375,000 $0 $297,891
=================================================================================================================
</TABLE>
(1) Value is calculated on the basis of the difference between the option
exercise price and the average of the bid and asked prices for the Common
Stock at May 30, 1997 as quoted on the over-the-counter market, multiplied
by the number of shares underlying the option.
Employment Agreements
The Company has an employment agreement with Henry Dubbin, as amended
September 1997, expiring June 1998 and providing for a salary of $50,000 per
year. For fiscal 1994, salary due Mr. Dubbin in the amount of $54,375 was
converted into a note, which was subsequently cancelled by Mr. Dubbin. Mr.
Dubbin waived his salary for the 1995 and 1996 fiscal years.
Gary Danziger had a three-year employment agreement with the Company, as
amended in July 1997, expiring in October 1999, which provided for (i) an annual
salary of $260,000, (ii) deferred compensation for the year ended May 31, 1997
of either $100,000 or 50,000 shares, (iii) incentive bonuses of up to $30,000
per quarter, (iv) options to acquire 350,000 shares of Common Stock, exercisable
at $1.00 per share until October 1, 1998, (v) a loan facility of $350,000,
payable in three years from the date of borrowing at interest of 7% per annum
and (vi) severance equal to 200% or 100% of annual salary if terminated during
twelve months ended September 30, 1998 or 1999, respectively. As part of his
settlement agreement with the Company upon his resignation, Mr. Danziger
received approximately $100,000 in cash and like considerations and a physical
therapy contract with a hospital in Westchester County, New York.
The Company had an employment agreement with William Kedersha, effective as
of December 3, 1996. Under the agreement, Mr. Kedersha was to receive an annual
salary of $150,000 and incentive bonuses. In addition, the agreement granted Mr.
Kedersha ten year options to purchase 375,000 shares of Common Stock at an
exercise price equal to $1 11/16 per share. The options granted to Mr. Kedersha
were cancelled upon his resignation in April 1997. In September 1997, the
Company issued 22,500 shares of Common Stock to Mr. Kedersha as part of a
settlement agreement.
6
<PAGE>
The Company had an employment agreement with Irwin Bosh Stack, providing
for a salary of $85,000 per year. For 1994 fiscal year, salary due Mr. Stack in
the amount of $63,500 was converted into a note, which was subsequently
cancelled by Mr. Stack. Mr. Stack took a reduced salary of $35,000 for the 1995
fiscal year and waived his salary for the 1996 fiscal year. Mr. Stack resigned
all positions with the Company on August 29, 1996.
In January 1995, in consideration of past services, the Company granted to
each of Messrs. Stack and Henry Dubbin options to acquire 250,000 shares of
Common Stock, exercisable at $2.00 per share until January 1, 1999. Options
granted to Mr. Stack expired upon his resignation in August 1996.
Certain Relationships and Related Transactions
On May 28, 1993, the Company acquired 50,000 tons of gold ore from Nevada
Minerals Corporation in exchange for the issuance of 1,350,000 shares of
restricted Common Stock. The gold ore was appraised as having a $5,000,000
value. On June 28, 1994, the Company formed a wholly owned subsidiary, Aurum
Mining Corporation ("Aurum"), with the gold ore as its only asset.
On June 21, 1995, an agreement was signed between the Company and Accord
Futronics Corp. ("Accord") whereby 100% of the stock of Aurum was exchanged for
6,000,000 shares of common stock of Accord. Accord was to pay the Company a
royalty equal to 12.5% of the net mining income for the productive life of the
property.
On November 15, 1997, the Company returned the 6,000,000 shares of common
stock of Accord in exchange for 100% of the common stock of Aurum.
In November 1996, Mr. Fred L. Singer produced a marketing video for the
Company and received $25,000 in compensation.
On December 3, 1996, the Company granted an option to purchase 375,000
shares of Common Stock to Burton Dubbin, Mr. Henry Dubbin's son. In August 1997,
Mr. Burton Dubbin terminated his employment with the Company and entered into a
consulting agreement for a period of two years at a fee of $150,000 per year,
plus 125,000 shares of Common Stock, with 25,000 shares issued immediately and
5,000 shares issued monthly. In addition, the option to acquire 375,000 shares
of Common Stock was amended to provide for immediate exercisability and
extension until August 2007.
1994 Performance Equity Plan
In February 1994, the Company adopted the 1994 Performance Equity Plan
("1994 Plan") covering 600,000 shares of the Company's Common Stock pursuant to
which officers, directors, key employees and consultants of the Company are
eligible to receive incentive or non-qualified stock options, stock appreciation
rights, restricted stock awards, deferred stock, stock reload options and other
stock based awards. The 1994 Plan will terminate at such time as no further
awards may be granted under the plan and awards granted are no longer
outstanding, provided that incentive options may be granted only until February
16, 2004. The 1994 Plan is administered by the Board of Directors, which
determines the selection of participants, allotment of shares, price, and other
conditions of purchase of awards and administration of the 1994 Plan.
As of January 14, 1998, no options under the 1994 Plan were outstanding.
Non-Plan Options
As of the Record Date, the Company has outstanding non-plan options to
purchase an aggregate of 1,182,500 shares of Common Stock. The outstanding
options granted to current and former officers and directors of the Company are
as set forth below.
7
<PAGE>
Number of
Name Option Shares Exercise Price Expiration Date
- ---- ------------- -------------- ---------------
Burton Dubbin 375,000 $1.69 August 31, 2007
Henry Dubbin 250,000 $2.00 January 1, 1999
Fred L. Singer 15,000 $1.00 April 16, 1999
Indemnification of Officers and Directors
Under the By-Laws of the Company, officers and directors of the Company and
former officers and directors are entitled to indemnification from the Company
to the full extent permitted by law. The Company's ByLaws and the Delaware
General Corporation Law generally provide for such indemnification for claims
arising out of the acts or omissions of Company directors and officers (and
certain other persons) in their capacity as such, undertaken in good faith and
in a manner reasonably believed to be in, or not opposed to, the best interests
of the Company and, with respect to any criminal action or proceedings, had no
reasonable cause to believe that such conduct was unlawful.
LEGAL PROCEEDINGS
Irwin Bosh Stack and Irene Stack v. Oak Tree Medical Systems, Inc. and
Henry Dubbin, Case No. 97-17996 CA 13 (11th Judicial Circuit, Dade County,
Florida). In August 1997, a stockholder, the wife of the Company's former
Chairman of the Board of Directors, filed a lawsuit against the Company,
alleging unreasonable restraint on the alienability of her shares of Common
Stock of the Company and breach of fiduciary duty on the part of Mr. Henry
Dubbin. The stockholder claimed that the Company has unjustifiably refused her
request for an opinion letter from counsel to remove a restrictive legend. The
plaintiff is seeking unspecified compensatory and punitive damages and
injunctive relief. Management does not believe this action will have any
material adverse effect to the Company.
U.S. Consultancy, Inc. and FYM, Inc. v. Henry Dubbin, Burton Dubbin, Fred
Singer, William Kedersha, Michael Gerber, Ellis Group, Inc., Liberty
International, Inc., NFC (Service) Ltd. and Oak Tree Medical Systems, Inc., C.A.
No. 15994 (Court of Chancery of the State of Delaware, New Castle County,
Delaware). Plaintiffs filed an action on October 20, 1997, alleging, among other
things, (i) the Company's failure to hold an annual meeting of stockholders
within the time prescribed by Section 211 of Delaware General Corporation Law
(the "DGCL") and (ii) breach of fiduciary duties by current and former officers
and directors of the Company in (a) issuing shares of Common Stock for the
purpose of entrenchment, (b) rejecting potential investment and acquisition
opportunities for personal reasons, (c) engaging in self-dealing and wasteful
transactions, and (d) failing to file annual and quarterly reports with the
Securities and Exchange Commission. Plaintiffs sought, among other things, an
order compelling the Company to hold an annual meeting of stockholders,
rescission of all issuances of shares of Common Stock and options to certain
individuals pursuant to Form S-8 registration statements filed in June 1997, and
unspecified damages. On January 14, 1998, plaintiffs filed an amendment to the
complaint alleging breach of fiduciary duties by the officers and directors of
the Company in issuing unregistered stock of the Company and in failing to file
certain reports with the Securities and Exchange Commission. Plaintiffs also
sought to inspect certain books and records of the company pursuant to Section
220 of the DGCL. Management does not believe this action will have any material
adverse effect on the Company.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
(a) Puritz & Weintraub served as the independent auditors of the Company
for the fiscal years ended May 31, 1993 and 1994 and until September 6, 1995. On
September 6, 1995, Puritz & Weintraub resigned their engagement upon
consultation with the Company because it was determined that the best interest
of the Company would be served by retaining BDO Seidman, LLP. The decision to
change auditors was approved by the
8
<PAGE>
Company's Board of Directors. There were no disagreements between the Company
and Puritz & Weintraub on any matters of accounting principles or practices,
financial statement disclosure or auditing scope or procedures.
(b) BDO Seidman, LLP ("BDO") served as the independent auditors of the
Company for the period from September 6, 1995 until January 4, 1996. During its
term of engagement, BDO advised the Company of its need to significantly expand
its audit of the cost and carrying values of the gold ore property, which had
been acquired by the Company in May 1993 in exchange for a controlling interest
in the Company, a portion of which shares were subject to an immediately
exercisable option by another stockholder of the Company. Specifically, BDO
requested a current, independent appraisal of the gold ore property and
documentary evidence of the cost of the property to its prior owner. The Company
terminated BDO because, although an appraisal from a qualified, licensed
appraiser and other information was provided, the Company was unable to provide
the type and level of appraisal or the documentary evidence demanded by BDO.
Because BDO was terminated as auditors of the Company, it did not complete
certain procedures related to the gold ore property, the result of which could
have materially impacted the fairness or reliability of the financial statements
for the year ended May 31, 1996 (the period covered by BDO's incomplete
engagement) and for the years ended May 31, 1994 and 1993 (with which BDO has no
association). The Company permitted BDO to respond to the inquiries of Simon
Krowitz Bolin & Associates, P.A. concerning the gold ore property. The decision
to change auditors was approved by the Company's Board of Directors.
(c) Simon Krowitz Bolin & Associates, P.A. ("Simon Krowitz") served as the
independent auditors from January 4, 1996 to April 29, 1997 and as the
independent auditors of the Company for the fiscal year ended May 31, 1996.
Effective April 29, 1997, Simon Krowitz resigned as the Company's independent
auditors. The report of Simon Krowitz on the Company's financial statements for
the fiscal year ended May 31, 1996 contained no adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principle. In connection with the audit of the Company's financial
statements for the fiscal year ended May 31, 1996 and through April 29, 1997,
there were no disagreements between the Company and Simon Krowitz on any matters
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
(d) Effective June 6, 1997, the Company appointed Most Horowitz & Company,
LLP, as its independent auditors. Most Horowitz & Company served as the
Company's independent public accountants for its fiscal year ended May 31, 1997.
No independent public accountant has been formally selected by the Company for
the current fiscal year. A formal selection of the Company's independent public
accountants will be considered by the Company's newly-elected Board of Directors
at a meeting of the Board of Directors to be held subsequent to the Company's
Annual Meeting of Stockholders. Representatives of Most Horowitz & Company are
not expected to be present at the Company's Annual Meeting of Stockholders, but
any stockholder who wishes to communicate with representatives of Most Horowitz
& Company should communicate directly with the Engagement Partner at 1133 Avenue
of the Americas, New York, New York 10036.
VOTING PROCEDURES
Pursuant to Commission rules, a designated blank space is provided on the
proxy card to withhold authority to vote for one or more nominees for directors.
Votes withheld in connection with the election of one or more directors will not
be counted in determining the votes cast and will have no effect on the vote.
Under the rules of the National Association of Securities Dealers, brokers
who hold shares in street name for customers have the authority to vote on
certain items when they have not received instructions from beneficial owners.
Under Delaware General Corporation Law, a broker non-vote will have no effect on
the outcome of the election of directors.
9
<PAGE>
GENERAL
The solicitation of proxies in the accompanying form is made by the Board
of Directors and the cost thereof will be borne by the Company. In addition to
the solicitation of proxies by use of the mails, some of the officers, directors
and other employees of the Company may also solicit proxies personally or by
mail, telephone or telegraph, but they will not receive additional compensation
for such services. Brokerage firms, custodians, banks, trustees, nominees or
other fiduciaries holding shares of Common Stock in their names will be
requested by the Company to forward proxy materials to their principals and will
be reimbursed for their reasonable out-of-pocket expenses in such connection.
As of the date of this Proxy Statement, the Board of Directors is not aware
of any other matters to be presented for action, but if any other matters
properly come before the meeting, it is intended that the persons voting the
accompanying proxy will vote the shares represented thereby in accordance with
their best judgment.
Stockholder Proposals
Stockholder proposals in respect of matters to be acted upon at the
Company's 1999 Annual Meeting of Stockholders should be received by the Company
on or before November 11, 1998, in order that they may be considered for
inclusion in the Company's proxy materials.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Proxy Statement is accompanied by a copy of the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31, 1997 (the "Form 10-KSB")
and the Amendment No. 1 to the Form 10-KSB.
The Company hereby incorporates by reference into this Proxy Statement the
following document as filed with the Securities and Exchange Commission pursuant
to Section 13 or 15(d) of the Exchange Act:
o the Company's Annual Report on Form 10-KSB for the fiscal year ended
May 31, 1997, as amended.
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE ANNUAL MEETING
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING. THE BOARD URGES YOU TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID
REPLY ENVELOPE. YOUR COOPERATION AS A STOCKHOLDER, REGARDLESS OF THE NUMBER OF
SHARES OF STOCK YOU OWN, WILL REDUCE THE EXPENSES INCIDENT TO A FOLLOW-UP
SOLICITATION OF PROXIES.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING YOUR SHARES, PLEASE TELEPHONE THE
COMPANY AT (718) 460-8400.
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10
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OAK TREE MEDICAL SYSTEMS, INC.
ANNUAL MEETING OF STOCKHOLDERS
------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Henry Dubbin and Fred L. Singer with
full power of substitution, to vote all shares of OAK TREE MEDICAL SYSTEMS, INC.
(the "Company"), which the undersigned is entitled to vote at the Company's
Annual Meeting to be held at Hotel Inter-Continental Miami, 100 Chopin Plaza,
Miami, on the 9th day of March, 1998, at 10:00 a.m., Eastern Standard Time, and
at any adjournment(s) or postponement(s) thereof, hereby ratifying all that said
proxy or his substitute may do by virtue hereof, and the undersigned authorizes
and instructs said proxy to vote as follows:
ELECTION OF DIRECTORS: To elect the nominees listed below for Director until the
next annual meeting of stockholders;
FOR ALL NOMINEES LISTED BELOW WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) |_| listed below |_|
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Henry Dubbin and Fred L. Singer;
and in his discretion, upon any other matters that may properly come before the
meeting or any adjournments thereof.
(Continued and to be dated and signed on the other side.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDERS. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES LISTED UNDER "ELECTION OF DIRECTORS."
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Receipt of the Notice of Annual Meeting and of the Proxy Statement and
Annual Report of the Company accompanying the same is hereby acknowledged.
Dated: _____________________________, 1998
------------------------------------------
(Signature of Stockholder)
------------------------------------------
(Signature of Stockholder)
Your signature should appear the same as
your name appears herein. If signing as
attorney, executor, administrator,
trustee or guardian, please indicate the
capacity in which signing. When signing
as joint tenants, all parties to the
joint tenancy must sign. When the proxy
is given by a corporation, it should be
signed by an authorized officer.
