================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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:
|X| Preliminary Proxy Statement
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Materials Pursuant toss.240.14a-11(c) orss.240.14a-12
OAK TREE MEDICAL SYSTEMS, INC.
(Name of Registrant as specified in its Charter)
OAK TREE MEDICAL SYSTEMS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| 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 Parties:
(4) Date Filed:
================================================================================
<PAGE>
OAK TREE MEDICAL SYSTEMS, INC.
2797 Ocean Parkway
Brooklyn, New York 11235
--------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 29, 2000
---------------------------------
To the Stockholders of
Oak Tree Medical Systems, Inc.
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of
Oak Tree Medical Systems, Inc., a Delaware corporation (the "Company"), will be
held at 10:00 a.m., local time, on Thursday, June 29, 2000, at the Hotel
Inter-Continental Miami, 100 Chopin Plaza, Miami, Florida 33131 for the
following purposes:
(1) To elect five members to the Company's Board of Directors to hold
office until the next Annual Meeting of Stockholders or until
their respective successors are duly elected and qualified;
(2) To act upon a proposal to amend the Company's Certificate of
Incorporation to increase the authorized capital stock; and
(3) To transact such other business as may properly come before the
meeting and any adjournment thereof.
The Company's Annual Report on Form 10-KSB for the fiscal year ended
May 31, 1999 is being mailed to stockholders along with the attached proxy
statement.
The Board of Directors has fixed the close of business on May 19, 2000
as the record date for determining those stockholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournment thereof. A complete list of
stockholders entitled to vote at the Annual Meeting will be available for
examination by any stockholder of the Company for any purpose germane to the
Annual Meeting during normal business hours at the offices of the Company, 2797
Ocean Parkway, Brooklyn, New York 11235, for the 10-day period prior to the
Annual Meeting and at the Annual Meeting.
Whether or not you expect to be present, please sign, date and return
the enclosed proxy card in the enclosed pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors,
Henry Dubbin
President
Brooklyn, New York
June ___, 2000
THIS IS AN IMPORTANT MEETING AND ALL STOCKHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE.
STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF
OAK TREE MEDICAL SYSTEMS, INC.
--------------------------------
PROXY STATEMENT
-----------------------
DATE, TIME AND PLACE OF ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Oak Tree Medical Systems, Inc., a Delaware
corporation (the "Company"), of proxies from the holders of the Company's Common
Stock, par value $0.01 per share (the "Common Stock"), for use at the 2000
Annual Meeting of Stockholders of the Company to be held on the 29th day of
June, 2000, at 10:00 a.m., local time, at the Hotel Inter-Continental Miami, 100
Chopin Plaza, Miami, Florida 33131 or any adjournment(s) thereof (the "Annual
Meeting"), pursuant to the enclosed Notice of Annual Meeting of Stockholders.
The approximate date this Proxy Statement and the enclosed form of proxy are
first being sent to the Company's stockholders is June ___, 2000. The complete
mailing address of the principal executive offices of the Company is 2797 Ocean
Parkway, Brooklyn, New York 11235.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Board of Directors of
the Company. The giving of a proxy does not preclude the right to vote in person
should any stockholder giving the proxy so desire. Stockholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Secretary
of the Company at the Company's headquarters a written revocation or duly
executed proxy bearing a later date; however, no such revocation will be
effective until written notice of the revocation is received by the Company at
or prior to the Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Stockholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone and facsimile. They will receive no
compensation therefor in addition to their regular salaries. Arrangements will
be made with banks, brokers and other custodians, nominees and fiduciaries to
forward copies of the proxy material to their principals and to request
authority for the execution of proxies. The Company will reimburse such persons
for their expenses in so doing.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's stockholders will consider and
vote upon the following matters:
1. The election of five directors to serve until the next Annual
Meeting of Stockholders or until their respective successors are
duly elected and qualified;
2. The proposal to amend the Company's Certificate of Incorporation
to increase the authorized capital stock; and
3. Such other business as may properly come before the Annual Meeting
and any adjournment 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, all shares represented by valid
<PAGE>
proxies received pursuant to this solicitation (and which have not been revoked
in accordance with the procedures set forth above) will be voted (i) FOR the
election of the five nominees for directors named below; (ii) FOR the proposal
to increase the Company's authorized capital stock; and (iii) in the discretion
of the proxies named on the card with respect to any other matters properly
brought before the Annual Meeting.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors has set the close of business on May 19, 2000
(the "Record Date"), as the record date for determining stockholders of the
Company entitled to notice of and to vote at the Annual Meeting. As of the
Record Date, there were 6,367,703 shares of Common Stock issued and outstanding,
all of which are entitled to be voted at the Annual Meeting. Holders of Common
Stock are entitled to one vote per share on each matter that is submitted to
stockholders for approval.
The attendance, in person or by proxy, of the holders of shares of
Common Stock representing a majority of the outstanding shares of such stock is
necessary to constitute a quorum. At the Annual Meeting, directors are elected
by a plurality of the votes of shares present in person or represented by proxy
and entitled to vote on the election of directors. Approval of the amendment to
the Company's Certificate of Incorporation requires the affirmative vote of a
majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting. Any other matter that may be submitted to a vote of the
stockholders will be approved by an affirmative vote of the majority of shares
present in person or represented by proxy at the meeting and entitled to vote,
unless otherwise required by law or the Company's Certificate of Incorporation
or Bylaws. Abstentions are considered as shares present and entitled to vote for
purposes of determining the presence of a quorum and for purposes of determining
the outcome of any matter submitted to stockholders for a vote. Accordingly,
abstentions will have the same effect as a vote against such proposal. The
inspectors of election will treat shares referred to as "broker or nominee
non-votes" (shares held by brokers or nominees as to which 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 on a particular
matter) as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Shares represented by such broker or
nominee non-votes, however, will be treated as not present and not entitled to
vote on that subject matter and therefore will not be considered by the
inspectors of election when counting votes cast on the matter (even though those
shares are considered entitled to vote for quorum purposes and may be entitled
to vote on other matters.) Accordingly, abstentions and broker or nominee
non-votes will not have the same effect as a vote against the election of any
director. With respect to the proposal to approve the amendment to the Company's
Certificate of Incorporation, however, broker or nominee non-votes will have the
same effect as a vote against such proposal. If less than a majority of the
outstanding shares of Common Stock are represented at the Annual Meeting, a
majority of the shares so represented may adjourn the Annual Meeting from
time-to-time without further notice.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock as of May 19, 2000 by (a)
each person known to the Company to own beneficially more than five percent of
the Company's outstanding Common Stock, (b) each director (including nominees)
who owns any such shares, (c) each Named Executive Officer (see "Executive
Compensation and Other Information-Summary of Cash and Certain Other
Compensation"), and (d) the directors and executive officers of the Company as a
group:
Common Stock
Beneficially Owned(1)
Name of Beneficial Owner Shares Percent
------------------------ ------ -------
Burton Dubbin......................................... 820,000(2) 11.47%
21394 Marina Cove Circle, Unit H11
North Miami Beach, FL 33180
-2-
<PAGE>
Common Stock
Beneficially Owned(1)
Name of Beneficial Owner Shares Percent
------------------------ ------ -------
Henry Dubbin.......................................... 650,000(3) 9.97%
10155 Collins Avenue, Suite 607
Bal Harbor, FL 33154
Simon Boltuch......................................... 80,000(4) 1.24%
c/o Oak Tree Medical Systems, Inc.
2797 Ocean Parkway
Brooklyn, NY 11235
Fred L. Singer........................................ 30,000(4) *
9240 West Bay Harbor Dr., Apt. 3-C
Bal Harbor Islands, FL 33154
Jerry D. Klepner...................................... 20,000(4) *
c/o Black Kelley Scruggs & Healey
1801 K Street, N.W. Suite 201L
Washington, D.C. 20006
Maxwell M. Rabb....................................... 20,000(4)(5) *
c/o Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Scott S. Rosenblum.................................... 120,000(4)(5) 1.85%
c/o Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
All directors and executive officers
as a group (6 persons)........................... 920,000(6) 13.55%
-------------
* Less than one percent.
(1) Based on 6,367,703 shares of Common Stock outstanding as of the Record
Date. Pursuant to the rules of the Securities and Exchange Commission
(the "SEC"), certain shares of Common Stock which a person has the right
to acquire within 60 days of May 19, 2000 pursuant to the exercise of
convertible securities are deemed to be outstanding for the purpose of
computing the percentage ownership of such person but are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) Includes (i) 280,000 shares of Common Stock subject to currently
exercisable options, (ii) 500,000 shares subject to currently exercisable
options that Mr. Burton Dubbin beneficially owns through Progressive
Planning Associates, Inc., a corporation of which he is consultant, and
(iii) 40,000 shares held indirectly.
(3) Represents (i) 500,000 shares of Common Stock that Mr. Henry Dubbin
beneficially owns through Nevada Minerals Corporation, a corporation of
which he is the majority stockholder and president, and (ii) 150,000
shares of Common Stock subject to currently exercisable options.
(4) Represents shares of Common Stock subject to currently exercisable
options.
(5) Mr. Rabb is of counsel to and Mr. Rosenblum is a partner at the law firm
of Kramer Levin Naftalis & Frankel LLP ("Kramer Levin"). While the
reporting person owns directly no securities of the Company, Kramer Levin
owns securities of the Company. Messrs. Rabb and Rosenblum disclaim
beneficial ownership of the securities held by Kramer Levin, except to
the extent of their pecuniary interest therein, if any.
(6) Includes 420,000 shares subject to currently exercisable options.
-3-
<PAGE>
ELECTION OF DIRECTORS
(Proposal No. 1)
The Company's Certificate of Incorporation provide that the number of
directors constituting the Company's Board of Directors shall consist of not
less than one member, the exact number of directors to be determined from time
to time by resolution adopted by the Board of Directors. The Company's Bylaws
provide that the number of directors shall be fixed from time to time, within
the limits specified by the Certificate of Incorporation, by resolution of the
Board of Directors. The Board of Directors has fixed five as the number of
directors that will constitute the Board for the ensuing year. Each director
elected at the Annual Meeting will serve for a term expiring at the 2001 Annual
Meeting of Stockholders or until his successor has been duly elected and
qualified.
Nominees
All incumbent directors of the Company, Henry Dubbin, Fred L. Singer,
Jerry D. Klepner, Maxwell M. Rabb and Scott S. Rosenblum, have been nominated
for re-election at the Annual Meeting and proxies will be voted for such persons
absent contrary instructions. See "Management-Executive Officers and Directors"
for the biographies of the incumbent directors.
The Board of Directors has no reason to believe that any nominee will
refuse to act or be unable to accept election; however, in the event that a
nominee for a directorship is unable to accept election or if any other
unforeseen contingencies should arise, it is intended that proxies will be voted
for the remaining nominees and for such other person as may be designated by the
Board of Directors, unless it is directed by a proxy to do otherwise.
Henry Dubbin has served as a director since May 1993. Mr. Singer has
served as a director since April 1997. Messrs. Klepner, Rabb and Rosenblum have
served as directors since October 1998.
Directors are elected by a plurality of the votes cast at the Annual
Meeting either in person or by proxy. Votes that are withheld will be excluded
entirely from the vote and will have no effect.
The Board of Directors unanimously recommends that stockholders vote
"FOR" each of the nominees.
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of the Company are as follows:
Name Age Position with the Company
---- --- -------------------------
Henry Dubbin....................... 84 President and Director
Simon Boltuch...................... 52 Chief Financial Officer
Fred L. Singer..................... 66 Vice President and Director
Jerry D. Klepner................... 55 Director
Maxwell M. Rabb.................... 89 Director
Scott S. Rosenblum................. 50 Director
-4-
<PAGE>
Henry Dubbin 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.
Simon Boltuch has served as Chief Financial Officer of the Company
since September 1998. Prior to joining the Company, Mr. Boltuch served as Chief
Financial Officer of News America In-Store from 1996 to 1998. Mr. Boltuch served
as Vice President of Taxation for News America Publishing, Inc. from 1992 to
1995. From 1980 to 1991, Mr. Boltuch served as Vice President Controller of News
America Publishing, Inc. Mr. Boltuch is a certified public accountant.
Fred L. Singer 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.
Jerry D. Klepner has served as a member of the Board of Directors since
October 1998. Mr. Klepner has served as Managing Director at Black, Kelly,
Scruggs & Healey since February 1998. From June 1996 to February 1998, Mr.
Klepner was a Senior Vice President at Ketchum Public Relations, a public
relations firm. From January 1993 to June 1996, he served as Assistant Secretary
for Legislation at the U.S. Department of Health and Human Services under
Secretary Donna Shalala as an advocate before the U.S. Congress on health and
human services initiatives. He also served as Acting Chief of Staff and
Transition Director for Secretary of Labor Alexis Herman during the spring of
1997, and was a Senior Advisor for Domestic Policy to the Clinton-Gore
Transition Team from November 1992 to January 1993. From 1987 to 1992, Mr.
Klepner was Director of Legislation for the American Federation of State, County
and Municipal Employees, a health care and public sector union.
Maxwell M. Rabb has served as a member of the Board of Directors since
October 1998. Ambassador Rabb has served as of counsel to the law firm of Kramer
Levin since 1991 and was a partner at Stroock & Stroock & Lavan from 1958 to
1981 and 1989 to 1991. Ambassador Rabb served as the United States Ambassador to
Italy from 1981 to 1989. Ambassador Rabb is a member of the board of directors
of Sterling National Bank, MIC Industries, Inc., and Data Systems and Software,
Inc. Ambassador Rabb also serves as a trustee or director of the Cardinals Cooke
and O'Connor Inter City Scholarship Fund, the Lighthouse, the Eisenhower
Institute, the George Marshall International Center and Seaman's Church
Institute.
Scott S. Rosenblum has served as a member of the Board of Directors
since October 1998. Mr. Rosenblum has been a partner of Kramer Levin since 1991
and its Managing Director since 1994. Mr. Rosenblum is a member of the board of
directors of several public companies, including Greg Manning Auctions, Inc., a
collectibles auction house, Temco Services Industries, Inc., an industrial
maintenance company, and I.T. International Theatres, Ltd., a leading motion
picture distributor in Israel and central Europe.
Meetings and Committees of the Board of Directors
During the fiscal year ended May 31, 1999 ("Fiscal 1999"), there were a
total of two meetings of the Board of Directors. Each director participated in
at least 75 percent of the aggregate of the number of such meetings.
During Fiscal 1999, the Company's Board of Directors did not have any
committees.
Director Compensation
Each of Messrs. Singer, Klepner, Rabb and Rosenblum receives director
fees of $1,000 per month and is reimbursed for any expenses incurred on behalf
of the Company. Directors, who are not employees of the Company, are reimbursed
for expenses pertaining to attendance at meetings of the Company's Board of
Directors, including travel, lodging and meals.
-5-
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries to or on behalf
of the Company's Chief Executive Officer and each of the most highly compensated
executive officers of the Company who were serving as executive officers at the
end of the last completed fiscal year, whose total annual salary and bonus,
determined as of the end of the last fiscal year, exceeded $100,000
(collectively, the "Named Executive Officers"), for the fiscal years ended May
31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation(1) No. of Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary($) Bonus ($) Options Compensation
--------------------------- ---- --------- --------- ------- ------------
<S> <C> <C> <C> <C> <C>
Henry Dubbin 1999 $ 48,000
President 1998 32,000
1997 15,414
Simon Boltuch 1999 $131,250
Chief Financial Officer
Gary Danziger 1998 $147,000 $94,924(2)
Chief Operating Officer 1997(3) 120,641 $100,000 350,000
-------------
(1) The column for "Other Annual Compensation" has been omitted because there
is no compensation required to be reported in such columns. The aggregate
amount of perquisites and other personal benefits provided to each
officer listed above is less than 10% of the total annual salary and
bonus of such officer.
(2) Represents settlement payment upon Mr. Danziger's resignation from the
Company in February 1998 and termination of his employment agreement,
deferred compensation and options to acquire 350,000 shares of Common
Stock.
(3) Includes deferred compensation of $100,000 as of May 31, 1997, pursuant
to Mr. Danziger's amended employment agreement with the Company.
OPTION GRANTS IN LAST FISCAL YEAR
Number of Securities Percent of Total Options
Name Underlying Options Granted to Employees Exercise Price Expiration Date
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Simon Boltuch 20,000 3.45% $2.00 September 1, 2008
</TABLE>
-6-
<PAGE>
Option Exercises in Last Fiscal Year and Year-End Option Value Table
The following table sets forth certain information concerning option
exercises in Fiscal 1999, the number of stock options held by the Named
Executive Officers as of May 31, 1999 and the value (based on the fair market
value of a share of stock at fiscal year-end) of in-the-money options
outstanding as of such date.
<TABLE>
<CAPTION>
Number of
Shares Number of Unexercised Value of Unexercised In-the-Money
Acquired Options at Options at
on Value May 31, 1999 May 31, 1999(1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Henry Dubbin 0 0 250,000 0 $375,000 $0
Fred Singer 0 0 15,000 0 37,500 0
Simon Boltuch 0 0 20,000 0 30,000 0
</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 28, 1999 as quoted on the over-the-counter market,
multiplied by the number of shares underlying the option.
Employment Contracts and Termination of Employment Agreements
The Company has an employment agreement with Henry Dubbin, as amended
effective June 1998, expiring on June 14, 2002 and providing for a salary of
$50,000 per year. Mr. Dubbin received a salary of $48,000 in fiscal 1999,
$32,000 in fiscal 1998 and $15,414 in fiscal 1997 and waived his salary for
fiscal 1995.
The Company has an employment agreement with Simon Boltuch, as of
September 1, 1998, expiring on August 31, 2001 which provides for (i) an annual
salary of $175,000, (ii) performance bonus of up to $35,000 annually and (iii)
annual options to acquire 20,000 shares of Common Stock at an exercise price
equal to the fair market value of the shares on date of grant (September 1, 1999
and September 1, 2000).
Gary Danziger had a three-year employment agreement with the Company,
an 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 salary if terminated
during twelve months ended September 30, 1998 or 1999, respectively. In February
1998, Mr. Danziger resigned all positions with the Company and his employment
agreement was terminated, including his right to receive 50,000 shares of Common
Stock (which was recorded as deferred compensation of $100,000) and his options
to acquire 350,000 shares of Common Stock in exchange for $60,000 in cash. In
addition, the Company forgave outstanding net loans to Mr. Danziger in the
amount of $34,924.
Certain Transactions
Mr. Burton Dubbin, the son of Mr. Henry Dubbin, was an employee of the
Company from April 1997 through August 1997. During fiscal 1998, Mr. Burton
Dubbin received total compensation of $125,000 from the Company, which consisted
of salary for the months he served as an employee of the Company and consulting
fees for the months he served as a consultant to the Company. In August 1997,
after termination of his employment with the Company, Mr. Burton Dubbin entered
into a consulting agreement ("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 the remaining 100,000 shares issued over a 20
month period at 5,000 shares per month. In June 1998, the Company amended the
Consulting Agreement to extend the term of the agreement to August 2002 and
granted options to purchase 500,000 shares of Common Stock of the Company at an
exercise price of $2.17.
In October 1998, Messrs. Rabb and Rosenblum were appointed to the Board
of Directors of the Company. Mr. Rabb is of counsel to and Mr. Rosenblum is a
partner of the law firm of Kramer Levin, which has served as outside counsel to
the Company during fiscal 1998 and received customary fees for legal services.
-7-
<PAGE>
Change in Control
The Company is in negotiations to acquire certain companies whose
assets consist primarily of management contracts with approximately 42 medical
practices and MRI facilities located in the greater New York metropolitan area.
The Company intends to finance the proposed acquisition through issuance of debt
and equity securities of the Company, which, if consummated, will result in a
substantial change to the Company's current debt and equity structure and could
result in a change in control of the Company. There can be no assurance,
however, that the Company will consummate the purchase of these assets 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of the Company's Common Stock, to file with the
SEC initial reports of ownership and reports of changes in ownership of Common
Stock. Officers, directors and 10% stockholders are required by SEC regulation
to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and representations that no other reports
were required, during Fiscal 1999 all Section 16(a) filing requirements
applicable to its officers, directors and 10% stockholders were complied with,
except that Mr. Henry Dubbin did not file Forms 4 to report his disposition of
shares.
-8-
<PAGE>
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED CAPITAL STOCK
(Proposal No. 2)
On May 25, 2000, the Board of Directors of the Company approved an
amendment (the "Charter Amendment") to the Company's Certificate of
Incorporation which, if adopted, would increase the total authorized capital
stock from thirty-five million (35,000,000) shares to sixty million (60,000,000)
shares.
The Charter Amendment will increase the authorized capital stock of the
Company by amending and restating the first sentence of Article FOURTH of the
Company's Certificate of Incorporation so that, as amended and restated, it will
read as follows:
"FOURTH: The corporation is authorized to issue 50,000,000
shares of $0.01 par value common stock and 10,000,000 shares
of $.001 par value preferred stock."
The Board of Directors believes that the Charter Amendment is in the
best interests of the Company and its stockholders.
In the past, the Company has issued Common Stock to raise funds for its
operations, as consideration in asset acquisitions and as incentive compensation
to employees and directors. The Charter Amendment needs to be approved in order
for the Company to enter into such transactions in the future, inasmuch as the
Certificate of Incorporation does not provide for sufficient additional stock
issuances.
The increase in the authorized number of shares of Common Stock could
deter takeovers, in that additional shares could be issued (within the limits
imposed by applicable law) in one or more transactions that could make a change
in control or takeover of the Company more difficult. For example, additional
shares could be issued by the Company so as to dilute the stock ownership or
voting rights of persons seeking to obtain control of the Company. Similarly,
the issuance of additional shares to certain persons allied with the Company's
management could have the effect of making it more difficult to remove the
Company's current management by diluting the stock ownership or voting rights of
persons seeking to cause such removal.
The affirmative vote of the holders of a majority of the shares of
Common Stock issued and outstanding on the Record Date is required to approve
the amendment of the Company's Certificate of Incorporation.
The Board of Directors unanimously recommends that stockholders vote
"FOR" approval of the Charter Amendment.
-9-
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Most Horowitz & Company, LLP (" Most Horowitz" )
was engaged as the independent accountants for the fiscal years ended May 31,
1997 and May 31, 1998. On August 13, 1999, Most Horowitz resigned as the
Company's independent accountants. Most Horowitz' reports on the financial
statements of the Company for the two fiscal years did not contain an adverse
opinion or disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope, or accounting principles. In connection with the audit
of the Company's financial statements for the fiscal year ended May 31, 1997 and
May 31, 1998 and for the interim periods thereafter there were no disagreements
between the Company and Most Horowitz on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Most Horowitz, would have
caused it to make reference to the subject matter of the disagreements in
connection with its reports.
On August 16, 1999 the Company's Board of Directors engaged Grant
Thornton LLP as the Company's independent accountants for the fiscal year ended
May 31, 1999. The report of Grant Thornton LLP on the Company's financial
statements for the fiscal year ended May 31, 1999 did not contain an adverse
opinion or disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope, or accounting principle. 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 Annual Meeting. Representatives
of Grant Thornton LLP are not expected to be present at the Annual Meeting but
any stockholder who wishes to communicate with representatives of Grant Thornton
LLP should communicate directly with the Engagement Partner at 666 Third Avenue,
The Chrysler Center, New York, New York 10017.
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before
the Annual Meeting. If, however, any other business should properly come before
the Annual Meeting, the persons named in the accompanying proxy will vote
proxies as, in their discretion, they may deem appropriate unless they are
directed by a proxy to do otherwise.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the SEC, a stockholder intending
to present a proposal to be presented at the 2001 Annual Meeting of Stockholders
must deliver a proposal in writing to the Company's principal executive offices
on or before _________, 2001.
By Order Of The Board Of Directors
Henry Dubbin
President
Brooklyn, New York
June ___, 2000
-10-
<PAGE>
FORM OF PROXY
OAK TREE MEDICAL SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, a stockholder of OAK TREE MEDICAL SYSTEMS, INC., a
Delaware corporation (the "Company"), hereby appoints Henry Dubbin and Fred L.
Singer, and each of them, as proxies for the undersigned, each with full power
of substitution, and hereby authorizes them to represent and to vote, as
designated below, all of the shares of stock of the Company held of record by
the undersigned at the close of business on May 19, 2000 at the Annual Meeting
of Stockholders of the Company to be held at Hotel Inter-Continental Miami, 100
Chopin Plaza, Miami, Florida 33131, on June 29, 2000 at 10:00 a.m., local time,
and at any adjournment thereof.
1. ELECTION OF Henry Dubbin
DIRECTORS Jerry D. Klepner
Maxwell M. Rabb
Scott S. Rosenblum
Fred L. Singer
The Board of Directors unanimously recommends a vote FOR all nominees.
[ ] VOTE FOR all nominees listed above, except authority
to vote withheld from the following nominees (if
any):_______________________________________
[ ] authority to VOTE WITHHELD from all nominees.
2. To approve an amendment to the Company's Certificate of
Incorporation to increase the authorized capital stock.
The Board of Directors unanimously recommends a vote FOR the Charter
Amendment.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Upon such other matters as may properly come before such
Annual Meeting or any adjournment thereof. In their discretion, the
proxies are authorized to vote upon such other business as may properly
come before the Annual Meeting and any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ALL OF THE NOMINEES FOR DIRECTORS AND "FOR" THE PROPOSAL TO AMEND
THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED CAPITAL
STOCK.
(See reverse side)
<PAGE>
(Continued from other side)
The undersigned hereby acknowledges receipt of (1) the Notice of Annual
Meeting of Stockholders, (2) the Proxy Statement, and (3) the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31, 1999.
Dated: ____________________, 2000
----------------------------------
(Signature)
----------------------------------
(Signature if held jointly)
IMPORTANT: Please sign exactly as your name appears hereon and mail it promptly
even though you now plan to attend the meeting. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
When shares are held by joint tenants, both should sign. If a corporation,
please sign in full corporate name by president or other authorized officer. If
a partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY USING THE ENVELOPE
PROVIDED. NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.