<PAGE> 1
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 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
MEDICAL TECHNOLOGY 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> 2
[LETTERHEAD OF MEDICAL TECHNOLOGY SYSTEMS, INC.]
August 11, 1997
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of Medical
Technology Systems, Inc. (the "Company"), which will be held at the Summit
Executive Suites and Conference Center, Rubin ICOT Center, 13575 58th Street
North, Clearwater, Florida 33760, on September 10, 1997, at 10:00 a.m., local
time.
The notice of the meeting and proxy statement on the following pages cover
the formal business of the meeting. Whether or not you expect to attend the
meeting, please sign, date, and return your proxy promptly in the enclosed
envelope to assure your stock will be represented at the meeting. If you
decide to attend the annual meeting and vote in person, you will, of course,
have that opportunity.
The continuing interest of the stockholders in the business of the Company
is gratefully acknowledged. We hope many will attend the meeting.
Sincerely,
/s/ Michael P. Conroy
-------------------------------
Michael P. Conroy
Secretary
<PAGE> 3
MEDICAL TECHNOLOGY SYSTEMS, INC.
12920 AUTOMOBILE BOULEVARD
CLEARWATER, FLORIDA 34622
___________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 10, 1997
The Annual Meeting of Stockholders (the "Meeting") of Medical Technology
Systems, Inc. will be held at the Summit Executive Suites and Conference
Center, Rubin ICOT Center, 13575 58th Street North, Clearwater, Florida 33760,
on September 10, 1997, at 10:00 a.m., local time, for the following purposes:
1. To elect four members of the Board of Directors, each of which will
serve until the 1999 Annual Meeting of Stockholders;
2. To ratify the appointment of Grant Thornton LLP as the Company's
independent certified public accountants for fiscal year 1998;
3. To approve the adoption and amendment of the Medical Technology
Systems, Inc. 1997 Stock Option Plan; and
4. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on July 21, 1997,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting.
Stockholders are requested to vote, date, sign and promptly return the
enclosed proxy in the envelope provided for that purpose, WHETHER OR NOT THEY
INTEND TO BE PRESENT AT THE MEETING.
By Order of the Board of Directors,
/s/ Michael P. Conroy
------------------------------------
Secretary
Clearwater, Florida
August 11, 1997
<PAGE> 4
MEDICAL TECHNOLOGY SYSTEMS, INC.
PROXY STATEMENT
ANNUAL MEETING AND PROXY SOLICITATION INFORMATION
This proxy statement is first being sent to stockholders on or about
August 11, 1997, in connection with the solicitation of proxies by the Board of
Directors of Medical Technology Systems, Inc. (the "Company"), to be voted at
the Annual Meeting of Stockholders to be held on September 10, 1997, and at any
adjournment thereof (the "Meeting"). The close of business on July 21, 1997,
has been fixed as the record date of the determination of stockholders entitled
to notice of and to vote at the Meeting. At the close of business on the
record date, the Company had outstanding 5,957,173 shares of common stock, par
value $.01 per share (the "Common Stock"), entitled to one vote per share.
Shares represented by duly executed proxies in the accompanying form
received by the Company prior to the Meeting will be voted at the Meeting. If
stockholders specify in the proxy a choice with respect to any matter to be
acted upon, the shares represented by such proxies will be voted as specified.
If a proxy card is signed and returned without specifying a vote or an
abstention on any proposal, it will be voted according to the recommendation of
the Board of Directors on that proposal. The Board of Directors recommends a
vote FOR the election of directors listed on the proxies and other proposals
described in this Proxy Statement. The Board of Directors knows of no other
matters that may be brought before the Meeting. However, if any other matters
are properly presented for action, it is the intention of the named proxies to
vote on them according to their best judgment.
Stockholders who hold their shares through an intermediary must provide
instructions on voting as requested by their bank or broker. A stockholder who
signs and returns a proxy may revoke it at any time before it is voted by
taking one of the following three actions: (i) giving written notice of the
revocation to the Secretary of the Company; (ii) executing and delivering a
proxy with a later date; or (iii) voting in person at the Meeting.
Approval of the election of directors will require a plurality of the
votes cast at the Meeting, provided a quorum is present. Votes cast by proxy
or in person at the Meeting will be tabulated by one or more inspectors of
election appointed at the Meeting, who will also determine whether a quorum is
present for the transaction of business. Abstentions and broker non-votes will
be counted as shares present in the determination of whether shares of the
Company's common stock represented at the Meeting constitute a quorum. With
respect to matters to be acted upon at the Meeting, abstentions and broker
non-votes will not be counted for the purpose of determining whether a proposal
has been approved.
The expense of preparing, printing, and mailing proxy materials to
stockholders of the Company will be borne by the Company. In addition to
solicitations by mail, regular employees of the Company may solicit proxies on
behalf of the Board of Directors in person or by telephone. The Company will
reimburse brokerage houses and other nominees for their expenses in forwarding
proxy material to beneficial owners of the Company's stock.
The executive offices of the Company are located at 12920 Automobile
Boulevard, Clearwater, Florida 34622 and the Company's telephone number is
(813) 576-6311.
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of July 21, 1997, certain information
regarding the beneficial ownership of the Common Stock by (i) each director of
the Company, (ii) each executive officer named in the Summary Compensation
Table, (iii) each person who is known by the Company to be the beneficial owner
of more than 5% of the outstanding shares of Common Stock, and (iv) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Title of Beneficial Common Stock Percentage of
Beneficial Owner(1) Class Ownership Percentage Voting Shares (6)
- ---------------------------------- ----------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Todd E. Siegel, individually and
through the Siegel Family QTIP
Trust(2)(3) . . . . . . . . . . . Common 656,082 (4) 11.0% 72.0%
Preferred 6,500,000
David Kazarian(5) . . . . . . . . . Common 58,000 0.9% 0.3%
Michael Conroy(7) . . . . . . . . . Common 90,000 1.5% 0.5%
John Stanton . . . . . . . . . . . Common 100,000 1.7% 0.5%
All Officers and Directors
as a Group (4 persons) . . . . . . Common 924,890 15.5% 73.4%
Preferred 6,500,000
- -----------------
</TABLE>
(1) The business address for Messrs. Siegel, Kazarian, Conroy and Stanton is
12920 Automobile Boulevard, Clearwater, Florida 34622.
(2) Todd E. Siegel is the trustee of the Siegel Family QTIP Trust, established
pursuant to the Siegel Family Revocable Trust (the "Trust"), and
accordingly controls the shares owned of record by the Trust. The Trust
is the managing partner of JADE Partners (the "Partnership") and
accordingly controls the Partnership. Currently, Mr. Siegel owns 185,769
shares of Common Stock individually. The Partnership owns 390,313 shares
of Common Stock.
(3) The Partnership is the owner of record of 6,500,000 Shares of the
Company's Voting Preferred Stock, which represents 100% of the outstanding
Voting Preferred Stock. Each share of Voting Preferred Stock has the
power to cast two votes per share on any matter on which the Common Stock
is entitled to vote.
(4) Includes options to acquire 80,000 shares of Common Stock, of which 20,000
options are exercisable at $1.00 per share and 60,000 are exercisable at
$1.625 per share, granted in connection with his employment arrangements.
This figure also includes the 160,769 unregistered shares of common stock
Mr. Siegel elected to receive in lieu of salary in fiscal 1996. See
"Executive Compensation--Employment Agreements."
(5) Includes options to acquire 33,000 shares, of which 27,000 are exercisable
at $1.00 and 6,000 are exercisable at $1.625 and includes 25,000 shares of
Common Stock held by his wife for which Mr. Kazarian disclaims beneficial
ownership.
(6) Combined voting percentage of Common and Voting Preferred Stock, including
6,500,000 shares of Voting Preferred Stock held of record by the
Partnership, of which Todd E. Siegel may be deemed to be the beneficial
owner.
(7) Mr. Conroy was selected to be the Company's Chief Financial Officer and
Vice President by the board of directors in August 1996 and has served in
those capacities since that time. Currently, Mr. Conroy does not have an
employment agreement with the Company.
-2-
<PAGE> 6
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information, as of July 21, 1997, with respect
to each person who is currently a director or executive officer of the Company.
<TABLE>
<CAPTION>
Year First
Became a
Name Position(s) Held(1) Age Director
-------- ----------------------- ------- ------------
<S> <C> <C> <C>
Todd E. Siegel . . . . . . . . Chairman of the Board of Directors, President, 39 1986
Chief Executive Officer
David Kazarian . . . . . . . . Director 56 1988
Michael Conroy . . . . . . . . Director, Chief Financial Officer, Vice 49 1996
President and Secretary
John Stanton . . . . . . . . . Director, Vice Chairman of the Board of 49 1996
Directors
Ronald Rhodes . . . . . . . . . Principal Accounting Officer and Controller 49
</TABLE>
_________________
(1) Each director serves a one-year term that expires at the Annual Meeting or
when his successor is duly elected and qualified.
TODD E. SIEGEL. Mr. Siegel became President and Chief Executive Officer
of the Company in 1992 and has served as a director of the Company since 1985.
Mr. Siegel served from 1988 to 1992 as Executive Vice President and Chief
Operating Officer of the Company and from 1985 to 1988 as Vice President of
Sales. Additionally, Mr. Siegel served as the Company's Secretary from 1986 to
1996. Mr. Siegel received a Bachelor's degree in Business Administration from
Fort Lewis College.
DAVID KAZARIAN. Mr. Kazarian has served as a director of the Company
since 1988. Prior to its sale in December 1990, Mr. Kazarian and his wife
owned and operated Kazarian Pharmacy. Since March 1991, Mr. Kazarian has been
the founder and President of Infuserve America, Inc., a firm involved in the
home health care business.
MICHAEL CONROY. Mr. Conroy has served as a director of the Company since
1996. Mr. Conroy was selected as Chief Financial Officer, Vice President and
Secretary by the board of directors in August 1996. Since 1994, Mr. Conroy has
been President of CFO Financial Services, Inc. See "Certain Transactions."
From 1990 through 1994, Mr. Conroy was the Vice President of Finance and Chief
Financial Officer of the Grant Group of Companies. Since February 1996, Mr.
Conroy has been devoting substantially all of his full time to the affairs of
the Company. Mr. Conroy is a certified public accountant.
JOHN STANTON. Mr. Stanton has served as a director of the Company since
1996. Since 1981, Mr. Stanton has been President of Florida Engineered
Construction Products Corp., which is a privately owned company he assisted in
successfully reorganizing. Mr. Stanton also serves as President of Octofoil,
Inc., an entity that assists other companies with strategic planning. See
"Certain Transactions."
RONALD RHODES. Mr. Rhodes has served as the Principal Accounting Officer
and Controller of the Company since 1991. From 1988-1991, Mr. Rhodes served as
a consultant to various businesses regarding accounting, finance, and tax
issues. In addition, from 1983 to 1988, Mr. Rhodes served as Vice President of
Finance of Porpoise Pool and Patio, Inc., a retail and wholesale supplier of
pool and patio products.
-3-
<PAGE> 7
COMPENSATION OF DIRECTORS
Directors, who are not otherwise employees of the Company, are paid a $750
fee for attending meetings. The fee is $350 if a meeting is held
telephonically. In addition, for each year that an individual, who is not
otherwise an employee of the Company, serves as a director, he is issued
options to acquire 2,000 shares of the Company's Common Stock at an exercise
price equal to the fair market value of such shares on the date of issuance.
However, if the fair market value of a share of the Company's Common Stock is
$1.00 or less on the date of issuance, the options granted will entitle the
holder to purchase Common Stock of the Company for $1.00 per share. Directors'
options are issued as of the date of each annual meeting of directors.
Directors must serve until the next annual meeting of stockholders to vest
their options issued in the prior year. Directors are also issued options to
acquire 1,000 shares of Common Stock for serving on a committee and options to
acquire an additional 1,000 shares of Common Stock if they are the chairman of
a committee. The options expire 10 years from their issuance date.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than ten
percent of the Common Stock of the Company, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
directors, and ten percent stockholders are required by the SEC regulations to
furnish the Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of such reports received by it,
and written representations from certain reporting persons that no SEC Forms 3,
4, or 5 were required to be filed by those persons, the Company believes that
during fiscal year 1997, its officers, directors and ten percent beneficial
owners timely complied with all applicable filing requirements.
EXECUTIVE COMPENSATION
Summary Compensation Table. The table below sets forth certain
information concerning the compensation earned during fiscal years 1995, 1996,
and 1997 by the Company's Chief Executive Officer. No other executive officer
received total annual compensation in excess of $100,000.
<TABLE>
<CAPTION>
Annual Compensation Securities
------------------------- Underlying
Fiscal Other Options/SARs
Name and Principal Position Year Salary ($) ($)(3) (#)
- --------------------------- ---- -------------- ---------- ----------------
<S> <C> <C> <C> <C>
Todd E. Siegel . . . . . . . . . . . . . . . . . . . . . 1997 $ 160,343 $ 73,607 20,000
President and Chief 1996 $ 157,462(1) $ 22,538 60,000(2)
Executive Officer 1995 $ 129,064 -0- 40,000
- --------------------
</TABLE>
(1) Pursuant to his employment agreement, Mr. Siegel elected to receive
160,769 shares of the Company's common stock, at a price of $0.25 per share, in
lieu of 1996 cash compensation in the amount of $42,692. At the time of Mr.
Siegel's election, the closing bid price was $0.44 and the closing ask price
was $0.56. The board of directors valued these shares at $0.25 per share
because they were not freely tradeable. The fair market value of the 160,769
shares has been included in the 1996 salary figure of $157,462 to reflect the
value of the compensation Mr. Siegel elected to receive in shares of Common
Stock.
(2) Consists of 40,000 options repriced in 1996 and 20,000 options
granted in 1996. For the year ended March 31, 1995, Mr. Siegel was issued
options to acquire 40,000 shares of Common Stock at $7.00 per share (fair
market value as of grant date) with a ten-year exercise period. In 1996, the
Company reduced the exercise price for these options to $1.625. In addition,
Mr. Siegel receives options to purchase 20,000 shares of the Company's Common
Stock per year pursuant a long-term incentive agreement. The options granted
in 1996 have an exercise price of $1.625 per share. Mr. Siegel is also
entitled to SARs based upon certain criteria relating to the market value of
the Company.
-4-
<PAGE> 8
(3) Includes automobile expenses, hospitalization and life insurance paid
by the Company for the benefit of the named individual and the value of SARs
earned during fiscal 1997. The automobile expenses for Mr. Siegel for 1996 and
1997 were $12,888 and $10,236, respectively, which represented 57% and 50%,
respectively, of the total "Annual Compensation--Other" received by Mr. Siegel.
Option Grants in 1997. The table below sets forth information concerning
grants of stock options to the Chief Executive Officer for the fiscal year
ended March 31, 1997.
<TABLE>
<CAPTION>
Percent of Total
Number of Securities Options Granted Exercise
Underlying Options to Employees Price Expiration
Name Granted in 1997 in Fiscal Year 1997 Per Share Date
- ---- --------------------- -------------------- ------------- -----------
<S> <C> <C> <C> <C>
Todd E. Siegel . . . . . . . . . 20,000(1) 100% $ 1.00 2007
- ------------------
</TABLE>
(1) Pursuant to a long-term incentive agreement with Mr. Siegel in 1997, the
Company granted him options to acquire 20,000 shares of the Company's
Common Stock. See "Employment Agreements." Options granted are
exercisable for a period of ten years. Currently, the exercise price of
the options is $1.00 per share, which may be reduced by a resolution of
the board of directors.
Aggregated Option Table. The following table sets forth information
concerning options held by the Chief Executive Officer at the end of fiscal
year 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options/SARS
Options/SARS at Fiscal at
Year-End Fiscal Year-End
(#) ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
Todd E. Siegel . . . . . . . . . . . . 80,000(1) 53,000(2)
</TABLE>
____________________
(1) All such options held by Mr. Siegel are currently exercisable.
(2) Value of options is based on the bid price of a share of the
Company's Common Stock as of March 31, 1997 ($0.5625), minus the
exercise price (which ranges from $1.00-$1.625) multiplied by 80,000,
which yields a negative figure. The amount payable to Mr. Siegel for
SARs earned during fiscal 1997 is $53,000.
EMPLOYMENT AGREEMENTS
Effective September 1, 1994, the Company entered into an Employment
Agreement with Mr. Todd E. Siegel (the "Employment Agreement"). The Employment
Agreement is for a five year term. Mr. Siegel's base salary for the period
September 1, 1994 through August 31, 1995, was $150,000, and that figure
increases 6% per year to approximately $189,000 for the fifth year of his
agreement ending August 31, 1999. The Employment Agreement also provides for
bonuses, expense reimbursement, and other performance-based incentive
compensation arrangements. The Employment Agreement provides Mr. Siegel the
right to receive compensation in the form of common stock of the Company in
lieu of cash.
In connection with the execution of the Employment Agreement, Mr. Siegel
was granted the right to acquire 40,000 shares of the Company's Common Stock at
an exercise price of $7.00 per share, which was the fair market value of those
shares as of the date of grant. In 1996, the exercise price was reset to
$1.625. The options are "non-qualified" and have an exercise period of ten
years.
The Employment Agreement provides for severance payments equal to a lump
sum payment of 299% of his then current base salary in the event of (i) a
change of control and a subsequent termination without cause of
-5-
<PAGE> 9
Mr. Siegel or (ii) a material reduction in his compensation. The Employment
Agreement contains a restrictive covenant not to compete, solicit or disclose
confidential information during the term of the agreement.
The Company and Mr. Siegel have entered into an Executive Stock
Appreciation Rights and Non-Qualified Stock Option Agreement (the "Long-Term
Incentive Agreement") to provide for the long-term incentive of Mr. Siegel and
the alignment of his interest with those of the Company's stockholders. The
Long-Term Incentive Agreement grants Mr. Siegel a stock appreciation right
("SAR") equal to 3.25% of the incremental increase in the value of the Company
between successive fiscal years. Originally, value was defined to mean the
difference between the total market capitalization of the Company between
successive fiscal year ends. Now that the Common Stock has been delisted from
NASDAQ, value will be determined by the average of the high bid and ask price
for the Common Stock as quoted on the NASD OTC bulletin board. The total
market capitalization means the total number of shares of Common Stock
outstanding multiplied by the closing price of the Common Stock traded on the
NASDAQ or other quotation service. The amount payable to Mr. Siegel under the
Long-Term Incentive Agreement for fiscal 1997 was $53,000.
Mr. Siegel has the option of receiving his rights to the SARs in the form
of cash or the Company's Common Stock equal to the cash value. The shares of
Common Stock issued to Mr. Siegel are valued at one-half of the fair market
value of the Company's Common Stock as of the March 31 in the year for which
the SARs are granted (the "Valuation Date"). In the event of a change of
control or sale of the Company's business, Mr. Siegel's rights under his SARs
are accelerated and immediately vested.
Pursuant to the Long-Term Incentive Agreement, the Company granted Mr.
Siegel the right to acquire up to 20,000 shares of its Common Stock on an
annual basis at a purchase price equal to the fair market value of such shares
as of the end of each fiscal year during the term of this agreement. However,
if the fair market value of a share of Common Stock is $1.00 or less at the end
of a particular fiscal year, options granted during that year will entitle Mr.
Siegel to purchase shares of Common Stock for $1.00 per share. The options are
non-qualified and have a ten year term. The options granted in 1997 have an
exercise price of $1.00 per share.
-6-
<PAGE> 10
CERTAIN TRANSACTIONS
The JADE Partners (the "Partnership") is currently the holder of
6,500,000 shares of Voting Preferred Stock. The Siegel Family QTIP Trust,
established pursuant to the terms of the Siegel Family Revocable Trust (the
"Trust"), which originally acquired the shares of Voting Preferred Stock in
1986 for the aggregate par value of the shares ($650.00), transferred the
shares to the Siegel Family Limited Partnership in 1993. The Siegel Family
Limited Partnership transferred the shares to the Partnership in 1994. Mr.
Siegel is the trustee of the Trust, which is the managing general partner of
the Partnership, and accordingly, controls the shares held by the Partnership.
The Voting Preferred Stock has two votes per share on all matters
submitted to a vote of other holders of Common Stock. In addition to
preferential voting rights, the Voting Preferred Stock is entitled to receive
upon dissolution or liquidation of the Company, the first $10,000 of proceeds
distributed to stockholders of the Company upon such events. Thereafter, the
Voting Preferred Stock is entitled to no additional amounts upon dissolution or
liquidation of the Company. The Voting Preferred Stock has no dividend rights,
redemption provisions, sinking fund provisions or conversion, or preemptive or
exchange rights. The Voting Preferred Stock is not subject to further calls or
assessments by the Company.
The Voting Preferred Stock was issued to assure complete and unfettered
control of the Company by its holder. The issuance of the Voting Preferred
Stock constitutes an anti-takeover device since the approval of any merger or
acquisition of the Company will be completely dependent upon the approval of
the Trust.
Harold B. Siegel was the inventor of the patents and other proprietary
rights for the equipment and processes that the Company uses and sells. The
Trust is the assignee of all such proprietary and patent rights used in the
Company's business. In October 1986, the Company was granted rights to an
exclusive perpetual license from the Trust to utilize the know-how and patent
rights assigned to the Trust by Harold B. Siegel in the manufacture and sale of
the Company's medication dispensing systems.
The license granted to the Company by the Trust may only be terminated by
the Trust in the event the Company: (i) ceases to utilize the know-how created
by the Trust; (ii) defaults in making any royalty payment and fails to remedy
such default within 40 days after written notice by the Trust; or (iii) becomes
insolvent, makes any assignment for the benefit of creditors, is adjudged
bankrupt, or if a receiver or trustee of the Company's property is appointed.
Under such circumstances, the license will automatically terminate. In
addition, the Trust has granted the Company the right to sublicense the rights
granted under the license agreement between the Company and the Trust.
The Trust was originally entitled to receive a royalty of 2% of the gross
revenues realized from the sale of the Company's products. The license
agreement further provided that the Trust would waive any royalty fees owed by
the Company in the event the Company did not generate a pretax profit in any
fiscal year.
In September 1990, the Company, the Trust and Harold B. Siegel entered
into an agreement whereby the Company issued the Trust 1,500,000 shares of
Common Stock and the Trust and Harold B. Siegel agreed to reduce future
royalties due under the license agreement from 2% to 1%. For fiscal year 1997,
the Company paid $41,000 to the Trust for royalties. In addition, royalties of
$34,853 due for fiscal 1997 were unpaid at March 31, 1997.
Todd E. Siegel is a guarantor of the Company's outstanding restructured
credit facility with SouthTrust Bank. On September 4, 1996, the Bankruptcy
Court confirmed the Company's restructured indebtedness to the Bank in the
amount of approximately $28.0 million. The $28.0 million indebtedness has been
separated into two notes, Plan Note I and Plan Note II, and is scheduled to be
repaid as follows:
Plan Note I, in the stated principal amount of approximately $27.0
million, provides for a portion of the principal amount, $15.0 million, to be
due and payable as follows:
a) Interest at the rate of 7.5% for a period of two years ending
September 1, 1998.
b) Installments of principal and interest at the rate of 7.5% payable
monthly for a period of ten years ending September 1, 2006. At which time, the
then outstanding principal amount is due and payable in full. The monthly
installments of principal and interest are calculated based on the principal
amount amortized in level monthly payments over twenty years.
-7-
<PAGE> 11
Plan Note II, in the stated principal amount of $1,000,000 provided for
payment of $750,000 on or about the date of the confirmation of the Plans of
Reorganization. The Company made the payment of $750,000 on or about September
5, 1996 and in accordance with the terms of Plan Note II, the stated principal
amount was deemed fully satisfied.
Plan Note I further provides that the net sales proceeds from the sale of
Vangard, would be paid to the Bank. In addition, certain other mandatory
prepayments of the stated principal amount were required upon the occurrence of
a capital transaction in which any of the Company's subsidiaries are sold, as
well as upon the receipt of any proceeds resulting from certain causes of
action commenced by the Company. Plan Note I also provides that the full
stated principal amount of approximately $28 million will be due and payable
upon the occurrence of specified major events of default.
Effective March 31, 1997, the stated principal amount of Plan Note I was
reduced to $15.0 million. Thereby, permanently removing any contingent amount
due including the additional $12 million principal amount, except for the
mandatory prepayments for any capital transactions. As a result of this
modification and the receipt of proceeds from the sale of Vangard, the Company
realized an extraordinary gain of approximately $10.3 million, after the
mandatory payment from the Vangard sales proceeds of approximately $3.1
million.
Mr. Siegel agreed to unconditionally guarantee the full and timely payment
of the above payment schedule. Should the Company default on any of the above
payments, Mr. Siegel agreed to immediately cure such default on demand of the
Bank. If Mr. Siegel fails to cure the default, the Bank may proceed directly
against Mr. Siegel for payment in a court of competent jurisdiction. In
addition, Mr. Siegel, as trustee of the Siegel Family QTIP Trust, which is
managing general partner of the JADE Partnership, has pledged 100,000 shares of
the Company's Common Stock held by the JADE Partnership to SouthTrust Bank to
secure repayment of the Partnership's obligations in the amount of $300,000.
As of March 31, 1997, Mr. Siegel had outstanding indebtedness to the
Company of approximately $11,886. This debt represents advances made by the
Company to Mr. Siegel for travel related expenses. In January 1997, Mr. Siegel
signed a promissory note payable to the Company agreeing to cure his
indebtedness to the Company plus 8% interest per annum on January 31, 1998.
The Company has entered into indemnification agreements with each of its
directors, including Mr. Siegel. The indemnification agreements authorize
indemnification of such directors to the full extent authorized or permitted by
law.
During February 1996, the Company retained the services of CFO Financial
Services, Inc. This entity and its representatives have substantial experience
in assisting entities such as the Company in restructuring and work out
arrangements. Mr. Conroy is affiliated with CFO Financial Services, Inc. The
Company pays CFO Financial Services, Inc. $8,500 a month for Mr. Conroy's
services.
In February 1996, the Company also retained Octofoil, Inc., an entity
affiliated with Mr. Stanton. The Company pays Octofoil, Inc. $7,500 a month
for Mr. Stanton's services. Mr. Stanton has provided significant time and
effort in assisting the Company in strategic planning and ongoing relationship
matters with the Company's principal lenders.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange
Act of 1934 that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following Board Compensation Committee
Report on Executive Compensation and the Performance Graph shall not be
incorporated by reference into any such filings.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Todd E. Siegel has been employed by the Company since 1985 and has
substantial experience in the Company's business. The Board of Directors has
determined that the loss of Mr. Siegel at the present time would be adverse to
the Company.
The Board of Directors, which acts as the compensation committee for the
Company, believes strongly that performance and, in turn, the maximization of
stockholder value, depends to a significant extent on the establishment of a
close alignment between the financial interest of stockholders and those of the
Company's employees, including
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<PAGE> 12
senior management. Compensation programs are designed to encourage and balance
the attainment of short-term operational goals and long-term strategic
initiatives.
The Board of Directors believes that employees' ownership of a significant
equity interest in the Company is a major incentive in building stockholder
wealth and aligning the long-term interests of management and stockholders.
The Board of Directors believes the Company has evolved to a point that
establishment of an integrated plan that allows all employees to participate in
the future growth of the Company is essential to retain and attract qualified
personnel.
The Company compensates Mr. Siegel, the Chief Executive Officer, in
accordance with two agreements, the Employment Agreement and the Long-Term
Incentive Agreement. See "Executive Compensation--Employment Agreements."
During the year ended March 31, 1997, Mr. Siegel received a salary of $160,340
pursuant to the Employment Agreement. In accordance with the terms of the
Long-Term Incentive Agreement, Mr. Siegel received options to acquire 20,000
shares of Common Stock and earned an SAR in the amount of $53,000 which
represents 3.25% of the increase in market capitalization during fiscal year
1997. The Board of Directors believes that compensation under the Long-Term
Incentive Agreement is consistent with the Board of Directors' policy of
aligning the long-term interests of management and stockholders.
The Securities and Exchange Commission requires compensation committees of
public companies to state their compensation policies with respect to the
recently enacted federal income tax laws that limit to $1 million the
deductibility of compensation paid to executive officers named in proxy
statements of such companies. In light of the current level of compensation
for the Company's named executive officers, the Compensation Committee has not
adopted a policy with respect to the deductibility limit, but will adopt such a
policy should it become relevant.
Board of Directors
Todd E. Siegel
David Kazarian
Michael P. Conroy
John Stanton
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<PAGE> 13
PERFORMANCE GRAPH
The following graph is a comparison of the cumulative total returns for the
Company's common stock as compared with the cumulative total return for the
NASDAQ Stock Market (U.S.) Index and the average performance of a group
consisting of corporations with a similar market capitalization. The
corporations making up this group are Tyrex Oil Company, Elmers Restaurant,
Inc. and Laser-PAC Media Corp. The Company selected a group of corporations with
a similar market capitalization because there is no public information
available with respect to companies in the same line of business or peer
issuers of publicly traded securities. The cumulative return of the Company was
computed by dividing the difference between the price of the Company's common
stock at the end and the beginning of the measurement period (March 31, 1992 to
March 31, 1997) by the price of the Company's common stock at the beginning of
the measurement period. The total return calculations are based upon an
assumed $100 investment on March 31, 1992.
[GRAPH]
<TABLE>
<CAPTION>
3/31/92 3/31/93 3/31/94 3/31/95 3/31/96 3/31/97
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Medical Technology 100 142 83 95 05 148
Similar Market Cap 100 77 68 135 92 102
NASDAQ Stock Market 100 114 109 110 135 111
</TABLE>
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<PAGE> 14
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors of the Company consists of only one class of
directors. The current terms of the four directors, Todd E. Siegel, David
Kazarian, Michael Conroy and John Stanton, expire in 1997. Each director has
been nominated to stand for election at the Meeting for a term ending in 1998,
or until their respective successors have been duly elected and qualified.
Information concerning each of the nominees is set forth under the caption
"Management--Directors and Executive Officers." Unless otherwise indicated,
votes will be cast pursuant to the accompanying proxy FOR the election of these
nominees. Should any nominee become unable or unwilling to accept nomination
or election for any reason, it is intended that votes will be cast for a
substitute nominee designated by the Board of Directors, which has no reason to
believe that any of the nominees named will be unable or unwilling to serve if
elected.
PROPOSAL 2 - RATIFY THE APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANT
The Company's Board of Directors has appointed Grant Thornton, LLP ("Grant
Thornton") as independent accountants to audit the consolidated financial
statements of the Company for the year ending March 31, 1998. Representatives
of Grant Thornton are expected to be present at the Meeting with the
opportunity to make a statement if they desire to do so and to respond to
appropriate questions posed by stockholders. The Company has not had any
changes in or disagreements with its independent accountants or accounting or
financial disclosure issues. The Board of Directors recommends a vote FOR the
ratification of the appointment of Grant Thornton as the Company's independent
certified public accountant of 1998.
PROPOSAL 3 - APPROVE THE ADOPTION AND AMENDMENT OF THE
MEDICAL TECHNOLOGY SYSTEMS, INC. 1997 STOCK OPTION PLAN
As of March 4, 1997, a total of 400,000 shares of the Common Stock of the
Company were reserved for issuance pursuant to the Medical Technology Systems,
Inc. 1994 Stock Option Plan (the "1994 Plan"), and options to purchase all of
the shares reserved were outstanding under the 1994 Plan. Therefore, no shares
were available for option grants under the 1994 Plan and the Company could not
adequately provide incentives to persons who contribute to the strategic and
long-term performance objectives and growth of the Company. Accordingly, the
board of directors, by unanimous vote, subject to the approval of the Company's
stockholders, adopted the Medical Technology Systems, Inc. 1997 Stock Option
Plan (the "1997 Plan") to make available an additional 1,000,000 shares of
Common Stock for option grants to eligible persons. On July 28, 1997, the
board of directors, by unanimous vote, subject to the approval of the Company's
stockholders, amended the 1997 Plan to increase to 1,500,000 the number of
shares of Common Stock available for option grants to eligible persons. The
purpose of the 1997 Plan is to further the interests of the Company and its
stockholders by providing key employees and other persons who contribute
materially to the success and profitability of the Company with additional
incentives to increase their efforts on the Company's behalf and by increasing
recipients' proprietary interest in the Company to thereby increase their
personal interest in its continued success and progress.
A SUMMARY OF THE PRINCIPAL FEATURES OF THE 1997 PLAN IS PROVIDED BELOW,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE 1997
PLAN, WHICH IS INCLUDED AS EXHIBIT A TO THIS PROXY STATEMENT.
GENERAL
Awards granted under the 1997 Plan may consist of options ("Options") to
purchase a specified number of shares of Common Stock at a stated price per
share. The 1997 Plan provides for the grant of Options that qualify as
"incentive stock options" ("ISOs") pursuant to the Internal Revenue Code of
1986, as amended (the "Code"), as well as nonqualified stock options ("NSOs"),
which are not intended to qualify as ISOs and which are taxed under Section 83
of the Code. Within certain limits, the board of directors has the right to
alter, amend or terminate the 1997 Plan. The board of directors may, however,
condition any amendment on the approval of the stockholders if such approval is
necessary or advisable with respect to tax, securities or other applicable laws
to which the Company, the 1997 Plan, Option recipients or persons eligible to
receive Option grants are subject.
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<PAGE> 15
SHARES AVAILABLE FOR ISSUANCE
As originally adopted by the board of directors, the 1997 Plan provided
that 1,000,000 shares of Common Stock were available for Options under the 1997
Plan, representing 16.8% of the current outstanding shares of Common Stock. On
July 28, 1997, the board of directors adopted an amendment to the 1997 Plan in
order to increase the number of shares of Common Stock available for Options
under the 1997 Plan to 1,500,000, representing 20.0% of the outstanding shares
of Common Stock. Authority to grant Options under the 1997 Plan will continue
until the 1997 Plan is terminated by the board of directors of the Company (the
"Board"), subject to the continued availability of shares for the granting of
Options under the 1997 Plan. In the event of certain changes in the number or
kind of outstanding shares of Common Stock, an appropriate adjustment will be
made with respect to existing and future awards. The proceeds received by the
Company from the sale of stock under the 1997 Plan are added to the general
funds of the Company.
ELIGIBILITY; ADMINISTRATION
All persons who perform or have in the past performed services for the
Company or any direct or indirect partially or wholly owned subsidiary of the
Company, whether as a director, officer, employee, consultant or other
independent contractor, and all persons performing services relating to the
Company in their capacity as an employee or independent contractor of a
corporation or other entity providing such services to the Company, shall be
eligible to receive Options under the 1997 Plan, provided that only employees
of the Company shall be eligible to receive ISOs. The 1997 Plan will be
administered by a stock option committee (the "Committee") consisting solely of
two or more nonemployee directors appointed by the Board. In the event the
Board does not make such appointments, the full Board shall constitute the
Committee. The Committee shall have the power to interpret the provisions of
the 1997 Plan, to select the eligible persons who are to receive Options under
the 1997 Plan, to determine the type of Option, the amount thereof and all
other terms of each Option and to make all other decisions with respect to the
1997 Plan and any Options granted thereunder.
GRANTING OF OPTIONS
The Committee is authorized to grant Options to eligible persons (the
"Recipients"), which may be either ISOs or NSOs. All ISOs are intended to
comply with the provisions of the Code applicable to ISOs. The term of an ISO
cannot exceed 10 years, and the exercise price of any ISO must be equal to or
greater than the Fair Market Value of a share of Common Stock on the date of
the grant. For purposes of the 1997 Plan, "Fair Market Value" generally means
the average of the high bid and ask price of the Common Stock as quoted on NASD
OTC Bulletin Board on the date for which Fair Market Value is being determined.
The exercise price of an NSO shall be determined by the Committee on the date
that the NSO is granted, and may be less than Fair Market Value.
Exercisability. Options shall become exercisable in whole or in part by
the Recipient during such period as the Committee shall determine at the date
of grant. The Committee may, in its sole discretion, accelerate the time at
which any Option becomes exercisable.
Expiration. Each option shall expire on such date or dates as the
Committee shall determine at the time the Option is granted. Upon a
Recipient's death, each unexercised Option granted to the Recipient shall
expire on the one-year anniversary of the Recipient's death; provided, however,
that the Committee may set an earlier or later expiration date in establishing
the terms of an NSO at grant or a later expiration date subsequent to the grant
date but prior to the one-year anniversary of the Recipient's death. In the
case of the total and permanent disability of a Recipient and a resulting
termination of employment or affiliation with the Company, each unexercised
Option granted to the Recipient shall expire on the one-year anniversary of the
Recipient's last day of employment; provided, however, that the Committee may
set an earlier or later expiration date in establishing the terms of an NSO at
grant or a later expiration date subsequent to the grant date but prior to the
one-year anniversary of the Recipient's last day of employment or affiliation
with the Company. If the Recipient's employment with the Company terminates by
reason of normal retirement under the Company's normal retirement policies,
each unexercised Option granted to the Recipient will expire 90 days after the
last day of employment; provided, however, that the Committee may set an
earlier or later expiration date in establishing the terms of an NSO at grant
or a later expiration date subsequent to the grant date but prior to the end of
the 90-day period following the Recipient's normal retirement. If the
Recipient ceases employment or affiliation with the Company for any reason
other than death, disability, or retirement, all Options granted to the
Recipient shall lapse immediately following the last day that the Recipient is
employed by or affiliated with the Company; provided, however, that the
Committee may, either at grant of the Option or at the time the Recipient
terminates employment, delay the
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<PAGE> 16
expiration date of an Option to a date after termination of employment;
provided further, however, that the expiration date of an Incentive Stock
Option may not be delayed more than 90 days following the termination of the
Recipient's employment or affiliation with the Company. If a Recipient commits
any act of malfeasance or wrongdoing affecting the Company or any parent or
subsidiary, or breaches any covenant not to compete or employment agreement
with the Company or any parent or subsidiary, or engages in conduct that would
warrant the Recipient's discharge from employment for cause, all of such
Recipient's Options shall immediately expire.
Other Terms. Payment for shares of Common Stock purchased upon exercise
of an Option must be made in full at the time of purchase. Payment may be made
in cash, or by certified check, or by the transfer to the Company of shares of
Common Stock owned by the participant having a Fair Market Value on the date of
transfer equal to the purchase price.
Any Option granted may be modified by the Committee if and to the extent
permitted in the 1997 Plan or applicable Option certificate or with the consent
of the participant to whom such Option was granted.
TAX CONSEQUENCES
The following discussion addresses certain federal tax consequences in
connection with the 1997 Plan. State tax treatment is subject to individual
state laws and is not reviewed in this discussion.
Incentive Stock Options. An ISO results in no taxable income to the
Recipient or deduction to the Company at the time it is granted or exercised.
If the Recipient retains the stock received as a result of the exercise of an
ISO for at least two years from the date of the grant and one year from the
date of exercise, then the gain is treated as long- term capital gain. If the
shares are disposed of during this period, the Option will be treated as an
NSO. The Company receives a tax deduction only if the shares are disposed of
during such period. The deduction is equal to the amount of taxable income to
the Recipient.
Non-Qualified Stock Options. An NSO results in no taxable income to the
Recipient or deduction to the Company at the time it is granted. An Recipient
exercising such an Option will, at that time, realize taxable compensation in
the amount of the difference between the option price and the then Fair Market
Value of the shares. Subject to the applicable provisions of the Code, a
deduction for federal income tax purposes will be allowable to the Company in
the year of exercise in an amount equal to the taxable compensation realized by
the Recipient.
ACCOUNTING TREATMENT
The Company accounts for the issuance of stock-based compensation
including stock options in accordance with Accounting Principles Board Opinion
("APB") No. 25, Accounting for Stock Issued to Employees. APB No. 25 requires
the accrual of compensation cost to the extent that the market price of the
Common Stock on the grant date exceeds the exercise price.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based
Compensation, SFAS No. 123 provides for the recognition of compensation expense
based on the fair value of the stock-based award (the "fair value method"), but
allows companies to continue to measure compensation expense using APB No. 25.
Companies electing to continue to account for stock-based compensation in
accordance with APB No. 25 must make pro forma disclosures of net income and
earnings per share as if the Fair Value Method had been applied. The Company
plans to continue to account for stock-based compensation under APB No. 25.
Under the 1997 Plan, the issuance of Options will result in compensation
expense only to the extent the exercise price of the Option is less than the
Fair Market Value of the Common Stock on the grant date.
The Board of Directors recommends a vote FOR adoption of the Medical
Technology Systems, Inc. 1997 Stock Option Plan and amendment of the 1997 Plan
to increase the number of shares of Common Stock available for Options.
PROPOSALS OF STOCKHOLDERS FOR THE NEXT ANNUAL MEETING
Proposals of stockholders intended for presentation at the next annual
meeting must be received by the Company on or before April 14, 1998, in order
to be included in the Company's proxy statement and form of proxy for that
meeting.
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<PAGE> 17
OTHER MATTERS
THE BOARD OF DIRECTORS KNOWS OF NO OTHER MATTER TO BE PRESENTED AT THE
ANNUAL MEETING. IF ANY OTHER MATTER SHOULD BE PRESENTED PROPERLY, IT IS
INTENDED THAT THE ENCLOSED PROXY WILL BE VOTED IN ACCORDANCE WITH THE JUDGMENT
OF THE INDIVIDUALS NAMED IN THE PROXY.
THE COMPANY WILL PROVIDE TO ANY STOCKHOLDER, UPON THE WRITTEN REQUEST OF
ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING
THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, FOR ITS FISCAL YEAR ENDED
MARCH 31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO RULE 13A-1 UNDER THE SECURITIES EXCHANGE ACT OF 1934. ALL SUCH REQUESTS
SHOULD BE DIRECTED TO MICHAEL P. CONROY, SECRETARY, MEDICAL TECHNOLOGY SYSTEMS,
INC., 12920 AUTOMOBILE BOULEVARD, CLEARWATER, FLORIDA 34622. NO CHARGE WILL BE
MADE FOR COPIES OF SUCH ANNUAL REPORT; HOWEVER, A REASONABLE CHARGE FOR THE
EXHIBITS WILL BE MADE.
By Order of the Board of Directors,
/s/ Michael P. Conroy
-------------------------------------
Michael P. Conroy, Secretary
Clearwater, Florida
August 11, 1997
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<PAGE> 18
EXHIBIT A
MEDICAL TECHNOLOGY SYSTEMS, INC.
1997 STOCK OPTION PLAN
1. PURPOSE. The purpose of this Medical Technology Systems. Inc. 1997
Stock Option Plan (the "Plan") is to further the interests of Medical
Technology Systems, Inc., a Florida corporation (the "Company"), its
subsidiaries and its stockholders by providing incentives in the form of grants
of stock options to key employees and other persons who contribute materially
to the success and profitability of the Company. The grants will recognize and
reward outstanding individual performances and contributions and will give such
persons a proprietary interest in the Company, thus enhancing their personal
interest in the Company's continued success and progress. This program will
also assist the Company and its subsidiaries in attracting and retaining key
persons.
2. DEFINITIONS. The following definitions shall apply to this Plan:
(a) "BOARD" means the board of directors of the Company.
(b) "CHANGE OF CONTROL" occurs when (i) any person, including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, becomes the beneficial owner of forty percent or more of the total
number of shares entitled to vote in the election of directors of the Board,
(ii) the Company is merged into any other company or substantially all of its
assets are acquired by any other company, or (iii) three or more directors
nominated by the Board to serve as a director, each having agreed to serve in
such capacity, fail to be elected in a contested election of directors.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means the Stock Option Committee consisting solely
of two or more nonemployee directors appointed by the Board. In the event that
the Board does not appoint a Stock Option Committee, "Committee" means the
Board.
(e) "COMMON STOCK" means the Common Stock, par value $.01 per share
of the Company, or such other class of shares or securities as to which the
Plan may be applicable pursuant to Section 10 herein.
(f) "COMPANY" means Medical Technology Systems, Inc.
(g) "DATE OF GRANT" means the date on which the Option is granted.
(h) "ELIGIBLE PERSON" means any person who performs or has in the
past performed services for the Company or any direct or indirect partially or
wholly owned subsidiary thereof, whether as a director, officer, employee,
consultant or other independent contractor, and any person who performs
services relating to the Company in his or her capacity as an employee or
independent contractor of a corporation or other entity that provides services
for the Company.
(i) "EMPLOYEE" means any person employed on an hourly or salaried
basis by the Company or any parent or Subsidiary of the Company that now exists
or hereafter is organized or acquired by or acquires the Company.
(j) "FAIR MARKET VALUE" means the fair market value of the Common
Stock. If the Common Stock is not publicly traded on the date as of which fair
market value is being determined, the Board shall determine the fair market
value of the Shares, using such factors as the Board considers relevant, such
as the price at which recent sales have been made, the book value of the Common
Stock, and the Company's current and projected earnings. If the Common Stock
is publicly traded on the date as of which fair market value is being
determined, the fair market value is the average of the high bid and ask price
of the Common Stock as quoted on NASD OTC Bulletin
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<PAGE> 19
Board on that date. If a price quotation does not occur on the date as of
which fair market value is being determined, the next preceding date on which a
price was quoted will determine the fair market value.
(k) "INCENTIVE STOCK OPTION" means a stock option granted pursuant
to either this Plan or any other plan of the Company that satisfies the
requirements of Section 422 of the Code and that entitles the Recipient to
purchase stock of the Company or in a corporation that at the time of grant of
the option was a parent or subsidiary of the Company or a predecessor
corporation of any such corporation.
(l) "NONQUALIFIED STOCK OPTION" means a stock option granted
pursuant to the Plan that is not an Incentive Stock Option and that entitles
the Recipient to purchase stock of the Company or in a corporation that at the
time of grant of the option was a parent or subsidiary of the Company or a
predecessor corporation of any such corporation.
(m) "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option granted pursuant to the Plan.
(n) "OPTION AGREEMENT" means a written agreement entered into
between the Company and a Recipient which sets out the terms and restrictions
of an Option Award granted to the Recipient.
(o) "OPTION SHAREHOLDER" shall mean an Employee who has exercised
his or her Option.
(p) "OPTION SHARES" means Shares issued upon exercise of an Option.
(q) "PLAN" means this Medical Technology Systems, Inc. 1997 Stock
Incentive Plan.
(r) "RECIPIENT" means an individual who receives an Option.
(s) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(t) "SUBSIDIARY" means any corporation 50 percent or more of the
voting securities of which are owned directly or indirectly by the Company at
any time during the existence of this Plan.
3. ADMINISTRATION. This Plan will be administered by the Committee.
The Committee has the exclusive power to select the Recipients of Options
pursuant to this Plan, to establish the terms of the Options granted to each
Recipient, and to make all other determinations necessary or advisable under
the Plan. The Committee has the sole and absolute discretion to determine
whether the performance of an Eligible Person warrants an Option under this
Plan, and to determine the size and type of the Option. The Committee has full
and exclusive power to construe and interpret this Plan, to prescribe, amend,
and rescind rules and regulations relating to this Plan, and to take all
actions necessary or advisable for the Plan's administration. The Committee,
in the exercise of its powers, may correct any defect or supply any omission,
or reconcile any inconsistency in the Plan, or in any Agreement, in the manner
and to the extent it shall deem necessary or expedient to make the Plan fully
effective. In exercising this power, the Committee may retain counsel at the
expense of the Company. The Committee shall also have the power to determine
the duration and purposes of leaves of absence which may be granted to a
Recipient without constituting a termination of the Recipient's employment for
purposes of the Plan. Any determinations made by the Committee will be final
and binding on all persons. A member of the Committee will not be liable for
performing any act or making any determination in good faith.
4. SHARES SUBJECT TO PLAN. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares that may be subject to Options
under the Plan shall be 1,500,000. If an Option should expire or become
unexercisable for any reason without having been exercised, the unpurchased
Shares that were subject to such Option shall, unless the Plan has then
terminated, be available for other Options under the Plan.
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<PAGE> 20
5. ELIGIBILITY. Any Eligible Person that the Committee in its sole
discretion designates is eligible to receive an Option under this Plan. The
Committee's grant of an Option to a Recipient in any year does not require the
Committee to grant an Option to such Recipient in any other year. Furthermore,
the Committee may grant different Options to different Recipients and has full
discretion to choose whether to grant Options to any Eligible Person. The
Committee may consider such factors as it deems pertinent in selecting
Recipients and in determining the types and sizes of their Options, including,
without limitation, (i) the financial condition of the Company or its
Subsidiaries; (ii) expected profits for the current or future years; (iii) the
contributions of a prospective Recipient to the profitability and success of
the Company or its Subsidiaries; and (iv) the adequacy of the prospective
Recipient's other compensation. Recipients may include persons to whom stock,
stock options, stock appreciation rights, or other benefits previously were
granted under this or another plan of the Company or any Subsidiary, whether or
not the previously granted benefits have been fully exercised or vested. A
Recipient's right, if any, to continue to serve the Company and its
Subsidiaries as an officer, Employee, or otherwise will not be enlarged or
otherwise affected by his designation as a Recipient under this Plan, and such
designation will not in any way restrict the right of the Company or any
Subsidiary, as the case may be, to terminate at any time the employment or
affiliation of any participant.
6. OPTIONS. Each Option granted to a Recipient under the Plan shall
contain such provisions as the Committee at the Date of Grant shall deem
appropriate. Each Option granted to a Recipient will satisfy the following
requirements:
(a) WRITTEN AGREEMENT. Each Option granted to a Recipient will be
evidenced by an Option Agreement. The terms of the Option Agreement need not
be identical for different Recipients. The Option Agreement shall include a
description of the substance of each of the requirements in this Section 6 with
respect to that particular Option.
(b) NUMBER OF SHARES. Each Option Agreement shall specify the
number of Shares that may be purchased by exercise of the Option.
(c) EXERCISE PRICE. Except as provided in Section 6(l), the
exercise price of each Share subject to an Incentive Stock Option shall equal
the exercise price designated by the Committee on the Date of Grant, but shall
not be less than the Fair Market Value of the Share on the Incentive Stock
Option's Date of Grant. The exercise price of each Share subject to a
Nonqualified Stock Option shall equal the exercise price designated by the
Committee on the Date of Grant.
(d) DURATION OF OPTION. Except as provided in Section 6(l), an
Incentive Stock Option granted to an Employee shall expire on the tenth
anniversary of its Date of Grant or, at such earlier date as is set by the
Committee in establishing the terms of the Incentive Stock Option at grant.
Except as provided in Section 6(l), a Nonqualified Stock Option granted to an
Employee shall expire on the tenth anniversary of its Date of Grant or, at such
earlier or later date as is set by the Committee in establishing the terms of
the Nonqualified Stock Option at grant. If the Recipient's employment with the
Company terminates before the expiration date of an Option granted to the
Recipient, the Option shall expire on the earlier of the date stated in this
subsection or the date stated in following subsections of this Section.
Furthermore, expiration of an Option may be accelerated under subsection (j)
below.
(e) VESTING OF OPTION. Each Option Agreement shall specify the
vesting schedule applicable to the Option. The Committee, in its sole and
absolute discretion, may accelerate the vesting of any Option at any time.
(f) DEATH. In the case of the death of a Recipient, an Incentive
Stock Option granted to the Recipient shall expire on the one-year anniversary
of the Recipient's death, or if earlier, the date specified in subsection (d)
above. During the one-year period following the Recipient's death, the
Incentive Stock Option may be exercised to the extent it could have been
exercised at the time the Recipient died, subject to any adjustment under
Section
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<PAGE> 21
10 herein. In the case of the death of a Recipient, a Nonqualified Stock
Option granted to the Recipient shall expire on the one-year anniversary of the
Recipient's death, or if earlier, the date specified in subsection (d) above,
unless the Committee sets an earlier or later expiration date in establishing
the terms of the Nonqualified Stock Option at grant or a later expiration date
subsequent to the Date of Grant but prior to the one-year anniversary of the
Recipient's death. During the period beginning on the date of the Recipient's
death and ending on the date the Nonqualified Stock Option expires, the
Nonqualified Stock Option may be exercised to the extent it could have been
exercised at the time the Recipient died, subject to any adjustment under
Section 10 herein.
(g) DISABILITY. In the case of the total and permanent disability
of a Recipient and a resulting termination of employment or affiliation with
the Company, an Incentive Stock Option granted to the Recipient shall expire on
the one-year anniversary of the Recipient's last day of employment, or, if
earlier, the date specified in subsection (d) above. During the one-year
period following the Recipient's termination of employment or affiliation by
reason of disability, the Incentive Stock Option may be exercised as to the
number of Shares for which it could have been exercised at the time the
Recipient became disabled, subject to any adjustments under Section 10 herein.
In the case of the total and permanent disability of a Recipient and a
resulting termination of employment or affiliation with the Company, a
Nonqualified Stock Option granted to the Recipient shall expire on the one-year
anniversary of the Recipient's last day of employment, or, if earlier, the date
specified in subsection (d) above, unless the Committee sets an earlier or
later expiration date in establishing the terms of the Nonqualified Stock
Option at grant or a later expiration date subsequent to the Date of Grant but
prior to the one-year anniversary of the Recipient's last day of employment or
affiliation with the Company. During the period beginning on the date of the
Recipient's termination of employment or affiliation by reason of disability
and ending on the date the Nonqualified Stock Option expires, the Nonqualified
Stock Option may be exercised as to the number of Shares for which it could
have been exercised at the time the Recipient became disabled, subject to any
adjustments under Section 10 herein.
(h) RETIREMENT. If the Recipient's employment with the Company
terminates by reason of normal retirement under the Company's normal retirement
policies, an Incentive Stock Option granted to the Recipient will expire 90
days after the last day of employment, or, if earlier, on the date specified in
subsection (d) above. During the 90-day period following the Recipient's
normal retirement, the Incentive Stock Option may be exercised as to the number
of Shares for which it could have been exercised on the retirement date,
subject to any adjustment under Section 10 herein. If the Recipient's
employment with the Company terminates by reason of normal retirement under the
Company's normal retirement policies, a Nonqualified Stock Option granted to
the Recipient will expire 90 days after the last day of employment, or, if
earlier, on the date specified in subsection (d) above, unless the Committee
sets an earlier or later expiration date in establishing the terms of the
Nonqualified Stock Option at grant or a later expiration date subsequent to the
Date of Grant but prior to the end of the 90-day period following the
Recipient's normal retirement. During the period beginning on the date of the
Recipient's normal retirement and ending on the date the Nonqualified Stock
Option expires, the Nonqualified Stock Option may be exercised as to the number
of Shares for which it could have been exercised on the retirement date,
subject to any adjustment under Section 10 herein.
(i) TERMINATION OF SERVICE. If the Recipient ceases employment or
affiliation with the Company for any reason other than death, disability, or
retirement (as described above), an Option granted to the Recipient shall lapse
immediately following the last day that the Recipient is employed by or
affiliated with the Company. However, the Committee may, in its sole
discretion, either at grant of the Option or at the time the Recipient
terminates employment, delay the expiration date of the Option to a date after
termination of employment; provided, however, that the expiration date of an
Incentive Stock Option may not be delayed more than 90 days following the
termination of the Recipient's employment or affiliation with the Company.
During any such delay of the expiration date, the Option may be exercised only
for the number of Shares for which it could have been exercised on such
termination date, subject to any adjustment under Section 10 herein.
Notwithstanding any provisions set forth herein or in the Plan, if the
Recipient shall (i) commit any act of malfeasance or wrongdoing affecting the
Company or any parent or subsidiary, (ii) breach any covenant not to compete or
employment agreement with the Company or
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<PAGE> 22
any parent or Subsidiary, or (iii) engage in conduct that would warrant the
Recipient's discharge for cause, any unexercised part of the Option shall lapse
immediately upon the earlier of the occurrence of such event or the last day
the Recipient is employed by the Company.
(j) CHANGE OF CONTROL. If a Change of Control occurs, the Board may
vote to immediately terminate all Options outstanding under the Plan as of the
date of the Change of Control or may vote to accelerate the expiration of the
Options to the tenth day after the effective date of the Change of Control. If
the Board votes to immediately terminate the Options, it shall make a cash
payment to the Recipient equal to the difference between the Exercise Price and
the Fair Market Value of the Shares that would have been subject to the
terminated Option on the date of the Change of Control.
(k) CONDITIONS REQUIRED FOR EXERCISE. Options granted to Recipients
under the Plan shall be exercisable only to the extent they are vested
according to the terms of the Option Agreement. Furthermore, Options granted
to Employees under the Plan shall be exercisable only if the issuance of Shares
pursuant to the exercise would be in compliance with applicable securities
laws, as contemplated by Section 9 of the Plan. Each Agreement shall specify
any additional conditions required for the exercise of the Option.
(l) TEN PERCENT STOCKHOLDERS. An Incentive Stock Option granted to
an individual who, on the Date of Grant, owns stock possessing more than 10
percent of the total combined voting power of all classes of stock of either
the Company or any parent or Subsidiary, shall be granted at an exercise price
of 110 percent of Fair Market Value on the Date of Grant and shall be
exercisable only during the five-year period immediately following the Date of
Grant. In calculating stock ownership of any person, the attribution rules of
Code Sections 424(d) and 318 will apply. Furthermore, in calculating stock
ownership, any stock that the individual may purchase under outstanding options
will not be considered.
(m) MAXIMUM OPTION GRANTS. The aggregate Fair Market Value,
determined on the Date of Grant, of stock in the Company with respect to which
any Incentive Stock Options under the Plan and all other plans of the Company
or its Subsidiaries (within the meaning of Section 422(b) of the Code) may
become exercisable by any individual for the first time in any calendar year
shall not exceed $100,000.
(n) METHOD OF EXERCISE. An Option granted under this Plan shall be
deemed exercised when the person entitled to exercise the Option (i) delivers
written notice to the President of the Company (or his delegate, in his
absence) of the decision to exercise, (ii) concurrently tenders to the Company
full payment for the Shares to be purchased pursuant to the exercise, and (iii)
complies with such other reasonable requirements as the Committee establishes
pursuant to Section 9 of the Plan. Payment for Shares with respect to which an
Option is exercised may be made in cash, or by certified check or wholly or
partially in the form of Common Stock having a Fair Market Value equal to the
exercise price. No person will have the rights of a shareholder with respect
to Shares subject to an Option granted under this Plan until a certificate or
certificates for the Shares have been delivered to him. A partial exercise of
an Option will not affect the holder's right to exercise the Option from time
to time in accordance with this Plan as to the remaining Shares subject to the
Option.
(o) LOAN FROM COMPANY TO EXERCISE OPTION. The Committee may, in its
discretion and subject to the requirements of applicable law, recommend to the
Company that it lend the Recipient the funds needed by the Recipient to
exercise an Option. The Recipient shall make application to the Company for
the loan, completing the forms and providing the information required by the
Company. The loan shall be secured by such collateral as the Company may
require, subject to its underwriting requirements and the requirements of
applicable law. The Recipient shall execute a Promissory Note and any other
documents deemed necessary by the Committee.
(p) DESIGNATION OF BENEFICIARY. Each Recipient shall designate, in
the Option Agreement he executes, a beneficiary to receive Options awarded
hereunder in the event of his death prior to full exercise of such Options;
provided, that if no such beneficiary is designated or if the beneficiary so
designated does not survive the Recipient,
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<PAGE> 23
the estate of such Recipient shall be deemed to be his beneficiary. Recipients
may, by written notice to the Committee, change the beneficiary designated in
any outstanding Option Agreements.
(q) NONTRANSFERABILITY OF OPTION. An Option granted under this Plan
is not transferable except by will or the laws of descent and distribution.
During the lifetime of the Recipient, all rights of the Option are exercisable
only by the Recipient.
7. TAXES; COMPLIANCE WITH LAW; APPROVAL OF REGULATORY BODIES; LEGENDS.
The Company shall have the right to withhold from payments otherwise due and
owing to the Recipient (or his beneficiary) or to require the Recipient (or his
beneficiary) to remit to the Company in cash upon demand an amount sufficient
to satisfy any federal (including FICA and FUTA amounts), state, and/or local
withholding tax requirements at the time the Recipient (or his beneficiary)
recognizes income for federal, state, and/or local tax purposes with respect to
any Option under this Plan.
Options can be granted, and Shares can be delivered under this Plan, only
in compliance with all applicable federal and state laws and regulations and
the rules of all stock exchanges on which the Company's stock is listed at any
time. An Option is exercisable only if either (a) a registration statement
pertaining to the Shares to be issued upon exercise of the Option has been
filed with and declared effective by the Securities and Exchange Commission and
remains effective on the date of exercise, or (b) an exemption from the
registration requirements of applicable securities laws is available. This
Plan does not require the Company, however, to file such a registration
statement or to assure the availability of such exemptions. Any certificate
issued to evidence Shares issued under the Plan may bear such legends and
statements, and shall be subject to such transfer restrictions, as the
Committee deems advisable to assure compliance with federal and state laws and
regulations and with the requirements of this Section. No Option may be
exercised, and Shares may not be issued under this Plan, until the Company has
obtained the consent or approval of every regulatory body, federal or state,
having jurisdiction over such matters as the Committee deems advisable.
Each person who acquires the right to exercise an Option may be required
by the Committee to furnish reasonable evidence of ownership of the Option as a
condition to his exercise of the Option. In addition, the Committee may
require such consents and releases of taxing authorities as the Committee deems
advisable.
With respect to persons subject to Section 16 of the Securities Exchange
Act of 1934 ("1934 Act"), transactions under this Plan are intended to comply
with all applicable conditions of Rule 16b-3 under the 1934 Act, as such Rule
may be amended from time to time, or its successor under the 1934 Act. To the
extent any provision of the Plan or action by the Plan administrators fails to
so comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Plan administrators.
8. ADJUSTMENT UPON CHANGE OF SHARES. If a reorganization, merger,
consolidation, reclassification, recapitalization, combination or exchange of
shares, stock split, stock dividend, rights offering, or other expansion or
contraction of the Common Stock of the Company occurs, the number and class of
Shares for which Options are authorized to be granted under this Plan, the
number and class of Shares then subject to Options previously granted to
Employees under this Plan, and the price per Share payable upon exercise of
each Option outstanding under this Plan shall be equitably adjusted by the
Committee to reflect such changes. To the extent deemed equitable and
appropriate by the Board, subject to any required action by stockholders, in
any merger, consolidation, reorganization, liquidation or dissolution, any
Option granted under the Plan shall pertain to the securities and other
property to which a holder of the number of Shares of stock covered by the
Option would have been entitled to receive in connection with such event.
9. LIABILITY OF THE COMPANY. The Company, its parent and any Subsidiary
that is in existence or hereafter comes into existence shall not be liable to
any person for any tax consequences incurred by a Recipient or other person
with respect to an Option.
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<PAGE> 24
10. AMENDMENT AND TERMINATION OF PLAN. The Board may alter, amend, or
terminate this Plan from time to time without approval of the stockholders of
the Company. The Board may, however, condition any amendment on the approval
of the stockholders of the Company if such approval is necessary or advisable
with respect to tax, securities or other applicable laws to which the Company,
the Plan, Recipients or Eligible Persons are subject. Any amendment, whether
with or without the approval of stockholders of the Company, that alters the
terms or provisions of an Option granted before the amendment (unless the
alteration is expressly permitted under this Plan) will be effective only with
the consent of the Recipient to whom the Option was granted or the holder
currently entitled to exercise it.
11. EXPENSES OF PLAN. The Company shall bear the expenses of
administering the Plan.
12. DURATION OF PLAN. Options may be granted under this Plan only during
the 10 years immediately following the effective date of this Plan.
13. APPLICABLE LAW. The validity, interpretation, and enforcement of
this Plan are governed in all respects by the laws of Florida and the United
States of America.
14. EFFECTIVE DATE. The effective date of this Plan shall be the earlier
of (i) the date on which the Board adopts the Plan or (ii) the date on which
the Stockholders approve the Plan.
Adopted by the Board of Directors on March 4, 1997; and
amended by the Board of Directors on July 28, 1997.
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<PAGE> 25
APPENDIX
MEDICAL TECHNOLOGY SYSTEMS, INC.
12920 AUTOMOBILE BOULEVARD
CLEARWATER, FLORIDA 34622
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Todd E. Siegel and Michael P. Conroy or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them or their substitutes to represent and to vote, as
designated below, all the shares of common stock of Medical Technology Systems,
Inc. held of record by the undersigned on July 21, 1997, at the annual meeting
of stockholders to be held on September 10, 1997 or any adjournment thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS [ ] FOR the nominees [ ] WITHHOLD AUTHORITY
listed below to vote for the nominees
(except as marked to the listed below
contrary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN
THE LIST BELOW)
Todd E. Siegel
Michael P. Conroy
David Kazarian
John Stanton
2. PROPOSAL TO RATIFY THE APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FOR FISCAL YEAR 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE THE ADOPTION AND AMENDMENT OF THE MEDICAL TECHNOLOGY SYSTEMS, INC. 1997 STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion the Proxies are authorized to vote upon such other business as may properly come before the
meeting.
</TABLE>
<PAGE> 26
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 PROPOSALS 1, 2 AND 3.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. 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.
DATED: ____________________________ 1997
___________________________________ ______________________________________
PLEASE MARK, SIGN, DATE, Signature
AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
___________________________________ ______________________________________
Signature if held jointly
