<PAGE>
SCHEDULE 14A
Information Required in Proxy Statement
Reg. ss. 240.14a-101
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
MEDICAL TECHNOLOGY SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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.
Checkbox 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 No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[LETTERHEAD OF MEDICAL TECHNOLOGY SYSTEMS, INC.]
August 29, 1998
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 29, 1998, 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>
MEDICAL TECHNOLOGY SYSTEMS, INC.
12920 Automobile Boulevard
Clearwater, Florida 33762
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 29, 1998
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 29, 1998, 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 1999;
3. 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 August 7, 1998,
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 29, 1998
<PAGE>
1
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
29, 1998, 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 29, 1998, and at any
adjournment thereof (the "Meeting"). The close of business on August 7, 1998,
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 ___________ 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 33762 and the Company's telephone number is (727)
576-6311.
<PAGE>
2
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of July 29, 1998, 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>
Name and Address of Title of Amount and Common Stock Percentage of Voting
Beneficial Owner (1) Class Nature of Percentage Shares (6)
Beneficial
Ownership
- --------------------------------------- ----------- ---------------- -------------- --------------------
<S> <C> <C> <C> <C>
Todd E. Siegel, individually and Common 676,082 10.9% 71.1%
through the Siegel Family QTIP Preferred 6,500,000
Trust(2)(3)(4)
Common 58,000 .9% .3%
David Kazarian (5)
Michael P. Conroy (7) Common 115,000 1.9% .6%
John Stanton Common 110,000 1.8% .6%
All Officers and Directors as a Common 959,082 15.2% 72.9%
Group (4 persons) Preferred 6,500,000
</TABLE>
- ------------------------
(1) The business address for Messrs. Siegel, Kazarian, Conroy and Stanton is
12920 Automobile Boulevard, Clearwater, Florida 33762.
(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 100,000 shares of Common Stock, of which 40,000
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 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) Includes options to acquire 25,000 shares of Common Stock exercisable at
$1.00 per share granted in connection with his employment agreement. See
"Executive Compensation-Employment Agreements".
<PAGE>
3
MANAGEMENT
Directors and Executive Officers
Set forth below is certain information, as of July 29, 1998, with respect
to each person who is currently a director or executive officer of the Company.
<TABLE>
<CAPTION>
Name Position(s) Held (1) Age Year First
Became a
Director
- -------------------- --------------------------------------------------------------------- ---- -----------
<S> <C> <C> <C>
Todd E. Siegel Chairman of the Board of Directors, President and Chief Executive Officer 40 1986
David Kazarian Director 57 1988
Michael P. Conroy Director, Chief Financial Officer, Vice President and Secretary 50 1996
John Stanton Director, Vice Chairman of the Board of Directors 50 1996
David L. Presnell Principal Accounting Officer and Controller 33
</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.
See "Certain Transactions" and "Employment Agreements". and 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 P. 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. 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. Mr. Stanton
also serves as President of Octofoil, Inc., an entity that assists other
companies with strategic planning. See "Certain Transactions."
David L. Presnell. Mr. Presnell was appointed Controller of the Company in
June 1998. Mr. Presnell served as Assistant Controller from February 1997 to
June 1998. Prior to 1997, Mr. Presnell served as Senior Accountant of Tropicana
Products, Inc. and Assistant Controller of HealthPlan Services, Inc. from 1993
to 1996. Mr. Presnell is a Certified Public Accountant.
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
<PAGE>
4
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. 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 1998, 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 1996, 1997, and 1998 by
the Company's Chief Executive Officer. No other executive officer received total
annual compensation in excess of $100,000.
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------
Name and Principal Position Fiscal Year Salary ($) Other Securities
($) (3) Underlying
Options/SARs
- ------------------------------------------- ------------ ---------------- ------------ ---------------
<S> <C> <C> <C> <C>
Todd E. Siegel 1998 $168,450 $14,608 20,000
President and Chief Executive Officer 1997 $160,343 $73,607 20,000
1996 $157,462 (1) 22,538 60,000 (2)
</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 tradable. 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.
(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, 1997
and 1998 were $12,888, $10,236 and $7,200, respectively, which represented 57%,
50%, and 47%, respectively, of the total "Annual Compensation-Other" received by
Mr. Siegel.
<PAGE>
5
Option Grants in 1998. The table below sets forth information concerning
grants of stock options to the Chief Executive Officer for the fiscal year ended
March 31, 1998.
<TABLE>
<CAPTION>
Name Number of Securities Percent of Total Exercise Price Expiration Date
Underlying Options Options Granted to Per Share
Granted in 1998 Employees in Fiscal
year 1998
- ------------------ ------------------------ ----------------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Todd E. Siegel 20,000 (1) 100% $1.00 2008
</TABLE>
- -----------------
(1) Pursuant to a long-term incentive agreement with Mr. Siegel in 1998,
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 $1.00 per share,
which may be reduced by a resolution of the Board of Directors.
Aggregated Option Table. The following table sets forth information concerning
options held by the Chief Executive Officer at the end of fiscal year 1998.
<TABLE>
<CAPTION>
Name Number of Securities Underlying Exercised Value of Unexercised in-the-Money
Options/SARS at Fiscal Year-End Options/SARS at Fiscal Year-End
(#) ($)
- ------------------------ --------------------------------------------- --------------------------------------
<S> <C> <C>
Todd E. Siegel 100,000 -0- (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, 1998 ($0.3750), minus the exercise price
(which ranges from $1.00-$1.625) multiplied by 100,000, which yields a
negative figure.
Employment Agreements
Effective September 1, 1994, the Company entered into an Employment
Agreement with Mr. Todd E. Siegel (the " Siegel Employment Agreement"). The
Siegel 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
amount increases 6% per year to approximately $189,000 for the fifth year of his
agreement ending August 31, 1999. The Siegel Employment Agreement also provides
for bonuses, expense reimbursement, and other performance-based incentive
compensation arrangements. The Siegel 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 Siegel 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 Siegel 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 Mr. Siegel or
(ii) a material reduction in his compensation. The Siegel 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
<PAGE>
6
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 1998 was $0.
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 1998 have an
exercise price of $1.00 per share.
<PAGE>
7
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:
(1) Interest at the rate of 7.5% for a period of two years ending
September 1, 1998.
(2) 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.
<PAGE>
8
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.
In May 1998, one of the Company's subsidiaries obtained a $500,000 loan
from an individual. The terms of the loan provide for repayment in full plus
interest at 10% in the earliest of the date the subsidiary receives the proceeds
of a sale of equity or July 31, 1998. Mr. Siegel agreed to unconditionally
guarantee the repayment of up to $100,000 of the loan and further agreed to
secure repayment of the guaranteed amount with 100,000 shares of the Company's
Common Stock which he owns.
As of March 31, 1998, Mr. Siegel had outstanding indebtedness to the
Company of approximately $10,466. This debt represents advances made by the
Company to Mr. Siegel for travel related expenses.
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 paid CFO Financial Services, Inc. $78,380 during the year ended March
31, 1998 for Mr. Conroy's services.
In February 1996, the Company also retained Octofoil, Inc., an entity
affiliated with Mr. Stanton. The Company paid Octofoil, Inc. $75,000 during the
year ended March 31, 1998 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 during the
year ended March 31, 1998.
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
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 senior management. Compensation programs are
designed to encourage and balance the attainment of short-term operational goals
and long-term strategic initiatives.
<PAGE>
9
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, 1998, Mr. Siegel received a salary of $168,450 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. 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
<PAGE>
10
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 (Composite) 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, 1993 to March 31,
1998) 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, 1993.
(Graph)
<TABLE>
<CAPTION>
----------------------------- ------------ ------------ ------------ ------------ ------------ -------------
3/31/93 3/31/94 3/31/95 3/31/96 3/31/97 3/31/98
----------------------------- ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Medical Technology 100 74 70 4 5 4
----------------------------- ------------ ------------ ------------ ------------ ------------ -------------
----------------------------- ------------ ------------ ------------ ------------ ------------ -------------
NASDAQ Stock Market 100 108 119 161 178 268
----------------------------- ------------ ------------ ------------ ------------ ------------ -------------
----------------------------- ------------ ------------ ------------ ------------ ------------ -------------
Similar Market Cap 100 68 92 85 87 90
----------------------------- ------------ ------------ ------------ ------------ ------------ -------------
</TABLE>
<PAGE>
11
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 P. Conroy and John Stanton, expire in 1998. Each director has
been nominated to stand for election at the Meeting for a term ending in 1999,
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 1999.
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, 1999, in order to
be included in the Company's proxy statement and form of proxy for that meeting.
<PAGE>
12
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, 1998, 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 33762. 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 29, 1998
<PAGE>
Medical Technology Systems, Inc.
12920 Automobile Boulevard
Clearwater, Florida 33762
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 August 7, 1998, at the annual meeting
of stockholders to be held on September 29, 1998 or any adjournment thereof.
1. ELECTION OF DIRECTORS [ ]FOR the nominees listed [ ]WITHHOLD AUTHORITY
below (except as marked to vote for the
to the contrary below) nominees listed 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 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued and to be signed on other side)
<PAGE>
(Continued from other side)
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 and 2.
[ ]Please Check if you plan to attend the meeting.
Dated: ________________________, 1998
-----------------------------------
Signature
-----------------------------------
Print Name
----------------------------------
Signature if held jointly
-----------------------------------
Print Name
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.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
