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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] 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)
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(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: 1
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 No.:
3) Filing Party:
4) Date Filed:
______________________
1 Set forth the amount on which the filling fee is calculated and state how
it was determined.
<PAGE>
1
[LETTERHEAD OF MEDICAL TECHNOLOGY SYSTEMS, INC.]
August ____, 2000
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
_______________________________________________________ on September 26, 2000 at
10:00 a.m., local time.
The notice of the meeting and proxy statement on the following pages covers
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>
2
MEDICAL TECHNOLOGY SYSTEMS, INC.
12920 Automobile Boulevard
Clearwater, Florida 33762
________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 26, 2000
The Annual Meeting of Stockholders (the "Meeting") of Medical Technology
Systems, Inc. will be held at the ____________________________ on September 26,
2000, 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 2001 Annual Meeting of Stockholders;
2. To effect an exchange of the Company's 6,500,000 issued and
outstanding Series Number I preferred shares for 4,000,000 shares of
common stock;
3. To amend the Certificate of Incorporation of the Company to effect a 1
for 2.5 reverse stock split of the issued and outstanding shares of
the Company's common Stock.
4. To ratify the appointment of Grant Thornton LLP as the Company's
independent certified public accountants for fiscal year 2001;
5. 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 31, 2000 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
---------------------
Michael P. Conroy
Secretary
Clearwater, Florida
August ____, 2000
<PAGE>
3
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
____, 2000 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 26, 2000 and at any
adjournment thereof (the "Meeting"). The close of business on July 31, 2000 has
been fixed as the record date for 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 6,542,621 shares of Common Stock, par value
$.01 per share (the "Common Stock") entitled to one vote per share and 6,500,000
shares of Preferred Stock, par value $.0001 per share, (the "Preferred Stock")
entitled to two votes 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>
4
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of July 31, 2000 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
Name and Address of Title of Nature of Common Stock Percentage of Voting
Beneficial Owner (1) Class Beneficial Percentage Shares (6)
Ownership
---------------------------------------- ---------- ---------------- -------------- --------------------
<S> <C> <C> <C> <C>
Todd E. Siegel, individually and
through the Siegel Family QTIP Common 775,082 11.5% 69.8%
Trust (2)(3)(4) 6,500,000
Preferred
David Kazarian (5) Common 89,215 1.4% 0.5%
Michael P. Conroy (7) Common 165,000 2.5% 0.8%
John Stanton (8) Common 139,215 2.1% 0.7%
All Officers and Directors as a Common 1,173,512 17.2% 71.8%
Group (4 persons) 6,500,000
Preferred
Gerald Couture (9) Common 633,837 9.7% 3.2%
</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 199,000 shares of Common Stock, of which 80,000
options are exercisable at $1.625 per share, 60,000 are exercisable at
$1.00 per share and 59,000 exercisable at $.75. (5) Includes options to
acquire 41,000 shares, of which 35,000 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".
(8) Includes options to acquire 6,000 shares of Common Stock exercisable at
$1.00 per share.
(9) Gerald Couture is a former Officer and Director of the Company.
<PAGE>
5
MANAGEMENT
Directors and Executive Officers
Set forth below is certain information, as of July 31, 2000, with respect
to each person who is currently a director or executive officer of the Company.
<TABLE>
<CAPTION>
Year First
Name Position(s) Held (1) Age Became a
Director
-------------------- ------------------------------------------------------------------------- ---- ----------
<S> <C> <C> <C>
Todd E. Siegel Chairman of the Board of Directors, President and Chief Executive Officer 42 1986
David Kazarian Director 58 1988
Michael P. Conroy Director, Chief Financial Officer, Vice President and Secretary 52 1996
John Stanton Director, Vice Chairman of the Board of Directors 51 1996
Mark J. Connolly Principal Accounting Officer and Controller 41
</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".
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. 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."
Mark J. Connolly. Mr. Connolly was appointed Controller of the Company in
December 1999. Mr. Connolly served as Senior Manager at N.G. Kelly and Company
from November 1997 to December 1999. Prior to 1999, Mr. Connolly served as Vice
President of Operations for Hospice of Southwest Florida from February 1993 to
October 1997. Mr. Connolly is a Certified Public Accountant.
<PAGE>
6
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. The
options expire 10 years from their issuance date. During the fiscal year ended
March 31, 2000, Mr. Stanton and Mr. Kazarian were each issued options to acquire
6,000 shares of the Company's Common Stock for their services during the fiscal
years ended March 31, 1997, 1998 and 1999. In addition, Mr. Stanton and Mr.
Kazarian were each issued 23, 215 shares of Common Stock in lieu of cash
compensation of $9,250 for meetings attended during fiscal years ended March 31,
1997, 1998, 1999 and 2000.
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 (the "SEC"). 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 2000, 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 1998, 1999 and 2000 by
the Company's Chief Executive Officer and Chief Financial Officer. No other
executive officer received total annual compensation in excess of $100,000.
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------------
Securities
Name and Principal Position Fiscal Salary ($) SAR/ Other Underlying
Year Bonus ($) (1) Options/SARs
-------------------------------------------- ------- --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Todd E. Siegel 2000 $209,457 $21,016 $11,766 0
President and Chief Executive Officer 1999 $191,029 $0 $18,206 79,000 (2)
1998 $168,450 $0 $14,608 20,000
Michael P. Conroy 2000 $130,508 $18,021 $7,596 0
Vice President and 1999 $127,685 $0 $10,537 25,000 (3)
Chief Financial Officer
1998 $23,538 (4) $0 $10,334 0
</TABLE>
_________________
(1) Includes automobile expenses, health and life insurance premiums paid by
the Company for the benefit of named individuals.
<PAGE>
7
(2) Consists of options to acquire 59,000 shares of Common Stock issued
pursuant to the terms of a $100,000 loan made to the Company by Mr. Siegel.
In addition, Mr. Siegel receives options to purchase 20,000 shares of the
Company's Common Stock per year pursuant to a long-term incentive
agreement.
(3) Consists of options to acquire 25,000 shares of Common Stock issued
pursuant to Mr. Conroy'Employment Agreement.
(4) During 1998, the Company retained the services of CFO Financial Services,
Inc. Mr. Conroy was affiliated with CFO Financial Services, Inc. The
Company paid CFO Financial Services, Inc. $78,380 during the year ended
March 31, 1998 for Mr. Conroy's services.
Aggregated Option Table. The following table sets forth information concerning
options held by the Chief Executive Officer at the end of fiscal year 2000.
<TABLE>
<CAPTION>
Number of Securities Underlying Exercised Value of Unexercised in-the-Money
Name Options/SARS at Fiscal Year End Options/SARS at Fiscal Year End
(#) ($)
------------------------ --------------------------------------------- --------------------------------------
<S> <C> <C>
Todd E. Siegel 199,000 (1) -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, 2000 ($0.31), minus the exercise price (which
ranges from $0.75-$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 was 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 ended August 31, 1999. The Siegel Employment Agreement also provided
for bonuses, expense reimbursement, and other performance-based incentive
compensation arrangements. The Siegel Employment Agreement provided Mr. Siegel
the right to receive compensation in the form of Common Stock of the Company in
lieu of cash. The Company and Mr. Siegel have not entered into a new Employment
Agreement for periods commencing after August 31, 1999, therefore, according to
its terms, the Siegel Employment Agreement was renewed for a one-year period
ending August 31, 2000.
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
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 2000 was $26,890.
<PAGE>
8
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.
Effective March 1, 1998, the Company entered into an Employment Agreement
with Mr. Michael P. Conroy, the Chief Financial Officer. The Employment
Agreement is for a three-year term and provides for an annual base salary of
$125,000, $130,000 and $136,000 in each of the three years. Pursuant to the
Employment Agreement, Mr. Conroy received options to acquire 25,000 shares of
the Company's Common Stock, exercisable for a period of ten years at a price of
$1.00.
<PAGE>
9
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 2000, the Company
paid $50,000 to the Trust for royalties. In addition, royalties of $266,000 are
due for fiscal years ending through March 31, 2000.
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.
<PAGE>
10
(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.
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 SouthTrust Bank credit facility. 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 approximately
$300,000.
In August 1998, Mr. Siegel loaned the Company $100,000 for general working
capital needs. The terms of the loan provide for repayment in monthly
installments of $17,625 including interest at 18% per annum commencing July 31,
2000. In addition, Mr. Siegel received options to purchase 59,000 shares of the
Company's Common Stock at $.75 per share.
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.
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>
11
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, 2000, Mr. Siegel received a salary of $209,457 pursuant
to the Employment Agreement. In accordance with the terms of the Long-Term
Incentive Agreement, Mr. Siegel was entitled to receive $26,890, of which
$21,016 was paid during the fiscal year ended March 31, 2000 for his stock
appreciation rights and options to acquire 20,000 shares of the Company's 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 SEC 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>
12
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 Sobieski BNCP, Flamemaster Corporation and
Nitches, Inc. 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, 1995 to March 31, 2000) 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, 1995.
(GRAPH)
------------------- --------- --------- --------- --------- --------- ---------
3/31/95 3/31/96 3/31/97 3/31/98 3/31/99 3/31/00
------------------- --------- --------- --------- --------- --------- ----------
Medical Technology 100 4 5 4 2 4
------------------- --------- --------- --------- --------- --------- ----------
NASDAQ Stock Market 100 135 149 225 304 560
------------------- --------- --------- --------- --------- --------- ----------
Similar Market Cap 100 96 112 161 134 105
------------------- --------- --------- --------- --------- --------- ----------
<PAGE>
13
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 2000. Each director has
been nominated to stand for election at the Meeting for a term ending in 2001,
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 - EXCHANGE OF THE COMPANY'S ISSUED AND OUTSTANDING
SERIES I PREFERRED STOCK FOR COMMON STOCK
The Board of Directors believes that it is in the best interests of the
Company for the stockholders to exchange each share of the Company's Series
Number I Preferred Stock, $.0001 par value, (the "Preferred Stock") for 0.61538
shares of the Company' common stock, $.01 par value, (the "Common Stock") (the
"Exchange"). Therefore, the Board of Directors passed a resolution, subject to
stockholder approval, approving the Exchange. If approved by the stockholders, a
total of 6,500,000 shares of Preferred Stock will be exchanged for a total of
4,000,000 shares of Common Stock. If the Exchange is approved by the
stockholders, the preferred stockholder shall deliver certificates representing
shares of Preferred Stock, together with duly executed stock transfer powers, to
the Company. Such shares of Preferred Stock will be cancelled by the Company and
the Company will issue to the preferred stockholder one or more certificates
representing a total of 4,000,000 shares of Common Stock.
Background
The Preferred Stock was initially issued in 1986. At various times since
1986, general discussions were held between representatives of the Company and
Todd E. Siegel, the Company's CEO (who indirectly controls the Preferred Stock)
regarding a possible exchange of the Preferred Stock. During 1999 and 2000, the
Company engaged the services of an expert to assist in valuing the Preferred
Stock. During late 1999 the independent members of the Board of Directors hired
outside legal counsel to assist in the consideration of the possibility of an
exchange of the Preferred Stock. These general discussions were given more
serious attention throughout the early part of year 2000, and in June 2000,
National Securities Corporation ("National") was retained by the Company to
assist it in evaluating its capital structure. Negotiations began in earnest in
June 2000, between the Company and the preferred stockholder to establish
specific terms for the exchange of Preferred Stock for Common Stock. Once the
proposed terms of the Exchange were reached, a proposed exchange agreement was
presented to the Board of Directors on July 28, 2000. The Board of Directors
considered the Exchange Agreement and requested that National opine as to the
fairness of the proposed transaction and tabled further discussion of the
Exchange until, if and when National was ready to give such an opinion.
Upon completion of the fairness opinion prepared by National (the "National
Fairness Opinion"), the Board of Directors met to evaluate the Exchange and
considered a variety of factors, including financial and operating information
relating to the Company and reports from, and presentations by National, legal
counsel, and other outside consultants. The factors considered by the Board of
Directors, all of which were deemed material but were given varying priorities
by the individual directors, included, but were not limited to the foregoing:
(i) the Exchange Agreement dated July 24, 2000, between the Company and the Jade
Family Limited Partnership (attached as Exhibit A to this Proxy Statement), (ii)
the exchange ratio for the Preferred Stock; (iii) a comparison of financial data
for similar publicly traded companies; (iv) the financial history of the
Company; (v) certain financial projections prepared by management; (vi) the
National Fairness Opinion; and (vii) an independent valuation of the Company's
common and preferred stock.
<PAGE>
14
The Board of Directors believes the Exchange will assist management in
exploring new business opportunities, in part, by making the Company more
attractive to third parties as an investment and to generally increase interest
in the Company in the investment community. The Board of Directors also believes
that the Exchange will further the goals of the Company to list its stock on a
stock exchange or on the NASDAQ Stock Market.
The Board of Directors has concluded, in light of these factors, that the
Exchange of the Preferred Stock is in the best interests of the Company and its
stockholders. The Board of Directors did not attempt to weigh the factors
considered and no poll of the directors was taken to determine which of the
factors considered they deemed most important in arriving at their ultimate
conclusion.
Because Mr. Siegel indirectly controls the Preferred Stock, he abstained
from the voting to approve the exchange.
Exchange of Preferred Stock
The Board of Directors has considered, approved and recommends that the
stockholders approve the exchange of its Preferred Stock for Common Stock. The
vote on the Exchange requires approval by a majority of the holders of common
and preferred stock. Absent contrary instructions, shares represented by
properly executed proxies in the accompanying form will be voted FOR exchange
consistent with the terms outlined below. Any stockholder who wishes to withhold
authority from the proxy holders to vote for the exchange of the Preferred Stock
for Common Stock or to withhold authority to vote for any additional initiatives
of the Board of Directors may do so by marking his proxy to that effect.
There are 6,500,000 shares of Preferred Stock outstanding as of the Record
Date and there was one holder of those shares, the Jade Family Partnership (the
"Partnership"). The Partnership is indirectly controlled by Todd Siegel, the
Company"s CEO. The Company proposes that the Preferred Stock be exchanged for
Common Stock at the rate of approximately 0.61538 shares of Common Stock for
every one share of Preferred Stock. If the Exchange is adopted, the Company will
be required to issue 4,000,000 additional shares of Common Stock, increasing the
Company's outstanding shares of Common Stock from 6,542,621 to 10,542,621. If
the Exchange is approved, the Preferred stockholder will own approximately 41.6%
of the Common Stock upon completion of the Exchange including 390,313 (3.3%)
shares held by the Preferred shareholder before the exchange. Therefore, if the
Exchange is approved, the current holder of the Preferred Stock and its
affiliates would own a significant percentage of the Common Stock and will
continue to have a controlling influence on the affairs of the Company. The
shares of Common Stock that will be issued to the holder of the Preferred Stock
will be exempt from registration under the Securities Act of 1933, as amended
(the "Act") under Section 3(a)(9) of the Act. Upon completion of the Exchange,
there will be no outstanding Preferred Stock.
Series Number I Preferred Stock
The holders of Preferred Stock are not entitled to receive dividends. In
the event of any liquidation, dissolution or winding up of the affairs of the
Company, whether voluntary or involuntary, the holders of the Preferred Stock
are entitled to receive the first $10,000 in distributions out of the assets of
the Company available for distribution to stockholders. Thereafter any of the
assets of the Company, available for distribution, shall be made solely to the
holders of the Company's Common Stock. In addition, the holders of Preferred
Stock are entitled to two votes for each share held on all matters on which the
holders of Common Stock are entitled to vote and shall vote together with the
holders of Common Stock and not as a separate class or series (the preferred
stockholders will not vote on this Proposal 3). Accordingly, the preferred
stockholder and its affiliates currently control approximately 66.5% of the
voting power at the stockholders meeting. Shares of Preferred Stock are not
subject to a sinking fund.
The Company proposes to exchange the Preferred Stock for Common Stock,
primarily to create a capital structure that the Company believes is more
attractive to existing and potential investors. The effect upon the holders of
the Preferred Stock will include the loss of their voting and liquidation
preferences.
<PAGE>
15
Fairness Opinion Of National Securities Corporation
National is a nationally recognized investment banking firm and was
selected by the Company based upon National's reputation and general investment
banking experience, including its experience in rendering fairness opinions.
National, as part of its investment banking services, is engaged in the
valuation of businesses and securities in connection with mergers, acquisitions,
underwritings, sales, recapitalizations and distributions of listed and unlisted
securities and private placements. National had no prior business relationship
with the Company prior to its engagement of June 2000. By an engagement letter
dated June 27, 2000, and executed by the Company on June 30, 2000, the Board of
Directors retained National to act as its financial advisor to provide
assistance to the Board of Directors in its evaluation of the Exchange. The
Company agreed to pay National an aggregate fee of $35,000, pursuant to the
terms of the engagement letter payable upon delivery of their opinion.
Over the course of several weeks, management worked to develop the Exchange
Ratios (as defined below) to be used in the Exchange. Once the general
provisions of the Exchange were negotiated, management thereafter submitted the
Exchange to the Board of Directors for the Board of Director's approval. The
Board of Directors then requested that National opine in connection with the
Exchange prior to such time as the Exchange would be submitted to the
stockholders of the Company for their approval. As of July 26, 2000, National
presented the National Fairness Opinion to the Board of Directors. The National
Fairness Opinion was reviewed by the Board of Directors at a Special Meeting
convened on July 28, 2000. The National Fairness Opinion stated that, as of July
26, 2000, and based on the matters and subject to the various considerations set
forth therein, that the Exchange Ratios (as defined below) used in the Exchange
were fair from a financial point of view to the Company's stockholders.
National has consented to the inclusion of the National Fairness Opinion in
this Proxy Statement.
THE FULL TEXT OF THE NATIONAL FAIRNESS OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS EXHIBIT B TO THIS PROXY STATEMENT. THE SUMMARY
OF THE NATIONAL FAIRNESS OPINION SET FORTH IN THIS PROPOSAL IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. STOCKHOLDERS OF THE
COMPANY ARE URGED TO READ THE NATIONAL FAIRNESS OPINION IN ITS ENTIRETY. THE
NATIONAL FAIRNESS OPINION WAS PREPARED FOR AND ADDRESSED TO THE BOARD OF
DIRECTORS ONLY AS TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE
EXCHANGE RATIOS USED IN THE EXCHANGE, AND DOES NOT CONSTITUTE AN OPINION AS TO
THE MERITS OF THE EXCHANGE, A VOTE IN CONNECTION WITH THE EXCHANGE OR A
RECOMMENDATION AS TO ANY SPECIFIC AMOUNT OF CONSIDERATION FOR THE EXCHANGE. IN
ADDITION, THE NATIONAL FAIRNESS OPINION IS NOT DIRECTED TO THE FAIRNESS OF
EXCHANGE RATIOS USED IN THE RECLASSIFICATION AMONG THE VARIOUS STOCKHOLDERS OF
THE COMPANY OR TO ANY INDIVIDUAL STOCKHOLDER.
IN RENDERING ITS OPINION AS TO THE FAIRNESS OF THE EXCHANGE RATIOS USED IN
THE EXCHANGE, NATIONAL EXPRESSLY EXCLUDED FROM ITS OPINION ANY OF THE
INVESTMENTS OR PRIOR TRANSACTIONS COMPLETED BY THE COMPANY OTHER THAN THE
EXCHANGE.
In rendering its opinion, National:
(i) relied on management statements that, subject to stockholder approval,
the Company will effect a 2.5 share for 1 share reverse stock split.
(ii) reviewed the exchange agreement between the Company and the holder of
Preferred Stock, the Jade Family Partnership;
(iii)reviewed the Company's annual reports on Form 10-K for fiscal years
ended March 31, 1998, 1999 and 2000 and reviewed the Company's
quarterly reports on Form 10-Q for the periods ended September 30,
1999 and December 31, 1999;
<PAGE>
16
(iv) reviewed the Company's Certificate of Incorporation and Bylaws;
(v) reviewed certain financial projections prepared by management;
(vi) held discussions with senior management and reviewed historical and
current operations and financial conditions, as well as forecasts and
strategic opportunities of the Company and its wholly-owned
subsidiary, MTS Packaging Systems, Inc.;
(vii)visited certain facilities of the Company and MTS Packaging Systems,
Inc.
(viii) reviewed current and historical market prices and trading data of
the Company's Common Stock;
(ix) reviewed financial and market data for certain companies deemed
comparable to the Company (the "Peer Group");
(x) reviewed and analyzed mergers and acquisitions of the Peer Group;
(xi) analyzed the financial impact of the Exchange on the Company's Common
Stock;
(xii)Conducted a valuation analysis of the Company's Common Stock
comparing it to the common stock values of the Peer Group;
(xiii) reviewed calculations and analysis prepared by an outside analyst as
to the value of the Exchange.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set above, without considering the
analyses as a whole, could create an incomplete view of the processes underlying
the National Fairness Opinion. In arriving at its fairness determination,
National did not attribute any particular weight to any analysis or fact
considered by it, but rather made qualitative judgements as to the significance
and relevance of each analysis and factor.. No company or transaction used in
the above analyses as a comparison is directly comparable to the Company's
business or its subsidiary. The analyses were prepared solely for the purpose of
National's providing its opinion to the Board of Directors as to the fairness,
from a financial point of view, of the Exchange Ratios (as defined herein) used
in the Exchange.
National did not verify independently the foregoing information which was
provided to National by the Company or which was publicly available through
sources such as the SEC's EDGAR system. National did rely upon the accuracy of
the foregoing and completeness of the foregoing information. Where the Company
provided National with unaudited information, National relied upon the
representations of Management regarding the accuracy and completeness of those
unaudited financial statements. National assumed that all projections were
prepared on a reasonable basis reflecting the best available information,
estimates and judgement of the Company, and that such projections will be
realized in the amounts and time periods currently estimated by management.
National did not make any independent appraisals or evaluations of the assets of
the Company or any of the underlying assets of its subsidiary.
The National Fairness Opinion concluded that the exchange of 6,500,000
shares of Preferred Stock held by the JADE Family Limited Partnership for
4,000,000 shares of Common Stock, which equates to a ratio of approximately
0.61538 shares of Common Stock for every share of Preferred (the "Exchange
Ratios") was, when taken as a whole fair, from a financial point of view, to the
Company's stockholders.
Certain Federal Income Tax Consequences to Holders of Preferred Stock
The following is a summary of certain Federal income tax consequences of
the Exchange to holders of Preferred Stock and is based on the Federal income
tax law now in effect, which is subject to change, possibly retroactively. This
summary does not discuss all aspects of Federal income taxation which may be
important to particular holders of Preferred Stock in light of their individual
investment circumstances, including holders who hold, directly or indirectly,
10% or more of Preferred Stock and certain types of holders subject to special
tax rules (e.g., financial institutions, broker-dealers, insurance companies,
tax-exempt organizations, and foreign taxpayers). In addition, this summary does
not address state, local or foreign tax consequences. Holders of Preferred Stock
are urged to consult their tax advisors regarding the specific Federal, state,
local and foreign income and other tax consequences of the Exchange.
<PAGE>
17
The receipt of Common Stock in exchange for shares of Preferred Stock
pursuant to the Exchange will be a non-taxable transaction for Federal income
tax purposes. In general, a holder of Preferred Stock will not recognize gain or
loss for Federal income tax purposes. A holder who receives shares of Common
Stock in exchange for Preferred Stock will have a basis in the shares of Common
Stock received equal to the basis of the Preferred Stock and the holding period
of such shares of Common Stock will include the holding period of the Preferred
Stock.
Incorporation by Reference
The Company incorporates by reference the following periodic reports filed
with the SEC:
o Annual report on Form 10-K for the years ending March 31, 1998, 1999
and 2000.
o Amendment to Annual Report on Form 10-K/A for the year ended March 31,
2000.
o Quarterly Report on Form 10-Q for the quarters ended June 30, 1999,
September 30, 1999 and December 31, 1999 and June 30, 2000.
STOCKHOLDERS ARE STRONGLY URGED TO READ THE COMPANY'S PERIODIC REPORTS.
THESE REPORTS CAN BE ACCESSED AT THE SEC WEBSITE, WWW.SEC.GOV OR BY WRITTEN
REQUEST OF THE COMPANY (INSTRUCTIONS ON REQUESTING PERIODIC REPORTS ARE INCLUDED
IN THE SECTION TITLE "OTHER MATTERS"). THE REPORTS CONTAIN IMPORTANT DISCLOSURE
AND DISCUSSION OF THE CONDITION OF THE COMPANY. THIS INFORMATION IS IMPORTANT TO
CONSIDER IN A DETERMINATION WHETHER OR NOT TO VOTE FOR THE PROPOSED EXCHANGE.
STOCKHOLDERS ALSO ARE ENCOURAGED TO READ THE SECTION ENTITLED, "FAIRNESS OPINION
OF NATIONAL SECURITIES CORPORATION" AND THE FULL TEXT OF THAT OPINION, ATTACHED
TO THIS PROXY AS EXHIBIT B. NOTHING IN THE NATIONAL FAIRNESS OPINION SHOULD BE
CONSTRUED AS LEGAL OR INVESTMENT ADVICE TO AN INDIVIDUAL STOCKHOLDER.
Vote Required
The affirmative vote of a majority of both of (a) the outstanding shares of
the Common Stock entitled to vote on the Exchange and (b) the outstanding shares
of Preferred Stock entitled to vote on the Exchange are required for approval of
the Exchange. If the Exchange is adopted, it will become effective September 12,
2000.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL 3 - REVERSE STOCK SPLIT
The Board of Directors believes it is in the best interest of the Company
to amend the Company's Certificate of Incorporation (the "Amendment") to effect
a 1 for 2.5 reverse stock split (the "Reverse Split") and to provide for the
payment of cash in lieu of fractional shares otherwise issuable in connection
with the Reverse Split. Therefore, the Board of Directors passed a resolution,
subject to stockholder approval, approving the Amendment to effect the Reverse
Split. There will be no change in the number of the Company's authorized shares
of Common or Preferred Stock and no change in the par value of the Common or
Preferred Stock.
If the Reverse Split is approved, the Board of Directors will have the
authority, without further stockholder approval, to effect the Reverse Split,
pursuant to which each of the Company's presently outstanding shares (the "Old
Shares") of Common and Preferred Stock would be exchanged for new shares (the
"New Shares") of Common or Preferred Stock (as applicable) in an exchange ratio
of one New Share for each 2.5 Old Shares. The Board of Directors would also have
the authority to determine the exact timing of the Reverse Split, which may be
at any time on or prior to March 31, 2001, without further stockholder approval.
The timing will be determined in the judgment of the Board of Directors, with
the intention of maximizing the benefits of the Reverse Split to stockholders
and the Company. The Board of Directors currently intends to file the amendment
to its Articles of Incorporation as soon as it receives approval of the
stockholders and Board of Directors. See "Purposes of the Reverse Split." The
text of the proposed Amendment is set forth on Exhibit C to this Proxy
Statement.
<PAGE>
18
The Board of Directors also reserves the right, notwithstanding stockholder
approval and without further action by stockholders, to not proceed with the
Reverse Split, if, at any time prior to filing the Amendment with the Secretary
of State of the State of Delaware, the Board of Directors, in its sole
discretion, determines that the Reverse Split is no longer in the best interests
of the Company and its stockholders. The Board of Directors may consider a
variety of factors in determining whether or not to implement the Reverse Split,
including, but not limited to:
o overall trends in the stock market;
o recent changes and expected trends in the per share market price of
the Company's Common Stock;
o business and transactional developments; and
o the Company's actual and projected financial performance.
The Reverse Split will result in a consolidation or reduction in the number
of shares of our common stock that are issued and outstanding, so that after the
Reverse Split each common and preferred stockholder will own two fifths of the
number of shares owned prior to the Reverse Split and each optionee or warrant
holder will have the right to receive upon conversion or exercise of the
securities they own two fifths of the number of shares he would have been
entitled to receive prior to the Reverse Split. Although the Reverse Split will
reduce the number of outstanding shares, it will not reduce the number of
authorized shares. Implementation of the Reverse Split will not change the
relative equity positions among common and preferred stockholders nor the
contingent equity positions of the holders of stock options and warrants. The
Reverse Split will not alter the relative rights of the common stockholders,
preferred stockholders, warrant holders or optionees.
The Reverse Split will not:
o affect your percentage ownership interest or proportional voting
power, except for minor differences if you receive cash instead of a
fractional share;
o reduce the authorized number of common stock;
o have an effect on the par value of our common stock;
o substantially affect your voting rights or other privileges, unless
you would receive cash for all of your stock holdings (only applicable
if you own less than 2.5 shares of Common Stock); or
o substantially reduce our number of stockholders.
Our common stock is currently registered under section 12(g) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The Reverse Split
will not affect the registration of our common stock under the 1934 Act.
Purposes of the Reverse Split
Although the effect of a Reverse Split on the market price of our common
stock cannot accurately be predicted, we believe that if stockholders approve
the Reverse Split and the Reverse Split is effected, the market price of our
common stock will likely increase. We cannot guarantee that the market price of
our common stock following the Reverse Split will increase in direct proportion
to the exchange ratio selected by our Board of Directors or that any such
increase will be sustained for an extended period of time. Nor can we guarantee
that the Reverse Split will not adversely affect the market price of our common
stock.
<PAGE>
19
Assuming the market price of our common stock will increase following
effectiveness of the Reverse Split, management also believes that the perception
of our common stock as an investment will improve and that our common stock will
appeal to a broader market. Due to the volatility of low priced stocks, we
believe the investment community generally views common stock that sells at a
low price negatively. Some brokers are reluctant to or will not recommend that
their clients purchase lower priced stocks, and institutional investors may be
prohibited from purchasing such stocks as a matter of policy. These practices
may adversely affect the liquidity of our common stock and our ability to raise
additional equity capital. Management believes that additional interest in our
common stock by the investment community is desirable and could result in a more
stable trading market for our common stock. An increased market price that may
result from the Reverse Split may encourage interest and trading in our common
stock.
In addition, by decreasing the number of outstanding shares of common stock
and preferred stock and the number of shares of common stock the holders of
outstanding options and warrants are entitled to acquire, the Reverse Split will
increase the number of shares of our common stock available for future issuance.
Our Certificate of Incorporation currently authorizes the issuance of up to
25,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), and 7,500,000 shares of preferred stock, par value $.0001 per share
(the "Preferred Stock"). As of July 31, 2000, we had 6,542,621 shares of Common
Stock issued and outstanding and 8,085,386 million shares on a fully diluted
basis, including shares issuable upon the exercise of outstanding options and
warrants. There were also 6,500,000 shares of Preferred Stock outstanding. The
Reverse Split will increase the number of shares available for future issuance
by approximately 7,825,573 million shares (assuming a 1 for 2.5 reverse stock
split and assuming that we do not issue additional shares of common stock).
Certain Effects of the Reverse Split
The following table illustrates the principal effects of the Reverse Split
on the Company's Common Stock:
<TABLE>
<CAPTION>
Number of Shares Prior to the Subsequent to
Reverse Split Reverse Split
------------------------------------ ------------------ ------------------
<S> <C> <C>
Authorized Common Stock 25,000,000 25,000,000
Outstanding(1) (2) 6,542,621 2,617,048
Authorized Preferred 7,500,000 7,500,000
Outstanding(1)(3) 6,500,000 2,600,000
Available for Future Issuance(3) 19,457,379 27,282,952
</TABLE>
(1) Gives effect to the Reverse Split as if it occurred on the Record
Date, subject to adjustment resulting from the repurchase by the
Company of fractional shares.
(2) Excludes shares of Common Stock issuable upon the exercise of
outstanding options and warrants under the Medical Technology Systems,
Inc. 1997 Stock Option Plan. Upon effectiveness of the Reverse Split,
each option will be appropriately adjusted as to exercise price and
number of shares subject to stock options to reflect the Reverse
Split.
(3) Does not take into account the proposed exchange of all 6,500,000
shares of Preferred Stock for 4,000,000 shares of Common Stock, which
is subject to Stockholder approval. If such exchange is approved, the
preferred stockholders will receive 1,600,000 shares of Common Stock.
<PAGE>
20
Stockholders should recognize that if the Reverse Split is effectuated they
will own a fewer number of shares than they presently own (a number equal to the
number of shares owned immediately prior to the filing of the Amendment divided
by 2.5 (before adjustment for fractional shares, as described below)). While the
Company expects that the Reverse Split will result in an increase in the market
price of the Common Stock, there can be no assurance that the Reverse Split will
increase the market price of the Common Stock by a multiple of 2.5 or result in
the permanent increase in the market price (which is dependent upon many
factors, including, but not limited to, the Company's performance and
prospects). Also, if the market price of the Common Stock declines, the
percentage decline may be greater than would pertain in the absence of a Reverse
Split. Furthermore, the possibility exists that liquidity in the market price of
the Common Stock could be adversely affected by the reduced number of shares
that would be outstanding after the Reverse Split. In addition, the Reverse
Split will increase the number of stockholders of the Company who own odd-lots
(less than 100 shares). Stockholders who hold odd-lots typically will experience
an increase in the cost of selling their shares, as well as greater difficulty
in effecting such sales. There can be no assurance that the Reverse Split will
achieve the desired results that have been outlined above.
Procedure for Effecting Reverse Split and Exchange of Stock Certificates
If the Amendment is approved by the Company's stockholders, and if the
Board of Directors still believes that the Reverse Split is in the best
interests of the Company and its stockholders, the Company will file the
Amendment with the Secretary of State of Delaware at such time as the Board of
Directors has determined the appropriate effective time for the Reverse Split.
The Board of Directors may delay effecting the Reverse Split until March 31,
2001 without resoliciting such stockholder approval. The Reverse Split will
become effective on the date of filing the Amendment (the "Effective Date").
Beginning on the Effective Date, each certificate representing Old Shares will
be deemed for all corporate purposes to evidence ownership of New Shares.
Promptly after the Effective Date, stockholders will be notified that the
Reverse Split has been effected. The Company's transfer agent, Continental Stock
Transfer and Trust Company, will act as exchange agent (the "Exchange Agent")
for purposes of implementing the exchange of stock certificates. Holders of Old
Shares will be asked to surrender to the Exchange Agent certificates
representing Old Shares in exchange for certificates representing New Shares in
accordance with the procedures to be set forth in a letter of transmittal to be
sent by the Company. No new certificates will be issued to a stockholder until
such stockholder has surrendered such stockholder's outstanding certificate(s)
together with the properly completed and executed letter of transmittal to the
Exchange Agent. STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE AND SHOULD
NOT SUBMIT ANY CERTIFICATES UNTIL REQUESTED TO DO SO.
Fractional Shares
No scrip or fractional certificates will be issued in connection with the
Reverse Split. Stockholders who otherwise would be entitled to receive
fractional shares because they hold a number of Old Shares not evenly divisible
by 2.5, will be entitled, upon surrender to the Exchange Agent of certificates
representing such shares, to a cash payment in lieu thereof at a price equal to
the fraction to which the stockholder would otherwise be entitled multiplied by
the closing price of the Common Stock as reported in the Over the Counter
Bulletin Board on the last trading day prior to the Effective Date (or if such
price is not available, the average of the last bid and ask prices of the Common
Stock on such day or other price determined by the Board of Directors). The
ownership of a fractional interest will not give the holder of such fractional
interest any voting, dividend, or other rights except to receive payment as
described in this section.
Stockholders should be aware that, under the escheat laws of the various
jurisdictions where stockholders reside, where the Company is domiciled and
where the funds will be deposited, sums due for fractional interests that are
not timely claimed after the Effective Date may be required to be paid to a
designated agent for each such jurisdiction, unless correspondence has been
received by the Company or the Exchange Agent concerning ownership of such funds
within the time permitted in such jurisdiction. Thereafter, stockholders
otherwise entitled to receive such funds will have to seek to obtain them
directly from the state to which they were paid.
No Dissenter's Rights
Under Delaware law, stockholders are not entitled to dissenter's rights
with respect to the proposed Amendment.
<PAGE>
21
Federal Income Tax Consequences of the Reverse Split
The following is a summary of certain material federal income tax
consequences of the Reverse Split, and does not purport to be complete. It does
not discuss any state, local, foreign or minimum income or other U.S. federal
tax consequences. Also, it does not address the tax consequences to holders that
are subject to special tax rules, such as banks, insurance companies, regulated
investment companies, personal holding companies, foreign entities, nonresident
alien individuals, broker-dealers and tax-exempt entities. The discussion is
based on the provisions of the United States federal income tax law as of the
date hereof, which is subject to change retroactively as well as prospectively.
This summary also assumes that the Old Shares were, and the New Shares will be,
held as a "capital asset," as defined in the Internal Revenue Code of 1986, as
amended (generally, property held for investment). The tax treatment of a
stockholder may vary depending upon the particular facts and circumstances of
such stockholder. EACH STOCKHOLDER SHOULD CONSULT WITH SUCH STOCKHOLDER'S OWN
TAX ADVISOR WITH RESPECT TO THE CONSEQUENCES OF THE REVERSE SPLIT.
No gain or loss should be recognized by a stockholder of the Company upon
such stockholder's exchange of Old Shares for New Shares pursuant to the Reverse
Split (except to the extent of any cash received in lieu of a fraction of a New
Share). Cash payments in lieu of a fractional New Share should be treated as if
the fractional share were issued to the stockholder and then redeemed by the
Company for cash pursuant to Section 302 of the Internal Revenue Code of 1986,
as amended. A Company stockholder receiving such payment should recognize gain
or loss equal to the difference, if any, between the amount of cash received and
the stockholder's basis in the fractional share (determined as provided below).
Such gain or loss will be capital gain or loss if the payment of cash in lieu of
the fractional share is undertaken solely for the purpose of saving the Company
the expense and inconvenience of issuing and transferring fractional shares, is
not separately bargained for consideration and the payment is "not essentially
equivalent to a dividend" with respect to the stockholder under the federal
income tax law. For this purpose, a payment is not essentially equivalent to a
dividend if it results in a "meaningful reduction" in the stockholder's
percentage interest in the Company, taking into account the constructive
ownership rules and redemptions of fractional shares from all the stockholders.
The Internal Revenue Service has ruled publicly that any reduction in the
percentage interest of a small minority stockholder in a publicly-held
corporation who exercises no control over corporate affairs should constitute a
meaningful reduction.
The aggregate tax basis of the New Shares received in the Reverse Split
(including any fraction of a New Share deemed to have been received) will be the
same as the stockholder's aggregate tax basis in the Old Shares exchanged
therefor. The stockholder's holding period for the New Shares will include the
period during which the stockholder held the Old Shares surrendered in the
Reverse Split.
Required Vote
The affirmative vote of a majority of the outstanding shares of Common
Stock and Preferred Stock entitled to vote on the Amendment will be required to
approve the Amendment. If the Amendment is adopted it will become effective upon
filing of the of the Amendment with the Secretary of State of the State of
Delaware.
The Text of this Amendment is annexed as Exhibit C.
The Board of Directors unanimously recommends a vote FOR this proposal.
<PAGE>
22
PROPOSAL 4 - 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, 2001. 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 for
fiscal year 2001.
PROPOSALS OF STOCKHOLDERS FOR THE NEXT ANNUAL MEETING
(1) Proposals of stockholders intended for presentation at the next annual
meeting must be received by the Company on or before April 15, 2001,
in order to be included in the Company's proxy statement and form of
proxy for that meeting.
<PAGE>
23
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 attached to the Company's Annual
Report, for its fiscal year ended March 31, 2000, as filed with the SEC 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 ____, 2000
<PAGE>
1
Exhibit A
EXCHANGE AGREEMENT
------------------
This Exchange Agreement (the "Agreement") is made and entered on July 24,
2000, by and among Medical Technology Systems, Inc. (the "Company") and the JADE
Family Limited Partnership (the "Preferred Stockholder").
Background
The Company has decided upon a recapitalization of its capital stock,
whereby the Company, subject to approval of its stockholders, will effectuate an
exchange of the outstanding shares of the Company's preferred stock for shares
of the Company's common stock (the "Exchange"). The Preferred Stockholder owns
6,500,000 shares of Series Number I preferred stock, par value $.0001 per share
(the "Preferred Stock"), which has the rights set forth in the Company's
Certificate of the Designation, Preferences, Rights and Limitations. The Company
and the Preferred Stockholder have agreed that, subject to the terms and
conditions of this Agreement, the Preferred Stockholder will tender to the
Company 6,500,000 shares of Preferred Stock and the Company will exchange the
Preferred Stock for 4,000,000 shares of the Company's common stock, par value
$.01 per share (the "Common Stock").
Accordingly, in consideration, of the mutual covenants and agreements set
forth below, the parties agree as follows:
Terms
1. Exchange of Certificates. If the Company's stockholders approve the
Exchange, the Preferred Stockholder shall deliver to the Company
certificates representing 6,500,000 shares of Preferred Stock, together
with stock transfer power, duly executed in blank. Such shares of Preferred
Stock will be cancelled by the Company and the Company shall issue to the
Preferred Stockholder a certificate or certificates representing 4,000,000
shares of Common Stock (the "Exchanged Shares").
2. Representations and Warranties of the Company. The Company represents and
warrants to the Preferred Stockholder as follows: (i) the Company has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated by this Agreement, (ii) the execution, delivery and
performance of this Agreement by the Company and the consummation by it of
the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action (excluding stockholder approval),
(iii) this Agreement has been duly executed and delivered by the Company
and constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally, or by
principles governing the availability of equitable remedies) and (iv) the
Exchanged Shares will be validly issued, fully paid and non-assessable when
issued.
3. Representations and Warranties of the Preferred Stockholder. The Preferred
Stockholder, represents and warrants to the Company that (i) this Agreement
has been duly executed and delivered by the Preferred Stockholder; (ii) the
execution, delivery and performance by the Preferred Stockholder of, and
the consummation by the Preferred Stockholder of the transactions
contemplated by, this Agreement have been duly and validly authorized by
all necessary partnership action on the part of the Preferred Stockholder;
(iii) this Agreement constitutes a legal, valid and binding obligation of
the Preferred Stockholder enforceable in accordance with its terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable
remedies) and (iv) the Preferred Stockholder acknowledges that the
Exchanged Shares will not be registered under any federal or state
securities laws, will bear appropriate legends restricting transfer, and
may not be transferred except in accordance with all applicable securities
laws.
<PAGE>
2
4. Miscellaneous.
(a) Survival of Provisions. The representations and warranties of the
parties made in or pursuant to this Agreement shall survive the
consummation of any of the transactions contemplated hereby, in each
case regardless of any investigation that may have been or may be made
by or on behalf of any other party.
(b) Communications. All notices and other communications required or
permitted by this Agreement shall be in writing, and, (i) if to the
Preferred Stockholder, addressed to the Preferred Stockholder at 12920
Automobile Boulevard, Clearwater, Florida or at such other address as
the Preferred Stockholder may designate in a written notice to the
Company and (ii) if to the Company, to Medical Technology Systems,
Inc., 12920 Automobile Boulevard, Clearwater, Florida 33762, Attn:
Chief Financial Officer or to such other address as the Company may
designate in a written notice to the Preferred Stockholder. All
notices and other communications required or permitted by this
Agreement shall be deemed to have been duly given if personally
delivered to the intended recipient at the proper address determined
pursuant to this Section or sent to such recipient at such address by
registered or certified mail, return receipt requested, Express Mail,
Federal Express or similar overnight delivery service for next
business day delivery and will be deemed given, unless earlier
received: (1) if sent by certified or registered mail, return receipt
requested, five calendar days after being deposited in the United
States mail, postage prepaid; (2) if sent by Express Mail, Federal
Express or similar overnight delivery service for next Business Day
delivery, the next Business Day after being entrusted to such service,
with delivery charges prepaid or charged to the sender's account; and
(3) if delivered by hand, on the date of delivery.
(c) Binding Effect; Successors and Assigns; Entire Agreement. Except as
expressly provided in this Agreement, nothing in this Agreement,
express or implied, is intended or shall be construed to confer upon
or give any person other than the parties to this Agreement any remedy
or claim under or by reason of this Agreement or any term, covenant or
condition of this Agreement, all of which shall be for the sole and
exclusive benefit of the parties. This Agreement and all of the
provisions shall be binding upon and inure to the benefit of the
parties and their respective successors, heirs, executors, legal
representatives and permitted assigns. This Agreement sets forth the
entire agreement and understanding among the parties as to the
specific subject matter of this Agreement and merges and supersedes
all prior discussions, agreements and understandings of any and every
nature among them with respect to such subject matter.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented unless approved in writing by the
Company and the Preferred Stockholder.
(e) Governing Law. This Agreement will be governed by, and will be
construed in accordance with, the laws of Florida.
(f) Interpretation. The headings of the sections contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not affect the meaning or
interpretation of this Agreement.
(g) No Implied Waivers. No action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties,
agreements, covenants, obligations or commitments contained or made
pursuant to this Agreement. The waiver by any party of a breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any preceding or succeeding breach and no failure by any
party to exercise any right, privilege or remedy hereunder shall be
deemed a waiver of such party's rights, privileges or remedies
hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
<PAGE>
3
(h) Counterparts. This instrument may be executed in two or more
counterparts, each of which shall be deemed an original, and all of
which together shall constitute one instrument.
(i) Further Assurances. Each party shall cooperate and take such actions
as may be reasonably requested by the other party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated by this Agreement.
5. Stockholder Approval. The transactions contemplated by this Agreement are
expressly contingent upon the approval of a majority of the shares voting
at a meeting of the stockholders of the Company, excluding shares held by
the Preferred Stockholder, Todd E. Siegel or any of their respective
affiliates. This Agreement shall have no force or effect if such approval
is not obtained on or before January 31, 2001 or if a stockholder vote is
held and the transactions contemplated by this Agreement are not approved
by the stockholders of the Company.
6. Reverse Stock Split. The parties expressly contemplate the possibility that
the Company may effectuate a 1 share for 2.5 shares reverse stock split.
Such reverse stock split shall have no effect upon the transactions
contemplated by this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
date set forth above.
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:______________________________________________
Name: ___________________________________________
Title:___________________________________________
JADE Family Limited Partnership
By: ______________________________________________
Todd E. Siegel as Trustee of the Siegel Family
QTIP Trust, its general partner
<PAGE>
1
Exhibit B
National Securities Corporation
July 26, 2000
The Board of Directors
Medical Technology Systems, Inc.
12920 Automobile Boulevard
Clearwater, Florida 33762
Gentlemen:
You have asked National Securities Corporation ("National") to render an
opinion (the "Opinion") as to the fairness, from a financial point of view, to
the stockholders of Medical Technology Systems, Inc. ("MTSI") of the Exchange
Ratio (as defined below) to the MTSI stockholders in connection with the
proposed conversion or exchange (the "Exchange") of MTSI preferred stock into
MTSI common stock by the preferred stockholders ("Preferred Stockholders")
pursuant to the terms and conditions set forth in the Agreement of Exchange
dated July 24, 2000 (the "Agreement").
Pursuant to the Agreement, as more fully described therein, each holder of
a share of Preferred Stock shall have the right to exchange said share of
Preferred Stock for 0.61538 (the "Exchange Ratio") share(s) of MTSI common
stock. Currently, there are 6,500,000 shares of Preferred Stock outstanding.
Assuming all shares of Preferred Stock are Exchanged, the holder(s) thereof
shall have the right to receive 4,000,000 shares of MTSI common stock, Such
Exchange is to be effective on the day following the annual meeting (estimated
to be September 12, 2000), provided that it is approved by the shareholders (the
"Effective Date,").
In the course of analysis for rendering this Opinion, we have:
(i) relied on MTSI's management statement that, subject to shareholder
approval, MTSI will effect a 2.5 share for 1 share reverse stock split
effective September 12, 2000.
(ii) reviewed the Exchange Agreement;
(iii)reviewed MTSI's annual reports on Form 10-K for fiscal years ended March
31, 1998, 1999 and 2000 and reviewed MTSI's quarterly reports on Form 10-Q
for the periods ended September 30, 1999 and December 31, 1999;
(iv) reviewed the Certificate of Incorporation and By-Laws of MTSI;
(v) reviewed certain financial projections prepared by MTSI's management;
(vi) held discussions with MTSI's senior management and reviewed historical and
current operations and financial conditions, as well as forecasts and
strategic opportunities of MTSI and its wholly owned subsidiary, MTS
Packaging Systems, Inc.;
(vii) visited certain facilities of MTSI and MTS Packaging Systems, Inc.;
(viii) reviewed current and historical market prices and trading data of MTSI
Common Stock;
<PAGE>
2
(ix) reviewed financial and market data for certain public companies we deemed
comparable to MTSI (the "Peer Group");
(x) reviewed and analyzed mergers and acquisitions of the Peer Group;
(xi) analyzed the financial impact of the Exchange on the Common Stock of MTSI;
(xii)conducted a valuation analysis of MTSI Common Stock comparing it to the
common stock values of the Peer Group;
(xiii) reviewed calculations and analysis prepared by Marshall and Stevens, Inc.
as to the value of the Exchange.
In addition to the above, we have performed such other analyses and
reviewed such other documents and information as were deemed appropriate.
In rendering our Opinion, we relied upon and assumed, without independent
verification or investigation, the accuracy and completeness of all financial
and other information available to us from public sources and provided to us by
MTSI and their respective representatives. Our analysis of the post-Exchange
capital structure relies on MTSI's management's forecasts as to the
reasonableness and achievability of the financial and operating projections. We
have not been engaged to assess the achievability of such projections or
assumptions on which they were based and, therefore, we express no view as to
the accuracy of such projections or assumptions.
Our opinion is necessarily based on economic, market and other conditions,
and the information made available to us, as of the date hereof.
Our Opinion is limited to a determination of the fairness, from a financial
point of view, of the Exchange Ratio as set forth in the Agreement. We have not
examined the merits or fairness of any other transactions contemplated by MTSI.
In addition, we assume that the factual circumstances and terms, as they exist
as of the date of our Opinion, will remain substantially unchanged until the
Exchange is completed. We have not assumed any responsibility for verifying the
accuracy of the advice and conclusions of MTSI's legal counsel and accountants
with respect to the tax and accounting matters provided to us. We have assumed
that the Exchange will be consummated in accordance with the terms of the
Agreement and that shareholder approval will occur at the annual meeting on
September 11, 2000.
<PAGE>
3
As part of our investment banking services, we are regularly engaged in the
valuation of businesses and securities in connection with mergers, acquisitions,
recapitalizations, underwritings, sales and distributions of listed and unlisted
securities and private placements. We have been engaged by the Board of
Directors of MTSI to render financial advisory services to MTSI in connection
with the Exchange and will receive a fee for our services, including a fee upon
the delivery of this Opinion. We may, in our ordinary course of business, serve
as a market maker in the Common Stock of MTSI and may actively trade in the
securities of MTSI for our own account or for the account of our customers and
accordingly may at any time hold a long or short position in the MTSI Common
Stock. Additionally, we may provide equity research coverage of MTSI.
Our Opinion is intended for the benefit and use of the Board of Directors
of MTSI in its evaluation of the Exchange, and our Opinion is not intended to be
and does not constitute a recommendation to the Board of Directors or any
stockholder to vote in favor of the Exchange. We understand that this Opinion
may be included in a registration statement filed with the Securities and
Exchange Commission and distributed to MTSI stockholders in connection with the
approval of the Exchange. We hereby consent to the foregoing use of the Opinion
in its entirety. Otherwise, our Opinion may not be published or used or referred
to without our prior written consent.
Based upon and subject to the foregoing, it is our Opinion that, as of the
date hereof, that the Exchange Ratio to be received by the Preferred
Stockholders in connection with their exchange of Preferred Stock for Common
Stock is fair, from a financial point of view, to the stockholders of MTSI.
Very truly yours,
NATIONAL SECURITIES CORPORATION, INC.
/s/ Steven A Rothstein
------------------------
By: Steven A. Rothstein
Title: Chairman
/s/ Samuel M. Chase, Jr.
-------------------------
By: Samuel M. Chase, Jr.
Title: Managing Director
<PAGE>
1
Exhibit C
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
MEDICAL TECHNOLOGY SYSTEMS, INC.
Medical Technology Systems, Inc., a Company organized and existing under
the laws of the State of Delaware (the "Company"), certifies as follows:
FIRST: That in accordance with the requirements of Section 242 of the
General Company Law of the State of Delaware, the Board of Directors of the
Company, acting at a meeting of the directors of the Company at which a quorum
was present duly adopted resolutions proposing and declaring advisable a reverse
stock split of the Common Stock outstanding and recommending that such proposal
be submitted to the stockholders of the Company for their consideration, action
and approval.
SECOND: Article 4 of the Certificate of Incorporation of this Company, as
previously amended, shall be further amended by adding a new paragraph to the
end of said Article 4, which new paragraph shall read as follows:
"Effective upon the filing of this Certificate of Amendment to the
Certificate of Incorporation of the Company, each 2.5 shares of Common
Stock, $.01 par value per share, of the Company then issued and
outstanding or held in the treasury of the Company automatically shall
be combined into 1 share of Common Stock of the Company. There shall
be no fractional shares issued. Each holder of shares of Common Stock
who otherwise would be entitled to receive a fractional share shall be
entitled to receive a cash payment in lieu thereof at a price equal to
the fraction to which such holder would otherwise be entitled to
receive multiplied by the closing price of Common Stock as reported in
The Wall Street Journal on the last trading day prior to the filing of
this Certificate of Amendment to the Certificate of Incorporation of
the Company, or, if such price is not available, the average of the
last bid and asked prices of the Common Stock on such day, or such
other price as may be determined by the Board of Directors of the
Company."
THIRD: That thereafter, pursuant to resolution of the Board of Directors of
Directors, at least a majority of the outstanding stock of the Company entitled
to vote on the reverse stock split, acting at a meeting of stockholders of the
Company at which a quorum was present in accordance with the General Company Law
of the State of Delaware, duly approved the aforesaid amendment to the
Certificate of Incorporation of the Company.
FOURTH: That the aforesaid amendment to the Certificate of Incorporation of
the Company was duly adopted in accordance with the provisions of Section 242 of
the General Company Law of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment to
the Certificate of Incorporation to be duly executed in accordance with Section
103 of the General Company Law of the State of Delaware this ____ day of
_______________, 2000.
MEDICAL TECHNOLOGY SYSTEMS, INC.
By: /s/ Todd Siegel
--------------------------
Todd Siegel, President
<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 July 31, 2000, at the annual meeting
of stockholders to be held on September 26, 2000 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 effect an Exchange of the Company's 6,500,000 issued and
outstanding Series I Preferred Shares for 4,000,000 shares of Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to amend the Certificate of Incorporation of the Company to effect
a 1 for 2.5 reverse stock split of the issued and outstanding shares of the
Company's Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to ratify the appointment of Grant Thornton LLP as the Company's
independent Certified Public Accountants for fiscal year 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. 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: ________________________, 2000
-----------------------------------
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
