SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MEDTOX SCIENTIFIC, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:
1 Set forth the amount on which the filing fee is
calculated and state how it was determined.
[ ] Fee Paid Previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No:
3) Filing Party:
4) Date Filed:
MEDTOX SCIENTIFIC, INC.
402 West County Road D
St. Paul, Minnesota 55112
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on September 26, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of the stockholders ("Annual
Meeting") of MEDTOX SCIENTIFIC, INC., a Delaware corporation (the "Company"),
will be held at the Four Points Hotel (formerly the Sheraton Minneapolis
Metrodome), located at 1330 Industrial Blvd., Minneapolis, Minnesota on
Wednesday, September 26, 2001 at 3:30 p.m. (CST) for the following purposes:
1. To elect two directors to serve on the Board of Directors of the
Company (the "Board of Directors") for three year terms or
until their successors are elected and qualified; and
2. To consider and act upon a proposal to approve an amendment to Article
FOURTH of the Company's Certificate of Incorporation to increase its
number of authorized shares of Common Stock from 7,400,000 to
14,400,000; and
3. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
In accordance with the provisions of the Bylaws of the Company, the Board
of Directors has fixed the close of business on August 6, 2001 as the record
date for the determination of the holders of the shares of Common Stock entitled
to notice of, and to vote at, the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement.
Stockholders are requested to date, sign and mail the enclosed Proxy as
promptly as possible, whether or not they expect to attend the meeting in
person.
By Order of the Board of Directors,
Richard J. Braun
Chairman of the Board, President and
Chief Executive Officer
St. Paul, Minnesota
August 20, 2001
MEDTOX SCIENTIFIC INC.
402 West County Road D
St. Paul, Minnesota 55112
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
September 26, 2001
PROXIES
The enclosed proxy (the "Proxy") is solicited by and on behalf of the Board
of Directors of MEDTOX SCIENTIFIC, INC., a Delaware corporation (the "Company"),
for use at the Company's 2001 annual meeting of stockholders (the "Annual
Meeting") and at any and all adjournments thereof. Any stockholder has the power
to revoke his or her Proxy at any time before it is voted. A Proxy may be
revoked (1) by delivery of written notice of revocation to the Secretary of the
Company at its principal office, 402 West County Road D, St. Paul, Minnesota
55112, (2) by the execution of a subsequent Proxy and presentment of such
subsequent Proxy at the Annual Meeting or (3) by attendance at the Annual
Meeting and voting in person. This solicitation is being made by use of the
mails and the cost thereof will be borne by the Company. Shares represented by
valid Proxies will be voted in accordance with the instructions indicated
thereon. Unless otherwise directed, votes will be cast FOR the election of the
directors named and FOR Proposal 2.
The costs of solicitation of proxies will be borne by the Company. In
addition to use of mails, proxies may be solicited personally, or by telephone
by one or more of the regular personnel of the Company without additional
compensation. The Company expects to pay an independent proxy solicitor
approximately $15,000 as compensation for the solicitation of proxies. In
addition, the Company may reimburse brokers and other custodians, nominees and
fiduciaries for their expenses for sending proxy material to beneficial owners,
in accordance with Securities and Exchange Commission regulations.
The Company anticipates mailing proxy materials and the annual report for
its fiscal year ended December 31, 2000 (the "Annual Report") to stockholders of
record as of August 6, 2001 (the "Stockholders") on or about August 24, 2001.
OUTSTANDING VOTING STOCK
Only holders of record of the Company's Common Stock, par value $.15
per share (the "Common Stock"), at the close of business on August 6, 2001 are
entitled to vote on matters to be presented at the Annual Meeting. Each share of
Common Stock is entitled to one vote with respect to all such matters. The
number of shares of Common Stock outstanding and entitled to vote at the close
of business on August 6, 2001 was 3,578,983.
VOTE AND QUORUM REQUIREMENTS
The presence in person or by Proxy of Stockholders of a majority of the
outstanding shares of Common Stock is required for there to exist the quorum
needed to transact business at the Annual Meeting. If, initially, a quorum
should not be present, the Annual Meeting may be adjourned from time to time
until a quorum is obtained.
A plurality of the votes cast is required to elect the Directors. The
affirmative vote of a majority of the outstanding shares of common stock
entitled to vote is required for approval of Proposal No. 2. In the election of
a Director, any action other than a vote for a nominee will have the practical
effect of voting against the nominee. Abstentions and "broker non-votes" (as
defined below) are counted for purposes of determining whether a quorum is
present, but do not represent votes cast with respect to any proposal. "Broker
non-votes" are shares held by a broker or nominee for which an executed proxy is
received by the Company, but are not voted as to one or more proposals because
instructions have not been received from the beneficial owners or persons
entitled to vote and the broker or nominee does not have discretionary voting
power.
An independent party will receive and tabulate all proxies and ballots, and
such independent party and certain other team members of the Company will act as
voting inspectors at the Annual Meeting.
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information available to the Company as of
July 20, 2001 regarding the beneficial ownership of the common stock by (i) each
person known by the Company to beneficially own more than five percent (5%) of
the outstanding common stock, (ii) each of the Directors, (iii) the Chief
Executive Officer and all executive officers whose compensation was $100,000 or
greater during 2000, and (iv) all executive officers and Directors of the
Company as a group:
Number of Shares Percent of Common
Name Beneficially Owned Stock Outstanding
Harry G. McCoy, Pharm. D. 203,398 (1) 5.16 %
Former President and Chairman of the Board of
Directors; Director
Richard J. Braun 162,100 (2) 4.12 %
Chairman of the Board of Directors, President,
Chief Executive Officer
Samuel C. Powell, Ph.D., Director 119,923 (3) 3.04 %
James W. Hansen, Director 18,756 (4) *
Miles E. Efron, Director 11,984 (5) *
Brian P. Johnson, Director 15,826 (6) *
Harry W. Alcorn, Jr. 228 (7) *
James B. Lockhart (13) 23,219 (8) *
Former Chief Financial Officer and Vice President
Finance and Administration
Kevin J. Wiersma 38,237 (9) *
Vice President and Chief Operating Officer
of Medtox Laboratories, Inc.
James A. Schoonover 51,594 (10) 1.31 %
Vice President and Chief Marketing Officer
B. Mitchell Owens 40,301 (11) 1.02 %
Vice President and Chief Operating Officer
of Medtox Diagnostics, Inc.
All Directors and Executive Officers
as a Group (11 in number) 685,566 (12) 17.40 %
Perkins Capital Management, Inc. 528,300 (14) 13.41 %
Pyramid Trading Limited Partnership 348,300 (15) 8.84 %
* Less than one percent (1%)
1. Includes 86,201 shares of common stock issuable under options which
are or which will become exercisable within the next 60 days.
2. Includes 129,150 shares of common stock issuable under options which
are or which will become exercisable within the next 60 days. Also
includes 5,500 shares of restricted stock which will not become vested
until 5/1/03, 7,500 shares which will not become vested until 11/1/03
and 10,000 shares which will not become vested until 5/1/04.
3. Includes 9,234 shares of common stock issuable under stock options and
7,692 shares of common stock issuable under common stock purchase
warrants which are or will become exercisable within the next 60 days.
Also includes 1,250 shares of restricted stock which will not become
vested until 5/1/04.
4. Includes 12,506 shares of common stock issuable under stock options
which are or will become exercisable within the next 60 days. Also
includes 1,250 shares of restricted stock which will not become vested
until 5/1/04.
5. Includes 8,234 shares of common stock issuable under stock options
which are or will become exercisable within the next 60 days. Also
includes 1,250 shares of restricted stock which will not become vested
until 5/1/04.
6. Includes 3,230 shares of common stock issuable under stock options and
3,846 shares of Common Stock issuable under common stock purchase
warrants and which are or will become exercisable within the next 60
days. Also includes 1,250 shares of restricted stock which will not
become vested until 5/1/04.
7. Includes 228 shares of common stock issuable under stock options
which are or will become exercisable within the next 60 days.
8. Includes 16,450 shares of common stock issuable under stock options and
5,769 shares of common stock issuable under common stock purchase
warrants and which are or will become exercisable within the next 60
days.
9. Includes 24,287 shares of common stock issuable under stock options
which are or will become exercisable within the next 60 days. Also
includes 4,000 shares of restricted stock which will not become vested
until 5/1/03, 3,750 shares which will not become vested until 11/1/03
and 6,000 shares of restricted stock which will not become vested until
5/1/04.
10. Includes 27,548 shares of common stock issuable under options which are
or will become exercisable within the next 60 days. Also includes 3,000
shares of restricted stock which will not become vested until 5/1/03,
3,750 shares which will not become vested until 11/1/03 and 6,000
shares of restricted stock which will not become vested until 5/1/04.
11. Includes 26,787 shares of common stock issuable under options which are
or will become exercisable within the next 60 days. Also includes 3,000
shares of restricted stock which will not become vested until 5/1/03,
3,750 shares which will not become vested until 11/1/03 and 6,000
shares of restricted stock which will not become vested until 5/1/04.
12. Includes 360,934 shares of common stock issuable under options or
warrants which are or will become exercisable within the next 60 days
and 67,250 shares of restricted stock.
13. Mr. Lockhart's employment with the Company was terminated effective
April 30, 2001.
14. Includes 248,000 shares of common stock issuable under common stock
purchase warrants which are or will become exercisable within the next
60 days.
15. Includes 140,000 shares of common stock issuable under common stock
purchase warrants which are or will become exercisable within the next
60 days.
PROPOSAL 1
ELECTION OF DIRECTORS
The Certificate of Incorporation provides that the Board of Directors
is divided into three classes and shall consist of not less than three nor more
than twelve individuals, with the exact number to be fixed from time to time by
the majority vote of the Board of Directors. The Board of Directors has fixed
the number of Directors at six individuals and has nominated the two individuals
set forth below to serve as Directors of the Company for three year terms or
until their respective successors have been elected and qualified. All nominees
are members of the current Board.
Unless otherwise instructed, the enclosed Proxy will be voted FOR the
election of the nominees listed below, except that the persons designated as
proxies reserve full discretion to cast their votes for another person
recommended by the Board of Directors in the unanticipated event that any
nominee is unable or declines to serve.
Directors will be elected by the plurality vote of the holders of
Common Stock entitled to vote at the Annual Meeting and present in person or by
Proxy.
Information About Nominees and Other Directors
Director
Name of Nominee Age Since Position with the Company
--------------- --- ----- -------------------------
Nominees for three-year terms expiring in 2004:
James W. Hansen 46 1996 Director
Brian P. Johnson 52 2000 Director
Directors not standing for election this year whose terms expires in 2002:
Harry G. McCoy 50 1996 Former President and
Chairman of the Board of
Directors; Director
Richard J. Braun 56 1996 Chairman of the Board of
Directors, President, Chief
Executive Officer
Directors not standing for election this year whose terms expire in 2003:
Samuel C. Powell, Ph.D. 49 1986 Director
Miles E. Efron 74 1997 Director
Harry W. Alcorn, Jr 45 2001 Director
Harry G. McCoy, Pharm.D., Dr. McCoy served as Chairman of the Board of
Directors and President from July 1996 until October 26, 2000. On June 5, 2001,
Dr. McCoy became President and a Director of Hamilton Thorne Biosciences, Inc.
He has served as Chairman and Chief Executive Officer of the Nova Jazz
Foundation, a Minnesota nonprofit company, since 1996.
Richard J. Braun, MBA, JD, CPA, was named Chairman of the Board of
Directors and President on October 26, 2000. Mr. Braun was named a Director and
elected as Chief Executive Officer in July 1996. From 1994 until joining the
Company, Mr. Braun acted as a private investor and provided management
consulting services to the health care and technology industries. From 1992
until 1994, he served as Chief Operating Officer and as a Director of EBP, Inc.,
a NYSE company engaged in managed care. From 1989 through 1991, Mr. Braun served
as Executive Vice President, Chief Operating Officer and Director of Reich and
Tang L.P., a NYSE investment advisory and broker dealer firm.
Samuel C. Powell, Ph.D., served as Chairman of the Board of Directors from
November 1987 to June 1994 and has served as a Director of the Company since
September 1986. Dr. Powell served as Chairman of the Board and Chief Executive
Officer of Granite Technological Enterprises, from January 1984 until its
acquisition by the Company in June 1986. Since 1987, he has been President of
Powell Enterprises, Burlington, North Carolina, offering financial and
management services to a group of businesses and real estate ventures. Dr.
Powell sits on the Board of Carolina Biological Supply Co., Inc. and holds an
elected seat on the Alamance County Board of Commissioners in North Carolina.
Dr. Powell served on the North Carolina Board of Science and Technology from
1989 to 1995, and as a Board Member and Chairman of the N.C. State Alcoholism
Research Authority.
James W. Hansen, MBA, was named as a Director in September 1996. Mr. Hansen
has, since November, 1996, been Chairman, CEO and Treasurer of E.mergent, Inc.,
a NASDAQ traded, technology company. From 1986 to 1992, Mr. Hansen was Senior
Vice President and General Manager of the Pension Division of Washington Square
Capital, a Reliastar company, which is a NYSE traded financial services company.
Prior to 1986, he was a Vice President of Apache Corporation. Since 1992, Mr.
Hansen has served as an Investor, Director, President or Vice President of
several private companies in medical services and technology. He also serves as
a Director of UBIQ, Inc., E.mergent, Inc. and Ciprico Inc. and has taught in the
MBA program at the University of St. Thomas since 1984.
Miles E. Efron was named as a Director in January 1997. From 1988 to 1993,
Mr. Efron served as Chief Executive Officer of North Star Universal, a holding
company with interests in health care, food products and computer connectivity
and networking. From 1993 to 2000, Mr. Efron served as Chairman of North Star
Universal. Mr. Efron currently serves on the Board of Directors of several
companies, none of which are related to the Company.
Brian P. Johnson, MBA, was named as a Director in June 2000. Mr. Johnson is
a Principal of ArrowHead Capital Management. Mr. Johnson holds a bachelor's
degree from the University of South Dakota and a master's degree in business
administration in marketing from the University of St. Thomas. He has also
served on a number of civic boards in addition to business boards.
Harry W. Alcorn, Jr., Pharm.D., was named as a Director in July 2001. Since
1998, Dr. Alcorn has served as Chief Operating Officer of DaVita Clinical
Research, a Phase I-IV clinical trial site and site management organization.
Previously, he was Executive Director Clinical Programs of GalaGen, Inc., a
biotech pharmaceutical company from 1996-1998 and Vice President,
Marketing/Sales and Clinical Programs of In Home Health, Inc from 1992 to 1996.
Dr. Alcorn graduated form Creighton University with his B.S. in Pharmacy and
went on to receive his Doctor of Pharmacy degree from the University of Nebraska
Medical Center.
Compliance With Section 16(a) Of The Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that the Company's directors and executive officers, and persons who
own more than ten percent (10%) of a registered class of the Company's equity
securities, file with the Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten percent beneficial owners are required
by Commission regulations to furnish the Company with copies of all reports they
file under Section 16(a).
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with
during the fiscal year ended December 31, 2000.
During the fiscal year ended December 31, 2000, the Board of Directors
held three meetings (including regularly scheduled, telephonic and special
meetings). During that time, all members of the Board attended One Hundred
Percent (100%) of the meetings held subsequent to their appointment.
The Company has a stock option committee (the "Stock Option Committee")
which, by the terms of the Company's Stock Option Plans, is to consist of not
less than two members of the Board of Directors appointed by the Board of
Directors. The Stock Option Committee is comprised of James W. Hansen, Miles E.
Efron, and Samuel C. Powell. The Stock Option Committee determines the terms of
options granted, including, but not limited to, the exercise price, the number
of shares subject to the option and the terms and conditions of the option.
During the fiscal year ended December 31, 2000, the Stock Option Committee held
one meeting.
The Company has an Audit Committee which is comprised of Brian P. Johnson,
James W. Hansen and Miles E. Efron. During the fiscal year ended December 31,
2000, the Audit Committee held two meetings.
The Company has a Compensation Committee which is comprised of James W.
Hansen, Miles E. Efron, and Samuel C. Powell. The Compensation Committee's
purpose is to determine the compensation of the Executive Officers of the
Corporation. During the fiscal year ended December 31, 2000, the Compensation
Committee held one meeting.
The Company does not have a Nominating Committee.
The Board of Directors recommends that Stockholders vote FOR Proposal 1.
EXECUTIVE COMPENSATION
The following table discloses the compensation earned by the Company's Chief
Executive Officer and Former Chairman of the Board and President and the four
other most highly compensated executive officers whose total annual salary
exceeded $100,000 for the fiscal year ended December 31, 2000.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
Other
Annual Restricted Options/ LTIP All Other
Name and Compen- Stock SAR's Payouts Compen-
Principal Positon Year Salary Bonus sation(3) Awards($)(4)(5) (#) (6) sation
- -------------------------- ------- --------- ---------- ---------- ------------- --------- --------- -------------
Harry G. McCoy 2000 $225,000 -- -- $43,313 -- -- --
Former President and 1999 $200,000 -- -- -- 40,000 -- --
Chairman of the Board 1998 $200,000 $9,615 -- -- 50,000 -- --
of Directors; Director
(1)
Richard J. Braun 2000 $250,000 -- -- $133,781 15,000 -- $15,060 (7)
Chairman of the Board of 1999 $200,000 -- -- -- 80,000 -- $11,910 (7)
Directors, President, 1998 $200,000 $9,615 -- -- 50,000 -- $ 9,060 (7)
Chief Executive Officer
(2)
James B. Lockhart 2000 $121,731 $43,000 -- $60,984 32,500 -- --
Former Chief Financial (12)
Officer and Vice
President Finance and
Administration (8)
Kevin J. Wiersma 2000 $131,346 -- -- $76,734 10,000 -- --
Vice President and Chief 1999 $115,000 -- -- -- 17,500 -- --
Operating Officer of 1998 $ 92,144 $11,700 -- -- 5,000 -- --
Medtox
Laboratories, Inc. (9)
James A. Schoonover 2000 $131,346 -- -- $68,859 7,500 -- --
Vice President and Chief
Marketing Officer (10)
B. Mitchell Owens 2000 $131,346 -- -- $68,859 10,000 -- --
Vice President and Chief
Operating Officer of
Medtox Diagnostics, Inc.
(11)
(1) Dr. McCoy served as Chairman and President of the Company until
October 26, 2000. See Employment Contracts for further information.
(2) Mr. Braun was elected Chairman of the Board of Directors and President
on October 26, 2000.
(3) Other Annual Compensation for executive officers is not reported as
it is less than the required reporting threshold of the Securities
and Exchange Commission.
(4) 2000 restricted stock awards were made pursuant to the Restated Equity
Compensation Plan adopted by the Board of Directors effective May 10,
2000. The value of each award shown is based upon the closing market
price of the Company's common stock on the date of grant ($7.88 per
share on May 1, 2000 and $12.06 per share on November 1, 2000). Awards
granted under the Restated Equity Compensation Plan vest over a three
year period. A total of 45,500 shares of restricted stock were granted
to the executives named in the table in the respective numbers
indicated: Harry G. McCoy, 5,500; Richard J. Braun, 13,000 shares;
James B. Lockhart, 5,750 shares; Kevin J. Wiersma, 7,750 shares; James
A. Schoonover, 6,750 shares; and B. Mitchell Owens, 6,750 shares. Any
dividends declared on the Company's common stock will be paid on all
shares of restricted stock granted under the Restated Equity
Compensation Plan.
(5) As of December 31, 2000, the number and fair market value, based on the
closing market price of the Company's common stock of $6.3125 on
December 29, 2000, of the aggregate restricted stock holdings granted
to the named executive officers were: Harry G. McCoy, 5,500 shares and
$34,719; Richard J. Braun, 13,000 shares and $82,063; James B.
Lockhart, 5,750 shares and $36,297; Kevin J. Wiersma, 7,750 shares and
$48,922; James A. Schoonover, 6,750 shares and $42,609; and B. Mitchell
Owens, 6,750 shares and $42,609.
(6) Not applicable. No compensation of this type received.
(7) Includes $15,060, $11,910 and $9,060 of premiums paid for by the
Company for a life and disability insurance policy on Mr. Braun in
2000, 1999 and 1998, respectively.
(8) Mr. Lockhart's employment with the Company was terminated effective
April 30, 2001.
(9) Mr. Wiersma was appointed Vice President and Chief Operating Officer
of MEDTOX Laboratories, Inc. on July 17, 2000.
(10) Mr. Schoonover was appointed Vice President and Chief Marketing
Officer on July 17, 2000.
(11) Mr. Owens was appointed Vice President and Chief Operating Officer of
MEDTOX Diagnostics, Inc. on July 17, 2000.
(12) Mr. Lockhart received a guaranteed bonus payment in 2000 as part of
his compensation in the initial year of employment with the Company.
Stock Options Granted During Fiscal Year
The following table sets forth information about the stock options
granted to the named executive officers of the Company during 2000.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realized
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
% of Total
Options
Number Granted to
of Employees Exercise
Options in Fiscal Price Expiration 5% ($) 10%( $)
Name Granted Year ($/Sh) Date (1) (1)
- -----------------------------------------------------------------------------------------------------
Richard J. 15,000 14% $12.0625 11/01/10 $294,728 $469,305
Braun
James B. 25,000 24% $ 8.6875 01/03/10 $353,776 $563,328
Lockhart 7,500 7% $12.0625 11/01/10 $147,364 $234,653
Kevin J. 10,000 10% $12.0625 11/01/10 $196,485 $312,870
Wiersma
James A. 7,500 7% $12.0625 11/01/10 $147,364 $234,653
Schoonover
B. Mitchell 10,000 10% $12.0625 11/01/10 $196,485 $312,870
Owens
(1) The potential realizable value of the options reported above was
calculated by assuming 5% and 10% annual rates of appreciation of the
common stock of the Company from the date of grant of the options until
the expiration of the options. These assumed annual rates of
appreciation were used in compliance with the rules of the Securities
and Exchange Commission and are not intended to forecast future price
appreciation of the common stock of the Company. The Company chose not
to report the present value of the options, which is an alternative
under Securities and Exchange Commission rules, because the Company
does not believe any formula will determine with reasonable accuracy a
present value based on unknown or volatile factors. The actual value
realized from the options could be substantially higher or lower than
the values reported above, depending upon the future appreciation or
depreciation of the common stock during the option period and the
timing of exercise of the options.
Stock Options Exercised During Fiscal Year and Year-End Values of
Unexercised Options
The following table sets forth information about the stock options held
by the named executive officers of the Company at December 31, 2000.
Number of
Shares Number of Unexercised Value of Unexercised In-the
Acquired Value Options at FY-End Money Options at FY-End
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable (1)
- ------------------------------------------------------------------------------------------------------------------------------
Harry G. McCoy - - 76,667/13,333 $100,001/$ 49,999
Richard J. Braun - - 104,126/40,874 $199,838/$100,163
James B. Lockhart - - 8,705/23,795 - / -
Kevin J. Wiersma - - 16,200/16,300 $ 29,679/$ 14,852
James A. Schoonover - - 21,249/11,251 $ 29,679/$ 14,852
B. Mitchell Owens - - 19,200/16,300 $ 29,679/$ 14,852
- ----------------------------
(1) The closing price of the Common Stock of the Company at
December 31, 2000 was $6.3125 per share.
Long-Term Incentive Plans and Pension Plans
The Company does not contribute to any Long-Term Incentive Plan or
Pension Plan for its executive officers as those terms are defined in the rules
of the Securities and Exchange Commission. The Company relies on its stock
option and restricted stock plans to provide long-term incentives for executive
officers. The Company has three stock option plans: a 1983 Stock Option Plan for
employees which expired on June 23, 1993; the Restated Equity Compensation Plan
which was originally adopted by the shareholders of the annual meeting in 1993
to replace the 1983 Incentive Stock Option Plan and was restated and adopted by
the Board of Directors on May 10, 2000; and a 1991 Non-Employee Director's Plan
for members of the Board of Directors who are not employees of the Company. In
addition, the Company has granted separately to various existing and former
executive employees, including Mr. Braun and Dr. McCoy, non-qualified options to
purchase shares of the Company's Common Stock.
Compensation of Directors
All directors who are not employees of the Company receive $500 per
month for their service as a director. All directors are also reimbursed for
expenses incurred in attending board of directors' meetings and participating in
other activities.
Employment Contracts
Harry G. McCoy, former Chairman of the Board of Directors and former
President of the Company, has an employment agreement with the Company dated
January 1, 2000. The initial term of the agreement is through December 31, 2002,
and thereafter is renewed automatically for one-year terms unless otherwise
terminated in accordance with the terms of the agreement. The agreement provides
for an annual base salary of $225,000 and additional bonuses, fringe benefits
and grants of restricted stock which, except for the fringe benefits, are
performance based. The agreement also provides for a Severance Award equal to
base salary, health insurance and bonus plan payments for the greater of twelve
(12) months or the then remaining term of employment under the agreement. The
Severance Award is payable following termination by the Company other than for
cause, or if the employee voluntarily terminates following (i) a change in
control; (ii) any relocation of greater than fifty (50) miles; or (iii) any
material reduction in the level of the employee's responsibility, position,
authorities or duties; or (iv) the Company breaches any of its obligations under
the Agreement.
The employment agreement contains a covenant not to compete whereby for
a period of twelve (12) months after the termination of employment with the
Company, the employee agrees that they will not, directly or indirectly, either
(a) have any interest in (b) enter the employment of, (c) act as agent, broker,
or distributor for or advisor or consultant to, or (d) provide information
useful in conducting the business of the Company to solicit customers or
employees on behalf of the Company to any person, firm, corporation or business
entity which is engaged, or which employee reasonably knows is undertaking to
become engaged, in the United States in the business of the Company.
Following Mr. McCoy's termination as President and Chairman in October
2000, Mr. McCoy continued to receive payments under his contract as an employee.
After commencement of Mr. McCoy's new employment with Hamilton Thorne
Biosciences, Inc., the Company ceased payments of compensation under the
employment contract. Mr. McCoy contends that he is entitled to continued
payments of compensation not withstanding his new employment elsewhere. The
Company is uncertain whether Mr. McCoy will commence litigation against the
Company.
Richard J. Braun, Chairman of the Board of Directors, President, and
Chief Executive Officer, has an employment agreement with the Company dated
January 1, 2000. The initial term of the agreement is through December 31, 2002,
and thereafter is renewed automatically for one-year terms unless otherwise
terminated in accordance with the terms of the agreement. The agreement provides
for an annual base salary of $250,000 and additional bonuses, fringe benefits
and grants of restricted stock which, except for the fringe benefits, are
performance based. The agreement also provides for a Severance Award equal to
base salary, health insurance and bonus plan payments for the greater of twelve
(12) months or the then remaining term of employment under the agreement. The
Severance Award is payable following termination by the Company other than for
cause, or if the employee voluntarily terminates following (i) a change in
control; (ii) any relocation of greater than fifty (50) miles; or (iii) any
material reduction in the level of the employee's responsibility, position,
authorities or duties; or (iv) the Company breaches any of its obligations under
the Agreement.
The employment agreement contains a covenant not to compete whereby for
a period of twelve (12) months after the termination of employment with the
Company, the employee agrees that they will not, directly or indirectly, either
(a) have any interest in (b) enter the employment of, (c) act as agent, broker,
or distributor for or advisor or consultant to, or (d) provide information
useful in conducting the business of the Company to solicit customers or
employees on behalf of the Company to any person, firm, corporation or business
entity which is engaged, or which employee reasonably knows is undertaking to
become engaged, in the United States in the business of the Company..
The Company has entered into severance agreements with James B.
Lockhart, Kevin J. Wiersma, James A. Schoonover and B. Mitchell Owens, at
various times in 2000 as each individual was appointed to the position of Vice
President. The initial term of the severance agreement is one year and each
shall automatically be extended for one additional year unless, not later than
July 1 of the preceding year, either the Company or the individual provides
written notice to the other party or unless the agreement is otherwise
terminated due to death, permanent disability, or for "cause." If during the
term of the severance agreement, the Company terminates the employment of the
individual other than for "cause," the individual shall be entitled to a
severance award. The severance award consists of payment of an amount equal to
the individual's then current base salary plus certain health benefits over the
course of the twelve month period following the date of the individual's
termination.
The severance agreements for Mr. Lockhart, Mr. Wiersma, Mr. Schoonover and
Mr. Owens agreement contain a covenant not to compete whereby the individual
agrees that during the twelve (12) month period following the Date of
Termination during which the individual receives severance payments, the
individual will not directly or indirectly own, manage, operate, control, be
employed by, participate in or be connected in any manner with the ownership,
management, operation or control of any business providing or delivering
products or services which compete with the business, products or services of
the Company or its affiliates, in the geographic markets in which the Company
operates.
Compensation Committee and Decision Making
The compensation of executive officers of the Company for 2000 was
determined by the Compensation Committee which is currently comprised of James
W. Hansen, Miles E. Efron, and Samuel C. Powell. Stock options are awarded under
the Company's Restated Equity Compensation Plan and Non-Employee Director Plan
by the Compensation Committee. All non-employee directors were eligible to
receive stock options under the Company's 1991 Non-Employee Director Plan.
Report of the Compensation Committee on Executive Compensation
In General
The Committee has three primary goals for executive compensation at the
Company.
o Retaining good performers,
o Rewarding executives appropriately for performance, and
o Aligning executives' interests with those of stockholders.
Currently, executive pay consists of three elements that are designed
to meet those objectives:
o Base salary is paid based primarily on job responsibilities and
industry job comparison. The Committee believes that base salaries at
approximately industry averages are essential to retaining good
performers.
o Stock options, which allow executives to benefit when the market price
of the Company's stock increases.
o Bonuses to be paid upon the attainment of certain financial objectives
and individual circumstances when warranted.
Following is additional information regarding each of the above elements.
Base Salary
Base salary increases for executive officers have been modest and
consistent with job performance and increases in responsibility.
Bonus
James B. Lockhart received a guaranteed bonus payment in 2000 as part
of his compensation in the initial year of employment with the Company.
Stock Options
In 2000, certain executive officers received incentive stock options to
purchase a total of 75,000 shares. The number of options granted to the
executive officers represented 72% of the total options granted in 2000 to all
employees.
Restricted Stock
In 2000, certain executive officers received restricted stock awards
for a total of 45,500 shares. The number of restricted stock awards granted to
the executive officers represented 82% of the total restricted stock awards
granted in 2000 to all employees.
Summary
Currently, the Company's executive compensation program rewards the
following elements of performance.
o Individual performance is rewarded through continued employment with the
Company.
o Stock price performance is rewarded through increases in the value of
stock options.
o Financial performance of the Company is rewarded through payments of
bonuses upon the attainment of certain financial goals
The Committee believes that the current program has been effective in
rewarding executives appropriately for performance, retaining good performers,
and aligning executives' interests with those of stockholders. While the
Committee is satisfied with the current compensation system, it reserves the
right to make changes to the program as are necessary to continue to meet its
stated goals in future years.
Benefits also are offered to officers that are not based on
performance. Such benefits provide a safety net of protection in the event of
illness, disability, death, retirement, etc. Such a safety net is provided to
all full time employees of the Company.
Chief Executive Officer Pay
Amounts earned during 2000 by the Chief Executive Officer, Richard J.
Braun, are shown in the Summary Compensation Table. Achievements by the Company
which were deemed material to the Chief Executive Officer's compensation include
record increases in total revenue, record growth of the Diagnostic segment of
the Company and new product development. For the year ended December 31, 2000,
the Compensation Committee used, in its deliberations on executive compensation,
these criteria and other accomplishments.
Submitted by the Compensation Committee of the Company's Board of Directors
James W. Hansen
Miles E. Efron
Samuel C. Powell
Performance Graph
The graph shown below is a line presentation comparing the Company's
cumulative five-year shareholder returns on an indexed basis with the S&P 500
Index and the S&P Health Care Index for the five-year period commencing on
December 31, 1995 and ending on December 31, 2000. The total return assumes that
dividends were reinvested quarterly and is based on a $100 investment on
December 31, 1995.
Comparative Five-Year Total Returns*
MEDTOX Scientific, Inc., S&P 500, S&P Health Care
(Performance results through 12/31/2000)
(Comparative chart appears here. The plot points are below.)
1995 1996 1997 1998 1999 2000
- -----------------------------------------------------------------------------
TOX $100.00 $21.74 $ 10.87 $ 8.70 $ 15.44 $ 10.98
S&P 500 $100.00 $122.96 $163.98 $210.84 $255.20 $231.96
S&P Hcare $100.00 $121.04 $173.97 $250.31 $223.61 $306.47
- -----------------------------------------------------------------------------
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in MEDTOX common stock, S&P 500
Index, and S&P Health Care Index.
* Cumulative total return assumes reinvestment of dividends.
Source: Russell/Mellon, Analytical Services Company.
Factual material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained herein.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lease Agreement with Dr. Samuel C. Powell
In July 1986, the Company executed a lease agreement with Dr. Powell
providing for a lease to the Company of approximately 16,743 square feet of
space at 1238 Anthony Road, Burlington, North Carolina. Since 1986, the Company
has expanded the space rented under the lease to approximately 33,000 square
feet. For the last several years, the Company has leased this same approximately
33,000 square feet on a month-to-month basis at an annual base rent, excluding
operating cost, of approximately $121,000. Effective March 28, 2001, the Company
entered into a 10-year lease of the entire building (approximately 39,500 square
feet) at the same location for an annual base rent of $197,000, exclusive of
certain operating expenses. In addition, under the lease the Company will have
available to it, up to $600,000 to spend on tenant improvements of the building,
which will then be amortized over the 10-year life of the lease as additional
rent at an assumed annual interest rate of 9.5%. The Company believes it is
renting this facility in Burlington on terms as favorable as those available
from third parties for equivalent premises.
PROPOSAL 2
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Company's Certificate of Incorporation presently authorizes the
issuance of a total of 7,400,000 shares of Common Stock, par value $.15 per
share and 50,000 shares of Preferred Stock, par value $1.00 per share. No shares
of Preferred Stock are currently outstanding. Of the 7,400,000 presently
authorized shares of Common Stock, 3,578,135 shares were issued and outstanding
as of July 20, 2001. In addition, an aggregate of 1,265,427 shares has been
reserved for issuance as of July 20, 2001, as summarized in the following table:
Shares of Common Stock Reserved For Number of Shares Reserved
Outstanding Warrants 649,230
Common Stock Options
Equity Compensation Plans 494,414
Non-Employee Director Plan 9,972
Non-Qualified Outside of Plan 110,239
Qualified Employee Stock Purchase Plan 1,572
1,265,427
The Board of Directors has approved an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 7,400,000 to 14,400,000. The Company has no current intention
of issuing the additional authorized shares.
The additional Common Stock, if so authorized, would be issued at the
discretion of the Board of Directors without any further action by the
stockholders except as required by applicable law or regulation. Shares of stock
will be issued only upon determination by the Board of Directors that a proposed
issuance is in the best interests of the Company. As noted above, the Company
has no current intention of issuing the additional authorized shares.
Accordingly, the Board of Directors has proposed that Article Fourth of
the Company's Certificate of Incorporation be amended to increase its capital
stock. As so amended, this provision of the Certificate of Incorporation would
read as set forth on Appendix A hereto.
The Board of Directors recommends a vote FOR Proposal 2. An affirmative
vote by holders of a majority of the outstanding shares of Common Stock entitled
to vote at the annual meeting is required to approve the amendment.
INFORMATION REGARDING MEDTOX'S INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP ("Deloitte & Touche") has been appointed as MEDTOX's
independent auditors for the year ending December 31, 2001. Representatives of
Deloitte & Touche will be present at the Annual Meeting. They will have an
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions from shareholders.
Audit Fees
Audit Fees billed or expected to be billed to MEDTOX by Deloitte & Touche
for the audit of MEDTOX's financial statements for the fiscal year ended
December 31, 2000 and for reviews of MEDTOX's financial statements included in
MEDTOX's quarterly reports on Form 10-Q for the last fiscal year totaled
$62,000.
Financial Information Systems Design and Implementation Fees
No fees were billed or expected to be billed to MEDTOX by Deloitte & Touche
for services provided during the last fiscal year for the design and
implementation of financial information systems.
All Other Fees
Fees billed or expected to be billed to MEDTOX by Deloitte & Touche for all
other non-audit services, including tax-related and acquisition accounting
services, provided during the last fiscal year totaled $63,000.
As indicated in the audit committee report of the board of directors, the
audit committee has considered whether the provision of the non-audit related
services listed above is compatible with maintaining Deloitte & Touche's
independence.
OTHER BUSINESS OF THE MEETING
Management is not aware of any matters to come before the Annual
Meeting other than those stated in the Proxy Statement. However, inasmuch as
matters of which management is not now aware may come before the meeting or any
adjournment thereof, the Proxies confer discretionary authority with respect to
acting thereon, and the persons named in such properly executed Proxies intend
to vote, act and consent in accordance with their best judgment with respect
thereto. Upon receipt of such Proxies (in the form enclosed) in time for voting,
the shares represented thereby will be voted as indicated thereon and in the
Proxy Statement.
DATES FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposal, relating to a proper subject, which a Stockholder may
intend to present for action at the Company's Annual Meeting of Stockholders in
2002, and which such Stockholder may wish to have included in the Company's
proxy materials for such meeting, in accordance with the provisions of Rule
14a-8 promulgated under the Exchange Act, must be received in proper form by the
Company addressed to Mr. Richard J. Braun, Chief Executive Officer, and sent by
registered mail, return receipt requested, and received at the Company's
principal executive office at 402 West County Road D, St. Paul, Minnesota 55112,
not later than December 1, 2001.
Any proposal, relating to a proper subject, which a stockholder may
wish to present for action at the Company's Annual Meeting of Stockholders in
2002, whether or not such Stockholder wishes to have such proposal included in
the Company's proxy materials for such meeting, must, pursuant to the Company's
By-laws, be the subject of a written notice delivered to the Company addressed
to Mr. Richard J. Braun, Chief Executive Officer, and sent by registered mail,
return receipt requested, and received at the Company's principal executive
office at 402 West County Road D, St. Paul, Minnesota 55112, not less than 60
days or more than 90 days prior to the Annual Meeting date in 2002.
By order of the Board of Directors,
RICHARD J. BRAUN
Chairman of the Board, President and
Chief Executive Officer
St. Paul, Minnesota
August 20, 2001
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 2000 MAY BE OBTAINED WITHOUT CHARGE BY ANY STOCKHOLDER TO WHOM THE PROXY
STATEMENT IS SENT, UPON WRITTEN REQUEST TO THE SECRETARY, MEDTOX SCIENTIFIC,
INC., 402 WEST COUNTY ROAD D, ST. PAUL, MINNESOTA 55112.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its Regional Offices located at 75
Park Place, New York, New York 10007, and the John C. Kluczynski Federal
Building, 230 South Dearborn Street, Chicago, Illinois 60604. Copies of such
material can be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 upon request and
payment of the prescribed fees. The Commission maintains a web site that
contains reports, proxy and information statements, and other information
regarding issues that are filed electronically with the Commission. The address
of the web site is HTTP://WWW.SEC.GOV.
The Company's Common Stock is listed on the American Stock Exchange
(the "AMEX"), and reports, proxy statements and other information filed by the
Company can be inspected at such exchange.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, each of which was previously filed by the
Company with the Commission pursuant to Section 13 of the Exchange Act, are
incorporated herein by reference:
a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date of this Proxy Statement
and prior to the Annual Meeting of Shareholders to which this Proxy Statement
relates shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein or in any accompanying Proxy Statement Supplement modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement.
The Company will provide without charge to each person to whom a Proxy
Statement is delivered upon written or oral request of each person, a copy of
any documents incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the documents that this Proxy Statement incorporates). Requests for such copies
should be directed to MEDTOX SCIENTIFIC, INC., Attention: Secretary, 402 West
County Road D, St. Paul, Minnesota 55112, (651) 636-7466.
APPENDIX A
MEDTOX SCIENTIFIC, INC.
AMENDED ARTICLE FOURTH
OF CERTIFICATE OF INCORPORATION
"FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is FOURTEEN MILLION FOUR HUNDRED FIFTY THOUSAND
(14,450,000) shares, FOURTEEN MILLION FOUR HUNDRED THOUSAND (14,400,000) of
which shall be of a class designated as Common Stock with a par value of FIFTEEN
CENTS ($0.15) per share and FIFTY THOUSAND (50,000) of which shall be a class
designated as Preferred Stock with a par value of ONE DOLLAR ($1.00) per share.
All or any part of the authorized capital stock of the Corporation may be issued
and sold, from time to time by the corporation, without further action by
stockholders, for such consideration (but not less than the par value thereof)
and to such persons and on such terms and conditions as may, from time to time,
be fixed or determined by the Board of Directors. The voting powers,
designations, preferences, and relative, participating, optional or other
special rights and the qualifications, limitations or restrictions thereof, of
the classes of stock of the corporation which are fixed by this Certificate of
Incorporation, and the authority vested in the Board of Directors to fix by
resolution or resolution providing for the issue of Preferred Stock the voting
powers, designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of Preferred Stock which are not fixed by the Certificate of
Incorporation, are as follows:
1. The Preferred Stock may be issued from time to time in one or more
series, each such series to have such distinctive designation or title as may be
fixed by the Board of Directors prior to the issuance of any shares thereof.
Each such series may differ from every other series already outstanding as may
be determined from time to time by the Board of Directors prior to the issuance
of any shares thereof, in any or all of the following, but in other, respects:
(a) The rate of dividend which the Preferred Stock of any such
series shall be entitled to receive, whether the dividends of such series shall
be cumulative or non-cumulative and, if such dividends shall be cumulative, the
date from which they shall be cumulative.
(b) The right or obligation, if any, of the corporation to
redeem shares of Preferred Stock of any series and the amount per share which
the Preferred Stock of any such series shall be entitled to receive in case of
the redemption thereof, and the right of the corporation, if any, to reissue any
such shares after the same shall have been redeemed.
(c) The amount per share which the Preferred Stock of any such
series shall be entitled to receive in case of the voluntary liquidation,
distribution or sale of assets, dissolution or winding up of the corporation, or
in case of the involuntary liquidation, distribution or sale of assets,
dissolution or winding up of the corporation.
(d) The right, if any, of the holders of Preferred Stock of
any such series to convert the same into other classes of stock and the terms
and conditions of such conversion.
(e) The voting power, if any, of the holders of Preferred
Stock of any such series, and the terms and conditions under which they may
exercise such voting power.
(f) The terms of the sinking fund or fund of similar nature,
if any, to be provided for the Preferred Stock of any such series.
The description of terms of the Preferred Stock of each series in
respect of the foregoing particulars shall be fixed and determined by the Board
of Directors by appropriate resolution at or prior to the time of the
authorization of the issue of the original shares of each such series.
2. In case the stated dividends and the amounts payable on liquidation,
distribution or sale of assets, dissolution or winding up of the corporation are
not paid in full, the stockholders of all series of the Preferred Stock shall
share ratably in the payment of dividends, including accumulations, if any, in
accordance with the same which would be payable on such shares if all dividends
were declared and paid in full and in any distribution of assets other than by
way of dividends, in accordance with the sums which would be payable on such
distribution if all sums payable were discharged and paid in full.
3. The holders of the Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of funds legally available
therefore, preferential dividends in cash at, but not exceeding the annual rate
fixed for each particular series. The holders of the Preferred Stock shall not
be entitled to receive any dividends thereon other than dividends referred to in
this Subdivision 3.
4. So long as any of the Preferred Stock remains outstanding, in no
event shall any dividend whatever, whether in cash or other property (other than
shares of Common Stock), be paid or declared or any distribution be made on the
Common Stock, nor shall any shares of the Common Stock be purchased, retired or
otherwise acquired for a consideration by the corporation unless (a) the full
dividends of the Preferred Stock for all past dividend periods from the
respective date or then current quarter-yearly dividend period shall have been
paid or declared and a sum set apart sufficient for the payment thereof, and (b)
if at any time he corporation is obligated to retire shares of any series of the
Preferred Stock pursuant to a sinking fund or a fund of a similar nature, all
arrears, if any, in respect of the retirement of the Preferred Stock of all such
series shall have been made good. Subject to the foregoing provisions and not
otherwise, such dividends (payable in cash, stock or otherwise) as may be
determined by the Board of Directors may be declared and paid on the Common
Stock from time to time out of the remaining funds of the corporation legally
available therefor, and the Preferred Stock shall not be entitled to participate
in any such dividend, whether payable in cash, stock or otherwise.
5. In the event of any liquidation, distribution or sale of assets,
dissolution or winding up of the corporation, whether voluntary or involuntary,
before any distribution or payment shall be made to the holders of Common Stock,
the holders of the Preferred Stock of each series shall be entitled to be paid
in cash the applicable liquidation price per share fixed at the time of the
original authorization of issuance of shares of such respective series, together
with a sum in the case of each share of the Preferred Stock, computed at the
annual dividend on such share because cumulative to the date fixed for such
distribution or payment date paid thereon. If such payment shall have been made
in full to the holders of the Preferred Stock, the remaining assets and funds of
the corporation shall be distributed among the holders of the Common Stock
according to their respective shares.
6. Subject to the powers, preferences and rights and the qualification,
limitations and restrictions thereof, with respect to each class of capital
stock of the corporation having any preference or priority over the Common
Stock, the holders of the Common Stock shall have and possess all rights
appertaining to capital stock of the corporation. Holders of Common Stock may
not act by written consent without a meeting."
APPENDIX B
MEDTOX Scientific, Inc.
Audit Committee Charter
Organization
There shall be a committee of the Board of Directors to be known as the Audit
Committee. The Audit Committee shall be composed of at least three directors,
all of whom are all independent of the management of the corporation (as defined
by the applicable regulations of the American Stock Exchange) and are free of
any relationship that, in the opinion of the Board of Directors, would interfere
with their exercise of independent judgment as a committee member. All members
of the Audit Committee shall be able to read and understand financial
statements, and at least one member shall have accounting or financial
management expertise.
Statement of Policy
The Audit Committee shall provide assistance to the corporate directors in
fulfilling their responsibility to the shareholders, potential shareholders, and
investment community relating to corporate accounting, reporting practices of
the corporation, and the quality and integrity of the financial reports of the
corporation. In so doing, it is the responsibility of the Audit Committee to
maintain free and open means of communication between the directors, the
independent auditors, and the financial management of the corporation and to
ensure that the independent auditors are accountable to both the Audit Committee
and to the Board of Directors.
Responsibilities
In carrying out its responsibilities, the Audit Committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the corporate
accounting and reporting practices of the corporation are in accordance with all
requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
o Review and recommend to the full Board of Directors the independent
auditors to be selected to audit the financial statements of the
corporation and its divisions and subsidiaries on an annual basis.
o Oversee the independence of the outside auditors, which shall include
obtaining from the outside auditors a formal written statement delineating
all relationships between the auditors and the Company and actively
engaging the auditors in a discussion as to any disclosed activities that
may impact the objectivity or independence of the auditors. The Audit
Committee will obtain annually a written statement from the independent
auditors delineating all relationships between the Company and independent
auditors. When necessary the committee shall make recommendations to ensure
the auditors independence.
o Meet with the independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof
review such audit, including any comments or recommendations of the
independent auditors.
o Review with the independent auditors and the Company's financial and
accounting personnel, the adequacy and effectiveness of the accounting and
financial controls of the corporation, and elicit any recommendations for
the improvement of such internal control procedures or particular areas
where new or more detailed controls or procedures are desirable. Particular
emphasis should be given to the adequacy of such internal controls to
expose any payments, transactions, or procedures that might be deemed
illegal or otherwise improper.
o Discuss with the independent auditors their qualitative judgments about the
appropriateness, not just the acceptability, of account principles and
financial disclosure practices used or proposed to be adopted by the
Company, particularly about the degree of aggressiveness or conservatism of
the Company's accounting principles and underlying estimates.
o Review the financial statements contained in the quarterly report on Form
10-Q and in the annual report to shareholders with management and the
independent auditors to determine that the independent auditors are
satisfied with the disclosure and content of the financial statements to be
presented to the shareholders. Any significant changes in accounting
principles will be reviewed by the Audit Committee.
o Provide the report for the Company's annual proxy statement required by
regulations of the Securities and Exchange Commission respecting the
activities of Audit Committee and whether the Committee recommends
inclusion of the Company's audited financial statements in the annual
report to be filed with the Commission.
o Provide sufficient opportunity for the independent auditors to communicate
directly with the Audit Committee and to meet with the members of the Audit
Committee without members of management present. Among the items to be
discussed in these meetings are the independent auditors' evaluation of the
corporation's financial and accounting personnel, and the cooperation that
the independent auditors received during the course of the audit.
o Review with the full Board of Directors any material matters discussed or
acted upon by the Audit Committee during its regular meetings.
o Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
o Review at least annually the adequacy of its charter and where necessary
make recommendations to the full Board of Directors for modification of
such charter.
APPENDIX C
MEDTOX Scientific, Inc.
Audit Committee Report
In accordance with its written charter adopted by the Board of Directors
("Board"), the Audit Committee ("Committee") of the Board assists the Board in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing and financial reporting practices of the Company. During
fiscal year ended December 31, 2000, the Committee discussed the interim
financial information contained in each quarterly earnings announcement with
Company management and independent auditors prior to each public release.
In discharging its oversight responsibility as to the audit process, the Audit
Committee obtained from the independent auditors, Deloitte & Touche LLP, a
formal written statement describing all relationships between the auditors and
the Company that might bear on the auditors' independence consistent with
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," discussed with the auditors any relationships that may impact
their objectivity and independence and satisfied itself as to the auditors'
independence. The Committee also discussed with management, the internal audit
function's organization, responsibilities, budget and staffing. The Committee
reviewed with both the independent auditors and management their audit plans,
audit scope, and identification of audit risks.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Committee also discussed the results of the
internal audit examinations.
The Committee reviewed the audited financial statements of the Company as of and
for the fiscal year ending December 31, 2000, with management and the
independent auditors. Management has the responsibility for the preparation of
the Company's financial statements and the independent auditors have the
responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Committee recommended to the Board that the Company's
audited financial statements be included in its annual report on Form 10K for
the fiscal year ended December 31, 2000, for filing with the Securities and
Exchange Commission.
Date: February 19, 2001
/s/ Brian Johnson
Committee Chair
/s/ Jim Hansen
Committee Member
/s/ Miles Efron
Committee Member
APPENDIX D
MEDTOX SCIENTIFIC, INC.
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 26, 2001
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned stockholder of MEDTOX Scientific, Inc. (the "Company")
hereby appoints Richard J. Braun and Kevin J. Wiersma, and each or either one of
them, the true and lawful attorneys, agents, and proxies of the undersigned with
full power of substitution for and in the name of the undersigned, to vote all
the shares of Common Stock of MEDTOX Scientific, Inc. which the undersigned may
be entitled to vote at the Annual Meeting of Stockholders of the Company to be
held at the Four Points Hotel (formerly the Sheraton Minneapolis Metrodome),
located at 1330 Industrial Blvd., Minneapolis, Minnesota on or about Wednesday,
September 26, 2001, at 3:30 P.M., Central Time, and at any and all adjournments
thereof, with all the powers which the undersigned would possess if personally
present, for the following purposes:
(Continued and to be signed on the other side)
Please mark your
votes as in this example FOR AGAINST ABSTAIN
For Withheld 2. The adoption of an Amendment to the
Certificate of Incorporation to increase
the number of authorized Common Stock as
set forth in the Proxy Statement.
1.Election of Directors
Nominees: James W. Hansen and
Brian P. Johnson
3. Considering and acting upon any
other matters which may properly come
before the meeting or any adjournment
thereof.
For, except vote withheld from the following nominees:
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[ ] Please check box if you intend to attend the meeting in person.
This Proxy will be voted for the choices specified. If no choice is specified
with respect to the election of Directors, this Proxy will be voted FOR the
election of the Directors listed. If no choice is specified for Proposal 2, this
Proxy will be voted FOR Proposal 2.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement dated August 20, 2001.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY IN THE ENVELOPE PROVIDED.
SIGNATURE(S) Dated:______, 2001
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NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee, guardian, please
give your full title as such.