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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
NATIONAL DENTEX CORPORATION
(Name of Registrant as Specified In Its Charter)
NATIONAL DENTEX CORPORATION
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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NATIONAL DENTEX CORPORATION
NOTICE OF SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
The 2001 Special Meeting in Lieu of Annual Meeting of Stockholders of
National Dentex Corporation will be held as follows:
- Date: Tuesday, April 10, 2001
- Time: 10:00 a.m.
- Place: Posternak, Blankstein & Lund, L.L.P.
8th Floor Conference Center
100 Charles River Plaza
Boston, MA 02114
Matters to be voted on:
1. Election of 6 directors.
2. Approval of the proposed 2001 Stock Plan.
3. Ratification of the appointment of Arthur Andersen LLP as auditors for
2001.
4. Any other matters properly brought before the meeting.
The Board of Directors has fixed the close of business on February 20, 2001
as the record date for determining stockholders entitled to notice of and to
vote at the meeting.
YOUR VOTE AT THE MEETING IS VERY IMPORTANT TO US. PLEASE VOTE YOUR SHARES,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, BY COMPLETING THE ENCLOSED PROXY
CARD AND RETURNING IT TO US IN THE ENCLOSED ENVELOPE.
By order of the Board of Directors,
Donald H. Siegel, Clerk
March 8, 2001
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CONTENTS
PAGE
----
General Information About Voting............................ 1
Proposal No. 1: Election of Directors....................... 4
Proposal No. 2: Approval of 2001 Stock Plan................. 13
Proposal No. 3: Appointment of Independent Auditors......... 16
Appendix A: 2001 Stock Plan................................. A-1
Appendix B: Audit Committee Charter......................... B-1
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NATIONAL DENTEX CORPORATION
526 Boston Post Road
Wayland, Massachusetts 01778
------------------------------
PROXY STATEMENT
GENERAL INFORMATION ABOUT VOTING
What is this document? This is the Notice of our 2001 Special Meeting in
Lieu of Annual Meeting of Stockholders of National Dentex Corporation (the
"Company"), combined with our Proxy Statement which provides important
information for your use in voting your shares of our Company's common stock at
the meeting.
Who can vote? You can vote your shares of common stock if our records show
that you owned the shares on February 20, 2001. A total of 3,473,000 shares of
common stock are eligible to vote at the annual meeting. You are permitted one
vote for each share of common stock. The enclosed proxy card shows the number of
shares you can vote.
How do I vote by proxy? Follow the instructions on the enclosed proxy card
to vote on each proposal to be considered at the annual meeting. Sign and date
the proxy card and mail it back in the enclosed envelope. The proxyholders named
on the proxy card will vote your shares as you instruct. If you sign and return
the proxy card but do not vote on a proposal, the proxyholders will vote for you
on that proposal. Unless you instruct otherwise, the proxyholders will vote in
favor of each of the six director nominees and each of the other proposals to be
considered at the meeting.
What if other matters come up at the annual meeting? The matters described
in this proxy statement are the only matters we know will be voted on at the
annual meeting. If other matters are properly presented at the meeting, the
proxyholders will vote your shares as they see fit.
Can I change my vote after I return my proxy card? Yes. At any time before
the annual meeting, you can change your vote either by sending our Corporate
Clerk a written notice revoking your proxy card or by signing, dating, and
returning to us a new proxy card. We will honor the proxy card with the latest
date.
Can I vote in person at the annual meeting rather than by completing the
proxy card? Although we encourage you to complete and return the proxy card even
if you plan to attend the meeting to ensure that your vote is counted, you can
always vote your shares in person at the meeting.
What do I do if my shares are held in "street name"? If your shares are
held in the name of your broker, a bank, or other nominee, that party will give
you instructions for voting your shares, which should be enclosed with this
document.
How are votes counted? We will hold the annual meeting if holders of a
majority of the shares of common stock entitled to vote either sign and return
their proxy cards or attend the meeting. If you sign and return your proxy card,
your shares will be counted to determine whether we have a quorum even if you
abstain or fail to vote on any of the proposals listed on the proxy card.
Who pays for this proxy solicitation? We do. In addition to sending you
these materials, one of our officers, directors or employees may contact you by
telephone, by mail, or in person. None of these persons will receive any extra
compensation for doing this.
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STOCK OWNERSHIP
The following table shows the number of shares of common stock beneficially
owned as of February 20, 2001 by:
- each nominee for director;
- each executive officer shown in the summary compensation table below;
- all executive officers and directors as a group; and
- each person who we believe beneficially owns more than 5% of the common
stock.
PERCENTAGE OF
NAME NUMBER OF SHARES(1) OUTSTANDING SHARES(1)
---- ------------------- ---------------------
David V. Harkins*........................................ 28,000 0.8%
Jack R. Crosby(2)*....................................... 5,589 0.2%
Daniel A. Grady*......................................... -- --
William H. McClurg*...................................... 7,321 0.2%
Norman F. Strate*........................................ 2,926 0.1%
David L. Brown(3)*+...................................... 76,374 2.2%
Eloy V. Sepulveda(4)+.................................... 31,916 0.9%
Donald E. Merz(5)+....................................... 48,355 1.4%
Arthur B. Champagne(6)+.................................. 20,530 0.6%
Richard F. Becker, Jr. (7)+.............................. 36,950 1.1%
All executive officers and directors as a group (12
persons)(8)............................................ 313,146 8.8%
Wasatch Advisors, Inc.................................... 955,102 27.5%
150 Social Hall Avenue
Salt Lake City, UT 84111
Artisan Partners Ltd. Partnership........................ 518,400 14.9%
1000 North Water Street
Milwaukee, WI 53202
Goldman Sachs Asset Management........................... 380,600 11.0%
32 Old Slip
New York, NY 10005
Dalton, Greiner, Hartman,................................ 229,300 6.6%
Maher & Co.
1100 Fifth Avenue South
Naples, FL 34102
J.P. Morgan Chase & Co................................... 224,890 6.5%
270 Park Avenue
New York, NY 10017
FMR Corp................................................. 198,400 5.7%
82 Devonshire Street
Boston, MA 02109
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* Nominee for Director. Their address is c/o National Dentex Corporation, 526
Boston Post Road, Wayland, MA 01778.
+ Executive officer. Their address is c/o National Dentex Corporation, 526
Boston Post Road, Wayland, MA 01778.
(1) Unless otherwise indicated, each of the persons named on the table has sole
voting and investment power with respect to the shares listed. For each
person or group, percentages are based on the number of shares outstanding
plus any shares which may be acquired by such person or group within 60 days
of February 20, 2001 by exercising options, warrants or conversion
privileges. Options indicated below as being "exercisable" include any
options vesting during such 60-day period. This stock ownership information
is based upon information furnished to us by the persons named on the table.
(2) These shares are held by Rust Capital, Ltd. Mr. Crosby is the President of
Rust Capital, Ltd. and he could be deemed to be indirectly a beneficial
owner of these shares. Mr. Crosby disclaims beneficial ownership of such
shares.
(3) Mr. Brown holds options for 63,500 shares, of which 17,500 are exercisable.
(4) Mr. Sepulveda holds options for 27,000 shares, of which 15,000 are
exercisable.
(5) Mr. Merz holds options for 42,000 shares, of which 15,000 are exercisable.
(6) Includes 30 shares held by his wife, of which Mr. Champagne could be deemed
to be indirectly a beneficial owner. Mr. Champagne disclaims beneficial
ownership of such shares. Mr. Champagne holds options for 20,500 shares, of
which 8,500 are exercisable.
(7) Mr. Becker holds options for 27,000 shares, of which 13,332 are exercisable.
(8) Certain executive officers, other than the executive officers named in the
table, hold options for 42,000 shares, of which 18,000 are exercisable.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The entire Board of Directors, consisting of six members, will be elected
at the annual meeting. The directors elected will hold office until their
successors are elected, which should occur at the next annual meeting.
VOTE REQUIRED.
The six nominees receiving the highest number of votes will be elected.
Votes withheld for a nominee will not be counted.
NOMINATIONS.
At the annual meeting, we will nominate the persons named in this proxy
statement as directors. Although we don't know of any reason why one of these
nominees might not be able to serve, the Board of Directors may either propose
to reduce the number of directors or propose a substitute nominee if any nominee
is not available for election.
GENERAL INFORMATION ABOUT THE NOMINEES.
With the exception of Daniel A. Grady, all of the nominees profiled below
are currently directors of the Company. Each has agreed to be named in this
proxy statement and to serve as a director if elected.
DIRECTOR
NAME AGE OFFICE HELD
-------- --- -----------
David V. Harkins............................. 60 Chairman of the Board and Director
David L. Brown............................... 60 President, Chief Executive Officer and Director
Jack R. Crosby............................... 74 Director
Daniel A. Grady.............................. 64 Director
William H. McClurg........................... 64 Director
Norman F. Strate............................. 60 Director
Mr. Harkins is a founder of the Company and has served as Chairman of the
Board and as a director since its inception. Mr. Harkins is President of Thomas
H. Lee Partners, L.P., a private equity investment firm, and has been associated
with the Thomas H. Lee Company since its founding in 1975. Mr. Harkins is
currently a director of Conseco, Inc., Cott Corporation, Fisher Scientific
International, Inc., Metris Companies, Inc., Stanley Furniture Company, Inc.,
Syratech Corporation and Tucker Anthony Sutro.
Mr. Brown was appointed President and a director of the Company in
December, 1998, and Chief Executive Officer in 2000. He joined the Company in
1984 as Vice President-Finance and Chief Financial Officer, and was appointed as
Treasurer in 1991. Mr. Brown also serves on the Board of Directors of the
American Dental Trade Association, the Forsyth Institute Board of Trustees, and
the Harvard School of Dental Medicine Board of Fellows.
Mr. Crosby is Chairman of The Rust Group, a private investment partnership
headquartered in Austin, Texas. Mr. Crosby serves as a director of several
public and privately held companies, including Propaganda Film Holdings and
CinemaStar Luxury Theaters, Inc. Mr. Crosby has been a director of the Company
since 1992.
Mr. Grady is Vice President-Finance of Bose Corporation, a designer and
manufacturer of high quality home audio and other electronics equipment. Mr.
Grady also serves as a director of Welch Foods Inc. and as a trustee of Dedham
Savings Bank. Mr. Grady is being proposed for election for the first time at the
meeting.
Mr. McClurg has been President of Load Controls, Inc., since 1984. Load
Controls manufactures and sells electric motor power sensors and load controls.
Mr. McClurg has been a director of the Company since 1994.
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Mr. Strate was Chief Executive Officer of J.F. Jelenko & Co., a supplier of
dental products to dental labs, from 1986 until it was acquired by Heraeus, GmbH
in 1996. He is a partner in The Strate Group, a merger and acquisitions firm. He
is a former member of the Board of Fellows of the Harvard School of Dental
Medicine. Mr. Strate joined the Board of Directors of the Company in 1997.
COMPENSATION OF DIRECTORS.
"Non-employee" directors receive a retainer fee of $16,000 annually, and at
their election may receive such compensation in cash or common stock of the
Company. All of the directors except Mr. Brown are non-employee directors. Prior
to 2001, an annual retainer of $12,000 was paid only to "non-affiliated"
directors. All of the directors are reimbursed for travel and similar expenses
incurred in connection with their services.
COMMITTEES OF THE BOARD.
The Board of Directors has three principal committees. The following chart
describes the function and membership of each committee and the number of times
it met in 2000:
EXECUTIVE COMMITTEE -3 MEETINGS
FUNCTION MEMBERS
-------- -------
- Approve terms of acquisitions of David V. Harkins
dental laboratories or other William H. McClurg
business (under $1.0 million in purchase price) David L. Brown
COMPENSATION COMMITTEE -3 MEETINGS
FUNCTION MEMBERS
-------- -------
- Review and approve compensation David V. Harkins
and benefit programs Jack R. Crosby
- Approve compensation of senior executives William H. McClurg
- Administer stock option plans Norman F. Strate
See the report of the Compensation Committee on page 6.
AUDIT COMMITTEE -3 MEETINGS
FUNCTION MEMBERS
-------- -------
- Recommend the engagement of independent auditors David V. Harkins
- Review the annual financial statements Jack R. Crosby
- Review control procedures and accounting practices William H. McClurg
- Monitor accounting and reporting practices Norman F. Strate
- Review compliance with the conflict-of-interest policy
- Review the capital structure of the Company
See the report of the Audit Committee on page 16.
The Board of Directors held three meetings during 2000. Each director
attended all of the meetings of the Board and of each committee that he belongs
to. The Board does not maintain a standing nominating committee.
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EXECUTIVE COMPENSATION
The following report and the performance graph on page 11 do not constitute
soliciting materials and are not considered filed or incorporated by reference
into any other Company filing with the Securities and Exchange Commission,
unless we state otherwise.
REPORT OF THE COMPENSATION COMMITTEE
Compensation Committee Participation. The Compensation Committee is
composed of four directors who are not employees of the Company. There are no
interlocking compensation committee relationships between our directors and
executive officers and the directors and executive officers of any other public
company.
General Philosophy on Executive Compensation. The Committee's goals are
to:
- provide compensation competitive with similar companies;
- reward executives consistent with the performance of the Company;
- recognize individual performance;
- retain and attract qualified executives; and
- encourage those executives to increase stockholder value by aligning
their interests with the interests of our stockholders.
To achieve these goals, the Committee has put in place an executive
compensation program with three basic elements; base salary, annual cash bonus,
and stock options. The Committee intends to review its compensation policies
from time to time in order to take into account factors which are unique to the
Company.
Base Salary. The Committee determines the base salary of each executive
officer. The Committee considers competitive industry salaries, the nature of
the officer's position, the officer's contribution and experience, and the
officer's length of service. Base salaries are conservatively pegged to a level
we subjectively believe to be competitive with the average levels of base salary
in organizations of similar size.
Annual Cash Bonus. The Committee grants annual cash bonuses to executive
officers based directly on the short-term financial performance of both our
operating dental laboratories and the Company as a whole. This annual cash bonus
is designed to provide better than competitive pay only for better than
competitive financial performance.
The Company has established cash incentive plans which reward:
- dental laboratory management and other key employees who directly
influence the financial performance of an individual dental laboratory;
- key executives based upon our achievement of corporate earning targets,
expressed in terms of pre-tax income, as compared to our budget for each
year; and
- group managers based upon the achievement of earnings within each
manager's group of dental laboratories.
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Stock Options. The Committee administers the Company's stock option plans,
which reward executives and other employees for delivering long-term value to
our stockholders. The goals of our stock option plans are to:
- reward executives for long-term strategic management and the enhancement
of stockholder value through appropriate equity ownership in the Company;
- support a performance-oriented environment that rewards plan participants
for improving the Company's financial performance; and
- attract and retain key executives and employees critical to our long-term
success.
Compensation of Chief Executive Officer in 2000. We increased President
and Chief Executive Officer David L. Brown's base salary from $130,000 to
$200,000 in August, 2000. This increase was based on a recognition of Mr.
Brown's performance since succeeding former President and Chief Executive
Officer William M. Mullahy, who passed away in July, 1999.
Compensation of Other Executive Officers in 2000. With respect to the
other executive officers named in the summary compensation table below, the
Company increased the base salaries of the Group Vice Presidents, Eloy V.
Sepulveda and Arthur B. Champagne, from $80,000 and $75,000, respectively, to
$120,000 in May, 2000, while decreasing their percentage of participation in the
Laboratory Incentive Compensation Plan from 13.5% to 8% and from 22% to 18.5%,
respectively. The Company increased Senior Vice President Donald E. Merz' base
salary from $80,000 to $120,000 in May, and decreased his percentage of
participation in the Laboratory Incentive Compensation Plan from 24% to 17%. The
Company also increased Chief Financial Officer Richard F. Becker, Jr.'s base
salary from $92,000 to $120,000 in May, and reduced his participation in the
Corporate Executives Incentive Compensation Plan from 40% of base salary to 30%
of base salary. We determined that this shift in compensation from bonus to base
salary was warranted by the continuing strong performance of our senior
executive team, as well as our subjective view that our existing base salary
levels were somewhat less than what competitive companies were offering.
Option Grants and Proposed 2001 Stock Plan. During 2000, the Committee
made relatively modest option grants ranging from 3,000 to 7,500 shares to the
executive officers named in the summary compensation table below. On January 23,
2001, the Board of Directors approved the proposed 2001 Stock Plan, which is
intended as a replacement for the 1992 Long Term Incentive Plan, which was
almost entirely depleted by option grants made to executive officers on that
date, and which will expire next year in any event. As more fully described
below, the new plan, if approved by the stockholders, would allow us to continue
to offer an equity incentive to executive officers, as well as eligible
employees, officers, directors, advisors and consultants of the Company.
Submitted by:
David V. Harkins
Jack R. Crosby
William H. McClurg
Norman F. Strate
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EXECUTIVE OFFICERS OF THE COMPANY.
The following table sets forth our current executive officers, their ages,
the positions and offices held by each person, and the year each person first
served as an executive officer of the Company. The officers serve at the
discretion of the Board of Directors.
FIRST YEAR AS
AN EXECUTIVE
NAME AGE OFFICES HELD OFFICER
---- --- ------------ -------------
David L. Brown.................................. 60 President, 1984
Chief Executive Officer,
Treasurer, and Director
Donald E. Merz.................................. 62 Senior Vice President 1987
Richard F. Becker, Jr........................... 48 Vice President-Finance, 1990
Chief Financial Officer
and Assistant Treasurer
Richard G. Mariacher............................ 56 Vice President- 1982
Technical Services
Arthur B. Champagne............................. 60 Group Vice President 1986
James F. Dodd, III.............................. 61 Group Vice President 1993
Eloy V. Sepulveda............................... 65 Group Vice President 1994
Mr. Brown's background is summarized on page 4 above.
Mr. Merz has been in the dental laboratory industry for over 35 years with
the Company or its predecessors. He has been a Vice President of the Company
since 1987. In 1998, Mr. Merz became Senior Vice President and, in 2000, the
Chairman of the Company's new Laboratory Operations Committee.
Mr. Becker served as Corporate Controller of the Company from 1984 to 1990,
as Vice President and Corporate Controller from 1990 to 1996, and is currently
Vice President -- Finance and Chief Financial Officer. Prior to joining the
Company, Mr. Becker held a number of financial management positions with Etonic,
Inc. and Kendall Company, subsidiaries of Colgate-Palmolive, Adage Corporation,
William Underwood Company and Rix Corporation.
Mr. Mariacher has served as Vice President-Technical Services of the
Company since its inception. Mr. Mariacher has been with the Company or its
predecessors for over 30 years. He is the author of many technical articles,
Chairman of the National Board for Certification of Dental Laboratories,
Technical Editor of Laboratory Management Today, serves as Chairman of the Board
of Directors of the CAL-Lab Group and is a member of the American Prosthodontic
Society and the Academy of Esthetic Dentistry.
Mr. Champagne has been a Vice President of the Company since 1986. In 2000,
he became a member of the Company's Laboratory Operations Committee. Mr.
Champagne has been employed by the Company or its predecessors for over 40
years.
Mr. Dodd has been a Vice President of the Company since 1993, and is a
member of the Laboratory Operations Committee . He was the founder and President
of Dodd Dental Laboratories, Inc. from 1963 until its acquisition by the Company
in 1992. Mr. Dodd has also served as President of the Dental Laboratory
Conference (1987-1998), as President of the Delaware Dental Laboratory
Association (1971-1973), and as director (1988-1993), Secretary (1992-1993) and
Treasurer (1991-1992) of the American Fund for Dental Health.
Mr. Sepulveda has been employed by the Company or its predecessors for over
40 years. He has served as a Vice President since 1994, and is also a member of
the Laboratory Operations Committee.
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SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
--------------------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
NAME AND PRINCIPAL ------------------------------ UNDERLYING COMPENSATION
POSITION YEAR SALARY BONUS (1) OPTIONS (2)
------------------ ---- -------- ---------- ---------- ------------
David L. Brown........................................ 2000 $155,308 $ 110,000 7,500 $21,688
President and Chief 1999 130,000 100,000 -- 21,563
Executive Officer 1998 120,000 60,000 6,000 21,563
Donald E. Merz........................................ 2000 106,154 113,489 7,500 28,195
Senior Vice President 1999 80,000 117,453 -- 27,587
1998 70,000 107,455 6,000 27,291
Eloy V. Sepulveda..................................... 2000 106,154 59,475 3,000 46,039
Group Vice President 1999 80,000 75,007 -- 45,414
1998 80,000 69,066 3,000 45,414
Arthur B. Champagne................................... 2000 104,423 61,557 3,000 19,585
Group Vice President 1999 70,000 74,672 -- 18,874
1998 70,000 50,943 3,000 18,724
Richard F. Becker, Jr................................. 2000 111,385 44,000 5,000 10,043
Vice President-Finance 1999 92,000 48,000 -- 9,716
and Chief Financial 1998 86,000 40,000 4,000 9,568
Officer
- ---------------
(1) Paid for services rendered in 1998, 1999 or 2000 to all of the officers
named above under the Corporate Executives Incentive Compensation Plan, and
under the Company's Laboratory Incentive Compensation Plan as to Messrs.
Merz, Sepulveda and Champagne.
(2) Represents the Company-paid portion of life insurance premiums to fund our
Supplemental Executive Retirement Plan. Also includes the Company's matching
contribution under our Dollars Plus Plan, a plan qualified under sec. 401(k)
of the Internal Revenue Code of 1986, as amended. The matching contribution
is 100% of the first 1% of salary contributed by the employee and 50% of the
next 3% of salary contributed.
OPTIONS GRANTED IN 2000
The following table shows the options granted to the executive officers
named in the summary compensation table above during the fiscal year ended
December 31, 2000. These "incentive stock options" were granted on April 5,
2000, vest in equal installments over a three year period from date of grant,
and expire ten years from the date of grant.
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATE OF STOCK
SHARES OPTIONS PRICE
UNDERLYING GRANTED TO APPRECIATION (1)
OPTIONS ALL EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED EMPLOYEES PER SHARE DATE AT 5% AT 10%
---- ---------- ------------- -------------- ---------- -------- ---------
David L. Brown.......................... 7,500 10.0% $13.00 4/5/10 $61,350 $155,400
Donald E. Merz.......................... 7,500 10.0 13.00 4/5/10 61,350 155,400
Eloy V. Sepulveda....................... 3,000 4.0 13.00 4/5/10 24,540 62,160
Arthur B. Champagne..................... 3,000 4.0 13.00 4/5/10 24,540 62,160
Richard F. Becker, Jr................... 5,000 6.7 13.00 4/5/10 40,900 103,600
- ---------------
(1) Represents the hypothetical net gains from exercise of these options, based
on assumed rates of stock price appreciation over the options' terms. The
table is not intended to forecast possible future appreciation of the common
stock. The actual net gains, if any, will be dependent on the actual future
performance of the common stock. There can be no assurance that the assumed
rates of stock price appreciation utilized in calculating the amounts
reflected in these columns will be achieved.
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OPTION EXERCISES AND YEAR-END VALUE
The following table sets forth information concerning options exercised
during 2000 (there were none) and the unexercised options held as of December
31, 2000 by the executive officers named above.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
STOCK OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
ACQUIRED VALUE END AT FISCAL YEAR END (2)
ON REALIZED --------------------------- ---------------------------
NAME EXERCISE (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
David L. Brown............................ -- $-- 15,000 9,500 $39,625 $58,438
Donald E. Merz............................ -- -- 12,500 9,500 39,625 58,438
Eloy V. Sepulveda......................... -- -- 14,000 4,000 38,250 24,250
Arthur B. Champagne....................... -- -- 7,500 4,000 8,750 24,250
Richard F. Becker, Jr..................... -- -- 11,666 6,334 38,961 38,961
- ---------------
(1) The value realized upon the exercise of an option is determined by
multiplying the number of options exercised by the difference between the
market price of the common stock on the date of exercise of the options and
the exercise price of the options exercised.
(2) The value of unexercised in-the-money options at the end of fiscal year 2000
is determined by multiplying the number of options held by the difference
between the market price of the common stock underlying the options on
December 31, 2000 ($19.625 per share) and the exercise price of the options.
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STOCK PERFORMANCE GRAPH.
The following graph compares the cumulative total stockholder return on our
common stock during the five fiscal years ended December 31, 2000 with the
cumulative total return of the Nasdaq Industrial Index and a peer group index
described more fully below.
COMPARISON OF CUMULATIVE TOTAL RETURN (1)
AMONG THE COMPANY ("NADX"), NASDAQ INDUSTRIAL INDEX AND PEER GROUP INDEX (2)
[CHART]
NADX NASDAQ PEERS
---- ------ -----
12-31-95 100.00 100.00 100.00
12-31-96 82.14 115.03 114.95
12-31-97 89.80 126.57 158.65
12-31-98 68.37 135.20 166.04
12-31-99 68.37 232.09 157.89
12-31-00 80.10 153.73 257.39
(1) Assumes $100 invested on December 31, 1995 in our common stock, the Nasdaq
Industrial Index and the Peer Group Index, including reinvestment of any
dividends paid on the investment.
(2) The Peer Group Index consists of Dentsply International, Inc. and Patterson
Dental Company. We believe that these companies represent the other publicly
traded companies within the dental service community.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS.
The Company has entered into employment agreements with David L. Brown and
Richard F. Becker which provide for annual base salaries which may be increased
at the discretion of the Board of Directors. These agreements also provide for
participation in our Executive Incentive Compensation Plan, reimbursement of
expenses, and the same benefits offered to the Company's executives generally.
The agreements provide for automatic renewal for one-year terms until
termination by the Company or by the employee.
The Company also has entered into Change of Control Severance Agreements
with the seven executive officers named in this proxy statement, which may
provide for a severance benefit upon termination of employment within two years
after a change in control of the Company. These agreements provide that, in the
event that the executive is terminated without cause or the executive terminates
his employment for certain specified reasons, such as a reduction in
compensation or duties, the executive will receive severance benefits
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equal to two times his base salary in effect immediately prior to the date of
termination, plus two times the average amount of the bonus payable for the two
fiscal years ending on or immediately prior to the date of termination. These
severance benefits are three times salary and bonus in the case of Mr. Brown's
agreement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act ("Exchange Act") requires our
officers, directors and greater than 10% stockholders ("Reporting Persons") to
file certain reports ("Section 16 Reports") with respect to beneficial ownership
of our equity securities. Based solely on a review of the Section 16 Reports
furnished to us by or on behalf of the Reporting Persons and, where applicable,
any written representation by any of them that Section 16 Reports were not
required, we believe that all Section 16(a) filing requirements applicable to
our Reporting Persons during and with respect to 2000 have been complied with on
a timely basis.
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PROPOSAL NO. 2
APPROVAL OF THE 2001 STOCK PLAN
At the annual meeting, you will be asked to vote to approve our proposed
new 2001 Stock Plan (the "Plan"), which is intended as a replacement for our
1992 Long Term Incentive Plan, which is almost entirely depleted and will expire
next year. THE BOARD RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PLAN.
VOTE REQUIRED.
If a majority of the shares of common stock represented and entitled to
vote at the meeting vote in favor, the Plan will be approved. Abstentions and
broker non-votes, if any, will therefore have no effect on the outcome of the
vote.
SUMMARY OF THE PLAN.
Below is a summary of the significant terms of the Plan as approved by the
Board on January 23, 2001. The full text of the Plan is set forth as Appendix A
to this Proxy Statement.
Total Number of Shares Covered. 300,000 shares of common stock (subject to
adjustment for stock splits and similar changes in capitalization).
Purpose. The purpose of the Plan, like the 1992 Long Term Incentive Plan,
is to provide a long-term equity incentive in the form of stock options to
persons whose present and potential contributions are important to our continued
success, to afford such persons an opportunity to acquire a proprietary interest
in the Company, and to enable us to continue to enlist and retain the best
available talent for the successful conduct of our business.
Administration. The Plan will be administered by the Compensation Committee
of the Board. Subject to the Plan, the Committee determines the persons who are
to receive awards, the number of shares subject to each award, the terms and
conditions of such awards and the dates of grants. The Committee also has the
authority to construe and interpret any of the provisions of the Plan or any
options granted thereunder. Such interpretations are binding on the Company and
on the optionees.
Eligibility. All employees, prospective employees, officers, directors
(whether or not also employees), advisors, consultants and other key persons of
the Company, and of any present or future parent or subsidiary of the Company,
are eligible to receive options under the Plan.
Option Awards. Both incentive stock options ("ISOs"), as defined in Section
422(b) of the Internal Revenue Code (the "Code"), and nonqualified stock options
("NQSOs"), may be granted under the Plan. The Committee determines whether an
option granted under the Plan will be an ISO or a NQSO. ISOs may be granted only
to employees, and are subject to a number of restrictions.
Grant Limitations. No eligible individual shall be granted options to
acquire in the aggregate more than 100,000 shares of common stock in any one
fiscal year.
Terms of the Options. Each option granted pursuant to the Plan is evidenced
by a stock option grant (the "Grant") issued by the Company. An exercise notice
and agreement (the "Exercise Notice") is to be completed by the optionee at the
time an option is exercised. The Company does not receive any consideration from
an optionee at the time an option is granted. The forms of the Grant and the
Exercise Notice may be determined by the Committee from time to time, subject to
the terms of the Plan.
Options may be granted under the Plan until the tenth anniversary of the
date of the adoption of the Plan.
Subject to the provisions of the Plan, the Committee may determine the
vesting schedule of each option and other terms and conditions of
exercisability. Generally, options granted under the Plan must be exercised
within ten years from the option grant date.
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The Committee determines the exercise price of each option granted, which
is set forth in the Grant. Under the Plan, the exercise price of each option
granted may not be less than the fair market value per share of the Company's
common stock on the date the option is granted; except that, over the life of
the Plan, options for an aggregate of up to 50,000 shares may be granted with
exercise prices below fair market value. We have never granted such discounted
price options in the past, and have no current intention to do so in the future.
Payment for shares purchased upon exercise of an option may be made (a) in
cash or by check, (b) at the discretion of the Committee, through delivery or
withholding of shares of common stock, (c) at the discretion of the Committee
and consistent with applicable law, through a broker-assisted "cashless"
exercise, or (d) by any combination of the above.
Nontransferability. Options granted under the Plan may not be transferred
by the optionee other than by will or by the laws of descent and distribution,
unless the Committee determines otherwise. During the lifetime of the optionee,
an option may be exercised only by the optionee.
Termination of Employment. If an optionee's employment is terminated for
any reason other than death, any outstanding option must generally be exercised
by the optionee within 90 days following such termination. If termination is on
account of death, any outstanding option must generally be exercised within 12
months following the participant's death. The Committee has the authority under
the Plan to vary the provisions of an award applicable upon termination of
employment.
Capital Changes. If the number of our outstanding shares of common stock is
changed by a stock dividend, stock split, combination, reclassification or
similar change in the capital structure of the Company, the number of shares of
common stock available for option grants under the Plan, the number of shares
and the exercise price per share for each outstanding option and the other
numerical limitations noted above will be proportionately adjusted by the
Committee, subject to any required action by the Board or stockholders.
Change of Control. The Committee may in its discretion provide in any
option Grant agreement, or at any time thereafter, for acceleration of the
vesting of any options granted pursuant to the Plan and for any option to become
fully vested and exercisable in the event of a "Change of Control" of the
Company, as defined in the Plan.
Amendment and Termination. The Committee may amend or terminate the Plan at
any time and in any respect, except that the Committee cannot, without the
approval of the stockholders of the Company, amend the Plan in any manner that
requires stockholder approval pursuant to the Code or the regulations thereunder
or pursuant to Rule 16b-3 of the Exchange Act. No amendment of the Plan may
adversely affect any outstanding option without the optionee's written consent.
If an option granted pursuant to the Plan expires or terminates for any
reason without being exercised in whole or in part, the shares released from
such option or award will again become available for grant and purchase under
the Plan.
CERTAIN UNITED STATES FEDERAL INCOME TAX INFORMATION
General. The following is a general summary of the current United States
federal income tax consequences associated with participation in the Plan. The
federal tax laws may change and the federal, state and local tax consequences
for any participant will depend upon his or her individual circumstances. This
information may not be applicable to participants who are not residents of the
United States. All participants have been and are encouraged to seek the advice
of a qualified tax advisor regarding the tax consequences of participation in
the Plan.
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TAX TREATMENT OF THE OPTIONEE.
Nonqualified Stock Options. An optionee will not recognize any taxable
income at the time a NQSO is granted. However, upon exercise of a NQSO the
optionee will generally include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
and the optionee's purchase price. The included amount will be treated as
ordinary income and reported on an employee's W-2 form, or in the case of a
non-employee, on a 1099 form and will be subject to income tax and FICA
withholding by the Company (either by payment in cash or withholding out of the
optionee's salary) if the optionee is an employee. Upon the sale of the shares
by the optionee, any subsequent appreciation or depreciation in the value of the
shares will be treated as short term or long term capital gain or loss depending
upon whether or not the optionee held the shares for more than one year
following exercise of the NQSO.
Incentive Stock Options. The optionee will recognize no income upon grant
of an ISO and incur no tax on its exercise unless the optionee is subject to the
alternative minimum tax described below. If the optionee holds the stock
acquired upon exercise of an ISO (the "ISO Shares") for more than one year after
the date the option was exercised and for more than two years after the date the
option was granted, the optionee generally will realize long-term capital gain
or loss (rather than ordinary income or loss) upon disposition of the ISO
Shares. This gain or loss will be equal to the difference between the amount
realized upon such disposition and the amount paid for the ISO Shares.
If the optionee disposes of ISO Shares prior to the expiration of either of
the above required holding periods (a "disqualifying disposition"), the gain
realized upon such disposition, up to the difference between the fair market
value of the ISO Shares on the date of exercise and the option exercise price,
will be treated as ordinary income and reported on the employee's W-2 form.
Income tax withholding on this income is optional. Any addition gain or loss
will be long-term or short-term capital gain or loss, depending upon whether or
not the ISO Shares were held for more than one year following the date of
exercise by the optionee. A disposition of ISO Shares for this purpose includes
not only a sale or exchange, but also a gift or other transfer of legal title
(with certain exceptions).
Alternative Minimum Tax. Generally, the difference between the fair market
value of stock purchased by exercise of an ISO (generally measured as of the
date of exercise) and the amount paid for that stock upon exercise of the ISO is
an adjustment to income for purposes of the alternative minimum tax. An
alternative minimum tax adjustment applies unless a disqualifying disposition of
the ISO Shares occurs in the same calendar year as exercise of the ISO. The
alternative minimum tax (imposed to the extent it exceeds the taxpayer's regular
tax) is 26% of an individual taxpayer's alternative minimum taxable income for
alternative minimum taxable income up to $175,000 and 28% thereafter.
Alternative minimum taxable income is determined by adjusting regular taxable
income for certain items, increasing that income by certain tax preference items
and reducing this amount by the applicable exemption amount ($45,000 in the case
of a joint return, subject to reduction under certain circumstances).
TAX TREATMENT OF THE COMPANY.
Deductions. The Company will be entitled to a deduction in connection with
the exercise of a NQSO by a domestic optionee to the extent that the optionee
recognizes ordinary income provided that the deduction is not disallowed under
the provisions of Section 162(m) of the Code. The Company will be entitled to a
deduction in connection with the disposition of ISO Shares only to the extent
that the optionee recognizes ordinary income on a disqualifying disposition of
the ISO Shares and will not be entitled to any deduction upon exercise of an ISO
in the absence of any such disqualifying disposition.
ERISA. The Company believes that the Plan is not subject to any of the
provisions of the Employee Retirement Income Security Act of 1974, nor is it
qualified under Section 401(a) of the Code.
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PROPOSAL NO. 3
APPOINTMENT OF INDEPENDENT AUDITORS
We have appointed the accounting firm of Arthur Andersen LLP as our
independent auditors to examine the Company's financial statements for the year
ending December 31, 2001. A resolution to ratify the appointment will be
presented at the annual meeting. We recommend that you vote for ratification of
the appointment of Arthur Andersen LLP. A majority of the votes cast must vote
in favor to ratify the appointment. (Therefore, absentions and broker non-votes,
if any, will have no effect on the outcome of the vote). If the stockholders do
not ratify the appointment, we will reconsider our selection.
Arthur Andersen LLP audited and reported upon the Company's financial
statements for 2000. In connection with that audit, Arthur Andersen LLP also
reviewed the Company's Annual Report, quarterly financial statements, and the
Company's filings with the Securities and Exchange Commission, and consulted
with management as to the financial statement implications of matters under
consideration. A representative of Arthur Andersen LLP will be at the meeting
and available to answer questions.
As described above, the Board of Directors has appointed an Audit
Committee. The Audit Committee has adopted a written charter governing its
actions. The Charter is set forth in full as Appendix B to this proxy statement.
All members of the Company's Audit Committee are "independent" within the
definition of that term as provided by Rule 4200(a)(14) of the listing standards
of the National Association of Securities Dealers.
The following report does not constitute soliciting material and is not
considered filed or incorporated by reference into any other Company filing with
the Securities and Exchange Commission, unless we state otherwise.
REPORT OF THE AUDIT COMMITTEE.
The Audit Committee hereby states that it:
- Has reviewed and discussed the audited financial statements with the
Company's management;
- Has discussed with the Company's independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61, as
may be modified or supplemented;
- Has received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1, as may
be modified or supplemented, and has discussed with the independent
auditors the independent auditors' independence; and
- Has recommended to the Board of Directors of the Company that the
audited financial statements be included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2000 for filing with
the Securities and Exchange Commission.
Submitted by:
David V. Harkins
Jack R. Crosby
William H. McClurg
Norman F. Strate
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FEES PAID TO AUDIT FIRM.
For fiscal year 2000, we paid (or have agreed to pay) Arthur Andersen LLP
to provide services in the following categories and amounts:
Annual audit for 2000 and review of quarterly financial
statements during that year............................... $70,500
Financial information systems design and implementation..... $ --
All other fees (consisting primarily of tax consulting
services and audit of our Dollars Plus Plan).............. $28,025
STOCKHOLDER PROPOSALS
Any stockholder desiring to present a proposal for action at our 2002
Annual Meeting of Stockholders must submit the proposal in writing so as to be
received by the Company at its principal executive offices no later than
November 8, 2001.
OTHER MATTERS
The Board of Directors is not aware of any other matters which may come
before the meeting. If any other matters come before the meeting, the persons
named in the enclosed proxy may vote in accordance with their best judgment.
A copy of our Annual Report on Form 10-K for the year ended December 31,
2000 is enclosed with this proxy statement. These materials are being mailed to
stockholders beginning on or around March 8, 2001.
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APPENDIX A
NATIONAL DENTEX CORPORATION
2001 STOCK PLAN
1. Purpose. The purpose of the National Dentex Corporation 2001 Stock Plan
(the "Plan") is to provide an incentive for employees of National Dentex
Corporation, (the "Company"), and of any present or future parent or subsidiary
of the Company (collectively, "Related Corporations") and other persons who may
render services to the Company or a Related Corporation, by offering
opportunities to participate in the ownership of the Company and its future
growth through (a) the grant of options which qualify as "incentive stock
options" ("ISOs") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"); and (b) the grant of options which do not qualify as ISOs
("Non-Qualified Options"). Both ISOs and Non-Qualified Options are referred to
hereafter individually as an "Option" and collectively as "Options." As used
herein, (i) the terms "parent" and "subsidiary" mean "parent corporation" and
"subsidiary corporation," respectively, as those terms are defined in Section
424 of the Code, and (ii) the term "grantee" refers to the recipient of Options.
2. Administration of the Plan.
A. Board or Committee Administration. The Plan shall be administered
by the Board of Directors of the Company (the "Board") or by a committee of
two or more non-employee directors appointed by the Board (the
"Committee"). Hereinafter, all references in this Plan to the "Committee"
shall mean the Board if no Committee has been appointed. Subject to the
terms of the Plan, the Committee shall have the authority to (i) determine
to whom (from among the class of employees eligible under paragraph 3 to
receive ISOs) ISOs shall be granted, and to whom (from among the class of
individuals and entities eligible under paragraph 3 to receive
Non-Qualified Options) Non-Qualified Options, shall be granted; (ii)
determine the time or times at which Options shall be granted; (iii)
determine the purchase price of shares subject to each Option, which prices
shall not be less than the minimum price specified in paragraph 6; (iv)
determine whether each Option granted shall be an ISO or a Non-Qualified
Option; (v) determine (subject to paragraph 7) the time or times when each
Option shall become exercisable and the duration of the exercise period;
(vi) extend the period during which outstanding Options may be exercised;
(vii) determine whether restrictions such as repurchase options are to be
imposed on shares subject to Options and the nature of such restrictions,
if any; (viii) determine whether performance targets or goals are to be
imposed on Options, and set and interpret such targets or goals; and (ix)
interpret the Plan and prescribe and rescind rules and regulations relating
to it. The interpretation and construction by the Committee of any
provisions of the Plan or any Options granted under it shall be final
unless otherwise determined by the Board. The Committee may from time to
time adopt such rules and regulations for carrying out the Plan as it may
deem advisable. Consistent with the terms of the Plan, the Committee may
waive, modify or suspend any restriction or performance target or goal
imposed by the Committee. No member of the Board or the Committee shall be
liable for any action or determination made in good faith with respect to
the Plan or any Options granted under it.
B. Grant of Options to Board Members. Subject to the restrictions on
ISOs imposed by the Code, Options may be granted to members of the Board,
including members of the Committee. All grants of Options to members of the
Board shall in all other respects be made in accordance with the provisions
of this Plan applicable to other eligible persons. Members of the Board who
either (i) are eligible to receive grants of Options pursuant to the Plan
or (ii) have been granted Options may vote or act by written consent on any
matters affecting the administration of the Plan.
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3. Eligible Employees and Others. ISOs may be granted only to employees of
the Company or any Related Corporation. Non-Qualified Options may be granted to
any employee, prospective employee, officer, director (whether or not also an
employee), advisor, consultant or other key person of or to the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant Options. The granting
of any Options to any individual or entity shall neither entitle that individual
or entity to, nor disqualify such individual or entity from, participation in
any other grant of Options or any other incentive plan or arrangement of the
Company.
4. Stock. The stock subject to Options shall be authorized but unissued
common shares of the Company, par value $.01 per share (the "Common Stock"), or
shares of such Common Stock reacquired by the Company in any manner. The
aggregate number of shares of Common Stock which may be issued pursuant to the
Plan is 300,000, subject to adjustment as provided in paragraph 13. If any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part or shall be repurchased by the Company, the unpurchased shares
of Common Stock subject to such Option shall again be available for grants of
Options under the Plan. The Maximum number of shares of Common Stock that may be
subject to Options granted under the Plan to any one individual during any
fiscal year of the Company shall be 100,000 shares.
5. Granting of Options. Options may be granted under the Plan at any time
on or after the date of adoption hereof and prior to the tenth anniversary of
such date of adoption. The date of grant of Options under the Plan will be the
date specified by the Committee at the time it grants the Options.
6. Minimum Option Price; ISO Limitations.
A. Price for Non-Qualified Options. The exercise price per share
specified in the agreement relating to each Non-Qualified Option granted
under the Plan shall in no event be less than the fair market value per
share of Common Stock on the date of grant, except that Non-Qualified
Options to purchase up to an aggregate of 50,000 shares may be granted
under the Plan at a lesser price, but in no event less than the minimum
legal consideration required therefor under the laws of any jurisdiction in
which the Company or its successors in interest may be organized.
B. Price for ISOs. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, the
price per share specified in the agreement relating to such ISO shall not
be less than one hundred ten percent (110%) of the fair market value per
share of Common Stock on the date of grant. For purposes of determining
stock ownership under this paragraph, the rules of Section 424(d) of the
Code shall apply.
C. $100,000 Annual Limitation on ISO Vesting. Each eligible employee
may be granted Options treated as ISOs only to the extent that, in the
aggregate under this Plan and all incentive stock option plans of the
Company and any Related Corporation, ISOs do not become exercisable from
the first time by such employee during any calendar year with respect to
stock having a fair market value (determined at the time the ISOs were
granted) in excess of $100,000. The Company intends to designate any
Options granted in excess of such limitation as Non-Qualified Options.
D. Determination of Fair Market Value. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the date of grant or, if the
prices or quotes discussed in this sentence are unavailable for such date,
the last business day for which such prices or quotes are available prior
to the date of grant and shall mean (i) the average
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(on that date) of the high and low prices of the Common Stock on the
principal national securities exchange on which the Common Stock is traded,
if the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Stock on the
NASDAQ National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the
NASDAQ National Market, in each case determined as of the end of the
"regular" trading day. If the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall mean
the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors which it deems appropriate,
including, without limitation, recent sale and offer prices of the Common
Stock in private transactions negotiated at arm's length.
7. Option Duration. Subject to earlier termination as provided herein or
in the agreement relating to such Option, each Option shall expire on the date
specified by the Committee, but not more than (i) ten (10) years from the date
of grant in the case of Options generally and (ii) five (5) years from the date
of grant in the case of ISOs granted to an employee owning stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Related Corporation, as determined under paragraph
6(B). Subject to earlier termination as provided herein, the term of each ISO
shall be the term set forth in the original instrument granting such ISO, except
with respect to any part of such ISO that is converted into a Non-Qualified
Option pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9 through
13, each Option granted under the Plan shall be exercisable as follows:
A. Vesting. The Option shall either be fully exercisable on the date
of grant or shall become exercisable thereafter in such installments (which
need not be equal) as the Committee may specify.
B. Full Vesting of Installments. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Committee.
C. Partial Exercise. Each Option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
D. Acceleration of Vesting. The Committee may in its discretion
provide in any agreement relating to any Options, or at any time
thereafter, for the acceleration of the date that any installment of any
Options become exercisable, including prior to or in connection with any
Change of Control (as defined herein); provided that, except as set forth
in any agreement relating to any Options, the Committee shall not, without
the consent of an optionee, accelerate the permitted exercise date of any
installment of any Option granted to any employee as an ISO (and not
previously converted into a Non-Qualified Option pursuant to paragraph 16)
if such acceleration would violate the annual vesting limitation contained
in Section 422(d) of the Code, as described in paragraph 6(C).
As used in this Plan, "Change of Control" shall mean the occurrence of any
one of the following events:
(i) there occurs a change of control of the Company of a nature that
would be required to be reported in response to Item 1(a) of the Current
Report on Form 8-K pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") or in any other filing under the
Exchange Act; or
(ii) any Person (as defined in Section 13(d) of the Exchange Act)
other than an employee benefit plan of the Company or of any Related
Corporations becomes the owner of 33% or more of the Company's Common Stock
and thereafter individuals who were not directors of the Company prior to
the
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date such Person became a 33% owner are elected as directors pursuant to an
arrangement or understanding with, or upon the request of or nomination by,
such Person and constitute at least 1/3 of the Board; or
(iii) there occurs any solicitation or series of solicitations of
proxies by or on behalf of any Person other than the Board and thereafter
individuals who were not directors of the Company prior to the commencement
of such solicitation or series of solicitations are elected as directors
pursuant to an arrangement or understanding with, or upon the request of or
nomination by, such Person and constitute at lest 1/3 of the Board; or
(iv) the Company executes an agreement of acquisition, merger or
consolidation which contemplates that (i) after the effective date provided
for in such agreement, all or substantially all of the business and/or
assets of the Company shall be owned, leased or otherwise controlled by
another Person and (ii) individuals who are directors of the Company when
such agreement is executed shall not constitute at least two-thirds of the
board of directors of the survivor or successor entity immediately after
the effective date provided for in such agreement; provided, however, that
for purposes of this paragraph (iii), if such agreement requires as a
condition precedent approval by the Company's shareholders of the agreement
or transaction, a Change of Control shall not be deemed to have taken place
unless and until such approval is secured.
9. Termination of Employment. Unless otherwise specified in the agreement
relating to such Option, if an optionee ceases to be employed by the Company and
all Related Corporations other than by reason of death or disability as defined
in paragraph 10, no further installments of his or her Options shall become
exercisable, and his or her Options shall terminate on the earlier of ninety
(90) days after the date of termination of his or her employment, or (b) their
specified expiration dates. For purposes of this paragraph 9, employment shall
be considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, maternity leave, military obligations or
governmental service) provided that the period of such leave does not exceed
ninety (90) days or, if longer, any period during which such optionee's right to
reemployment is guaranteed by statute. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. Options granted
under the Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Options the right to be retained in employment
or other service by the Company or any Related Corporation for any period of
time.
10. Death; Disability.
A. Death. If an optionee ceases to be employed by the Company and all
Related Corporations by reason of his or her death, any Option held by such
optionee upon death may be exercised, to the extent otherwise exercisable
on the date of death, by the estate, personal representative or beneficiary
who has acquired the Option by will or by the laws of descent and
distribution, until the earlier of (i) the specified expiration date of the
Option or (ii) one year from the date of the optionee's death.
B. Disability. If an optionee ceases to be employed by the Company
and all Related Corporations by reason of his or her disability, such
optionee shall have the right to exercise any Option held by him or her on
the date of termination of employment, for the number of shares for which
he or she could have exercised it on that date, until the earlier of (i)
the specified expiration date of the Option or (ii) ninety (90) days from
the date of termination of the optionee's employment; provided, however,
that, if the optionee dies within such ninety (90) day period (or such
other period as the Board shall specify at grant,
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any unexercised Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time of death
for a period of twelve (12) months, from the date of such death or until
the expiration of the stated term of such Option, whichever period is the
shorter. In the event of termination of employment by reason of Disability,
if an ISO is exercisable after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, such Option will thereafter
be treated as a Non-Qualified Option. For the purposes of the Plan, the
term "disability" shall mean "permanent and total disability" as defined in
Section 22(e)(3) of the Code or any successor statute.
11. Assignability. Unless otherwise determined by the Committee or
specified in the agreement, Options shall not be assignable or transferable by
the grantee except by will or by the laws of descent and distribution. Except as
set forth in the previous sentence, during the lifetime of a grantee each Option
shall be exercisable only by such grantee.
12. Terms and Conditions of Options. Options shall be evidenced by
agreements or other instruments (which need not be identical) in such forms as
the Committee may from time to time approve. Such instruments shall conform to
the terms and conditions set forth in paragraphs 6 through 11 hereof, to the
extent applicable, and may contain such other provisions as the Committee deems
advisable which are not inconsistent with the Plan, including restrictions
applicable to shares of Common Stock issuable upon exercise of Options,
including but not limited to rights of first refusal and options to purchase.
The Committee may specify that any Options shall be subject to the restrictions
set forth herein with respect to ISOs, or to such other termination and
cancellation provisions as the Committee may determine. The Committee may from
time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The officers of the Company are authorized and empowered to take
any and all action necessary or advisable from time to time to carry out the
terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events, the
shares of Common Stock subject to outstanding Options granted hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the grantee and the Company relating to such Options:
A. Stock Dividends and Stock Splits. If the shares of the Company shall be
subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock subject to
outstanding Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
B. Recapitalization, Reorganization, Consolidation or Mergers. In the
event of a recapitalization or reorganization of the Company or a consolidation
or a merger involving the Company (other than a transaction described in
subparagraph C below) pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock, a
grantee upon exercising Options shall be entitled to receive for the purchase
price paid upon such exercise the securities he or she would have received if he
or she had exercised such Stock Right prior to such recapitalization or
reorganization.
C. Certain Consolidations and Mergers. If the Company is to be
consolidated with or acquired by another entity in a merger or other
reorganization or in the event of a sale or other disposition of assets which
constitutes a Change of Control (each, a "Sale"), the Committee or the board of
directors of any entity assuming the obligations of the Company hereunder (the
"Successor Board"), shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by substituting on an
equitable basis for the shares then subject to such Options either (a) the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Sale, (b) shares of stock of the surviving or
A-5
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successor corporation or other entity or (c) such other securities as the
Successor Board deems appropriate, the fair market value of which shall not
materially exceed the fair market value of the shares of Common Stock subject to
such Options immediately preceding the Sale; or (ii) upon written notice to the
grantees, provide that all Options must be exercised, to the extent then
exercisable or to be exercisable as a result of the Sale, within a specified
number of days of the date of such notice, at the end of which period the
Options shall terminate; or (iii) terminate all Options in exchange for a cash
payment equal to the excess of the fair market value of the shares subject to
such Options (to the extent then exercisable or to be exercisable as a result of
the Sale) over the exercise price thereof.
D. Modification of ISOs. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs A, B or C with respect to ISOs shall be made only
after the Committee, after consulting with counsel for the Company, determines
whether such adjustments would constitute a "modification" of such ISOs (as that
term is defined in Section 424 of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee determines that such
adjustments made with respect to ISOs would constitute a modification of such
ISOs or would cause adverse tax consequences to the holders, it may in its
discretion refrain from making such adjustments.
E. Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, each outstanding Options will terminate immediately
prior to the consummation of such proposed action or at such other time and
subject to such other conditions as shall be determined by the Committee.
F. Other Issuances of Securities. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to outstanding Options. No adjustments shall be made for dividends paid
in cash or in property other than securities of the Company.
G. Fractional Shares. No fractional shares shall be issued under the Plan,
and the grantee of Options shall receive from the Company cash in lieu of any
such fractional share.
H. Adjustments. Upon the happening of any of the events described in
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Options which previously have
been or subsequently may be granted under the Plan shall also be appropriately
adjusted to reflect the events described in such subparagraphs. The Committee or
the Successor Board shall determine the specific adjustments to be made under
this paragraph 13 and, subject to paragraph 2, its determination shall be
conclusive.
14. Exercise of Options. An Option (or any part or installments thereof)
shall be exercised by giving written notice to the Company at its principal
office address. Such notice shall identify the Option being exercised and
specify the number of shares as to which such Option is being exercised. The
optionee shall make full payment of the exercise price of the Option shares
being purchased either (a) in United States dollars in cash or by check, (b) at
the discretion of the Committee, through delivery or withholding of shares of
Common Stock having a fair market value equal as of the date of the exercise to
the cash exercise price of the Option, (c) at the discretion of the Committee
and consistent with applicable law, through the delivery to the Company of a
portion of the proceeds from the sale of the Common Stock acquired upon exercise
of the Option equal to the cash exercise price of the Option, along with an
authorization to the broker or selling agent to pay that amount to the Company,
which sale shall be at the participant's discretion at the time of exercise, or
(d) at the discretion of the Committee, by any combination of (a), (b) and (c)
above. The holder of an Option shall not have the rights of a shareholder with
respect to the shares covered by such Option until the date of issuance of a
stock certificate to such holder for such shares. Except as expressly provided
above in
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paragraph 13 with respect to changes in capitalization and stock dividends, no
adjustment shall be made for dividends or similar rights for which the record
date is before the date such stock certificate is issued.
15. Term and Amendment of Plan. The Plan was adopted by the Board as of
January 23, 2001. The Plan shall expire at the close of business on January 22,
2011 (except as to Options outstanding on that date). The Board may terminate or
amend the Plan in any respect at any time, except that no amendment of the Plan
by the Board shall be effective, without the approval of the stockholders
obtained within 12 months before or after the Board's action, (i) if such
amendment would cause ISOs already granted under the Plan to fail to qualify as
"incentive stock options" under the Code, or (ii) if such stockholder approval
is then required by applicable law, by Rule 16b-3 (or any successor rule) under
the Exchange Act, or by applicable regulations of any stock exchange or NASDAQ.
In no event may action of the Board or stockholders alter or impair the rights
of a grantee, without such grantee's consent, under any Options previously
granted to such grantee, except as provided herein.
16. Conversion of ISOs into Non-Qualified Options. The Committee, at the
written request or with the written consent of any optionee, may in its
discretion take such actions as may be necessary to convert such optionee's ISOs
(or any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time prior
to the expiration of such ISOs, regardless of whether the optionee is an
employee of the Company or a Related Corporation at the time of such conversion.
Such actions may include, but shall not be limited to, extending the exercise
period or reducing the exercise price of the appropriate installments of such
ISOs. At the time of such conversion, the Committee (with the consent of the
optionee) may impose such conditions on the exercise of the resulting
Non-Qualified Options as the Committee in its discretion may determine, provided
that such conditions shall not be inconsistent with this Plan. Nothing in this
Plan shall be deemed to give any optionee the right to have such optionee's ISOs
converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Committee takes appropriate action.
17. Application of Funds. The proceeds received by the Company from the
sale of shares pursuant to Options granted under the Plan shall be used for
general corporate purposes.
18. Notice to Company of Disqualifying Disposition. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a "Disqualifying Disposition" (as
described in Sections 421, 422 and 424 of the Code and regulations thereunder)
of any stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the latter of (a) the date two (2) years following the date the ISO was granted
or (b) the date one (1) year following the date the ISO was exercised.
19. Withholding of Income Taxes. Upon the exercise of a Non-Qualified
Option or the making of a Disqualifying Disposition (as defined in paragraph
18), the vesting or transfer of restricted stock or securities acquired on the
exercise of an option hereunder, or the making of a distribution or other
payment with respect to such stock or securities, the Company may withhold taxes
in respect of amounts that constitute compensation includible in gross income.
The Committee in its discretion may condition the exercise of an Option on the
grantee's making satisfactory arrangement for such withholding. Such arrangement
may include payment by the grantee in cash or by check of the amount of the
withholding taxes or, at the discretion of the Committee, by the grantee's
delivery of previously held shares of Common Stock or the withholding, from the
shares of Common Stock otherwise deliverable upon exercise of a Options, of that
number of shares having an aggregate fair market value equal to the amount of
such withholding taxes.
20. Governmental Regulation. The Company's obligation to sell and deliver
shares of Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
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Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
21. Governing Law. The validity and construction of the Plan and the
instruments evidencing Options shall be governed by the laws of the Commonwealth
of Massachusetts or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
Approved by the Board on January 23, 2001.
Approved by the Stockholders on , 2001.
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APPENDIX B
NATIONAL DENTEX CORPORATION
AUDIT COMMITTEE CHARTER
ORGANIZATION
There shall be a committee of the Board of Directors to be known as the
audit committee, composed of at least three members of the Board of Directors.
The audit committee shall be composed of directors who are independent of the
management of the corporation, are free of any relationship that, in the opinion
of the Board of Directors, would interfere with their exercise of independent
judgement as a committee member, and are financially literate. The outside
auditor is ultimately accountable to the Board of Directors and the audit
committee of the Board of Directors.
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.
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:
- Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the corporation and its
divisions and subsidiaries.
- 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.
- 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. Further,
the committee periodically should review company policy statements to
determine their adherence to the code of conduct.
- Review the financial statements contained in the annual report to the
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 changes in accounting principles should be reviewed.
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- Provide sufficient opportunity for the independent auditors 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,
accounting and auditing personnel, and the cooperation that the
independent auditors received during the course of the audit.
- Ensure that the auditor submits a formal written statement regarding
relationships and services which may impact independence. The audit
committee will discuss any relevant independence matters with auditors.
- Review accounting and financial human resources and succession planning
within the corporation.
- Submit the minutes of all meetings of the audit committee to, or discuss
the matters discussed at each committee meetings with, the Board of
Directors.
- 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.
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SKU# NDCCM-PS-01
32
NATIONAL DENTEX CORPORATION
C/O EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398
NATIONAL DENTEX CORPORATION
Dear Shareholder,
Please take note of the information enclosed with this proxy card. This is
your opportunity to vote on important matters related to the management and
operation of your Company. These are discussed in detail in the enclosed
proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right
to vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will
be voted. Then sign the card, detach it and return your proxy vote in the
enclosed postage paid envelope.
Your proxy card must be received prior to the Special Meeting in Lieu of
Annual Meeting of Shareholders, which is scheduled to be held on April 10,
2001.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
NATIONAL DENTEX CORPORATION
DETACH HERE ZNDCC1
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
- ----------------------------------------------------
NATIONAL DENTEX CORPORATION
- ----------------------------------------------------
FOR AGAINST ABSTAIN
1. Proposal to fix the number of directors at 2. Proposal to approve the Company's 2001 [ ] [ ] [ ]
six and to elect the following persons as Stock Plan.
directors.
(01) DAVID L. BROWN (04) DAVID V. HARKINS
(02) JACK R. CROSBY (05) WILLIAM H. McCLURG FOR AGAINST ABSTAIN
(03) DANIEL A. GRADY (06) NORMAN F. STRATE 3. Proposal to approve the appointment of [ ] [ ] [ ]
Arthur Andersen LLP as Auditors.
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ] ______________________________________ 4. In their discretion on any other matters as may properly come
For all nominees except as noted above before the meeting or at any adjournment or postponement
thereof.
Mark box at right if an address change or comment has [ ]
been noted on the reverse side of this card.
Signature: __________________________ Date: ___________ Signature: __________________________ Date: ___________
33
DETACH HERE ZNDCC2
NATIONAL DENTEX CORPORATION
PROXY FOR THE SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS
ON APRIL 10, 2001
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, having received the Notice of Special Meeting in Lieu of Annual
Meeting of Shareholders, Proxy Statement and the Annual Report of National
Dentex Corporation (the "Company"), hereby appoint(s) David V. Harkins, David L.
Brown, and Richard F. Becker or any one of them, proxies for the undersigned,
with full power of substitution in each of them, to represent the undersigned at
the Special Meeting in Lieu of Annual Meeting of Shareholders of the Company to
be held at Posternak, Blankstein & Lund, L.L.P., 100 Charles River Plaza,
Boston, Massachusetts, 02114 at 10:00 a.m. on Tuesday, April 10, 2001 and at any
adjournment or postponement thereof, and thereat to vote and act in regard to
all matters which may properly come before said meeting (except those matters as
to which authority is hereinafter withheld) upon and in respect of all shares of
Common Stock of the Company upon or in respect of which the undersigned would be
entitled to vote or act and with all powers the undersigned would possess, if
personally present, and especially (but without limiting the general
authorization and power hereby given) to vote and act as indicated on the
reverse.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER. IF NO INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, AND 3.
The undersigned hereby confer(s) upon said proxies, and each of them,
discretionary authority to vote (a) upon any other matters or proposals not
known at the time of solicitation of this proxy which may properly come before
the meeting, and (b) with respect to the selection of Directors in the event of
any unforeseen emergency.
Attendence of the undersigned at said meeting or at any adjournment or
postponement thereof will not be deemed to revoke this proxy unless the
undersigned shall affirmatively indicate thereat his or her intention to vote
said shares in person. If a fiduciary capacity is attributed to the undersigned
hereon, this proxy will be deemed signed by the undersigned in that capacity.
- -------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________