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:
- --------------------------------------------------------------------------------
NATIONAL DENTEX CORPORATION
---------------------
NOTICE OF SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
---------------------
The 2003 Special Meeting in Lieu of Annual Meeting of Stockholders of
National Dentex Corporation will be held as follows:
DATE: Tuesday, April 8, 2003
TIME: 10:00 a.m.
PLACE:Posternak Blankstein & Lund LLP
8th Floor Conference Center
100 Charles River Plaza
Boston, MA 02114
MATTERS TO BE VOTED ON:
1. To fix the number of directors of the Company at five and to elect five
directors.
2. Ratification of the appointment of PricewaterhouseCoopers LLP as
auditors for 2003.
3. Any other matters properly brought before the meeting.
The Board of Directors has fixed the close of business on February 18, 2003
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, P.C.
Clerk
March 10, 2003
CONTENTS
<Table>
<Caption>
PAGE
----
General Information About Voting............................ 2
Stock Ownership............................................. 3
Proposal No. 1: Election of Directors....................... 5
Executive Compensation...................................... 7
Proposal No. 2: Appointment of Independent Auditors......... 14
Stockholder Proposals....................................... 15
Other Matters............................................... 15
</Table>
NATIONAL DENTEX CORPORATION
526 BOSTON POST ROAD
WAYLAND, MASSACHUSETTS 01778
---------------------
PROXY STATEMENT
GENERAL INFORMATION
What is this document? This is the Notice of our 2003 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 18, 2003. A total of 3,403,009 shares of
common stock are eligible to vote at the annual meeting. You are permitted one
vote for each share of common stock held by you. 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 five 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 in their discretion.
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.
Where can I get directions to the annual meeting? Interactive directions
to the meeting location are available at www.pbl.com.
2
STOCK OWNERSHIP
The following table shows the number of shares of common stock beneficially
owned as of February 18, 2003 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.
<Table>
<Caption>
PERCENTAGE OF
NUMBER OUTSTANDING
NAME OF SHARES(1) SHARES(1)
- ---- ------------ -------------
David V. Harkins*........................................... 29,400 0.9%
Jack R. Crosby*............................................. 1,400 --
Daniel A. Grady*............................................ 1,400 --
Norman F. Strate*........................................... 4,326 0.1
David L. Brown(2)*+......................................... 157,885 4.5
Donald E. Merz(3)+.......................................... 68,355 2.0
Arthur B. Champagne(4)+..................................... 40,500 1.2
James F. Dodd, III(5)+...................................... 42,500 1.2
Richard F. Becker, Jr.(6)+.................................. 53,850 1.6
All executive officers and directors as a group (11
persons)(7)............................................... 498,095 13.6
Artisan Partners Ltd. Partnership........................... 586,141 17.2
1000 North Water Street
Milwaukee, WI 58202
FMR Corp.................................................... 348,000 10.2
82 Devonshire Street
Boston, MA 02109
Federated Investors, Inc.................................... 333,300 9.8
Federated Investors Tower
Pittsburgh, PA 15222
Royce & Associates, L.L.C. ................................. 293,900 8.6
1414 Avenue of the Americas
New York, NY 10019
Dalton, Greiner, Hartman, Maher & Co. ...................... 242,900 7.1
565 Fifth Avenue
New York, NY 10017
J.P. Morgan Chase & Co. .................................... 209,460 6.2
270 Park Avenue
New York, NY 10017
</Table>
- ---------------
* 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
3
outstanding plus any shares which may be acquired by such person or group
within 60 days of February 18, 2003 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) Mr. Brown holds options for 144,500 shares, of which 95,166 are exercisable.
(3) Mr. Merz holds options for 62,000 shares, of which 39,333 are exercisable.
(4) Mr. Champagne holds options for 40,500 shares, of which 21,500 are
exercisable.
(5) Mr. Dodd holds options for 37,500 shares, of which 18,500 are exercisable.
(6) Mr. Becker holds options for 44,000 shares, of which 25,000 are exercisable.
(7) Certain executive officers, other than the executive officers named in the
table, hold options for 88,500 shares, of which 50,500 are exercisable.
4
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The entire Board of Directors, to consist of five 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 five 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 (on the
recommendation of the Nominating Committee) 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
All of the nominees profiled below currently serve as directors. Each has
agreed to be named in this proxy statement and to serve as a director if
elected.
<Table>
<Caption>
DIRECTOR NAME AGE OFFICE HELD
- ------------- --- -----------
David V. Harkins....................... 62 Chairman of the Board and Director
David L. Brown......................... 62 President, Chief Executive Officer and
Director
Jack R. Crosby......................... 76 Director
Daniel A. Grady........................ 66 Director
Norman F. Strate....................... 62 Director
</Table>
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, Inc., Fisher Scientific
International Inc., Metris Companies, Inc., Stanley Furniture Company Inc. and
Syratech Corporation.
Mr. Brown was appointed President and a director of the Company in
December, 1998, and Chief Executive Officer in 2000. He joined us in 1984 as
Vice President-Finance and Chief Financial Officer, and was appointed as
Treasurer in 1991. Mr. Brown serves on the Board of Directors of the American
Dental Trade Association and the National Association of Dental Laboratories, as
well as on 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 chief executive officer and
as a director of CinemaStar Luxury Theaters, Inc. (which filed for protection
under Chapter 11 of the U.S. Bankruptcy Code in January 2001 and emerged from
Chapter 11 protection in August 2002), as well as numerous other entities which
are privately held. Mr. Crosby has been a director of the Company since 1992.
Mr. Grady is Vice President-Finance and Chief Financial Officer 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 the Dedham Savings Bank. Mr. Grady joined the Board at our
annual meeting in 2001.
Mr. Strate is President and Chief Executive Officer of Protonex Technology
Corporation, a fuel cell company focused on affordable power sources. He served
as Chief Executive Officer of J.F. Jelenko & Co., a
5
supplier of dental products to dental labs, from 1986 until it was acquired by
Heraeus, GmbH in 1996. He is also a partner in The Strate Group, a merger and
acquisitions firm. Mr. Strate is a former member of the Board of Fellows of the
Harvard School of Dental Medicine, a member of the Lehigh University Alumni
Association Board and a director of the Gies Foundation of the American Dental
Education Association. Mr. Strate has been a director of the Company since 1997.
COMPENSATION OF DIRECTORS
"Non-employee" directors receive a retainer fee of $16,000 annually, and
may elect to receive such compensation in cash or common stock. All of the
directors except Mr. Brown are non-employee 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 four principal committees. The following chart
describes the function and membership of each committee and the number of times
it met in 2002:
EXECUTIVE COMMITTEE -- 4 MEETINGS
<Table>
<Caption>
FUNCTION MEMBERS
- -------- -------
- - Approve terms of acquisitions of dental laboratories or David V. Harkins
other business (under $1.0 million in purchase price) Norman F. Strate
David L. Brown
</Table>
COMPENSATION COMMITTEE -- 4 MEETINGS
<Table>
<Caption>
FUNCTION MEMBERS
- -------- -------
- - Review and approve compensation and benefit programs David V. Harkins
- - Approve compensation of senior executives Jack R. Crosby
- - Administer stock option plans Daniel A. Grady
</Table>
See the report of the Compensation Committee on page 7.
AUDIT COMMITTEE -- 6 MEETINGS
<Table>
<Caption>
FUNCTION MEMBERS
- -------- -------
- - Engage the independent auditors Daniel A. Grady
- - Review the annual financial statements Jack R. Crosby
- - Review control procedures and accounting practices Norman F. Strate
- - Monitor accounting and reporting practices
- - Review compliance with the conflict-of-interest policy
- - Review the capital structure of the Company
</Table>
See the report of the Audit Committee on page 13.
NOMINATING COMMITTEE -- 1 MEETING
<Table>
<Caption>
FUNCTION MEMBERS
- -------- -------
- - Review and recommend to the full Board nominations for David V. Harkins
election to the Board of Directors Jack R. Crosby
Norman F. Strate
Daniel A. Grady
</Table>
The full Board of Directors held four meetings during 2002. Each director
attended all of the meetings of the Board and of each committee that he belongs
to, except Mr. Harkins, who attended three of the four meetings of the Board of
Directors.
6
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
currently composed of three directors who are not employees of the Company. We
are aware of 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 our 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.
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;
7
- 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 2002. The 2002 compensation of
Mr. Brown, President and Chief Executive Officer, was determined in accordance
with the plans and policies discussed in this report. His annual salary of
$215,000 has been in effect since January 2002. His annual cash bonus shown in
the Summary Executive Compensation Table below, was paid under the Corporate
Executives Compensation Plan described above and increased from $0 in 2001 to
$75,000 in 2002. This 2002 payment was approximately 58% of Mr. Brown's targeted
bonus for the year and reflects his accomplishments and the progress of the
Company towards its financial and business goals. In addition, Mr. Brown was
granted stock options for 12,000 shares on January 22, 2002 exercisable at the
fair market value of the common stock on that date. These grants were designed
to provide incentive throughout the terms of the options to perform in a manner
that will directly affect both the short term and long term interests of the
stockholders.
Compensation of Other Executive Officers in 2002. With respect to the
other executive officers named in the summary compensation table below, the
Company increased the base salaries as follows:
<Table>
<Caption>
OLD BASE NEW BASE
-------- --------
Donald E. Merz.............................................. $135,000 $140,000
Arthur B. Champagne......................................... 120,000 125,000
James F. Dodd, III.......................................... 130,000 140,000
Richard F. Becker, Jr. ..................................... 130,000 140,000
</Table>
All of these increases were effective January 2002. We determined that
these increases were warranted by the individual performances of these
individuals, and our subjective view that our existing compensation levels were
somewhat less than what competitive companies were offering.
In addition, during 2002, the Committee made option grants of 12,000 shares
to each of the executive officers named in the summary compensation table below,
at the then fair market value. These grants were also designed to provide
incentive throughout the terms of the options to perform in a manner that will
directly affect both the short term and long term interests of the stockholders.
Submitted by:
DAVID V. HARKINS
JACK R. CROSBY
DANIEL A. GRADY
8
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.
<Table>
<Caption>
FIRST YEAR AS
AN EXECUTIVE
NAME AGE OFFICES HELD OFFICER
- ---- --- ------------ -------------
David L. Brown.................. 62 President, Chief Executive 1984
Officer, and Director
Donald E. Merz.................. 64 Senior Vice President 1987
Richard F. Becker, Jr. ......... 50 Vice President-Treasurer, Chief 1990
Financial Officer and Assistant
Clerk
James F. Dodd, III.............. 63 Vice President, Business 1993
Development
Richard G. Mariacher............ 58 Vice President-Technical 1982
Services
Arthur B. Champagne............. 62 Group Vice President 1986
Eloy V. Sepulveda............... 67 Group Vice President 1994
</Table>
Mr. Brown's background is summarized on page 5 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 our Laboratory Operations Committee.
Mr. Becker served as our Corporate Controller from 1984 to 1990, as Vice
President and Corporate Controller from 1990 to 1996, and is currently Vice
President -- Treasurer 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 our inception. Mr. Mariacher has been with the Company or its
predecessors for over 30 years. He is the author of many technical articles,
Trustee of the National Board for Certification of Dental Laboratories,
Technical Editor of Laboratory Management Today, Chairman of the Board of
Directors of the CAL-Lab Group and 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 our 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 our Laboratory Operations Committee. He was the founder and President
of Dodd Dental Laboratories, Inc. from 1963 until we acquired it in 1992. Mr.
Dodd has also served as President of the Dental Laboratory Conference, President
of the Delaware Dental Laboratory Association, as director, Secretary and
Treasurer 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
our Laboratory Operations Committee.
9
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS COMPENSATION(2)
- --------------------------- ---- -------- -------- ---------- ---------------
David L. Brown......................... 2002 $215,000 $ 75,000 12,000 $171,814
President and Chief 2001 200,000 0 100,000 127,938
Executive Officer 2000 155,308 110,000 7,500 21,688
Donald E. Merz......................... 2002 140,000 93,193 12,000 28,290
Senior Vice President 2001 133,846 73,483 20,000 28,166
2000 106,154 113,498 7,500 28,195
Arthur B. Champagne.................... 2002 125,000 51,127 12,000 19,722
Group Vice President 2001 120,000 45,536 9,000 19,599
2000 104,423 61,557 3,000 19,585
James F. Dodd, III..................... 2002 140,000 30,000 12,000 84,750
Group Vice President 2001 129,231 20,000 9,000 60,708
2000 113,846 44,000 3,000 2,625
Richard F. Becker, Jr.................. 2002 140,000 30,000 12,000 10,166
Vice President-Treasurer 2001 129,231 20,000 9,000 10,043
and Chief Financial Officer 2000 111,385 44,000 5,000 10,043
</Table>
- ---------------
(1) Paid for services rendered in 2000 and 2002 to all of the officers named
above, and in 2001 to Mr. Becker and Mr. Dodd under the Corporate Executives
Incentive Compensation Plan, and under the Company's Laboratory Incentive
Compensation Plan as to Messrs. Merz and Champagne for 2000, 2001 and 2002.
(2) Represents the Company-paid portion of life insurance premiums to fund our
Supplemental Executive Retirement Plan. Also includes the Company's matching
contribution for the account of the officers named above under the Company's
Dollar 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 2002
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, 2002. These "incentive stock options" were granted on January 22,
2002, vest in equal installments over a three year period from date of grant,
and expire ten years from the date of grant.
<Table>
<Caption>
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATE OF STOCK
SHARES TOTAL OPTIONS PRICE APPRECIATION(1)
UNDERLYING GRANTED TO EXERCISE PRICE EXPIRATION ---------------------
NAME OPTIONS GRANTED ALL EMPLOYEES PER SHARE DATE AT 5% AT 10%
- ---- --------------- ------------- -------------- ---------- --------- ---------
David L. Brown....... 12,000 10.2% $24.68 1/22/12 $186,240 $471,960
Donald E. Merz....... 12,000 10.2 24.68 1/22/12 186,240 471,960
Arthur B.
Champagne.......... 12,000 10.2 24.68 1/22/12 186,240 471,960
James F. Dodd, III... 12,000 10.2 24.68 1/22/12 186,240 471,960
Richard F. Becker,
Jr. ............... 12,000 10.2 24.68 1/22/12 186,240 471,960
</Table>
- ---------------
(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
10
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.
OPTION EXERCISES AND YEAR-END VALUE
The following table sets forth information concerning options exercised
during 2002 and the unexercised options held as of December 31, 2002 by the
executive officers named above.
<Table>
<Caption>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR END(2)
STOCK ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
David L. Brown............ -- $ -- 55,333 81,166 $32,700 $16,350
Donald E. Merz............ -- -- 26,166 27,834 32,700 16,350
Arthur B. Champagne....... -- -- 13,500 19,000 13,080 6,540
James F. Dodd, III........ 3,000 39,600 10,500 19,000 6,540 6,540
Richard F. Becker, Jr. ... -- -- 16,333 19,667 21,798 10,902
</Table>
- ---------------
(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 2002
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, 2002 ($19.54 per share) and the exercise price of the options.
11
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on our
common stock during the five fiscal years ended December 31, 2002 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)
(PERFORMANCE GRAPH)
<Table>
<Caption>
12-31-97 12-31-98 12-31-99 12-31-00 12-31-01 12-31-02
-------- -------- -------- -------- -------- --------
NADX............................... 100.00 76.14 76.14 89.20 109.91 88.82
NASDAQ............................. 100.00 106.82 183.37 121.46 113.77 84.33
Peers.............................. 100.00 104.66 99.52 162.23 203.14 181.04
</Table>
(1) Assumes $100 invested on December 31, 1997 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 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
12
reasons, such as a reduction in compensation or duties, the executive will
receive severance benefits 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 2002 have been complied with on
a timely basis.
13
PROPOSAL NO. 2
APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, we have appointed the
accounting firm of PricewaterhouseCoopers LLP as our independent auditors to
examine the Company's financial statements for the year ending December 31,
2003. A resolution to ratify the appointment will be presented at the annual
meeting. We recommend that you vote for ratification of the appointment of
PricewaterhouseCoopers 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.
PricewaterhouseCoopers LLP audited and reported upon the Company's
financial statements for 2002. In connection with that audit,
PricewaterhouseCoopers LLP also reviewed the Company's Annual Report, quarterly
financial statements for quarters ended June 2002 and September 2002, 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 PricewaterhouseCoopers LLP will be at the
meeting and available to answer questions.
The Board of Directors has appointed an Audit Committee. The Audit
Committee has adopted a written charter governing its actions. 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.
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, 2002 for filing with the
Securities and Exchange Commission.
Management has primary responsibility for the Company's financial
statements and the overall reporting process, including the Company's system of
internal controls.
The independent auditors audit the annual financial statements prepared by
management, express an opinion as to whether those financial statements fairly
present the financial position, results of operations and cash flows of the
Company in conformity with generally accepted accounting principles and discuss
with us any issues they believe should be raised with us.
During 2002, the Company paid no fees to PricewaterhouseCoopers LLP for
consulting work outside of the review and audit of the Company's financial
statements, the audit of the Company's 401(k) plan and the related tax work.
Submitted By
DANIEL A. GRADY
JACK R. CROSBY
NORMAN F. STRATE
14
FEES PAID TO AUDIT FIRM
For fiscal year 2002, we paid (or have agreed to pay)
PricewaterhouseCoopers LLP to provide services in the following categories and
amounts:
<Table>
Annual audit for 2002 and review of quarterly financial
statements during that year............................... $93,400
Financial information systems design and implementation..... --
All other fees (consisting of tax advisory services and the
audit of our Dollars Plus Plan -- 401k)................... 27,252
</Table>
In addition to the above amounts we paid Arthur Andersen LLP, our previous
independent auditors, $5,750 for the review of the quarterly financial
statements for the quarter ended March 2002. Arthur Andersen LLP ceased
operations and was dismissed as our auditors on June 27, 2002.
STOCKHOLDER PROPOSALS
Any stockholder desiring to present a proposal for action at our 2004
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 11, 2003.
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,
2002 is enclosed with this proxy statement. These materials are being mailed to
stockholders beginning on or around March 10, 2003.
15
REVOCABLE PROXY
NATIONAL DENTEX CORPORATION
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
PROXY FOR THE SPECIAL MEETING IN LIEU OF ANNUAL MEETING
OF SHAREHOLDERS ON APRIL 8, 2003
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 LLP, 100 Charles River
Plaza, Boston, Massachusetts, 02114 at 10:00 a.m. on Tuesday, April 8, 2003 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
hereon.
WITH- FOR ALL
FOR HOLD EXCEPT
1. Proposal to elect the following
persons as directors. [ ] [ ] [ ]
(01) DAVID L. BROWN (04) DAVID V. HARKINS
(02) JACK R. CROSBY (05) NORMAN F. STRATE
(03) DANIEL A. GRADY
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
MARK "FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED
BELOW.
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FOR AGAINST ABSTAIN
2. Proposal to approve the appointment of
PricewaterhouseCoopers LLP as Auditors. [ ] [ ] [ ]
3. In their discretion on any other matters as may properly come 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 BOTTOM PORTION OF THIS CARD. [ ]
PLEASE CHECK THE BOX AT RIGHT IF YOU PLAN TO ATTEND THE MEETING ON APRIL 8. [ ]
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 AND 2.
Please be sure to sign and date this Proxy in the box below.
Date
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Stockholder sign above Co-holder (if any) sign above
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DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
NATIONAL DENTEX CORPORATION
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.
Attendance 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 ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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