PRO-DEX, INC.
1401 Walnut Street, Suite 540
Boulder, CO 80302
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 28, 1997
Notice is hereby given that the Annual Meeting of
shareholders of Pro-Dex, Inc. will be held on October 28,
1997, at 9:00 a.m. local time, at the Pacific Club, 4110
MacArthur Boulevard, Newport Beach, California, 92660, for
the following purposes:
1. To ratify the selection of McGladrey & Pullen,
L.L.P. as the independent certifying accountants of the
Company's financial statements for the year ending June 30,
1998.
2. To transact such other business as may properly
come before the Meeting and any adjournment thereof.
A Proxy Statement explaining the matters to be acted
upon at the meeting is enclosed.
Shareholders of record at the close of business on
September 30, 1997, (the "Record Date") are entitled to
notice of and to vote at the Meeting or any postponement or
adjournment thereof. The stock transfer books of Pro-Dex,
Inc. will remain open.
All shareholders are cordially invited to attend the
Meeting. Whether or not you expect to attend the meeting in
person, you are urged to sign, date, and return your proxy
promptly in the enclosed envelope, which requires no postage
if mailed in the United States. The giving of a proxy will
not prevent you from revoking the proxy and voting your
shares in person if you attend the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Kent E. Searl, Chairman
Boulder, Colorado
September 30, 1997
PRO-DEX, INC.
1401 Walnut Street, Suite 540
Boulder, CO 80302
(303) 443-6136
Proxy Statement
This Proxy Statement is being furnished in connection
with the solicitation of proxies by the Board of Directors
of Pro-Dex, Inc. ("Pro-Dex" or the "Company") for use at an
Annual Meeting of shareholders of Pro-Dex to be held on
October 28, 1997 at 9:00 a.m., local time, at the Pacific
Club, 4110 MacArthur Blvd, Newport Beach, California, 92660,
and any adjournment thereof. The shareholders of Pro-Dex
are being asked to vote:
(1) To ratify the appointment of McGladrey & Pullen,
L.L.P. as the Company's independent certifying accountants
for the fiscal June 30, 1998.
(2) To transact of such other business as may properly
come before the Meeting and any adjournment or postponement
thereof.
Pro-Dex Common Stock is currently traded over-the-
counter and included on the NASDAQ Small-Capsm Market under
the symbol, "PDEX".
Security holders may correspond with the Company at the
above address, or reach the Company's corporate offices by
telephone at (303) 443-6136.
THIS PROXY STATEMENT IS BEING FURNISHED TO PRO-DEX
SHAREHOLDERS FOR PURPOSES OF VOTING IN PERSON OR BY PROXY ON
THE ABOVE LISTED PROPOSALS AT THE ANNUAL MEETING AND SUCH
OTHER MATTERS AS MAY COME BEFORE THE MEETING.
The date of this Proxy Statement is September 30, 1997.
INCORPORATION OF CERTAIN DOCUMENTS
AND INFORMATION BY REFERENCE
The following documents or portions thereof filed by
Pro-Dex (File No. 0-14942) with the Securities and Exchange
Commission ("Commission") are incorporated herein by
reference and are made a part hereof:
(a) Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1997;
(b) Current Reports on Form 8-K filed on August 1, 1997.
All documents filed by Pro-Dex pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") subsequent to the date of this
Proxy Statement are to be a part hereof from the respective
dates of filing such documents with the Commission. Any
statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Proxy Statement
to the extent that a statement contained herein modifies or
supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as modified or
superseded, to constitute a part of this Proxy Statement.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO
ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF PRO-DEX COMMON
STOCK, TO WHOM THIS PROXY STATEMENT IS DELIVERED ON THEIR
WRITTEN OR ORAL REQUEST TO PRO-DEX, INC., 1401 WALNUT STREET,
SUITE 540, BOULDER, COLORDO, 80302 (TELEPHONE NUMBER: (303)
443- 6136), ATTENTION: GEORGE J. ISAAC, CHIEF FINANCIAL
OFFICER. IN ORDER TO ENSURE DELIVERY OF THE DOCKUMENTS PRIOR
TO THE MEETING, REQUESTS MUST BE RECEIVERD BY OCTOBER
13, 1997.
AVAILABLE INFORMATION
Pro-Dex is subject to the informational requirements of
the Exchange Act and in accordance therewith files reports
and other information with the Commission. Such reports and
other information filed with the Commission by Pro-Dex are
available for inspection and copying at the Public Reference
facilities maintained by the Commission at Room 1024, 450
Fifth Street, NW, Washington, D.C. 20549. Copies of such
materials can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, NW,
Washington, D.C. 20549 at prescribed rates. Pro-Dex Common
Stock is quoted on the NASDAQ Small-CapSM Market and certain
of its reports, proxy materials and other information may be
available for inspection may be available for inspection at
the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, NW, Washington, D.C. 20006.
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy is solicited by the Board of
Directors of Pro-Dex to be voted at the Meeting, to be held
on the date, at the time and place and for the purposes set
forth in the accompanying Notice of Annual Meeting. When
proxies are received in properly completed and executed
form, the shares represented thereby will be voted at the
Meeting in accordance with the instructions specified
therein. In absence of instructions to the contrary, such
shares will be voted in favor of the proposals set forth
therein. Any shareholder executing a proxy has the power to
revoke that proxy at any time before it is voted by
delivering written notice to the Secretary of Pro-Dex, by
executing another proxy dated as of a later date or by
voting in person at the Meeting.
Pro-Dex's Annual Report on Form 10-KSB for the fiscal
year June 30, 1997 being delivered to the shareholders of
Pro-Dex with this Proxy Statement is hereby incorporated by
reference.
For the purposes of voting at the Meeting, abstentions
will be counted in determining a quorum to transact business
at the Meeting, but not for purposes of determining the vote
required for shareholder approval.
Only shareholders of record at the close of business
September 30, 1997 (the "Record Date") will be entitled to
notice of and to vote at the Meeting. On the Record Date,
there were 8,712,300 shares of Pro-Dex Common Stock
outstanding, and there were 78, 129 shares of Pro-Dex
Preferred Stock, 100% of which are owned by the Company's
officers, directors, and their affiliates.
All shares of Pro-Dex Common Stock are entitled to one
vote per share. The affirmative vote of the holders of a
majority of the outstanding shares of Pro-Dex Common Stock
is required to approve and adopt each of the proposals to be
voted upon at the annual meeting. The affirmative vote of
the holders of a majority of the Company's Preferred Stock
is not required to approve any proposals before the Meeting.
The costs of solicitation of Pro-Dex shareholders will
be paid by Pro-Dex. Such costs will include the
reimbursement of banks, brokerage firms, nominees,
fiduciaries, and other custodians for expenses of forwarding
solicitation materials to beneficial owners of shares. In
addition to the solicitation of proxies by use of the mails,
the directors, officers and employees of Pro-Dex, without
additional compensation, except for the reimbursement of out-
of-pocket expenses, may solicit proxies personally or by
telephone, telegraph, or facsimile transmission.
PROPOSAL ONE - RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
The Board of Directors recommends that the shareholders
ratify the appointment of McGladrey & Pullen, L.L.P. as
independent certifying accountants for the Company's
accounts for the year ending June 30, 1998. McGladrey &
Pullen, L.L.P. served as the Company's independent
certifying accountants for the years ended June 30, 1997 and
June 30, 1996. The reports of McGladrey & Pullen, L.L.P for
those years contained no adverse opinion or disclaimer of
opinion, and were not qualified or modified as to
uncertainty, audit scope, or accounting principals. During
the Company's two most recent years there were no
disagreements with accountants on any matter of accounting
principles or practices, financial statement disclosure, or
audit scope or procedure. The Company's Form 10KSB and the
financial statements set forth therein is incorporated
herein by reference and delivered to the shareholders
herewith. McGladrey & Pullen, L.L.P. expects to be present
at the Meeting. McGladrey & Pullen, L.L.P. will have an
opportunity to make a statement if they so desire, and are
expected to be available to respond to appropriate
questions.
DIRECTORS AND EXECUTIVE OFFICERS
Beginning in 1994, in accordance with a plan of
reorganization adopted by the shareholders, the directors of
the Company began serving staggered terms to assure
continuity on the Board of Directors. The following chart
indicates the term of service of each director.
STAGGERED TERMS OF DIRECTORS
Term Class
Name of Director Age Employee Committees Expires (#)
- ---------------- --- -------- ---------- ------- -----
Kent E. Searl 55 Yes Compensation* 06/30/99 III
Ronald G. Coss 61 Yes Audit* 06/30/99 III
George J. Isaac 52 Yes Audit* 06/30/98 I
Compensation
Richard N. Reinhardt 65 No Audit* 06/30/99 II
Compensation*
Robert A. Hovee+ 55 No Audit 06/30/99 II
Compensation
John B. Zaepfel/ 60 No Compensation* 06/30/99 II
# Directors are elected to serve until the later of such
date or the election and qualification of their
successors.
* Director serves on such committee(s) as an ex-officio
non-voting member.
+ Director commenced serving February 29, 1996, by the
election of the Board.
/ Director commenced serving August 27, 1996, by election
of the Board.
The follwong individuals currently serve as directors
of the Company:
Kent E. Searl is a co-founder of the Company and
currently serves as Chairman of the Board, Chief Executive
Officer, and Acting President. He has served as a director
of the Company or its predecessor since its inception in
1978. In addition to serving as Chairman of the Board, Mr.
Searl is an ex officio non-voting member of the Compensation
Committee of the Board of Directors. Since August 1969, he
has also served as Chairman of the Board of Directors of
Professional Sales Associates, Inc. ("PSA"), a national
dental equipment manufacturers' representative, which he co-
founded. PSA acted as marketing representative for dental
handpiece products of the Micro Motors, Inc. subsidiary
until June 30, 1997, at which time Biotrol International,
Inc. began marketing those products. Mr. Searl currently
also serves as an officer and director of two other
businesses. Mr. Searl was elected by the shareholders of
the Company to serve as a Class III Director until June 30,
1999 or the election and qualification of his successor.
Ronald G. Coss founded Micro Motors in 1971 and has
served as its Chairman since inception. He currently serves
as the Vice-Chairman of the Company's Board of Directors,
and also serves as an ex officio non-voting member of the
Audit Committee of he Board of Directors. Mr. Coss has been
the primary engineer in development of Micro's products
since its inception and invented the technologies, which are
the subject of the letters patent now owned by Micro. Mr.
Coss is currently one of the Trustees of the Micro Motors
Employee Stock Ownership Plan, a shareholder of the Company.
Mr. Coss was elected by the shareholders of the Company, to
serve as a Class III Director until June 30, 1999, or the
election and qualification of his successor.
George J. Isaac has served as a consultant to the
Company and its predecessor since 1978, and became a member
of the Company's Board of Directors on July 26, 1995. He
serves as an ex officio member of both the Audit Committee
and the Compensation Committees of the Board of Directors,
and is Vice President, Secretary, and Chief Financial
Officer of the Company. Mr. Isaac has been a certified
public accountant with Joseph B. Cohan and Associates,
Worcester, Massachusetts since 1969, became a partner in
1977 and served as its president from 1991 to 1996. He is a
member of the Board of Directors of Professional Sales
Associates, Inc. and recently completed terms as a member of
the Board of Directors for the Commerce Bank and Trust of
Worcester, MA, and the Medical Center of Central
Massachusetts. Mr. Isaac's accounting firm specialized in
handling medical and dental related accounts. Mr. Isaac
received a B.S. in Business Administration from Clark
University in Worcester, Massachusetts. Mr. Isaac was
elected by the shareholders of the Company, to serve as a
Class I Director until June 30, 1998 or the election and
qualification of his successor.
Richard N. Reinhardt has served as a Director of the
Company and its predecessor since 1990. He is a member of
the Audit Committee and the Compensation Committee of the
Board of Directors. Mr. Reinhardt has served as President
and director of Professional Sales Associates, Inc. ("PSA")
since he co-founded that firm in 1969. PSA is a national
manufacturers representative organization that represents
manufacturers in the dental equipment market. Mr. Reinhardt
as elected by the shareholders of the Company, to serve as a
Class II director until June 30, 1999, or the election and
qualification of his successor.
Robert A. Hovee began serving on the Company's Board of
Directors on February 27, 1996. He serves as a member of
both the Audit Committee and the Compensation Committee.
Currently, Mr. Hovee serves as President of the Orange
County Biomedical Industry Council and the Orange County
Biocommerce Association, both California non-profit
associations. Formerly Mr. Hovee was Chief Executive
Officer and President of Life Support Products, Inc. a maker
of emergency medical products of which he was a co- founder,
prior to its acquisition by Allied Healthcare Products, Inc.
He has also served as a director and chairman of Infrasonic,
Inc., an infant respirator manufacturer. Mr. Hovee, who is
active in many charities, serves as a co-chair of a
University of California-Irvine Center for the Health
Sciences fund-raising project. Mr. Hovee received a B.A. in
Business Administration and a B.A. in Business
Administration- International Business from the University
of Washington in Seattle, Washington as well as a Bachelor
of Foreign Trade and a Master of Foreign Trade from the
American Graduate School of International Management
(Thunderbird) in Glendale, Arizona. Mr. Hovee was elected
by the Board of Directors, to serve as a Class II Director
until the first to occur of the next shareholders meeting,
June 30, 1999 or the election and qualification of his
successor.
John B. Zaepfel has served as director of the Company
since August 27, 1996, and commenced service on the
Company's Compensation Committee on September 16, 1996.
Previously, Mr. Zaepfel served on the advisory committee
advising the Board of Directors of Micro Motors, Inc., prior
to its merger into Micro in July of 1995. Mr. Zaepfel spent
fifteen years as the Chief Executive Officer of CPG
International, Inc., which he founded in 1985 in a leveraged
buy-out of a division of a wholly owned subsidiary of Times
Mirror, Inc. Prior to its private sale in 1989, CPG
International, Inc. was a $90 million operating company,
manufacturing and marketing art, engineering, and media
supplies. Prior to forming CPG International, Inc., Mr.
Zaepfel was President and CEO of Chartpak and Picket
Industries, wholly owned subsidiaries of Times Mirror, Inc.
Mr. Zaepfel previously served as a director of Ideal School
Supplies, Inc., when it was a publicly traded company, and
was director of six privately held companies. Currently, Mr.
Zaepfel is Chairman of the Board of Acordia of Southern
California, a wholly owned subsidiary of Anthem, Inc.,
listed on the New York Stock Exchange. Mr. Zaepfel
previously served as a director of Varitronics, Inc.,
previously quoted on NASDAQ, Inc., and currently serves as a
director of Remedy Temp, Inc., a public company quoted on
NASDAQ, Inc. Mr. Zaepfel is a graduate of the University of
Washington, and holds a Master in Business Administration
from the University of Southern California. Mr. Zaepfel was
elected by the Board of Directors, to serve as a Class II
Director until the first to occur of the next shareholders'
meeting, June 30, 1999, or the election and qualification of
his successor.
RECENT EVENTS AND TRANSACTIONS
The Board of Directors of Pro-Dex, Inc. accepted the
resignation of Charles E. Strait from the Board of Directors
and from his position as President of Pro-Dex, Inc.
effective January 22, 1997. Mr. Strait advised the Board at
a regularly scheduled Board meeting held on January 22,
1997, that current health problems have made it increasingly
difficult for him to perform his duties as President and as
a Director and therefore he deemed it advisable to tender
his resignation. Mr. Strait commenced service on the Board
of Directors on July 26, 1995,and was elected to serve until
June 30, 1998. He resigned prior to the expiration of his
term. The Board of Directors immediately commenced a search
for a successor Director and President. Mr. Kent E. Searl,
currently the Chairman of the Board and Chief Operating
Officer of Pro-Dex, Inc., will serve as acting President
until a successor can be qualified and elected.
On April 25, 1997, the Company completed the unwinding
of its previous acquisition of the assets of Pnu-Light,
including United States Patent No. 5,267,129 entitled
"Pneumatic Lighting Apparatus." The decision of the Board
of Directors was previously announced in February, 1997. The
anticipated synergy between Pro-Dex' Micro Motors subsidiary
and Pnu-Light did not meet expectations and, in accordance
with procedures contained in the Pnu-Light Asset Purchase
Agreement, Martech, Inc. (the surviving successor of Pnu-
Light Tool Works, Inc. reconveyed to the Company 368,483
shares of the Company common stock that were originally
issued to Martech, Inc. in May, 1996.
The Company, in exchange for the 368,483 shares,
assigned the Pneumatic Lighting Apparatus Patent to Martech,
Inc. subject to a non-exclusive, fully paid, worldwide
license to the technology and the proprietary information
which are retained by Pro-Dex.
On June 11, 1997, the Company completed the sale of the
assets and business, exclusive of accounts receivable, of
Pro-Dex Management, Inc., the Company's dental clinic
management subsidiary in California ("DCM"). The effective
date of sale was May 31, 1997. The decision of the Board of
Directors to explore the feasibility of a sale of the
subsidiary was discussed by the Company in previous reports.
The sale of assets transaction was made with Professional
Dental Management, L.L.C., a California limited liability
company ("PDM"). Dr. M. Larry Kyle is the managing member
of PDM and prior to the sale was president of DCM and a
member of the Company's Board. See "Item 12 - Certain
Relationships and Related Party Transactions." The terms of
the sale provide that PDM assume DCM liabilities of
approximately $670,000 in exchange for the inventory and
equipment of DCM. DCM retains its accounts receivable in
the net amount of approximately $1,800,000 which will be
collected, with the assistance of PDM, over the ensuing 12
to 24 months. The losses from operations of DCM have been
reported by the Company on the basis of discontinued
operations since the Company's Board of Directors
announcement of the intention to sell the business and
assets of DCM. If the allowance for doubtful accounts is
not adequate to insure the realization of the net amount of
DCM's receivables, additional losses from discontinued
operations could occur in future years.
OTHER MANAGEMENT INFORMATION
Compliance with Section 16
- --------------------------
Based solely upon its review of Forms 3, 4, and 5 and
written representations of officers and directors, the
Company is not aware of any failure of any officer, director
or owner of 10% or more of the outstanding securities of the
Company to make timely filings in accordance with the
requirements of Section 16.
Business Experience of Key Management of Subsidiaries
- -----------------------------------------------------
Set forth below is information concerning certain key
management personnel of the Company's operating
subsidiaries, Biotrol International, Inc., Challenge
Products, Inc., Micro Motors, Inc. and Oregon Micro Systems,
Inc.
Daniel S. Reinhardt joined Biotrol International, Inc.
as a sales representative in September 1988. He was
promoted to National Sales Manager in January of 1991, and,
effective January 1, 1997, Mr. Reinhardt was made Vice
President and Chief Operating Officer of Biotrol
International, Inc.
Charles L. Bull founded Challenge Products, Inc. in
1978 and has served as its President and Chief Executive
Officer since its inception as a dental products business.
Mr. Bull has developed more than 40 chemical products used
in the industry, as well as a process for high speed filling
of a patented prophy ring. See "Item 12 - Certain
Relationships and Related Party Transactions."
Gary Garleb has served as Vice President and General
Manager of OMS, since its acquisition by the Company in July
of 1995. Prior to that time, he served as Vice President
for Operations and Manufacturing of Micro Motors from 1974
to 1995. Mr. Garleb recently resigned as a Trustee of the
Micro Employee Stock Ownership Plan ("Micro ESOP"), a
shareholder of the Company, which has demand registration
rights in respect of its restricted shares.
Executive Compensation
- ----------------------
The following table summarizes executive compensation
paid by the Company during the last three fiscal years to
the Company's Chairman and the four other most highly
compensated executives.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation Awards
------------------- -----------------------------
Secur-
Other Re- ities All
Name Annual strict Under LTIP Other
and Compen- ed lying Pay- Compen-
Principal sation Stock Options/ outs sation
Position Year Salary Bonus (1) Awards SAR (6)
- --------- ---- -------- ----- ----- ------ -------- ---- ------
Kent E. 1997 $160,000 - - - None - -
Searl 1996 150,000 - - - 100,000(3) - -
Chairman 1995 0.00 - - - 50,000 - -
and Chief
Executive
Officer(2)
Ronald G. 1997 $364,320 - - - None - -
Coss, Vice 1996 360,000 - - - None - -
Chairman(4) 1995 N/A - - - N/A - -
George J. 1997 $180,000 - - - None - -
Isaac, Vice 1996 170,000 - - - 200,000(3) - -
President, 1995 N/A - - - 50,000 - -
Chief
Financial
Officer,
Secretary-
Treasurer,
Director(5)
Dr. M. 1997 $ 90,390 - - - None - -
Larry Kyle 1996 114,000 - - - None - -
President 1995 114,672 - - - 50,000 - -
of DCM
Subsidiary
Charles E. 1997 $185,000 - - - None - -
Strait(7) 1996 175,000 - - - None - -
1995 N/A - - - N/A - -
Charles L. 1997 $113,276 - - - None - -
Bull 1996 110,000 - - - None - -
1995 100,000 - - - None - -
Gary 1997 $111,435 - - - None - -
Garleb 1996 101,826 - - - 98,505(8) - -
1995 98,568 - - - None - -
(1) The aggregate amount of perquisites or other personal
benefits received by any officer or director for which
no other annual compensation is indicated did not
exceed the lesser of $50,000 or 10% of such officer or
director's annual salary.
(2) Mr. Searl received no compensation from the Company
during the fiscal year ended June 30, 1995. Mr. Searl
was granted options under the 1994 Stock Option Plan in
1995 and under the Directors' Stock Option Plan in
1994.
(3) Options in the amount of 100,000 and 200,000 shares
were granted to Messrs. Searl and Isaac, respectively
during the Company's fiscal year ended June 30, 1996,
under the Stock Option Plan.
(4) Mr. Coss received no compensation from the Company
prior to the year ending June 30, 1996, as he was not
then an employee of the Company and did not serve on
its Board of Directors. The Company is obligated to
pay Mr. Coss $1 million over five years, commencing on
July 26, 2001, under a Non-Competition Agreement in
connection with the merger of Micro Motors with and
into the Company's Micro Acquisition subsidiary. In
addition, the Company assumed two notes of Micro Motors
payable to Mr. Coss in the aggregate amount of
$938,450, relating to termination of Mr. Coss' long
term employment agreement with Micro Motors and prior
unpaid earned compensation.
(5) Mr. Isaac received no compensation from the Company
prior to the fiscal yea r ending June 30, 1996, as he
was not then employed by the Company and did not serve
on its Board of Directors. During he fiscal year ended
June 30, 1995, Mr. Isaac was granted options to acquire
50,000 shares under the 1994 Stock Option Plan, in
connection with his acceptance of employment by the
Company. See also note 3 to this chart.
(6) Employer contributions to the Pro-Dex, Inc. 401(k)
Plan.
(7) Mr. Strait received no compensation from the Company
prior to the fiscal year ending June 30, 1996, as he
was not then employed by the Company and did not serve
on its Board of Directors. On January 22, 1997, Mr.
Strait resigned his position as President of the
Company, and as a member of the Board of Directors for
health reasons. Management has decided to continue Mr.
Strait's salary until a determination has been made on
his pending disability claim with his disability
insurance carrier.
(8) Mr. Garleb received no compensation from the Company
prior to the year ending June 30, 1996, as he was not
employed by the Company. The options set forth in this
chart were converted from the Micro options granted in
July, 1994 to options to acquire 98,505 shares of the
Company's common stock, under the 1994 Stock Option
Plan, pursuant to the vote of Shareholders at the
Company's annual meeting on February 27, 1996.
Employment Agreements
- ---------------------
Effective July 26, 1995, the Company entered into long-
term; employment agreements with a number of its executive
officers and extended existing employment agreements with
certain other officers. The Company paid salaries in an
aggregate amount of $964,153 for all its officers and
directors for the year ending June 30, 1997.
Ronald G. Coss currently serves as Vice Chairman of the
Company. Mr. Coss had, prior to the merger of Micro Motors,
Inc. with Pro-Dex, Inc., been compensated by Micro Motors at
a salary of $560,000 for the fiscal year ending March 31,
1995 and $456,000 for the fiscal year ending March 31, 1994.
Annual base compensation to Mr. Coss under the employment
agreement is $360,000 and is adjustable upward for inflation
each July 1 of the five year term of his employment
agreement, for which, for the year ending June 30, 1997,
compensation owed Mr. Coss was $364,320, not including other
benefits, payments or compensation. However, due to poor
operating performance, in February 1997 certain management
employees, to include Mr. Coss, agreed to a temporary
reduction in base salary which reduction is reflected by his
actual salary of $352,320 for the year ending June 30, 1997.
Mr. Coss' employment agreement is renewable until
terminated.
In addition to compensation to Mr. Coss under his
employment agreement, the Company is obligated to pay Mr.
Coss $1 million over five years, commencing on July 26, 2001
under a Non-Competition Agreement in connection with the
merger of Micro Motors with and into the Company's Micro
subsidiary. Upon the merger, the Company also assumed two
notes payable by Micro Motors to Mr. Coss in the aggregate
amount of $938,450, relating to termination of Mr. Coss'
long term employment agreement with Micro Motors and prior
unpaid earned compensation. See "Item 12 - Certain
Relationships and Related Party Transactions."
In addition to the direct compensation Mr. Coss is to
receive under his employment agreement with the Company, he
is to have reimbursement of reasonable travel and
entertainment expenses, a vehicle and auto expenses for
business use, country club dues and reasonable country club
expenses, annual physical with a prior recuperative period
and paid accommodations, and six weeks annual leave. In the
event Mr. Coss does not use all or part of his six weeks
annual leave, his employment agreement permits him to elect
to be paid cash in lieu of leave not taken. Mr. Coss is
required to reasonably forecast the amount of any cash in
lieu of leave, for purposes of the Company's financial
forecasts. Mr. Coss did not notify the Company that he
elected to be paid cash in lieu of leave not taken during
the year ending June 30, 1997 and has indicated that he is
unable to forecast his leave for the year ending June 30,
1998.
On July 26, 1995, the Company entered into a long-term
employment agreement with Kent E. Searl, its Chairman.
Until such date, Mr. Searl had received no compensation for
his services to the Company, other than grant of options
exercisable at the last bid price as of the date of grant.
During the year ended June 30, 1995, Mr. Searl was granted
options to acquire 50,000 shares of the Company's common
stock, under the 1994 Stock Option Plan. On November 21,
1994, Mr. Searl was granted options to acquire 100,000
shares, under the 1994 Stock Option Plan, exercisable at the
last bid price on the date of grant. Mr. Searl is located
in the Company's headquarters offices in Boulder, Colorado,
and travels frequently to all the Company's subsidiaries.
Under his employment agreement with the Company, Mr. Searl
was paid $150,000 for the year ended June 30, 1996. His
salary under the employment agreement was to be $160,000 per
annum through June 30, 1997, however, due to poor operating
performance, Mr. Searl deferred his contract right to the
increase in his compensation and further agreed to a
temporary base salary reduction. Compensation due Mr. Searl
for the remaining year of the three year term of his
employment agreement is $170,000 The employment agreement
accords Mr. Searl three weeks annual leave, but provides for
no alternative of cash in lieu of leave untaken. In
addition, Mr. Searl's employment agreement provides that he
may receive use of a car at Company expense, although to
date Mr. Searl has received limited reimbursement for use of
a vehicle not provided by the Company. Mr. Searl is also
entitled to such other benefits as the Company's Board of
Directors determines to offer the Company's executive
employees, and reimbursement of reasonable expenses.
On July 26, 1995, Mr. Charles E. Strait entered into a
long-term employment agreement with the Company. Pursuant
to that agreement, Mr. Strait's salary as the Company's
President and Chief Operating Officer for the year ending
June 30 1997 was $184,333. That employment agreement also
provides that, upon a determination of disability, the
Company is obligated to pay Mr. Strait for a period of
ninety days until his disability insurance coverage
commences. Mr. Strait has made application for such
benefits and a determination of the same is pending.
On July 26, 1995, George J. Isaac began serving as the
Company's Vice President and Chief Financial Officer, and on
September 21, 1995 he was elected the Company's Secretary-
Treasurer by the Board of Directors. Mr. Isaac was granted
options to acquire 50,000 shares of the Company's common
stock, exercisable at the last bid price as of the date of
grant, upon his acceptance of employment, during the fiscal
year ended June 30, 1995, but received no other compensation
as an employee during such year. Mr. Isaac was granted
options to acquire 200,000 shares exercisable at the last
bid price as of the date of grant, on November 21, 1995.
The employment agreement with Mr. Isaac provides that he is
to receive a salary of $170,000 through June 30, 1996,
$180,000 July 1, 1996 through June 30, 1997, and $190,000
for the remainder of the three year term of the employment
agreement. However, due to poor operating performance, in
February 1997 certain management employees, to include Mr.
Isaac, agreed to a temporary reduction in base salary which
reduction is reflected by his actual compensation of
$171,000 for the year ending 30 June 1997. Mr. Isaac's
employment agreement allows three weeks annual leave, but
any leave not taken is to be forfeited without compensation.
The employment agreement with Mr. Isaac provides that he may
receive use of a Company vehicle for business purposes. In
addition, Mr. Isaac is entitled to reimbursement of
reasonable expenses at the discretion of the Board of
Directors and such other benefits as the Board of Directors
determines to make available to its executive employees.
On August 1, 1993, the Company entered into an
employment agreement with Mr. Charles L. Bull, President,
and Chief Operating Officer of Challenge Products. Pursuant
to that agreement, Mr. Bull is to be paid a base salary of
$100,000 annually through December 31, 1998, with month to
month renewal thereafter unless terminated on 60 days prior
written notice. Challenge Products is also required to
maintain a $300,000 split-dollar life insurance policy on
Mr. Bull, payable in accordance with his direction. The
employment agreement provides that Mr. Bull cannot compete,
directly or indirectly, with Challenge for three years
following termination of employment.
Compensation to Directors
- -------------------------
Beginning July 1, 1990, the Company established a fee
of $1,000 per year for each director. Through the year
ended June 30, 1995, directors waived their fees. During
the year ended June 30, 1995, the three then serving
directors were granted options to acquire aggregate 150,000
shares in recognition of substantial efforts in obtaining
the Micro and OMS acquisitions. In addition, a new employee-
director was granted options to acquire 50,000 shares for
his services in connection with such acquisitions and to
induce him to accept appointment to serve as the Company's
Chief Financial Officer. In addition, during the year ended
June 30, 1995, the Company granted options to acquire 1,754
shares to Richard Reinhardt in accordance with the plan for
such options previously adopted by the Board with respect to
non- employee directors. All such options are exercisable
at the last sale price on the date of grant.
During the year ended June 30, 1997, the Board of
Directors determined that experienced outside directors
expect to receive directors' fees and stock options in
connection with such service. To that end, the Board of
Directors adopted a proposal to pay directors' fees for non-
employee directors in the amount of $3,000 per quarter,
together with $1,000 for each regular meeting attended by
non-employee directors and $500 for each committee meeting
held on a date other than a regular board meeting. During
the year ended June 30, 1997, $57,000 was paid as non-
employee director compensation. Employee directors receive
only their usual salaries and expenses in attendance at
Board and Committee meetings for service on the Board of
Directors. In addition, in August 1996, the Board adopted a
policy to grant each non-employee director an option to
purchase 20,000 shares of common stock upon commencement of
their service with an additional option granted
automatically each year to purchase 10,000 shares. The
maximum term of such options is ten years. During the year
ended June 30, 1997, Messrs. Reinhardt and Hovee were each
granted options to acquire 10,000 shares of the Company's
common stock, under the Directors' Stock Option Plan,
exercisable at $3.55 share, pursuant to the previously
adopted plan for grant of options. Mr. Zaepfel was granted
options to acquire 20,000 shares of the Company's common
stock, under the Directors' Stock Option Plan, exercisable
at $2.44 pursuant to the previously adopted plan for grant
of options.
Options Granted During the Last Fiscal Year
- ------------------------------------------
The following table provides information on options
granted to the Directors during the year ended June 30,
1997.
OPTIONS GRANTED DURING YEAR ENDED JUNE 30, 1997
Options Exercise Potential
Granted Price Expiration Value(1)
Name (#) ($/SH) Date ($)
- ------------------ ------- -------- ---------- ---------
John B. Zaepfel(2) 20,000 2.44 8-27-06 30,800
(1) Potential value is based on the assumption that the
price of the stock will appreciate at an annual
compounded rate of 5% until the applicable expiration
dates.
(2) Mr. Zaepfel was granted the indicated options pursuant
to the Directors' Stock Option Plan.
(3) A disinterested majority of the Board has committed, in
furtherance of the Board's decision respecting the
remuneration of non-employee directors, automatic
annual grants in the amount of 10,000 shares, to
Messrs. Hovee, and Reinhardt, at the exercise price of
$3.55, effective upon the resolution of the Board
reflecting the foregoing.
The following table provides information on exercise of
stock options during the year ended June 30, 1997 by
executives and directors and value of unexercised options at
June 30, 1997:
SHARES ACQUIRED ON EXERCISE OF OPTIONS AND VALUE OF OPTIONS
HELD BY EXECUTIVES AND DIRECTORS
At June 30, 1997
Number Value
of Shares of
Underlying Unexercised
Unexercised In the Money
Options at Options at
FY-End (#) FY-End (1)
Exer- ------------- -------------
cise Value Exercisable/ Exercisable/
Name (#) Realized Unexercisable Unexercisable
- --------------- ----- -------- ------------- -------------
Kent E. Searl - - 202,051/0 $56,500/0
George J. Isaac - - 250,000/0 $50,000/0
Richard N. Reinhardt - - 123,805/0 $31,500/0
Robert A. Hovee - - 20,000/0 0/0
John B. Zaepfel - - 20,000/0 0/0
(1) The indicated value has been determined based upon the
difference between the exercise price and the fair
market value of the securities underlying the options
on June 30, 1997.
1988 Stock Option Plan
- ----------------------
In 1988, the Company adopted its 1988 Stock Option Plan
(the "Plan") pursuant to which the Company's Board of
Directors was authorized to issue options to purchase up to
150,000 shares of the Company's common stock to employees,
directors and consultants of the Company. The option
exercise price must equal fair market value of the common
stock on the date of grant. No options to purchase shares
of common stock were granted under the 1988 Plan during the
fiscal year ended June 30, 1997. At June 30, 1997, options
to purchase an aggregate of 25,000 shares of the Company's
common stock were outstanding under this Plan. A former
director exercised options to purchase 30,000. Options to
purchase 25,000 shares were exercised by a former consultant
to the company. On July 5, 1996, the Company registered the
shares underlying the options theretofore granted under the
1988 Stock Option Plan on a Form S-8 filed with the
Securities and Exchange Commission.
1994 Stock Option Plan
- ----------------------
On May 25, 1994, the Company's shareholders adopted its
1994 Stock Option Plan (the "Plan"), pursuant to which the
Company's Option Committee was authorized to issue options
to purchase up to 500,000 shares of the Company's common
stock to employees of the Company. At the Annual Meeting of
shareholders on February 27, 1996, the shareholders approved
an increase in the number of shares authorized for grant of
options under the Plan to 1.5 million shares. In addition,
the shareholders also approved conversion of options to
acquire shares of Micro, granted to Micro employees prior to
the acquisition to options to acquire 591,120 shares of the
Company's common stock at an exercise price of $2.50 per
share, under the 1994 Stock Option Plan. The 1994 Stock
Option Plan was adopted to advance the interests of the
Company and its shareholders by affording employees an
opportunity for investment in the Company. The Compensation
Committee has sole discretion to select which employees of
the Company will be granted options, the number of shares
subject to option, the timing of such option grants, when
the options may be exercised, and the exercise price. The
exercise price of options must be at least equal to the fair
market value of the common stock on the date of grant. The
maximum term of options granted under the Plan is ten years.
As of June 30, 1997, there were outstanding options under
the 1994 Stock Option Plan to acquire 548,580 shares of the
Company's common stock.
Directors' Stock Option Plan
- ----------------------------
On May 25, 1994, the Company's shareholders adopted its
Directors' Stock Option Plan (the "Plan") pursuant to which
the Company was authorized to issue options to purchase up
to 200,000 shares of the Company's common stock to non-
employee Directors of the Company. At the February 26, 1996
Annual Meeting, the Company's shareholders approved an
increase in the number of shares authorized for grant of
options under the Directors' Stock Option Plan to 500,000
shares. The Plan was adopted to advance the interests of
the Company and its shareholders by attracting qualified non-
employee Directors, whose participation and guidance
contribute to the successful operation of the Company. The
Board of Directors previously adopted a resolution, which
provides that options to purchase $5,000 share value of
common stock. During the year ended June 30, 1996, the
Board of Directors determined that experienced outside
directors expect to receive more substantial directors'
remuneration in the form of fees and stock options in
connection with their service. To that end, the Board of
Directors adopted a proposal to pay directors' fees for non-
employee directors in the amount of $3,000 per quarter,
together with $1,000 for each regular meeting attended by
non-employee directors and $500 for each committee meeting
held on a date other than a regular board meeting. In
addition, in August 1996, the Board adopted a proposal to
grant 20,000 shares to non-employee directors upon their
commencement of service on the Board. Mr. Zaepfel was
granted options to acquire 20,000 shares of the Company's
common stock, under the Directors' Stock Option Plan,
exercisable at $2.44 pursuant to the previously adopted plan
for grant of options. The maximum term of each option is
ten years. As of June 30, 1997, there were outstanding
options under the Directors' Stock Option Plan to acquire
315,856 shares of the Company's common stock. A
disinterested majority of the Board has committed, in
furtherance of the Board's decision respecting the
remuneration of non- employee directors, automatic annual
grants in the amount of 10,000 shares, to Messrs. Hovee, and
Reinhardt, at the exercise price of $3.55, effective upon
the resolution of the Board reflecting the foregoing
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------
Set forth in the following table is information as of
June 30, 1997, with respect to the beneficial shareholdings
of the Company's common stock, by all directors,
individually, and all officers and directors as a group, and
beneficial owners of 5% or more of such common stock.
BENEFICIAL SHAREHOLDINGS OF DIRECTORS, OFFICERS AND
OWNERS OF MORE THAN 5% OF COMMON STOCK
Percent
Name and Address No. of Shares of Class(1)
- ---------------- ------------- ------------
Kent E. Searl
1401 Walnut St.,
Suite 540
Boulder, CO 80302 993,930(2)(4)(5) 11.03%
Ronald G. Coss
1401 Walnut St.,
Suite 540
Boulder, CO 80302 2,493,528(6) 27.68%
Richard N. Reinhardt
1401 Walnut St.,
Suite 540
Boulder,CO 80302 10,984(2)(4)(5)(7)(8) 5.78%
George J. Isaac
1401 Walnut St.,
Suite 540
Boulder, CO 80302 254,000(4) 2.82%
Robert A. Hovee
1401 Walnut St.,
Suite 540
Boulder, CO 80302 20,000(7)(8) 0.13%
John B. Zaepfel
1401 Walnut St.,
Suite 540
Boulder, CO 80302 20,000(7) 0.22%
All officers and
directors as a
group (6 persons) 3,995,213(2)(3)(4)(5 ) 44.34%
(6)(7)(8)(9)
Micro Motors
Employee Stock
Ownership Plan
151 E.Columbine
Santa Ana,CA 92707 1,075,359(6) 11.94%
(1) Calculated pursuant to Rule 13d-3 under Exchange Act.
(2) Includes 250,000 shares of common stock, 58,229 shares
of Preferred Stock convertible share-for-share into
common stock at any time, and Warrants to acquire
13,000 shares of common stock owned of record by
Professional Sales Associates, Inc. ("PSA"). Messrs.
Searl and Reinhardt are officers and directors of PSA
and may be deemed to beneficially own PSA's shares.
Mr. Searl, individually, owns of record 410,750 shares
of common stock and 19,900 shares of Preferred Stock.
Mr. Reinhardt, individually, owns of record 58,950
shares. In addition, Mr. Reinhardt's spouse, in-
individually, owns 7,000 shares, which are attributed
to him in this chart.
(3) Includes options held by Messrs. Searl, Reinhardt, and
Isaac to purchase 50,000 shares (each) shares of the
Company's common stock at $2.50 per share. Also
includes options held by Messrs. Searl and Reinhardt to
purchase 50,000 shares (each) at $1.75 per share. Also
includes options held by Messrs. Searl and Isaac to
purchase 100,000 and 200,000, respectively, of the
Company's common stock at $2.13 per share. These
shares have been added to outstanding shares in
calculating each director's individual percentage of
beneficial ownership.
(4) Includes options held by Messrs. Searl and Reinhardt to
purchase 2,051 shares (each) of the Company's common
stock at $2.43 per share and Mr. Reinhardt to purchase
1,754 shares of the Company's common stock at $2.85 per
share. These shares have been added to outstanding
shares in calculating each director's individual
percentage of beneficial ownership.
(5) Includes 584,377 shares of the Company's common stock
held by the Micro Motors ESOP, which are held by such
ESOP for the benefit of Mr. Coss. Such shares held by
the ESOP for the benefit of Mr. Coss are included in
the total opposite Mr. Coss' name and also included in
the total opposite the name of the Plan. Mr. Coss is
one of three Trustees of such Plan, and does not have
sole voting or dispositive power over shares held by
the Plan.
(6) Includes options of Messrs. Reinhardt, Hovee, and
Zaepfel to acquire 20,000 shares each of the Company's
common stock at $2.44 per share.
(7) Includes options of Messrs. Reinhardt and Hovee to
acquire 10,000 shares each of the company's common
stock at $3.55 per share.
(8) The officers and directors as a group currently have in
the aggregate, together with their affiliates, voting
power with respect to 2,639,851 currently issued and
outstanding shares of common stock, not including in
such number the convertible preferred stock or options
treated as shares of common stock attributed to them
for the purpose of this chart. Shares held by the
Micro Motors ESOP have not been included in com-
putting the voting power number in this footnote or in
stating the vote controlled by officers and directors
else- where in this proxy statement, but shares held by
the Micro Motors ESOP for the benefit o f Mr. Coss are
included the amount of his beneficial ownership and the
total held by all officers and directors as a group
reported in the chart.
(9) A disinterested majority of the Board has committed, in
furtherance of the Board's decision respecting the
remuneration of non-employee directors, automatic
annual grants in the amount of 10,000 shares, to
Messrs. Hovee, and Reinhardt, at the exercise price of
$3.55, effective upon the resolution of the Board
reflecting the foregoing.
Set forth in the following table is information as of
June 30, 1996 with respect to the beneficial
shareholdings of all directors, individually, and all
officers and directors as a group, and beneficial
owners of more than five percent of the Company's
Series A Preferred Stock.
BENEFICIAL SHAREHOLDINGS OF DIRECTORS, OFFICERS AND
OWNERS OF MORE THAN 5% OF PREFERRED STOCK
Percent
Name and Address No. of Shares of Class
- ---------------- ------------- --------
Kent E. Searl
1401 Walnut Street,
Suite 500
Boulder, CO 80302 78,129(1) 100.0%
Richard N. Reinhardt
1401 Walnut Street,
Suite 500
Boulder, CO 80302 58,229(1) 74.5%
All officers and
directors as a
group (3 persons) 78,129(1) 100.0%
Professional Sales
Associates, Inc.
1401 Walnut Street,
Suite 500
Boulder, CO 80302 58,229 74.5%
(1) Includes 58,229 shares owned of record by Professional
Sales Associates, Inc. ("PSA"). Messrs. Searl and
Reinhardt are officers and directors of PSA and may be
deemed to beneficially own PSA's shares. Mr. Searl,
individually, owns of record 19,900 shares (24.2% of
the outstanding shares of Preferred Stock). Mr.
Reinhardt owns no shares of Preferred Stock
individually.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In 1993, when the Company acquired Challenge, Mr.
Charles Bull and Challenge entered into a royalty agreement
and license agreement, both effective July 1, 1993 and
extending to December 31, 1998. Under the license
agreement, Mr. Bull granted Challenge Products an exclusive
license to manufacture, distribute and market a patented
prophy ring in return for execution of the acquisition
agreements and a royalty agreement providing for certain
payments in respect of sales targets never achieved. In
June 1996, Mr. Bull, the Company, and Challenge entered into
a letter agreement by which they agreed that the royalty
agreement was rescinded as void ab initio, for failure to
accurately reflect the intent of the parties. In addition,
the parties agreed that the exclusive paid up license
conferred by the license agreement should be evidenced by an
assignment of all rights in the prophy ring patent. Mr.
Bull continues to serve as President of Challenge, and
received $113,276 in compensation for his services as
President of Challenge, in the year ended June 30, 1997.
On July 26, 1995, in connection with the merger of
Micro Motors with and into Micro, the Company issued
3,350,000 shares of the Company's common stock in exchange
for all the issued and outstanding stock of Micro Motors,
all as more fully described in the Company's Form 8-K dated
July 26, 1995. The Micro Motors Employee Stock Ownership
Plan (the "Micro ESOP") holds 1,075,359 of the shares issued
in connection with the acquisition of Micro. The number of
shares owned by the ESOP has been adjusted to reflect the
correct allocation as between the ESOP and remaining
shareholders at the time of the merger. The number of
shares originally allocated to the ESOP was erroneously
calculated and reported as 1,099,805. The ESOP has certain
limited demand registration rights in respect thereof,
exercisable from July 26, 1996 through July 26, 1999, at the
expense of the Micro ESOP. In addition, the Micro ESOP has
limited concurrent registration rights, sharing costs on a
pro-rata basis; in the event the Company should undertake an
underwritten public offering prior to July 26, 2002. In
addition, shareholders at the Company's Annual Meeting on
February 27, 1996 approved conversion of outstanding options
of Micro Motors Incentive Stock Option Plan into options to
acquire 591,120 shares of the Company's common stock.
Pursuant to the Merger Agreement, Ronald G. Coss
entered into a Non-Competition Agreement pursuant to which
he is to be paid $1 million over five years, with payment
commencing in the sixth year after closing. In addition,
Mr. Coss executed an employment agreement with the Company,
pursuant to which he is to be paid $360,000 annually as Vice
Chairman of the Company under his employment agreement,
adjustable upward for inflation, representing a reduction
from the more than $560,000 which he had been paid as the
Chairman of Micro, despite his greater responsibilities with
the Company. In addition to compensation payable under the
employment agreement between the Company and Mr. Coss, he is
entitled to certain executive employee benefits and
perquisites.
Prior to the merger transaction, Mr. Coss also entered
into an agreement to terminate his long term employment
contract with Micro Motors, for an additional $677,400,
payable over five years, at 11% interest per annum. At the
closing contemplated by the Merger Agreement, the Company
assumed Micro Motor's obligation under the termination
agreement, as well as Micro's obligation under a note for
$261,050 in prior unpaid earned compensation. In connection
with the closing of the transactions under the Merger
Agreement, the Company also entered into a flexible Line of
Credit Loan Agreement, whereby Mr. Coss may borrow as much
as $500,000 from the Company, at 7% interest, with repayment
of the loan to occur as an offset of obligations owed by the
Company to Mr. Coss in respect of the Non-Competition
Agreement and employment agreement.
In connection with the acquisition of OMS, the Company
borrowed $500,000 from an unrelated third party pursuant to
a Loan Agreement and Promissory Note. Fifty percent (50%)
of the outstanding balance of obligations to the lender, at
any time, is jointly guaranteed by Professional Sales
Associates, Inc. ("PSA") and Mr. Kent E. Searl (the
Company's Chairman). In connection with the loan, the
lender was granted a ten year warrant to acquire 26,000
shares of the Company's common stock exercisable at the
market price of the Company's shares at $2.50 per share
exercise price. Warrants to acquire 13,000 shares of the
Company's common stock were issued to PSA exercisable at
$2.50 per share. Messrs. Kent E. Searl, Richard N.
Reinhardt, and George J. Isaac, directors of the Company,
are directors of PSA. No warrants were issued to Mr. Searl.
The unrelated third party loan, which PSA guaranteed, was
repaid on July 26, 1996, when the Company entered into a
loan agreement with Harris Bank and Trust, N.A.
The Company, prior to July 1, 1997, marketed certain of
the dental equipment manufactured by Micro through PSA, a
firm for which Messrs. Searl, Reinhardt, and Isaac are
directors. The terms and condition of the agreement with
PSA were a continuance of the relationship between PSA and
Micro Motors established on negotiated arms' length basis
prior to the merger of Micro Motors into Micro. Micro
Motors, Inc. dental handpieces previously marketed by PSA
are currently being marketed by the Biotrol International,
Inc. subsidiary of the Company, effective July 1, 1997.
The Company leases its offices in Boulder, Colorado
from PSA, a firm for which Messrs. Searl, Reinhardt, and
Isaac are directors, as sub-lessees under a master lease
between PSA and a third party unrelated to PSA or the
Company. The sublease between the Company and PSA is on a
month to month basis. The Company's monthly lease payments
are $1,883, which is equal to the amount of the lease
payments due from PSA to the third party lessor, on a per
square foot basis. The Company's management believes that
the monthly rental is comparable to rents charged for
comparable properties in the market area. Nevertheless, the
terms of the sub-lease, including price, may not be as
favorable to the Company as lease terms, which might have,
been negotiated with a third party in an arm's length
transaction.
Micro leases its offices and manufacturing facility in
Santa Ana, California from Ronald G. Coss, currently a
director of the Company, at a monthly rental of $28,237.
The Company's management believes that the monthly rental is
comparable to rents charged for comparable properties in the
market area. Nevertheless, the terms of the lease,
including price, may not be as favorable to the Company as
lease terms, which might have, been negotiated with a third
party in an arm's length transaction.
On October 10, 1995, the Company granted warrants to
acquire 100,000 shares to Mr. Carl Militello, pursuant to a
Warrant Agreement between Mr. Militello and the Company.
Such warrants are exercisable at the last bid price as of
the date of grant of $2.13. Such warrants were issued as
consideration to Mr. Militello for services to the Company,
including investor relations and financial consulting
services. Mr. Militello is not a related party.
On July 5, 1996, the Company filed a Form S-8 to
register the shares of common stock underlying options
theretofore granted pursuant to its 1988 Employee Stock
Option Plan. Dr. Kyle, President of DCM and a former
director of the Company, held 30,000 of such options, all of
which were exercisable at $0.25 per share.
OTHER MATTERS
The Company's Board of Directors does not know of any
other matters to be brought before the Meeting.
Proposals of shareholders (which myst comply with the
requirements of Rule 14a-8 under the Exchange Act) intended
to be presented at the 1998 Annual Meeting of Shareholder
must be received not later that September 15, 1998.
