PRELIMINARY COPY
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. 1)
--
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Professional Dental Technologies, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 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.
[X] 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.
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1) Amount Previously Paid: $130
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2) Form, Schedule or Registration Statement Number:
Rule 13E-3 Transaction Statement
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3) Filing Party: Professional Dental Technologies, Inc.
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William T. Evans, J. Robert Lemon, and Timothy A. Nolan
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4) Date Filed: April 22, 1999
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PROFESSIONAL DENTAL TECHNOLOGIES, INC.
633 LAWRENCE STREET
BATESVILLE, ARKANSAS 72501
(800) 228-5595
-----------------------------
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Professional Dental Technologies, Inc., to be held at the Company's facility at
70 Batesville Boulevard, Batesville, Arkansas, at 10:00 a.m. on
________________.
The attached Notice of Special Meeting and Proxy Statement describe the
business to be transacted and the proposal to be considered at the meeting. We
urge you to read carefully the description of the proposal and to vote for its
adoption.
Please mark, sign and date your proxy card today and return it in the
envelope provided, even if you plan to attend the Special Meeting. This will not
prevent you from voting in person, but will ensure that your vote is counted if
you are unable to attend.
Thank you for your support and interest in Professional Dental
Technologies, Inc., and we look forward to seeing you on ________________.
Sincerely,
Robert E. Christian
Secretary
<PAGE>
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
633 LAWRENCE STREET
BATESVILLE, ARKANSAS 72501
(800) 228-5595
NOTICE OF SPECIAL MEETING
TO BE HELD ON ______________________
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
Professional Dental Technologies, Inc. (the "Company") will be held at the
Company's facility at 70 Batesville Boulevard, Batesville, Arkansas, on
__________________, at 10:00 a.m., for the following purposes:
(1) To vote upon a proposed amendment to the Certificate of
Incorporation of the Company which would authorize the reduction
of the number of authorized shares of Common Stock from
30,000,000 to 3,000 and the increase of the par value per share
of Common Stock to $100.00 from $.01 by affecting a reverse split
of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), in the ratio of 10,000 shares to 1 share
(Proposal 1); and
(2) To transact any other business that may properly come before the
meeting.
Only stockholders of record at the close of business on ___________, 1999,
will be entitled to notice of and to vote at the meeting and any adjournment
thereof. Under the Nevada Revised Statutes, Title 7, Chapter 92A, Sections 300
to 500, inclusive, stockholders may assert dissenter's rights; said code
sections are included as part of the attached information for your review.
PLEASE FILL IN, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE
ENCLOSED STAMPED AND ADDRESSED ENVELOPE. NO MATTER HOW MANY OR HOW FEW SHARES
YOU OWN, YOUR VOTE IS IMPORTANT. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE MEETING, YOU MAY SUPERSEDE YOUR EXECUTED PROXY BY
INDICATING TO THE SECRETARY YOUR DESIRE TO VOTE IN PERSON.
By Order of the Board of Directors
ROBERT E. CHRISTIAN
Secretary
Batesville, Arkansas
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IF YOU HAVE ANY QUESTIONS, PLEASE CALL THE COMPANY AT (800) 228-5595
<PAGE>
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
633 LAWRENCE STREET
BATESVILLE, ARKANSAS 72501
(800) 228-5595
PROXY STATEMENT
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The solicitation of the enclosed proxy is made on behalf of the Board of
Directors of Professional Dental Technologies, Inc. (the "Company"), to be used
at the Special Meeting of the Company's stockholders to be held on
______________, at the Company's facility at 70 Batesville Boulevard,
Batesville, Arkansas, and at any adjournment thereof.
This proxy statement and an accompanying proxy card are being mailed to
stockholders on or about _________.
This proxy statement solicits stockholder approval of a proposal that
would authorize an amendment to the Company's Certificate of Incorporation
reducing the number of authorized shares of Common Stock from 30,000,000 to
3,000, and increasing the par value per share of Common Stock to $100.00 from
$.01 by effecting a reverse split of the Company's Common Stock. The Board
proposes a reverse split of the Common Stock in the ratio of 10,000 shares of
"Old Common Stock" to 1 share of "New Common Stock"; that is, each 10,000 shares
of Old Common Stock would be converted to one share of New Common Stock. As used
in this Proxy Statement, the term "Old Common Stock" refers to pre-split Common
Stock and "New Common Stock" refers to post-split Common Stock. Any fractional
shares of Common Stock resulting from the reverse stock split will be purchased
from the holders thereof at the rate of $6,500 per whole share of New Common
Stock.
The purpose of the reverse stock split and purchase of the resulting
fractional shares is to reduce the number of stockholders of record to fewer
than 300, thereby alleviating the Company's obligation to file reports under
Section 15(d) of the Securities and Exchange Act of 1934, making the Company a
private company. As a private company, the Company will no longer be able to
sell shares of Common Stock which are freely tradable, thereby limiting its
future access to equity capital.
As a result of the reverse stock split:
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o The Company will not be required to file periodic reports under the
federal securities laws;
o The Company will not have to provide stockholders with information now
available in the annual, quarterly and other reports required to be filed
by the Company with the Securities Exchange Commission;
o The Company's stock will be de-listed from the American Stock Exchange;
and
o Insider trading restrictions will no longer apply.
The effect of the reverse stock split on unaffiliated stockholders will be
as follows:
o Unaffiliated stockholders will not be entitled to inspect the books of
account and all financial records of the Company, to make extracts
therefrom, and to conduct an audit of such records in accordance with the
Nevada Revised Statutes Annotated, Section 78.257;
o Stockholders will no longer receive annual or quarterly reports from the
Company;
o Stockholders who retain whole shares of the Company will own shares for
which there is no liquid market; and
o Stockholders who will have all or a part of their holding liquidated as a
result of this transaction will receive a price per share of Old Common
Stock of $0.65. This compares to the current market price of the shares,
which is $0.5625 per share as of the date of this filing. This transaction
will involve no commissions or other transaction fees, as there would be
if a stockholder sold shares on the open market.
Under applicable Nevada law, this transaction does not require the
approval of a majority of the unaffiliated stockholders. The transaction
requires approval of a majority of all stock-holders, including both affiliated
and unaffiliated stockholders.
The expenses of solicitation of proxies in the enclosed form will be borne
by the Company. Solicitations may be made by mail, and by telephone or telegraph
by directors, officers and employees of the Company at nominal cost. Proxy
materials will also be distributed through brokers, custodians and other
nominees or fiduciaries to beneficial owners of stock. The Company expects to
reimburse such parties for their charges and expenses in connection therewith.
Each proxy that is properly executed and returned will be voted for or
against or withheld from voting on any ballot that may be called for in
accordance with the instructions contained in that proxy. IF NO INSTRUCTIONS ARE
GIVEN, SUCH PROXY WILL BE VOTED FOR THE AMENDMENT TO THE CERTIFICATE OF
INCORPORATION. THE ACCOMPANYING PROXY CONFERS DISCRETIONARY AUTHORITY WITH
RESPECT TO AMENDMENTS OR VARIATIONS TO THE MATTERS IDENTIFIED IN THE NOTICE
CALLING THE MEETING OR OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING,
AND ACCORDINGLY, IN THE EVENT THERE ARE ANY SUCH AMENDMENTS OR VARIATIONS OR
OTHER MATTERS BROUGHT BEFORE THE MEETING AND ANY ADJOURNMENT OR POSTPONEMENT
THEREOF, ALL PROXIES WILL BE VOTED
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IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS NAMED AS PROXIES. Abstentions and
broker non-votes will count for purposes of establishing a quorum but will not
count as votes cast.
Any stockholder may revoke his proxy at any time prior to its exercise by
(i) attending the Special Meeting and voting in person, (ii) filing written
notice of revocation with the Secretary of the Company prior to the Special
Meeting, or (iii) duly executing and delivering a proxy bearing a later date to
the Secretary of the Company prior to the exercise of the proxy. Written notices
of revocation of a proxy should be addressed to: Professional Dental
Technologies, Inc., 633 Lawrence Street, Batesville, Arkansas 72501.
A quorum for the transaction of business at the Meeting consists of
holders of a majority of the outstanding shares of the Company's Common Stock
present in person or represented by proxy. In the event that less than a
majority of the outstanding shares are present at the Meeting, either in person
or by proxy, a majority of the shares so represented may vote to adjourn the
Meeting without further notice. Matters properly brought before the Meeting or
any adjournment thereof, must be approved by the affirmative vote of the holders
of a majority of the outstanding shares of Common Stock present in person or by
proxy and entitled to vote at the Meeting or any adjournment thereof.
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
All voting rights are vested exclusively in the holders of the Common
Stock of the Company. Each stockholder is entitled to one vote for each share of
Common Stock owned on all matters brought to a vote of the stockholders.
Stockholders of record as of the close of business on _____________, 1999, are
the only stockholders who will be entitled to notice of and to vote at the
meeting. The Company had 14,100,000 shares of Common Stock outstanding on
____________, 1999 the record date for this solicitation of proxies. The Company
has no other class of equity securities outstanding.
The following table sets forth as of May 31, 1999, the beneficial
ownership of the Company's Common Stock, $0.01 par value, by all persons known
by the Company to own, beneficially or of record, more than five percent of the
Company's Common stock, by each director of the Company, by each of the officers
named in the Executive Compensation Table and by all officers and directors as a
group:
Amount and Nature of Percent
Beneficial Ownership Shares Of Class
- -------------------- ------ --------
William T. Evans 5,078,178(1) 36.0%
P. O. Box 4129
Batesville, AR 72503
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(1) Includes 4,211,360 shares held by a trust principally for the benefit of Mr.
Evans. Also includes 716,718 shares held in trust for the benefit of Mr. Evans'
nephew for which he disclaims beneficial ownership. Mr. Nolan serves as trustee
for these trusts.
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J. Robert Lemon 4,904,242(2) 34.8%
P. O. Box 4129
Batesville, AR 72503
Robert E. Christian 310,400(3) 2.2%
P. O. Box 4129
Batesville, AR 72503
Timothy A. Nolan 5,238,478(4) 37.2%
P. O. Box 4129
Batesville, AR 72503
J. Philip Boesel, Jr. --- ---
5246 Tie Road
Panora, IA 50216
Michael S. Black --- ---
421 Broad Street
Lake Geneva, WI 53147
Frank H. Newton, III --- ---
P. O Box 4129
Batesville, AR 72503
Directors and Officers as a 10,603,220(5) 75.2%
group (8) persons
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(2) Includes 4,093,360 shares held by a trust principally for the benefit of Mr.
Lemon. Also includes 670,782 shares held in trust for the benefit of nephews and
nieces of Mr. Lemon for which he disclaims beneficial ownership.
(3) Mr. Christian serves as trustee for Mr. Nolan's trust, for which shares he
disclaims beneficial ownership.
(4) Includes 310,400 shares held by a trust for the benefit of Mr. Nolan; Mr.
Christian serves as trustee for this trust. Also includes 4,928,078 shares held
as trustee for Mr. Evans' trusts, for which Mr. Nolan disclaims beneficial
ownership.
(5) These shares are subject to a stockholders agreement. Pursuant to the
stockholders agreement, these shares will be voted to approve the transaction.
See MANAGEMENT AND ITS INTENTIONS, below.
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PROPOSAL 1: AMENDMENT TO THE CERTIFICATE OF INCORPORATION
On April 6, 1999, the Board of Directors adopted a resolution authorizing
the submission to the vote of the stockholders of the Company a proposed
amendment to the Certificate of Incorporation of the Company (the "Proposal")
under which the all outstanding shares of Common Stock will be subject to a
reverse stock split at the ratio of 10,000 shares to 1 share; that is, each
10,000 shares of Common Stock before the reverse stock split will become one
share of Common Stock after the reverse stock split. Any fractional shares of
Common Stock resulting from the reverse stock split will be purchased from the
holders thereof at the rate of $6,500 per share.
In determining the price to be paid for fractional shares of Common Stock
following the reverse stock split, the Board unanimously approved the
recommendation of a special committee of directors, which was based upon the
fairness opinion of the Economic and Financial Consulting Group, Inc.
All stockholders should carefully read the entire Proxy Statement which
accompanies this Proxy Statement for a more complete description of the
Proposal, the reverse stock split, the purchase of fractional shares of Common
Stock resulting from the reverse stock split and effects of such purchase. The
Proxy Statement also contains a description of the fairness opinion of the
Economic and Financial Consulting Group, Inc. and a copy of such opinion.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT
TO THE CERTIFICATE OF INCORPORATION.
The Proposal must be approved by the affirmative vote of a majority of all
the votes entitled to be cast on the matter. Holders of Common Stock are
entitled to cast one vote for each share of Common Stock. The Board of Directors
was advised by counsel that under the relevant provisions of the Nevada Revised
Statutes Annotated, Title 7, Chapter 78, Section 207, the reverse stock split
must be approved by a majority of all stockholders, including both affiliated
and unaffiliated stockholders.
William T. Evans, J. Robert Lemon, and Timothy A. Nolan (the "Affiliated
Stockholders"), each of whom is an officer or Director of the Company (or both)
control in the aggregate sufficient votes to assure approval of the Proposal.
The Affiliated Stockholders have stated that they intend to vote in favor of the
Proposal authorizing the reverse stock split.
COMPLIANCE WITH SECTION 16 (A) OF THE SECURITIES ACT OF 1934
Section 16(a) of the Securities Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of
the Company's Common Stock, to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC") and the
American Stock Exchange (the "AMEX"), the exchange on which the Company's Common
Stock is listed for trading. Executive officers, directors and greater than ten
percent shareholders (collectively, the "Reporting Persons") are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
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Based solely on review of the copies of such forms furnished to the
Company, and representations by the Reporting Persons, the Company believes that
during the fiscal year ended October 31, 1998, and all fiscal periods through
April 30, 1999, all Section 16(a) filing requirements applicable to the
Reporting Persons were met.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have presented at the Special
Meeting of Stockholders of the Company and included in the Company's Proxy
Statement and proxy to be used in connection with such meeting must be received
at the main office of the Company, 633 Lawrence Street, Batesville, Arkansas
72501, within a reasonable time before the proxy is to be released. If such
proposal is in compliance with all of the requirements of Rule 14a-8 of the
Securities Exchange Act of 1934, as amended, it will be included in the Proxy
Statement and set forth on the form of proxy issued for the Special Meeting of
Stockholders. It is urged that any such proposals be sent by certified mail,
return receipt requested. No such proposals were received before the release
date of this Proxy Statement.
OTHER MATTERS
Management is not aware of any business to come before the Special Meeting
other than those matters described above in this Proxy Statement. If other
matters should properly come before the Special Meeting, however, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with judgment of the persons voting the proxies.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROXY STATEMENT, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
ENCLOSED WITH THIS PROXY STATEMENT ARE COPIES OF THE COMPANY'S ANNUAL
REPORT ON FORM 10KSB, WHICH INCLUDES THE INDEPENDENT AUDITORS' REPORT AND
AUDITED FINANCIAL STATEMENTS FOR THE COMPANY'S FISCAL YEARS ENDED OCTOBER 31,
1997 AND 1998, AND THE QUARTERLY REPORT ON FORM 10QSB FOR THE COMPANY'S MOST
RECENT FISCAL QUARTER, ENDED APRIL 30, 1999.
THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT IMPLY THAT THERE HAS BEEN
NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
By Order of the Board of Directors,
Robert E. Christian
Secretary
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<PAGE>
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
SUMMARY
The Board of Directors (the "Board") of Professional Dental Technologies,
Inc. (the "Company"), recommends to the Company's stockholders approval of a
proposal which would authorize an amendment to the Company's Certificate of
Incorporation reducing the number of authorized shares of Common Stock from
30,000,000 to 3,000 and increasing the par value per share of Common Stock to
$100.00 from $.01 by affecting a reverse split of the Company's Common Stock,
par value $.01 per share. The Board proposes a reverse split of the Common Stock
in the ratio of 10,000 shares of "Old Common Stock" to 1 share of "New Common
Stock"; that is, each 10,000 shares of Old Common Stock would be converted to
one share of New Common Stock. As used in this Proxy Statement, the term "Old
Common Stock" refers to pre-split Common Stock and "New Common Stock" refers to
post-split Common Stock. The par value of the New Common Stock would be adjusted
to $100 per share.
Any fractional shares of Common Stock resulting from the reverse stock
split will be purchased from the holders thereof at the rate of $6,500 per whole
share of New Common Stock.
A special meeting of the stockholders of the Company has been called by
the Board, _________________, at 10:00 a.m., for the purpose of considering and
voting upon the proposed amendment. The meeting will be held at the Company's
facility at 70 Batesville Boulevard, Batesville, Arkansas.
In determining the price to be paid for fractional shares of Common Stock
following the reverse stock split, the Board and the Affiliated Stockholders
relied upon the recommendation of a special committee of directors as to the
fairness of the purchase price, and the opinion of Economic and Financial
Consulting Group, Inc. as to the fair value of the Common Stock. The opinion of
Economic and Financial Consulting Group, Inc., which describes the methodology
used in determining the fair value of the Common Stock, is discussed in greater
detail below, and a copy of the opinion is attached hereto as Exhibit 3.
The Company and the Affiliated Stockholders have prepared and filed with
the Securities and Exchange Commission Schedule 13E-3 in connection with the
proposed reverse stock split. Schedule 13E-3 details certain specific
information about the Company and the proposed reverse stock split. A copy of
Schedule 13E-3 is available from the Secretary of the Company, 633 Lawrence
Street, Batesville, Arkansas 72501, or may be obtained through the Securities
and Exchange Commission's website at http://www.sec.gov.
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N. W., Washington, DC 20549. In addition, such reports, proxy
statements and other information may be electronically accessed at the
Commission's site on the World Wide Web located at http://www.sec.gov.
All stockholders should carefully read the entire Proxy Statement for a
more complete description of the Proposed Amendment, the reverse stock split,
the purchase of fractional shares of Common Stock resulting for the reverse
stock split, and the effects of such purchase.
<PAGE>
SPECIAL FACTORS
PURPOSE OF THE PROPOSED
REVERSE STOCK SPLIT
The purpose of the reverse stock split and purchase of the resulting
fractional shares is to reduce the number of stockholders of record to fewer
than 300, thereby alleviating the Company's obligation to file reports under
Section 15(d) of the Securities and Exchange Act of 1934. The Board of Directors
of the Company and the persons filing the 13E-3 Transaction Statement (Messrs.
Evans, Lemon and Nolan, who are the "Affiliated Stockholders") believe that such
action is in the best interests of the Company for the following reasons:
1. The market for the Company's Common Stock is relatively illiquid.
Approximately 85% of its outstanding shares are restricted as to sale by
a stockholders agreement that has been in force since 1989, which has
prevented these shares from ever being traded. The Board of Directors and
the Affiliated Stockholders considered both a secondary stock offering
and Rule 144 selling as methods of increasing the liquidity of the stock
in the market, but this action was not taken because of the combination
of low price of the stock and due to the adverse implications associated
with insider selling, which could very well have reduced share price even
further. It is management's view that, on balance, this would have had a
negative rather than a positive effect on the value of the shares.
2. The filing of periodic reports under Section 15(d) of the Securities and
Exchange Act of 1934 allows the Company's competitors to obtain
information concerning the Company's profit margins and operations which,
in the opinion of the Board and the Affiliated Stockholders, has or may
have an adverse effect on the Company's performance.
3. The out-of-pocket and internal costs to the Company associated with the
preparation and filing of the periodic reports when compared to the
limited number of stockholders is, in the opinion of the Board and the
Affiliated Stockholders, unwarranted. The Company estimates that, upon
termination of its obligation to file periodic reports with the
Securities and Exchange Commission, it will achieve savings within a
range of approximately $50,000 annually.
The Board and the Affiliated Stockholders propose to achieve their purpose
through a reverse stock split as they believe that this structure is the
simplest and most economical means of reducing the number of holders of the
Company's Common Stock below 300. In addition, the Board and the Affiliated
Stockholders believe that the reverse stock split and purchase of fractional
shares of New Common Stock will provide an easy and cost effective way for
shareholders with less than one share of New Common Stock to dispose of such
shares at a fair price without incurring brokerage commissions and other related
transaction costs. The Board and the Affiliated Stockholders believe that
implementing the reverse stock split at this time, thus terminating the
Company's obligation to file periodic reports with the SEC, will enhance the
Company's future performance.
The Company does not intend to list or register the New Common Stock on
any securities exchange. Completion of this transaction will result in the New
Common Stock becoming eligible for termination of registration pursuant to
Section 12 (g) (4) of the Securities Exchange Act of 1934. Registration of the
New Common Stock with the Securities and Exchange Commission will terminate
ninety (90) days after a certification is filed with the Securities and Exchange
Commission stating that the number of holders of record of the New Common Stock
has been reduced to less than 300 persons. The termination of registration will
<PAGE>
be deferred while the Securities and Exchange Commission, after notice and
opportunity for a hearing, determines that the certification is true.
Pursuant to the provisions of the Nevada Revised Statutes Annotated, Title
7, Chapter 78, Section 207, any proposed amendment to the Certificate of
Incorporation of the Company that affects an increase or decrease in the number
of authorized shares of a class of stock and that includes provisions pursuant
to which only money will be paid or scrip will be issued to stockholders, who
before the increase or decrease in the number of shares becomes effective, in
the aggregate hold 10 percent or more of the outstanding shares of the class,
and who would otherwise be entitled to receive fractional shares in exchange for
the cancellation of their outstanding shares, must be approved by the
stockholders of the Company by the affirmative vote of a majority of all the
votes entitled to be cast on the matter. Holders of Common Stock are entitled to
cast one vote for each share of Common Stock.
APPRAISAL RIGHTS AND
DISSENTERS RIGHTS
Under applicable Nevada law, shareholders of the Company will have
dissenters' rights with respect to this transaction. If dissenters' rights are
properly elected by a shareholder, the "fair value" of the dissenting
shareholder's shares will be determined by agreement of the Company and the
dissenting shareholder or, if no agreement is reached, by appraisal by order of
a court. Otherwise, appraisal rights are not provided under Nevada law or under
the Company's Certificate of Incorporation with respect to this transaction and
will not be voluntarily accorded by the Company to the shareholders.
Generally, under the provisions of the Nevada Revised Statutes Annotated
(hereinafter referred to as "NRS") Title 7, Chapter 78, Private Corporations
law, Section 207, a corporation may increase or decrease the number of shares of
a class and series, if any, of its capital stock and thereby correspondingly
increase or decrease the number of issued and outstanding shares of the same
class and series held by each stockholder by a resolution of the board of
directors. Notwithstanding the foregoing, in the event that a proposal to
increase or decrease the number of authorized shares of any class and series, if
any, that includes provisions pursuant to which only money will be paid or
script will be issued to stockholders who hold more than 10 percent of the
outstanding shares of the affected class or series and would otherwise be
entitled to receive fractions of shares in exchange for the cancellation of all
of their shares, the increase or decrease must be approved by the vote of
stockholders holding a majority of the voting power of the affected class and
series, unless the articles of incorporation provide for a greater proportion of
stockholders to approve the change in the number of shares.
Moreover, a proposed increase or decrease that includes provisions
pursuant to which only money will be paid or script will be issued to
stockholders who before the increase or decrease held one percent or more of the
outstanding shares of the affected class and series and would otherwise be
entitled to receive a fraction of a share, will be subject to the provisions of
NRS 92A.300 to 92A.500, Nevada's dissenting shareholder rights statutes. If the
proposal is subject to NRS 92A.300 to 91A.500 any stockholder may dissent in
accordance with those provisions and obtain payment of the fair value of the
fraction of a share to which the stockholder would otherwise be entitled.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO DISSENTER'S RIGHTS UNDER THE NEVADA REVISED STATUTES ANNOTATED AND IS
QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF CHAPTER 92A.300 THROUGH 92A.500,
WHICH IS REPRINTED IN ITS ENTIRETY AS AN ATTACHMENT TO THIS PROXY STATEMENT AS
EXHIBIT 8, AND IS INCORPORATED HEREIN BY REFERENCE.
<PAGE>
Under the NRS, holders of shares of common stock who dissent to the
proposed transaction in accordance with the procedures set forth in Chapter 92A
will be entitled to receive payment in cash of the "fair value" of their
fractional shares. NRS 92A.320 defines "fair value" as the value of the
fractional share immediately before the effectuation of the reverse stock split,
excluding any appreciation or depreciation in anticipation of the reverse stock
split. Any stockholder who wishes to exercise such dissenter's rights, or who
wishes to preserve his right to do so, should review carefully the following
discussion and Exhibit 8, because failure to timely and properly comply with the
procedures specified will result in the loss of dissenter's rights under the
NRS. A person having beneficial interest in shares of common stock held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the holder of record to follow the steps summarized below
properly and in a timely manner to perfect any dissenter's rights the beneficial
owner may have.
A stockholder wishing to exercise his dissenter's rights must deliver to
the Secretary of the Company, ON OR BEFORE ________________, a written notice of
his intent to demand payment for his shares if the reverse stock split is
effectuated, and he must not vote his shares in favor of the proposed reverse
stock split. Written notice should be delivered to the Company at the following
address:
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
ATTENTION: SECRETARY
633 LAWRENCE STREET
BATESVILLE, ARKANSAS 72501
As provided in Chapter 92A: (i) failure of a holder of shares to make
written notification of his intent to assert dissenter's right (or a beneficial
owner of shares of common stock who fails to cause the record holder of such
shares of common stock to make notice of his intent to assert dissenter's
rights) within such time limit; or, (ii) the vote by the stockholder of his
shares for the reverse stock split will result in the loss of such holder's
ability to assert dissenter's rights and receive payments for his shares
pursuant to NRS 92A.300 to 92A.500.
If the reverse stock split is approved by a majority of stockholders, the
Company must, ON OR BEFORE ___________, deliver written notice to all
stockholders who exercised their dissenter's rights to the split which notice
shall be set forth (a) where the demand for payment must be sent and where and
when certificates for shares must be deposited; (b) inform the dissenters not
represented by certificates to which extent the transfer of the shares will be
restricted after demand for payment is received by the Company; (c) supply a
form for demanding payment by the dissenting shareholders that includes, among
other things, that the dissenter acquired beneficial ownership of the shares
prior to the date on which the reverse stock split was approved; (d) the date by
which the Company must receive the demand for payment which date may not be less
than 30 nor more than 60 days after the date of the notice is delivered; and (e)
be accompanied by a copy of NRS 92A.300 to 92A.500. Dissenting stockholders who
do not comply with all stipulations and meet all deadlines to be set forth in
the foregoing notice, including returning to the Company the dissenter's demand
for payment, will not be entitled to payment for their shares in accordance with
NRS 92A.300 to 92A.500. In lieu thereof the non-complying stockholders will
receive the consideration of $6,500 per share of New Common Stock for their
fractional shares.
Within 30 days of the Company's receipt of the dissenter's demand for
payment, the Company will pay the Company's estimate of the fair value of the
fractional shares plus accrued interest to the dissenting stockholder. The
stockholder will also receive from the Company a statement of the Company's
estimate of the fair value of the shares, an explanation of how interest was
calculated, and a statement of the dissenter's further rights to demand payment
<PAGE>
under the NRS. In accordance with the NRS, interest will be calculated from the
effective date of the reverse stock split until the date of payment at the
average rate paid by the Company on its principal debt or, if none, at a rate
that is fair and equitable.
If a demand for payment remains unsettled, the Company must commence a
proceeding in the District Court of the county where its registered office is
located within 60 days after receiving the demand containing the dissenting
stockholder's estimate of fair value of his shares, and petition the Court to
determine the fair value of the shares and accrued interest. All dissenters,
whether or not residents of Nevada, whose demands remain unsettled shall become
parties to the proceeding. The jurisdiction of the Court in which the proceeding
is commenced is exclusive. The Court may appoint one or more persons as
appraisers to receive evidence and recommend a decision on the question of fair
value. The dissenters have the same discovery rights as parties in other civil
proceedings. Each dissenter who is made a party to the proceeding is entitled to
a judgment for the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the Company. If the
Company does not commence the proceeding within the 60-day period, it must pay
each dissenter whose demand remains unsettled the amount demanded by the
dissenter.
The costs of the legal proceeding, including the reasonable compensation
and costs of the appraisers, shall be determined by the Court and assessed
against the dissenters in amounts deemed equitable by the Court if the
dissenters acted arbitrarily or vexatiously or not in good faith in demanding
payment. The Court may also assess the fees and expenses of the counsel and
experts for the respective parties, in amounts the Court finds equitable.
FAILURE TO FOLLOW THE STEPS REQUIRED BY CHAPTER 92A OF THE NRS FOR
PERFECTING DISSENTER'S RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. DISSENTERS
WILL RECEIVE FURTHER NOTICE REGARDING SPECIFIC DEADLINES AND REQUIRED ACTIONS.
EFFECT UPON THE COMPANY
The Board considered making a tender offer for shares of Common Stock as
an alternative to the reverse stock split. This alternative was viewed as
undependable as it was not certain that the Company would reduce the number of
its record stockholders to less than 300 (and if it did not, a reverse stock
split such as the one described herein would be required in order to complete
the "going private" transaction). Furthermore, since a tender offer would
require retaining a firm to solicit tenders and the reverse stock split would
not require such solicitation, the projected costs of a tender offer appeared
likely to be considerably higher than the costs expected to be incurred in
connection with the reverse stock split.
Upon consummation of the reverse stock split, the Company anticipates that
the number of record shareholders will be reduced from approximately 947 to less
than 50, and the Company will have achieved the objective of the reverse stock
split described above.
As a private company, the Company will no longer be able to sell shares of
Common Stock which are freely tradable, thereby limiting its future access to
equity capital.
As a result of the reduction in the number of shareholders of record to
less than 300, the Company intends to suspend its obligation to file periodic
reports with the Securities and Exchange Commission under Section 15(d) of the
Securities Exchange Act of 1934 by de-listing its Common Stock with the American
Stock Exchange. As of the date of the reverse stock split transaction, the
<PAGE>
Company has been advised by the American Stock Exchange that trading in the
Common Stock of the Company will be suspended pending its de-listing.
UPON CONSUMMATION OF THE REVERSE STOCK SPLIT, THE COMPANY WILL NO LONGER
BE SUBJECT TO THE GOING PRIVATE DISCLOSURE OBLIGATIONS OF EXCHANGE ACT RULE
13E-3. FURTHERMORE, THE COMPANY'S OFFICERS, DIRECTORS AND TEN PERCENT OWNERS OF
COMMON STOCK WILL NO LONGER BE SUBJECT TO THE SHORT-SWING PROFIT PROVISIONS OF
EXCHANGE ACT SECTION 16(B) ONCE THE RULE 13E-3 TRANSACTION HAS BEEN FINALIZED.
EFFECT UPON CERTAIN AFFILIATES
OF THE COMPANY
Set forth in the following table are the number of shares of Common Stock
currently owned or controlled by certain officers and/or directors of the
Company (the "Affiliated Stockholders"), the percentage of total shares
outstanding they control, the number of shares expected to be owned , and the
percentage of total shares expected to be outstanding following the proposed
reverse stock split.
<TABLE>
<CAPTION>
NAME AND TITLE SHARES CURRENTLY SHARES OWNED POST
OWNED SPLIT
NUMBER % NUMBER %
<S> <C> <C> <C> <C>
William T. Evans, President & CEO,
Director, Controlling Person 5,078,178 (1) 36.0 507 38.7
J. Robert Lemon, Director,
Controlling Person 4,904,242 (2) 34.8 490 37.4
Timothy A. Nolan, Director, Controlling
Person 5,238,478 (3) 37.2 522 39.8
</TABLE>
NOTES:
(1) Includes 4, 211,360 shares held by a trust principally for the
benefit of Mr. Evans. Also includes 716,718 shares held in
trust for the benefit of Mr. Evans' nephew for which he
disclaims beneficial ownership.
(2) Includes 4,093,360 shares held by a trust principally for the
benefit of Mr. Lemon. Also includes 670,782 shares held in
trust for the benefit of nephews and nieces of Mr. Lemon for
which he disclaims beneficial ownership.
(3) Includes 310,400 shares held by a trust for the benefit of Mr.
Nolan. Also includes 4,928,078 shares held as trustee for Mr.
Evans, for which Mr. Nolan disclaims beneficial ownership.
<PAGE>
Set forth in the following table are the net book value and net earnings
per share attributable to the Affiliated Stockholders, in terms of both dollar
amounts and percentages, before and after the proposed stock split.
<TABLE>
<CAPTION>
BOOK VALUE BOOK VALUE BASIC EARNINGS BASIC EARNINGS
PRE-SPLIT (1) POST-SPLIT (1) PRE-SPLIT (2) POST-SPLIT (2)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
% % % %
of Total of Total of Total of Total
Name Amount Amount Amount Amount Amount Amount Amount Amount
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William T. Evans $2,082,053 36.0 $2,000,521 38.7 $457,036 36.0 $466,830 38.7
J. Robert Lemon $2,010,739 34.8 $1,938,442 37.4 $441,382 34.8 $451,177 37.4
Timothy A. Nolan $2,259,003 37.2 $2,059,708 39.8 $471,463 37.2 $480,642 39.8
</TABLE>
NOTES:
(1) This amount represents the numbers of shares owned
multiplied by the book value per share as of October 31,
1998, the end of the most recent fiscal year of the
Company. Such amounts represent only the stockholder's pro
rata interest in the Company's book value and are not
payable to the stockholders of the Company in the ordinary
course of business.
(2) This amount represents the numbers of shares owned
multiplied by the basic earnings per share of the Company
for the fiscal year ended October 31, 1998 (fully diluted
earnings per share is the same as basic earnings per
share). Such amounts represent only the stockholder's pro
rata interest (if any) in the Company's net earnings and
are not payable to the stockholders of the Company in the
ordinary course of business, other than as dividends. The
Company has never paid any dividends on its Common Stock.
The Affiliated Stockholders are expected to continue in their present
positions in the Company following the reverse stock split. None of these
persons will receive any consideration in connection with the reverse stock
split other than amounts received as a result of the purchase by the Company of
fractional shares of New Common Stock.
EFFECT UPON UNAFFILIATED
STOCKHOLDERS
Upon consummation of the reverse stock split and termination of the
Company's obligation to file periodic reports under the federal securities laws,
information now available to stockholders in the annual, quarterly and other
reports required to be filed by the Company with the Securities Exchange
Commission will not be provided to the Company's stockholders in the form
previously available or upon a periodic basis. Stockholders owning not less than
fifteen percent (15%) of the outstanding New Common Stock will retain the right
to inspect the books of account and all financial records of the Company, to
make extracts therefrom, and to conduct an audit of such records in accordance
<PAGE>
with the Nevada Revised Statutes Annotated, Section 78.257. Following the
reverse stock split, no unaffiliated stockholder will own fifteen percent (15%)
or more of the outstanding New Common Stock and accordingly, no unaffiliated
stockholder will be entitled to exercise the inspection rights afforded under
Nevada law. All unaffiliated stockholders will therefore lose access to
financial and other information the Company currently files with the Securities
Exchange Commission and provides to stockholders in its periodic reports.
As of the date of the reverse stock split, the American Stock Exchange
will suspend trading of the Company's Common Stock. As of that date, the
holdings of stockholders owning full shares of New Common Stock will become
illiquid. There can be no assurance that any market for such shares will be
available at that time or at any time in the future. The Company has no
obligation, nor does it have any present plans, to offer to commence a tender
offer for any of the remaining shares. As a result, any shareholder who would
hold whole shares following the reverse stock split must either hold those
shares indefinitely, sell those shares prior to the reverse stock split or
exercise dissenter's rights.
Following the reverse stock split, as is currently the case, the
Affiliated Stockholders will have absolute voting control of the Company's
affairs.
All owners of fractional shares of New Common Stock following the reverse
stock split will receive cash in lieu of such fractional shares at the rate of
$6,500 for each whole share of New Common Stock, pro rated as to the fractional
share held by each such owner. The Board and the Affiliated Stockholders believe
that the purchase price represents a fair price per share of the Company's
Common Stock. Furthermore, stockholders receiving cash in lieu of fractional
shares of New Common Stock will not have to pay any brokerage fees or
commissions in connection with such transaction.
Stockholders owning only fractional shares of New Common Stock following
the reverse stock split will receive cash in lieu of such fractional shares,
will cease to have any ownership interest in the Company, and will cease to
participate in future earnings and growth, if any, of the Company.
TAX TREATMENT OF PURCHASE
OF FRACTIONAL SHARES
Upon consummation of the reverse stock split, each 10,000 shares of Old
Common Stock issued and outstanding immediately prior to the effective time of
such split will be converted into one share of New Common Stock, and all
resulting fractional shares of New Common Stock will be purchased by the Company
at the price of $6,500 per share. The federal income tax consequences for any
particular stockholder may be affected by matters not discussed herein, and each
stockholder should consult his or her personal tax advisor in determining the
federal, state, and local income tax consequences of the reverse stock split and
purchase of fractional shares.
For those stockholders receiving New Common Stock from the consummation of
the reverse stock split, there will be no direct tax consequences except for the
reallocation to the stockholders' per share basis.
The purchase of fractional shares of New Common Stock by the Company will
be a taxable transaction for federal income tax purposes. Each holder of
fractional shares of New Common Stock purchased by the Company subsequent to the
reverse stock split will recognize gain or loss upon the purchase of that
stockholder's fractional share of New Common Stock equal to the difference, if
any, between (i) the amount of the cash payment received for the fractional
shares and (ii) the stockholder's tax basis in the fractional shares, so long as
the fractional shares were held as a capital asset of the stockholder. Any
subsequent gain or loss resulting from the disposition of New Common Stock may
<PAGE>
be treated as a capital gain or loss transaction. As indicated previously,
holders of New Common Stock are urged to consult their personal tax advisors as
to the tax consequences of the reverse stock split and purchase of fractional
shares under federal, state, local, and any other applicable laws.
The cash payments due to the holders of fractional shares of New Common
Stock (other than certain exempt entities and persons) will be subject to a
backup withholding tax at the rate of 31% under federal income tax law unless
certain requirements are met. Generally, the Company or its paying agent will be
required to deduct and withhold the tax on cash payments due at the effective
time of the purchase of fractional shares of New Common Stock subsequent to the
reverse stock split if (i) a stockholder fails to furnish a taxpayer
identification number ("TIN", the TIN of an individual is his or her Social
Security Number) to the paying agent or fails to certify under penalty of
perjury that such TIN is correct; (ii) the Internal Revenue Service ("IRS")
notifies the paying agent that the TIN furnished by the stockholder is
incorrect; (iii) the IRS notifies the paying agent that the stockholder has
failed to report interest, dividends, or original issue discount in the past; or
(iv) there has been a failure the stockholder to certify under penalty of
perjury that such stockholder is not subject to the backup withholding tax. Any
amounts withheld by the paying agent in collection of the backup withholding tax
will reduce the federal income tax liability of the stockholders from whom such
tax was withheld.
THE FAIRNESS OF THE TRANSACTION
The Board of Directors of the Company by unanimous vote on April 6, 1999,
with no member of the Board of Directors dissenting or abstaining from such
approval, adopted a resolution declaring the terms and conditions of the reverse
stock split and purchase of fractional shares to be advisable, and directing
that a proposed amendment to the Articles of Incorporation of the Company be
submitted to shareholders of the Company for consideration. The Affiliated
Stockholders believe that the proposed reverse stock split and subsequent
purchase of fractional shares are substantively and procedurally fair to
unaffiliated stockholders of the Company and concur in the recommendation of the
Board of Directors that stockholders of the Company approve the proposed
amendment to the Certificate of Incorporation of the Company to authorize the
reverse stock split.
The chain of events leading to the decision to engage in the reverse stock
split transaction are outlined in the paragraphs which follow:
o In November, 1997, with the Company's financial performance steadily
improving, the Board of Directors began to pursue a series of strategies
designed to enhance the value of the Company's Common Stock. The Company's
shares are listed on the American Stock Exchange ("Amex") under the "emerging
company" category, and as such the Company does not enjoy a full Amex
membership. With the completion of the 1997 fiscal year, the Company had met
all Amex requirements for a full listing, with the exception of the
requirement that its share price be a minimum of $3.00. The Board directed
management to seek a waiver of this requirement and pursue a full listing on
the Amex.
o In March, 1998, with the Amex having declined to grant a waiver of the
minimum share price requirement, the Board directed management to investigate
the feasibility of Rule 144 selling of shares by Affiliated Stockholders
and/or other insiders, or the possibility of a public offering of shares, for
the purpose of increasing the liquidity of the securities in the market.
o In June, 1998, informal discussions with prospective underwriters having
produced no mutually acceptable strategy for the public sale of shares, and
Rule 144 selling having been determined to be impractical due to the length
of time required to liquidate meaningful numbers of shares, as well as the
adverse implications associated with insider selling, the Board directed
management to consult with the Amex regarding the feasibility of a 1:5
<PAGE>
reverse stock split. The purpose of such a transaction being to increase the
share price of the stock to the $3.00 to $5.00 range, in order to meet the
Amex's minimum share price requirement, to make the shares marginable, and to
raise the price of the shares above the "penny stock" range.
o In October, 1998, consultations with the Amex having made it clear that
pursuing a 1:5 reverse stock split would result in the Company's shares being
de-listed for failure to meet the requirement regarding the minimum number of
shares in the public float, the Board directed management to investigate the
feasibility of taking the Company private.
o In February, 1999, having exhausted the possibility of increasing share price
through a 1:5 reverse split (without sacrificing its Amex listing); having
determined that Rule 144 selling or a public offering of its shares to
increase liquidity was impractical; and having determined that a full
membership on the Amex was not attainable, the Board unanimously decided to
consider a "going private" transaction.
A special committee of the Board of Directors of the Company was
established by the unanimous written consent of the Board, dated February 2,
1999 (the "Special Committee"). The Special Committee is comprised of J. Philip
Boesel, whose profession is investment banking, and Michael S. Black, a CPA,
both of whom are directors who are neither employees nor controlling persons of
either the Company or its affiliate, Life Plus International. The Special
Committee was asked to take such action as was necessary to find and retain an
appropriate firm to prepare a fairness opinion regarding the value of the
Company's common stock. On February 28, 1999 the Special Committee retained the
Economic and Financial Consulting Group, Inc. ("EFCG") to render its opinion as
to the fair value, from a financial point of view, of the Common Stock of the
Company.
EFCG delivered its written opinion on March 24, 1999. No restrictions were
imposed by the Special Committee or the Board of Directors of the Company upon
EFCG with respect to the investigations made or procedures followed by EFCG in
rendering its opinions.
The Special Committee was also charged with the responsibility of
recommending to the Board of Directors a fair price to pay for the fractional
shares resulting from the reverse stock split of the Common Stock. It met with
representatives of EFCG, discussions occurred and information was shared
concerning the methodologies employed in determining a fair value, and the
application of such methodologies to the Company's financial and market position
and future prospects. Based upon these deliberations and the written report of
EFCG, the Special Committee unanimously recommended to the Board of Directors of
the Company that $6,500 per share of New Common Stock resulting from the reverse
stock split would be a fair price (hereafter referred to as the "Purchase
Price").
The full text of EFCG's fairness opinion, which sets forth certain
assumptions made, certain procedures followed, and certain matters considered by
EFCG, is attached hereto as Exhibit 3.
Each of the Special Committee, the Board of Directors and the Affiliated
Stockholders individually made fairness determinations with regard to the
reverse stock split. In addition to considering the conclusion contained in the
EFCG report that the fair value of the Company's Common Stock lies in the range
$0.5709 to $0.7136, the Special Committee, the Board of Directors and the
Affiliated Stockholders independently considered certain additional factors
relating to the fairness of the transaction from a financial point of view.
These factors included a comparison of the purchase price for fractional shares
of the New Common Stock, which is equivalent to a value of $0.65 per share of
Old Common Stock, to: (i) the January 31, 1999 (end of first fiscal quarter)
book value per share of Old Common Stock, which was approximately $0.42 per
share; (ii) the historic market values of the Company's common stock, which
ranged between a high of $1.1875 and a low of $0.5625 during the period April 1,
<PAGE>
1998 and March 15, 1999, (iii) the current market value of the Company's Common
Stock, which was $0.625 as of April 5, 1999 (the last closing price prior to the
Board's vote to approve the transaction); and (iv) the liquidation value of the
Company's assets. The analyses of the Special Committee, the Board of Directors
and the Affiliated Stockholders are summarized below:
o The Special Committee, the Board of Directors and the Affiliated Stockholders
independently concurred with EFCG's conclusion that the fair value of the
shares lies in the range $0.5709 to $0.7136, based on a "going concern"
discounted cash flow valuation approach. They also concurred with EFCG's
conclusion that, of the available valuation methods, in general, and for the
Company specifically, discounted cash flow approaches are superior to other
valuation methodologies.
o The Special Committee, the Board of Directors and the Affiliated Stockholders
independently noted that six, three and one month average closing stock
prices on the American Stock Exchange were $0.68, $0.66 and $0.66
respectively. In addition, they noted that on April 5, 1999, the last closing
price available prior to the vote approving the reverse stock split
transaction was $0.625. They concurred with the conclusion of EFCG that
average stock prices do not represent a definitive indicator of economic
value, given the relative illiquidity of the stock and the small average
daily trading volume. They further concurred with EFCG's opinion that average
stock price does represent a corroborative measure of value determined using
discounted future cash flows. Average stock prices were therefore used in
this manner.
o The Special Committee, the Board of Directors and the Affiliated Stockholders
independently noted that the January 31, 1999 (the end of the Company's first
fiscal quarter) book value per share of Old Common Stock was approximately
$0.42 per share; they further noted that this book value per share is
approximately 35% lower than the fair value, established herein, of $0.65 per
share. Since the book value per share measure is backward-looking and
reflective of past, rather than future performance, they concluded that book
value per share is not an appropriate valuation measure for a going concern.
o The Special Committee, the Board of Directors and the Affiliated Stockholders
independently determined that liquidation value, were the Company to be
liquidated, would necessarily be less than book value. As discussed above,
since book value was determined to be not appropriate, they determined that
liquidation value was not a relevant measure of the fairness of share value.
o The Special Committee, the Board of Directors and the Affiliated Stockholders
independently noted that no firm offers to purchase the Company had ever been
received, nor had the Company engaged in any previous share purchase
transactions which could be used by the Board in connection with an
assessment of the fairness of the share valuation.
o The Special Committee, the Board of Directors and the Affiliated Stockholders
independently concurred with the conclusion of EFCG that there are currently
no publicly traded comparable companies whose price/earnings or similar
ratios would be useful for valuation purposes, and that, even if there were
such companies, this method of valuation would be useful primarily as a
corroborative measure.
In reaching its decision to recommend $0.65 as the Purchase Price for a
share of the Old Common Stock, the Special Committee calculated the average of
the endpoints of the valuation range determined by EFCG ($0.5709 and $0.7136;
average $0.64225), and rounded to this to $0.65. They cross-checked this value
with historical and current closing market prices, as indicated above, which
<PAGE>
they deemed to have reasonably corroborated the discounted cash flow valuation
analysis. Based on the considerations listed above, the Special Committee
concluded that the Purchase Price was a fair value.
The Board of Directors and the Affiliated Stockholders concurred with, and
on April 6, 1999, voted unanimously in favor of this recommendation, noting that
the price of the shares at the close of trading on the previous day had been
$0.625.
In determining the fairness of the Purchase Price, the Board of Directors
and the Affiliated Stockholders did not assign any relative or specific weights
to the foregoing factors, other than as described above. Specifically, the Board
of Directors and the Affiliated Stockholders consider that their reliance upon
"going concern" discounted cash flow valuation methodologies as corroborated by
historical and current closing prices, supports its conclusion to set the
Purchase Price at $0.65 per share of Old Common Stock. They believe that their
decision not to consider book value or liquidation value, which would have
resulted in a lower share valuation, further supports their conclusion. The
absence of publicly traded comparable companies, firm offers to purchase the
Company, or previous stock repurchases by the Company, prevent these measures of
valuation from being considered. See REPORTS, OPINIONS, APPRAISALS AND CERTAIN
NEGOTIATIONS, below, and Exhibit 3, the Fairness Opinion of EFCG, for additional
discussions of the various valuation measures employed in determining the value
of shares.
Certain unaffiliated stockholders, those who own more than 10,000 shares
of Old Common Stock as of the date of the reverse stock split transaction, will
retain an interest in the Company after the transaction has been consummated.
For those stockholders who may not wish to remain a shareholder in a private
company, prior to the date established for the reverse stock split, these
stockholders will have ample opportunity to orderly dispose of a sufficient
number of shares on the open market to lower their total holding to less than
10,000 shares, guaranteeing that the balance of their holding will be liquidated
in the reverse stock split transaction.
Stockholders owning less than 10,000 shares of Old Common Stock will have
their holding in the Company liquidated as a result of the reverse stock split
transaction. This forced liquidation of shares is the primary disadvantage of
the reverse stock split transaction. Certain stockholders may believe that the
advantages of remaining a stockholder outweigh the disadvantages of illiquidity,
lack of visibility into Company operations and lack of control which are
inherent to holding a minority interest in a private company. They may therefore
wish to remain a stockholder in the Company. For these stockholders, there is an
available course of action.
Those stockholders wishing to retain an interest in the Company may do so
by accumulating at least 10,000 shares of Old Common Stock through open market
purchases prior to the date of the reverse stock split transaction. Any such
stockholder will own one share of New Common Stock of the Company for each
10,000 shares of Old Common Stock held, after the transaction is consummated.
The Board of Directors believes that there are no benefits of this
transaction that will disproportionately accrue to Affiliated Stockholders or
other "insiders". The reasons for taking the Company private are to eliminate
the adverse implications associated with remaining a public company.
Pursuant to the provisions of the Nevada Revised Statutes Annotated, Title
7, Chapter 78, Section 207, the reverse stock split transaction must be approved
by a majority of all stockholders, including both unaffiliated and affiliated
stockholders. On the advice of its legal counsel, the Company has structured
this transaction to be in full compliance with Nevada law, such that it will
require a majority vote of all stockholders. See APPRAISAL RIGHTS AND DISSENTERS
<PAGE>
RIGHTS, above, for a further discussion of the procedural fairness of this
transaction.
OFFERS TO MERGE OR ACQUIRE
THE COMPANY
During the 18 month period preceding the date of this Proxy Statement the
Company has not received any firm offers from any unaffiliated person for (i)
the merger or consolidation of the Company into or with any person, (ii) the
sale or other transfer of all or any substantial part of the assets of the
Company, or (iii) securities of the Company which would enable the holder
thereof to exercise control of the Company. The Company, during this period, did
not solicit any third party offers to merge or acquire the Company, nor did it
authorize the Special Committee to do so.
REPORTS, OPINIONS, APPRAISALS AND
CERTAIN NEGOTIATIONS
On February 28, 1999, the Special Committee of the Board of Directors of
the Company retained the services of EFCG to perform a valuation of the
Company's Common Stock, from a financial point of view, to be used as part of
the process of establishing the price to be paid to the holders of fractional
shares of the New Common Stock following the reverse stock split.
The following information is provided with respect to the fairness opinion
provided by EFCG:
(1) EFCG performed a valuation analysis of the Company's common stock and
provided its opinion as to the value of the common stock, from a financial
point of view.
(2) EFCG is a regional firm providing multidisciplinary consulting
services. These services include, but are not limited to, corporate
finance, business valuation, financial advisory and litigation support.
(3) The Special Committee considered proposals from two advisory firms,
interviewed one and unanimously agreed to retain the services of EFCG.
(4) Other than the engagement of EFCG to provide the services described
above, there are no relationships between EFCG or its affiliates and the
Company or its affiliates which existed during the past two years or are
contemplated. The fee for EFCG's services is $15,000.
(5) EFCG provided to the Special Committee and the Board of Directors a
range of values with which to calculate the Purchase Price for the
fractional shares of New Common Stock. The Special Committee unanimously
recommended to the Board of Directors a price of $6,500 per share of New
Common Stock, and the Board of Directors unanimously adopted such
recommendation.
(6) The Company retained EFCG to perform a valuation analysis and to
provide its opinion as to the value of the Company's common stock, from a
financial point of view. On March 24,1999 EFCG delivered an opinion (the
"Fairness Opinion") to the Special Committee of the Board of Directors of
the Company. The Fairness Opinion was based upon economic, market and
other conditions in effect as of its date. No limitations were imposed by
the Board of Directors of the Company upon EFCG with respect to its
investigation or the procedures employed in rendering the Fairness
Opinion. The Fairness Opinion, which sets forth assumptions made, material
<PAGE>
reviewed, matters considered, and the limits of the review, is attached as
Exhibit 3 and is incorporated into this Schedule by reference.
The following is a summary of the Fairness Opinion. All material analyses
performed by EFCG are discussed and presented. Stockholders of the Company are
nonetheless urged to read the Fairness Opinion, which is attached as Exhibit 3,
in its entirety. EFCG has consented to the inclusion of its opinion in the 13E-3
Transaction Statement and in the Proxy Statement provided to stockholders of the
Company, and has reviewed and approved the following summary.
In reaching their conclusions, it was EFCG's opinion that in general, the
value of any asset, whether it be financial or real, should be equal to the
present value of the free cash flows accruing to the owner of the asset. Applied
to a business valuation, this methodology is premised on the assumption that a
buyer (shareholder) purchases a series of cash flows that would be generated
over time. For this reason, they concluded that in general, and for the Company
specifically, discounted cash flow approaches are far superior to other
valuation methodologies. Consequently, the discounted cash flow analysis was
used as the primary basis for the fair value determination, with other valuation
measures employed for corroboration.
In connection with the Fairness Opinion, EFCG reviewed, among other
things: (i) the proposed transaction; (ii) annual reports on form 10-K for the
fiscal years ended October 31, 1998, October 31, 1997, October 31, 1996, October
31, 1995, and October 31, 1994; (iii) quarterly reports on form 10-Q for the
periods ended January 31, 1999, July 31, 1998, April 30, 1998, January 31, 1997,
July 31, 1997, April 30, 1997, January 31, 1996, July 31, 1996, April 30, 1996,
January 31, 1995, July 31, 1995, April 30, 1995, January 31, 1994, July 31,
1994, and April 30, 1994; and (iv) projected financial results for fiscal years
1999 through 2004 provided by management of the Company and approved by the
Board of Directors of the Company. These projected financial results are shown
in Table 2 of Exhibit 3, the Fairness Opinion. EFCG also held discussions with
management of the Company regarding its past and current business operations,
financial condition and future prospects and the performance of its common
stock. EFCG reviewed the reported price and trading activity of the Company's
common stock, analyzed other companies which manufacture and sell products
within the dental industry, the securities of which are publicly traded, and
performed other such other studies and analyses as EFCG deemed appropriate.
EFCG assumed and relied upon the accuracy and completeness of all
financial and other information reviewed for the purposes of the Fairness
Opinion, whether publicly available or provided to EFCG by the Company, and did
not independently verify any such information or make an independent evaluation
or appraisal of the assets or liabilities of the Company. The opinion of EFCG is
necessarily based upon economic, market and other conditions as in effect on,
and the information made available to them as of March 8, 1999. The opinion of
EFCG is directed to the Special Committee of the Board of Directors of the
Company and does not constitute a recommendation to any stockholders of the
Company as to how the stockholder should vote at the stockholder's meeting held
in connection with the proposed transaction. Subsequent developments may affect
the conclusions reached in this opinion, and EFCG does not have any obligation
to update, revise or reaffirm this opinion.
The preparation of a fairness opinion involves determinations as to the
appropriate and relevant methods of financial analysis and, therefore, reference
should be made to the Fairness Opinion in its entirety and not to a summary
description. In performing its analysis, EFCG made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of the Company.
<PAGE>
EFCG considered several methods to evaluate the fair market value of the
Company's common stock. These methods are (i) the evaluation of the business as
a going concern utilizing discounted cash flow approaches to valuation; (ii)
current and historical market prices; (iii) net book value; (iv) liquidation
value; and (v) multiplier approaches based on comparisons to publicly traded
comparable companies. Although they examined all of these approaches to
valuation, they concluded that in general and for the Company specifically,
discounted cash flow approaches are far superior to other valuation
methodologies.
EVALUATION AS A GOING CONCERN: In general, the value of any asset, whether
it be financial or real, should be equal to the present value of the free cash
flows accruing to the owner of the asset. Applied to a business valuation, this
methodology is premised on the assumption that a buyer (shareholder) purchases a
series of cash flows that would be generated over time. Value is ascribed only
to cash flows that can ultimately be taken out of the business. Cash that is
generated but used to sustain the business (such as increases in working capital
and capital expenditures) creates no incremental value to the shareholder.
Valuations based on this premise must necessarily define an appropriate cash
flow and must also determine an appropriate discount factor to be used in
converting projected future magnitudes into present value terms.
Two measures of cash flow are widely accepted. The first measure of cash
flow, net cash flow to equity, is defined below:
Net Income (after taxes)
+ Depreciation and amortization
- Capital expenditures
- Changes in working capital
+ Net changes in long term debt
= Net cash flow to equity
The appropriate discount factor used to convert future magnitudes into
present value terms is dependent on which of the cash flow approaches, discussed
above, is utilized. When the focus is on net cash flow to equity, then the
appropriate discount factor would be a rate of return on equity. The starting
point for this analysis is a current relatively risk free rate of return such as
that available on long term government debt. To this basic rate an equity risk
premium reflecting the difference between large company stocks and long term
government bonds, adjusted for a particular company, is added. An additional
risk premium, based on size, would then be added to account for the extra risk
associated with smaller companies. Given these considerations the appropriate
rate of return on equity is calculated in accordance with the equation below:
ke = Rf + ((beta) x ERP) + SP
Where ke = Rate of return on equity.
Rf = Risk free rate of return which is assumed to be 5.75% based on the
current yield on long term government bonds as reported in the Wall Street
Journal, this date.
(beta)= A measure of a particular security's volatility (risk) as related
to the market in general. According to information contained in Ibbotson
Associates: INDUSTRY COST OF CAPITAL, an appropriate measure of (beta)
would amount to 0.95.
<PAGE>
ERP = equity risk premium which is assumed to be 7.8% based on information
contained in Ibbotson Associates: STOCKS, BONDS, BILLS AND INFLATION 1998
YEARBOOK (IBBOTSON).
SP = Size risk premium which is assumed to be 3.3 % based on IBBOTSON.
Performing the computation indicated by the formula above, the appropriate
rate of return on equity (ke) would be 16.46%.
An alternative approach to computing the appropriate rate of return on
equity involves the use of estimates of ke specific to the dental equipment and
supplies industry (SIC Code 3843) as reported in Ibbotson and Associates:
INDUSTRY COST OF Capital. The basic reported equity return, 14.23% (industry
composite return for an industry predominantly comprised of companies that would
be classified as low capitalization companies) should then be adjusted to
account for the size premium that would be appropriate for micro-capitalization
companies, 1.6% (micro-capitalization equity premium - low capitalization equity
premium), yielding a value of ke amounting to 15.83%.
EFCG then concluded that a conservative estimate of the appropriate equity
return for the Company would be in the range of 15.83% and 16.46%.
The second widely accepted measure of cash flow focuses on net cash flow
available to overall invested capital, equity plus debt, (free cash flows) is
defined below:
Earnings before interest and taxes (EBIT)
- Taxes on EBIT
+ Depreciation and amortization
- Capital expenditures
- Changes in working capital
= Net cash flow to overall invested capital
For valuations based on cash flows available to overall invested capital
(free cash flows), the appropriate discount factor would be a weighted average
cost of capital. The weighted average cost of capital can be described as the
average price a company must pay to attract both debt and equity to properly
capitalize the firm's operation and growth. The weighted average cost of capital
is defined by equation (2), below:
ka = (ke x we) + (kd(1-t) x wd)
Where ka = weighted average cost of capital
ke = rate of return on equity which is assumed to be in the range 15.83%
to 16.46% as discussed above.
we = Percentage of equity capital in the capital structure.
kd = rate of return on debt
t = company's effective income tax rate
wd = percentage of debt capital in the capital structure
<PAGE>
Performing the computation indicated by the equation above indicates an
average weighted average cost of capital for the years 1999-2004 in the range
12.67% to 13.14%. We have utilized an average for these years because the values
for we, wd and kd differ for each year in the projection period. The terminal
value of ka, utilized for year 2005 and subsequent years, is in the range 12.93%
to 13.42%, which represents the weighted average cost of capital for the year
2004.
Given the discussion of cash flows and discount factors, above, the basic
valuation of Pro-Dentec as a going concern (discounted cash flow analysis) is
described by the equation below:
5
Value = (SIGMA) Ct/(1+k)t + (Cf /(k-g))/(1+k)5 - current debt claims
t =0
Where Value = present value of projected future cash flows
Ct = Cash flow in year t
Cf = Normalized future cash flow
k = appropriate discount factor, either rate of return on equity (ke) or
weighted average cost of capital (ka).
g = projected growth in future cash flows which is assumed to be 2%. It
should be noted that any changes in inflation in future years would effect
k and g in the same direction so as to have little effect on the
computations.
Current debt claims = current outstanding debt of the company as of
October 31, 1998. Debt claims amounting to $2,736,000 are subtracted for
valuations focusing on free cash flows available to debt and equity, but
are ignored in valuations focusing on cash flows available to equity.
Value calculated in accordance with the equation above is converted into a
per share basis by dividing by 14,100,000 outstanding shares. Based on these
discounted cash flow analyses, EFCG has opined that the fair value of a share of
the common stock of the Company lies in the range $0.5709 and $0.7136.
CURRENT AND HISTORICAL MARKET PRICES: EFCG also examined current and
historical market prices and trading volume for the Company's common stock. They
concluded that stock prices would not necessarily be the best indicator of value
for the reasons indicated below. The "Efficient Markets Hypothesis" argues that
all publicly available information should at all points in time be fully
incorporated into the value of securities. Consequently, for most publicly
traded securities the current market price of common stock should reflect the
intrinsic value of discounted projected future cash flows based on information
available at the time. In the case of thinly traded securities, such as the
Company's, it would not necessarily be true that current stock price would
always be equal to intrinsic value. More specifically, while the shares of the
Company are publicly traded, they are closely held, are frequently not traded,
and when they do trade, tend to trade in small volume. Approximately 85% of the
shares are restricted as to sale by a formal shareholder agreement, and have
never been traded.
An additional point related to the use of current and historical stock
prices as indicators of value would involve the notion that, all other things
being equal, ownership interests which are not freely marketable are worth less
than the same shares if they were regularly traded. Consequently, any valuation
<PAGE>
based on current or historical stock prices would be subject to a significant
illiquidity discount.
While EFCG did not consider that in this instance stock prices represented
a definitive indicator of economic value, their calculation of average stock
price over the last 6 months and 3 months (ending March 15, 1999) indicated
values of $0.68 per share and $0.66 per share, respectively, which are
corroborative of the results obtained involving discounted future cash flows.
EFCG also considered book value per share and liquidation value as
indicators of value, as well as a ratio analysis of other publicly traded
comparable companies. Their conclusions regarding these indicators are
summarized as follows:
PUBLICLY TRADED COMPARABLE COMPANIES: In many instances multiplier
approaches based on price/earnings ratios or similar measures are used for
valuation purposes. This methodology entails identifying publicly traded
comparable companies and assuming that financial and valuation ratios would be
similar across companies. It should be stressed that the appropriate multiplier
utilized in these instances would essentially be the inverse of the rates of
return on equity (ke) or weighted average cost of capital (ka) utilized in the
discounted cash flow analysis. Consequently, this is a valuation technique that
is primarily corroborative in nature.
In an attempt to corroborate the findings reported above, EFCG examined a
number of publicly traded companies sharing some similarities with the Company.
They concluded that the Company is fairly unique in that it is relatively small,
is vertically integrated in the manufacturing and sale of its core products, and
sells its products in narrow dental market niches. There are some companies that
sell the same products, but also sell substantially different products;
consequently, it is difficult to disentangle the separate effects of the
relevant divisions. Other companies focus on either manufacturing or selling the
relevant products. Of those companies that are publicly traded, with a
substantial part of their business in the dental industry, and that both
manufacture and sell their products, relevant financial ratios provide little
guidance, since many of those companies have recently incurred losses, such that
calculations of Price/Earnings ratios are not meaningful. Further, those
companies do not produce and sell in the same narrow dental market niches that
the Company does. EFCG concluded that for purposes of valuing the Company's
common stock, there were no publicly traded comparable companies.
BOOK VALUE PER SHARE: The Company is engaged in a dynamic and
ever-changing dental market. EFCG stated that book value per share measures are
inherently backward-looking and reflective of past performance; that they are
not necessarily indicative of future performance. In dynamic markets proper
valuation of common stock should reflect expectations of FUTURE performance.
They noted that the Company's book value per share as of October 31, 1998 was
$0.41, which is significantly less than the Company's current and historical
prices. For these reasons EFCG concluded that use of book value per share in the
valuation of common stock is not appropriate.
LIQUIDATION VALUE: EFCG concluded that use of liquidation value is not
appropriate here for the following reasons. The Company is not in a business
posture where liquidation is remotely possible. Additionally, any liquidation
value would necessarily be below the book value, and as discussed above, book
value per share is not appropriate for valuation purposes here.
The Fairness Opinion relates only to whether the consideration to be
received by the holders of fractional shares of New Common Stock is fair from a
financial point of view and does not constitute a recommendation to any
stockholder of the Company as to how such stockholder should vote with respect
to the proposed transaction.
<PAGE>
The full text of EFCG's opinion is attached as Exhibit 3 to this
Statement. The Fairness Opinion shall be made available for inspection and
copying at the principal executive offices of the Company at 633 Lawrence
Street, Batesville, Arkansas, during its regular business hours by any
interested stockholder of the Company or his representative who has been so
designated in writing.
OTHER INFORMATION
BACKGROUND
The Company, a Nevada Corporation, is principally engaged in the business
of designing, manufacturing, and marketing products to dental professionals
relating to the diagnosis, treatment, and prevention of periodontal and other
oral diseases. The Company's executive offices are located at 633 Lawrence
Street, Batesville, Arkansas 72501; the telephone number is (870) 698-2300.
On April 6, 1999, the Board of Directors of the Company unanimously
adopted a resolution authorizing the submission to the vote of the stockholders
of the Company a proposal under which all outstanding shares of Old common Stock
will be subject to a reverse stock split at the ratio of 10,000 shares of Old
Common Stock to 1 share of New Common Stock. A copy of the resolution adopted by
the Board is attached to this Proxy Statement as Exhibit 2.
The Company expects to submit the proposal to the stockholders of the
Company at a special meeting expected to be held at 10:00 a.m. on
_____________________, at 70 Batesville Boulevard, Batesville, Arkansas.
The Company does not expect that any material change in the present
dividend rate or policy or indebtedness of the Company will occur as a result of
the reverse stock split. A change in the Company's capitalization will not occur
as a result of the change in par value of the New Common Stock.
PAYMENT OF PURCHASE PRICE
The purchase price of fractional shares of New Common Stock will be paid
from the operating cash balances of the Company, which, as of the end of the
Company's second fiscal quarter, April 30, 1999, stood at $1.55 million. The
reverse stock split transaction is expected to result in a use of cash in the
amount of $650,000 and a reduction in shareholders' equity in the same amount.
The Company anticipates that, as a result of the reverse stock split, there will
be approximately 100 aggregate fractional shares of the New Common Stock to be
purchased by the Company at a price of $6,500 per share of New Common Stock.
Such price per share was determined based upon the report of EFCG as to value of
the Common Stock of the Company as further described in this Proxy Statement.
<PAGE>
MANAGEMENT AND ITS INTENTIONS
The current directors and executive officers of the Company, along with
certain additional information about each, are as follows:
<TABLE>
<CAPTION>
Name Age Director Current
- ---- --- Since Positions Held
----- --------------
<S> <C> <C> <C>
William T. Evans 57 1987 President, Chief
Executive Officer & Director
Robert E. Christian 37 1988 Executive Vice President,
Secretary/Treasurer & Director
Frank H. Newton, III 59 --- Chief Operating Officer
Richard L. Land 53 --- Vice President, Controller
J. Robert Lemon 56 1987 Director
Timothy A. Nolan 45 1988 Director
J. Philip Boesel 66 1995 Director
Michael S. Black 47 1996 Director
</TABLE>
William T. Evans became President and Chief Executive Officer of the Company in
February, 1996. Previously, he was the Executive Vice President and Secretary,
and has been a Director since 1987. Mr. Evans was an officer of Dynavest
Partnership, the original licensee for the Rota-dent product, from 1981 until
its dissolution in December of 1992; and an officer of Multiway Associates, a
specialty nutrition company, since 1982. Mr. Evans is a cousin of Timothy A.
Nolan, a Director of the Company.
Robert E. Christian became Executive Vice President, Secretary and Treasurer of
the Company in February, 1996. Previously, he was the Senior Vice President and
Treasurer, and has been a Director since 1988. Mr. Christian has been Vice
President of Data Control and Computer Services for Multiway Associates, a
specialty nutrition company, since 1982.
Frank H. Newton, III has been Chief Operating Officer of the Company since
February, 1993. Prior to joining the Company, Mr. Newton was President and Chief
Operating Officer of Scott Instruments Corporation, Denton, Texas, since 1988,
and prior to that, President and Chief Executive Officer of AVM Systems, Inc.,
Fort Worth, Texas, for six years.
<PAGE>
Richard L. Land has been the Controller of the Company since June, 1996. He was
elected Vice President in March, 1997. Prior to that time, he served as
Controller of Darling Special Products, Inc., Caruthersville, Missouri, since
1990, and as General Accounting Manager of the Columbus Division of General Tire
and Rubber, Columbus, Mississippi, for four years. Mr. Land was awarded the CPA
Certificate by the state of Missouri in 1990.
J. Robert Lemon has been a director of the Company since 1987, and served as its
President from 1987 to 1996, when he resigned to devote full time to other
business interests. He continues to work with the Company as a consultant. Mr.
Lemon was an officer of Dynavest Partnership, the original licensee for the
Rota-dent product, from 1981 until its dissolution in December, 1992; and has
been an officer of Multiway Associates, a specialty nutrition company, since
1982.
Timothy A. Nolan has been a director of the Company since 1988. Mr. Nolan has
been Managing Director of Multiway Associates, a specialty nutrition company,
since 1987, and an officer and director of V. M. Nutri, Inc., a specialty
nutrition company, since 1989. He has been employed by V. M. Nutri since 1982.
Mr. Nolan is the cousin of William T. Evans.
J. Philip Boesel, Jr. has been a director of the Company since 1995. He was
formerly the First Vice President, Investment Banking of Kirkpatrick, Pettis,
Smith, Polian, Inc. from 1991 to 1996. Kirkpatrick Pettis is a subsidiary of
Mutual of Omaha. Prior to this Mr. Boesel was the President of Robert G.
Dickinson & Co., a regional investment banking firm, from 1971 through 1990,
when the company was sold. Mr. Boesel is a former Governor of the National
Association of Securities Dealers, and is currently a director of several
privately-held companies. He holds a B.B.A. degree from the University of
Wisconsin, and a Masters degree in Business from Michigan State University.
Michael S. Black has been a director of the Company since 1996. He is a partner
in the firm of Smith & Black, CPA's and Consultants, since 1988. He specializes
in the areas of corporate information systems and corporate income tax. Mr.
Black holds B.B.A degrees in Accounting and Finance from the University of
Wisconsin at Whitewater, and is a Certified Public Accountant.
No transactions in any shares of the Common Stock of the Company were
effected during the 60 days immediately preceding the date of this Proxy
Statement by the Company or by any of the persons named above.
Based upon inquiry by the Company, no executive officer, director, or
affiliate of the Company or any person listed above presently intends to tender
or sell any of the Company's Common Stock owned or held by such person, except
with respect to fractional shares of New Common Stock to be purchased by the
Company following the reverse stock split. Each of the persons has stated that
he presently intends to vote all shares of the Common Stock held by such person
and with respect to which such person holds proxies, in favor of the proposal.
None of the persons, to the Company's knowledge, has made a recommendation in
support of or opposed to the proposal, except for the recommendation in support
of the proposal made by the Board of Directors.
No officer, employee, class of employees, or corporate asset of the
Company (excluding corporate assets which are proposed to be used as
consideration for purchases of securities or payment of expenses as disclosed in
this Proxy Statement) has been or is proposed to be employed by the Company or
any affiliate in connection with the proposed reverse stock split as described
in this Proxy Statement.
<PAGE>
No person has been employed, retained, or is to be compensated by the
Company, or by any person on behalf of the Company, to make solicitations or
recommendations in connection with the proposed reverse stock split described in
this Proxy Statement.
There are no contracts, arrangements, understandings, or relationships
between the Company or the persons listed above and any other person in
connection with the proposed reverse stock split concerning the transfer or
voting of the Company's Common Stock, joint ventures, loan or option
arrangements, puts or calls, guaranties, or the giving or withholding of
proxies, consents, or other authorizations with the exception of the agreement
disclosed below:
Approximately 85% of the outstanding shares of the Company's common stock
are restricted as to transfer or sale by a shareholders agreement which was
signed in 1986. The shareholders agreement contains provisions which require the
following: (i) all decisions required to be made under the agreement shall be
made by a majority vote, with each shareholder having one vote for each share
owned by the shareholder; (ii) no shareholder may sell or transfer any of his or
her shares except in the proportion in which all of the shareholders sell or
transfer their shares; and (iii) all of the shares covered by the shareholders
agreement shall be voted as a block at all meetings of the shareholders of the
Company. The block of shares covered by the shareholders agreement will be voted
in favor of the Proposed Amendment.
THE COMPANY'S COMMON STOCK
As of May 31, 1999, 14,100,000 shares of the Common Stock were outstanding
and held of record by approximately 947 persons. The Common Stock of the Company
is traded in the Emerging Company Marketplace of the American Stock Exchange:
symbol "PRO.EC".
The following are the high and low prices of the Company's Common Stock as
published by the American Stock Exchange Emerging Company Marketplace:
QUARTER ENDED HIGH CLOSE LOW CLOSE
JULY 31, 1997 1 7/16 15/16
OCTOBER 31, 1997 1 3/16 3/4
JANUARY 31, 1998 1 3/16 3/4
APRIL 30, 1998 1 3/8 15/16
JULY 31, 1998 1 1/16 3/4
OCTOBER 31, 1998 15/16 11/16
JANUARY 31, 1999 3/4 9/16
APRIL 30, 1999 13/16 7/16
The Company has never paid cash dividends on its common Stock. Payment of
dividends on Common Stock is within the discretion of the Board and will depend,
among other factors, on earnings, capital requirements, and the operating
financial condition of the Company.
Neither the Company nor any of its affiliates has purchased any of the
securities of the Company since the commencement of the Company's second full
fiscal year preceding the date of this Statement, with the exception of the
following transaction: Mr. William T. Evans, President, Chief Executive Officer,
Director, and Controlling Person, purchased 10,000 shares of Common Stock in an
open market transaction on February 6, 1997 at a price of $1.25 per share.
<PAGE>
TERMS OF THE PROPOSED
REVERSE STOCK SPLIT
The Company proposes, subject to stockholder approval, to decrease the
number of shares of Common Stock outstanding by means of a reverse stock split
in the ratio of 10,000 shares of Old Common Stock to 1 share of New Common
Stock. The par value of the New Common Stock would be adjusted accordingly from
$.01 per share to $100.00 per share. If the proposal is approved by the
stockholders, as a result of the reverse stock split, the total authorized
shares of Common Stock will be reduced from 30,000,000 shares to 3,000 shares.
Following the reverse stock split, no fractional shares will be
authorized, and any fractional shares will be purchased from holders thereof at
the rate of $6,500 per share of New Common Stock. All holders of Common Stock
will be treated identically in connection with the reverse stock split, in that
all fractional shares of New Common Stock will be purchased at the rate of
$6,500 per share of New Common Stock.
Following the reverse stock split and purchase of resulting fractional
shares of New Common Stock, it is expected that the number of shareholders of
the Company's Common Stock will be reduced from approximately 947 (as of March
26, 1999) to less than 50. As a result of the reduction in number of
shareholders to less than 300, the Company intends to suspend its obligation to
file periodic reports with the SEC pursuant to section 15(d) of the Exchange Act
of 1934.
COSTS OF THE TRANSACTION
The following is a statement of all expenses incurred or estimated to be
incurred in connection with the going private transaction. The Company will be
responsible for paying any and all of such expenses.
Filing Fees $ 130
Legal Fees 25,000
Appraisal Fees 15,000
Solicitation Expense 5,000
Printing Costs 2,500
Total $ 47,630
All of the foregoing expenses, as well as the purchase price of fractional
shares of New Common Stock, will be paid from the available funds of the
Company.
ANTICIPATED APPROVAL OF THE
PROPOSED AMENDMENT
It is expected that the owners of more than the necessary majority of the
shares of Common Stock entitled to vote on the Proposed Amendment (including,
without limitation, all shares owned by the person listed on Exhibit 1 and any
shares controlled by them) will vote in favor of such amendment, and,
accordingly that such amendment will receive the necessary approval from the
stockholders entitle to vote on the question. Upon receipt of stockholder
approval, the Company expects to move quickly to implement the Proposed
Amendment and the reverse stock split authorized by such amendment.
<PAGE>
PROCEDURAL ISSUES OF
REVERSE STOCK SPLIT
Upon approval of the Proposed Amendment, each 10,000 shares of Old Common
Stock will be converted into 1 share of New Common Stock. Fractional shares of
New Common Stock will not be issued as a result of the reverse stock split.
Holders of Old Common Stock otherwise entitled to a fractional share of New
Common Stock following the reverse stock split will be paid cash in lieu of such
fractional shares at a Purchase Price equal to $6,500 per whole share of New
Common Stock. The reverse stock split will be come effective upon the filing of
the Certificate of Amendment to the Company's Certificate of Incorporation with
the Nevada Secretary of State. The filing of the Certificate of Amendment will
occur as soon as practicable on or after the approval of the Proposed Amendment.
The conversion of shares of Old Common Stock into New Common Stock will
occur upon the filing of the Certificate of Amendment with the Secretary of
State. As soon as practicable after such filing, each holder of Old Common Stock
will receive a letter of transmittal containing instructions for the surrender
of certificates representing shares of Old Common Stock in exchange for shares
of New Common Stock and cash (in the case of fractional shares of New Common
Stock) for which the shares represented by the certificates so surrendered are
exchangeable pursuant to the reverse stock split.
FOLLOWING THE REVERSE STOCK SPLIT, STOCKHOLDERS WILL RECEIVE, BY MAIL,
LETTERS OF TRANSMITTAL WITH WHICH STOCK CERTIFICATES FOR OLD COMMON STOCK SHOULD
BE RETURNED. STOCKHOLDERS SHOULD, THEREFORE, NOT SEND STOCK CERTIFICATES WITH
THEIR PROXY CARDS. STOCKHOLDERS OF THE COMPANY SHOULD NOT FORWARD THEIR STOCK
CERTIFICATES FOR EXCHANGE UNTIL THEY HAVE RECEIVED THE LETTER OF TRANSMITTAL.
TREATMENT OF STOCK OPTIONS UNDER
THE COMPANY'S OPTION PLAN
The Company has in place an incentive stock option plan (the "Plan"). The
maximum number of shares of common stock reserved for issuance under the Plan is
5,000,000, with the Board of Directors having the authority to grant such
options. As of October 31, 1998, options to purchase an aggregate of 1,296,000
shares of common stock were outstanding.
Outstanding options will be subject to the same treatment as outstanding
shares of common stock in regard to the proposed reverse stock split and
purchase of fractional shares: the options will be split in the ratio of 10,000
shares of Old Common Stock to 1 share of New Common Stock. Option certificates
will be reissued showing the adjusted number of option shares and the adjusted
exercise price, with all other provisions remaining unchanged. Option holders
will be paid cash for fractional option shares created by the reverse split,
based upon the difference between each option holder's exercise price and the
fair value established herein for the Old Common Stock, which is $0.65. Option
holders whose exercise price is greater than $0.65 will receive new option
certificates but no compensation for fractional shares created by the
transaction. The cost of redeeming such fractional option shares is estimated to
be $8,000.
FINANCIAL INFORMATION
Audited financial statements for fiscal years 1998 and 1997 filed with the
Company's most recent Annual Report on Form 10-KSB and the interim financial
statements for the quarter ending April 30, 1999, reported on Form 10-QSB under
Sections 13 and 15(d) of the Securities Exchange Act of 1934 are being delivered
with this document.
<PAGE>
The ratio of earnings to fixed charges for the fiscal years ending October
31, 1998 and 1997, was 4.34 and 1.91, respectively. The ratio of earnings to
fixed charges for the interim period ending April 30, 1999, was 9.53.
The book value per share as of the fiscal year ended October 31, 1998, was
$0.41.
Pro forma data disclosing the effect of the reverse stock split and
buyback of fractional shares on (1) the Company's balance sheets as of the most
recent fiscal year end and quarter end are attached as Exhibits 4 and 5; and (2)
the Company's statements of income and earnings per share amounts for the most
recent fiscal year end and quarter end are attached as Exhibits 6 and 7.
The Company's book value per share as of April 30, 1999, and October 31,
1998, taking into account the effect of the reverse stock split and buyback of
fractional shares was $4,338.93 and $3,945.80, respectively, per share of New
Common Stock.
LIST OF EXHIBITS
1. Identity and Background of Directors, Executive Officers, and Controlling
Persons of the Company.(1)
2. Proposed Amendment to the Company's Certificate of Incorporation.(1)
3. Fairness Opinion of Economic and Financial Consulting Group, Inc.(1)
4. Pro Forma Consolidated Balance Sheet as of October 31, 1998 and Notes.
(filed herewith)
5. Pro Forma Consolidated Balance Sheet as of April 30, 1999 and Notes.
(filed herewith)
6. Pro Forma Consolidated Statement of Income for the year ended October 31,
1998 and Notes. (filed herewith)
7. Pro Forma Consolidated Statement of Income for the quarter ended April 30,
1999 and Notes. (filed herewith)
8. Nevada Revised Statutes, Title 7, Chapter 92A.300 - 92A.500 (Dissenters'
Rights).(1)
9. Accountants' Reports.(2)
10. Form of Shareholders' Agreement. (filed herewith)
(1) Incorporated by reference from Registrant's Preliminary Proxy Statement on
Schedule 14A, filed April 22, 1999.
(2) Incorporated by reference from Registrant's Annual Report on Form 10-KSB,
filed January 29, 1999.
<PAGE>
1) PROPOSED AMENDMENT:_________FOR the amendment __________AGAINST the amendment
listed below listed below
A proposed amendment to the Certificate of Incorporation of the Company which
would authorize the reduction of the number of authorized shares of Common Stock
from 30,000,000 to 3,000 and the increase of the par value per share of Common
Stock to $100.00 from $.01 by affecting a reverse split of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), in the ratio of 10,000
shares to 1 share.
IN RESPECT OF OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF, THIS PROXY SHALL BE VOTED AS THE BOARD OF DIRECTORS MAY
RECOMMEND.
<PAGE>
THIS PROXY MAY BE REVOKED PRIOR TO ITS EXERCISE. THE PROXY, WHEN PROPERLY
EXERCISED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE SHAREHOLDER. IF NO
DIRECTION IS MADE, THE PROXY WILL BE VOTED "FOR" PROPOSAL 1. IF OTHER MATTERS
PROPERLY COME BEFORE SAID MEETING, THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" PROPOSAL 1.
NOTE: PLEASE MARK, SIGH, DATE AND RETURN YOUR PROXY AS SOON AS POSSIBLE.
DATED:_____________________,1999
_________________________________
Signature of Shareholder
_________________________________
Signature of Shareholder
<PAGE>
<TABLE>
<CAPTION>
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
Pro Forma Consolidated Balance Sheet
October 31, 1998
Exhibit 4
IN THOUSANDS
----------------------------------------------------------
Reverse Split &
Buyback
As Reported Adjustments Pro Forma
----------------------------------------------------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,735 $ (650) 1,085
Certificates of deposit 98 98
Accounts receivable, net 2,581 2,581
Inventory 3,216 3,216
Advances to employees, officers and directors 69 69
Deferred income taxes 211 211
Other current assets 403 403
----------------------------------------------------------
Total current assets 8,313 (650) 7,663
PROPERTY AND EQUIPMENT, NET 2,731 2,731
DEFERRED INCOME TAXES 122 122
OTHER ASSETS 13 13
----------------------------------------------------------
TOTAL $ 11,179 $ (650) $ 10,529
==========================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - line of credit $ 865 $ - 865
Accounts payable - trade 1,045 1,045
Accrued payroll and payroll taxes 765 765
Accrued warranty costs 197 197
Other accrued liabilities 617 617
Current portion of long-term debt 461 461
Current portion of capital lease obligations 209 209
----------------------------------------------------------
Total current liabilities 4,159 - 4,159
LONG-TERM DEBT, NET OF CURRENT PORTION 835 835
CAPTIAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 366 366
----------------------------------------------------------
Total liabilities 5,360 - 5,360
STOCKHOLDERS' EQUITY:
Common stock, at par 141 (10) 131
Additional paid-in capital 314 314
Retained Earnings 5,364 (640) 4,724
----------------------------------------------------------
Total stockholders' equity 5,819 (650) 5,169
----------------------------------------------------------
TOTAL $ 11,179 $ (650) $ 10,529
==========================================================
Common stock book value $ 5,819,000 $ (650,000) $ 5,169,000
Number of common shares outstanding $14,148,000 (14,146,690) 1,310
Book value per share $ 0.41 $ 3,945.80
</TABLE>
<PAGE>
<TABLE>
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 30, 1999
Exhibit 5
<CAPTION>
IN THOUSANDS
-----------------------------------------------
Reverse Split &
Buyback
As Reported Adjustments Pro Forma
-----------------------------------------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,548 (650) $ 898
Certificates of deposit 209 209
Accounts recievable, net 2,523 2,523
Inventory 2,550 2,550
Advances to employees, officers and directors 70 70
Deferred income taxes 211 211
Other current assets 449 449
-----------------------------------------------
Total current assets 7,560 (650) 6,910
PROPERTY AND EQUIPMENT, NET 2,695 2,695
INVESTMENTS IN AND ADVANCES TO AFFILIATES - -
DEFERRED INCOME TAXES 122 122
OTHER ASSETS 9 9
-----------------------------------------------
TOTAL $ 10,386 $ (650) $ 9,736
===============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - line of credit $ 223 $ 223
Accounts payable - trade 1,065 1,065
Accrued payroll and payroll taxes 553 553
Accrued warranty costs 150 150
Other accrued liabilities 411 411
Current portion of long-term debt 461 461
Current portion of capital lease obligations 209 209
-----------------------------------------------
Total current liabilities 3,072 3,072
Long-Term Debt, Net of current portion 714 714
Captial Lease Obligations, Net of current portion 266 266
-----------------------------------------------
Total liabilities 4,052 4,052
STOCKHOLDERS' EQUITY:
Common stock, at par 141 (10) 131
Additional paid-in capital 316 316
Retained Earnings 5,877 (640) 5,237
-----------------------------------------------
Total stockholders' equity 6,334 (650) 5,684
TOTAL $ 10,386 $ (650) $ 9,736
===============================================
Common stock book value $6,334,000 (650,000) 5,684,000
Number of common shares outstanding 14,148,000 1,310
Book value per share $ 0.45 $ 4,338.93
</TABLE>
<PAGE>
Professional Dental Technologies, Inc.
Notes to Pro Forma Consolidated Balance Sheets
April 30, 1999 and October 31, 1998
1. Reverse Split and Buyback Adjustments:
The pro forma balance sheets reflect the reduction in cash and cash
equivalents and the decrease in stockholders' equity of $650,000 (100
shares x $6,500/share) resulting from the buyback of estimated fractional
common shares after the 1-for-10,000 reverse common stock split (100
aggregate shares) at $6,500 per share, as if the buyback occurred at
October 31, 1998.
The pro forma book value per share reflects the lower common stock book
value and the lower number of common shares outstanding after the split and
buyback.
<PAGE>
<TABLE>
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
Pro Forma Consolidated Statement of Income
For the Year Ended October 31, 1998
Exhibit 6
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE INFORMATION
-------------------------------------------------------------------
Reverse Split &
Buyback
As Reported Adjustments Pro Forma
----------------------------------------------------------
<S> <C> <C> <C>
SALES $ 27,524 $ - $ 27,524
-
COST OF GOODS SOLD 10,798 10,798
----------------------------------------------------------
Gross profit 16,726 16,726
OPERATING EXPENSES 14,978 14,978
----------------------------------------------------------
Income from operations 1,748 - 1,748
OTHER INCOME (EXPENSE):
Affiliate activity (69) (69)
Interest expense (281) (281)
Miscellaneous income (expense) 606 (29) 577
----------------------------------------------------------
INCOME BEFORE INCOME TAXES 2,004 (29) 1,975
PROVISIONS FOR INCOME TAXES 784 (11) 773
----------------------------------------------------------
NET INCOME $ 1,220 $ (18) $ 1,202
==========================================================
WEIGHTED AVERAGE OF OUTSTANDING SHARES 14,148,000 (14,146,690) 1,310
BASIC EARNINGS PER SHARE $ 0.09 $ 920.77
==========================================================
DILUTED EARNINGS PER SHARE $ 0.09 $ 920.77
==========================================================
</TABLE>
<PAGE>
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE QUARTER ENDING APRIL 30, 1999
Exhibit 7
IN THOUSANDS, EXCEPT PER SHARE INFORMATION
-------------------------------------------
Reverse Split &
Buyback
As Reported Adjustments Pro Forma
-------------------------------------------
SALES $ 7,383 $ 7,383
COST OF GOODS SOLD 3,063 3,063
-------------------------------------------
Gross profit 4,320 4,320
OPERATING EXPENSES 3,659 3,659
-------------------------------------------
Income from operations 661 661
OTHER INCOME (EXPENSE):
Affiliate activity (25) (25)
Interest expense (38) (38)
Miscellaneous income (expense) 25 (7) 18
-------------------------------------------
INCOME BEFORE INCOME TAXES 623 (7) 616
PROVISIONS FOR INCOME TAXES 245 (3) 242
-------------------------------------------
NET INCOME $ 378 $ (4) $ 362
===========================================
WEIGHTED AVERAGE OF OUTSTANDING
SHARES 14,148,000 (14,146,690) 1,310
BASIC EARNINGS PER SHARE $ 0.03 $276.34
===========================================
DILUTED EARNINGS PER SHARE $ 0.03 $276.34
===========================================
<PAGE>
Professional Dental Technologies, Inc.
Notes to Pro Forma Consolidated Statements of Income
April 30, 1999 and October 31, 1998
1. Reverse Split and Buyback Adjustments:
The pro forma statements of income reflect the reduction in interest
income, net of income taxes, to give effect to the $650,000 (100 shares
$6,500/share) reduction of cash and cash equivalents to acquire the
estimated fractional common shares outstanding after the 1-for-10,000
reverse common stock split at $6,500 per share, as if the reverse split
(100 aggregate shares) and buyback occurred at October 31, 1997.
The pro forma basic and diluted earnings per share reflect the lower net
income and the lower number of common shares outstanding after the reverse
stock split and buyback of fractional common shares at $6,500 per share.
<PAGE>
Exhibit 10joan
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
SHAREHOLDERS AGREEMENT
This Agreement is made and entered into the ____ day of _________, 1991 by
and among E. P. BARRY, not personally but solely as Trustee of AMERICAN
INVESTMENTS, TIMOTHY A. NOLAN, not personally but solely as Trustee of CREATIVE
MANAGEMENT, ROBERT E. CHRISTIAN, DWIGHT L. MCKEE, ALICE L. SWISHER, not
personally, but solely as Trustee of RASPBERRY INVESTMENTS, ALICE L. SWISHER,
not personally but solely as Trustee of SOUTHWEST INVESTMENTS, and TERENCE A.
NOLAN, not personally, but solely as Trustee of SHAMROCK INVESTMENTS, MARION
PETER ROY, JR., not personally but solely as Trustee of GERTRUDE HAYDEL TRUST
NO. 1, and CATHERINE HALBERG, not personally, but solely as Trustee of
TECHNOLOGY ENTERPRISES TRUST (each as a "Shareholder" and as the
"Shareholders").
The Shareholders own a majority of the issued and outstanding shares of
PROFESSIONAL DENTAL TECHNOLOGIES, INC., a Nevada corporation (respectively, the
"Shares" and the "Company").
In order to assure the continued harmonious management of the affairs of
the Company, the parties desire to enter into certain agreements placing
limitations on disposition of the Shares and providing for various matters of
corporate governance and relations among the Shareholders.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto hereby agree as follows:
1. VOTING. All decisions required to be made under this Agreement
shall be made by a majority vote with each Shareholder having one vote for each
Share which he owns.
2. DISPOSITION OF SHARES. Except to the extent that the Shareholders
may otherwise agree in writing, no Shareholder shall sell or transfer any of his
Shares except in the proportion in which all of the Shareholders sell or
transfer their Shares and except that any Shareholder which is a trust may
transfer the Shares held by such trust to the beneficiary or beneficiaries of
such trust or to any person who is a proper appointee pursuant to the exercise
of a power of appointment providing that the person or persons to whom such
Shares are so distributed become a party to this Agreement.
3. SHAREHOLDERS MEETINGS. All of the Shares shall be voted as a block
at all meetings of the Shareholders of the Company and with respect to any
matters requiring a vote of the Shareholders which are voted upon outside a
meeting of Shareholders.
4. MISCELLANEOUS.
(a) WAIVER OF TERMS. Any of the terms or conditions of this
Agreement may be waived at any time by the party which is entitled to the
benefit thereof, but only by written notice signed by the party waiving such
terms or conditions.
<PAGE>
(b) AMENDMENT OF AGREEMENT. This Agreement may be amended,
supplemented or modified at any time only by written instrument duly executed by
a majority of the Shareholders (by share ownership).
(c) CONTENTS OF AGREEMENT; PARTIES; BENEFIT. This Agreement sets
forth the entire understanding of the parties with respect to the subject matter
hereof. Any previous agreements or understandings between the parties regarding
the subject matter hereof are merged into and superseded by this Agreement. All
representations, warranties, covenants, terms and conditions of this Agreement
shall be binding upon and shall inure to the benefit of and be enforceable by
the heirs, legal representatives, successors and assigns of the parties hereto.
(e) GOVERNING LAW. This Agreement and the legal relations between
the parties shall be governed by and construed and enforced in accordance with
the laws of the State of Arkansas.
(f) NOTICES. Any notice or other communication required or
permitted hereunder shall be sufficiently given if delivered personally or sent
by registered or certified mail, postage prepaid, return receipt requested, or
by Federal Express or other recognized courier service as follows:
[Name of Shareholder]
c/o Professional Dental Technologies, Inc.
633 Lawrence
Batesville, Arkansas 72501
or to any such other person or address as shall be furnished in writing by any
party, and any such notice or communication shall be deemed to have been given
as of the date personally delivered, one (1) business day after it is delivered
to a recognized courier service or five (5) days following the date mailed.
(g) COUNTERPARTS. This Agreement may be executed in any one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be considered one and the same agreement.
(h) LIABILITY OF TRUSTEE. This Agreement, to the extent executed by
a trustee, is executed to the extent shown on the signature lines show below,
not personally but solely as trustee in the exercise and under the power of
authority conferred upon him and it is expressly understood and agreed that
nothing herein contained shall be construed as creating any liability on any
trustee to the extent signed in such capacity, personally to pay any amount
required to be paid hereunder, or to perform any covenant, express or implied,
contained herein. All such liability, if any, being expressly waived by all of
the other parties hereto.
2
<PAGE>
(i) LEGEND. The certificates representing the Shares shall be
endorsed as follows:
"The shares represented by this Certificate are subject to the
terms, conditions and options contained in a certain Shareholders
Agreement and notice is hereby given that the shares represented by
this Certificate may only be dealt with as provided therein and that
said shares and any sale thereof are subject to the terms,
conditions and options contained in said Shareholders Agreement, a
copy of which is on file at the office of the Company and shall be
furnished on request to any Shareholder."
Notwithstanding such endorsement, the owners thereof shall, subject to the terms
of this Agreement, be entitled to exercise all rights of ownership of their
shares. All of the stock of the Company hereafter issued which is subject to the
terms of this Agreement, shall bear the same endorsement.
(j) EQUITABLE REMEDIES. Each of the Shareholders acknowledges that
his or its breach or violation of any of the provisions hereof will result in
immediate and irreparable damage to the other shareholders. Each Shareholder
also acknowledges that the other Shareholders will have no adequate remedy at
law for such breach or violation and in such event, the other Shareholders or
any of them, shall be entitled to injunctive relief in addition to any other
rights and remedies to which they, or any of them, may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement on the date first above written.
______________________________
3