<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1996, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to .
Commission File No. 0-19195
AMERICAN DENTAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 38-2905258
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
28411 Northwestern Highway, Suite 1100, Southfield, Michigan 48034
(Address of principal executive offices)(Zip Code)
(810) 353-5300
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each Class Name of Exchange on which registered
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
(Title of Class)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant was approximately $23,158,000 as of March 13,
1997, based upon the last sales price reported on The Nasdaq Stock Market's
SmallCap Market on that date. For purposes of this calculation only, all
directors, executive officers and owners of more than five percent of
registrant's common stock are assumed to be affiliates. There were 27,790,757
shares of the registrant's Common Stock issued and outstanding on March 13,
1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrants' Proxy Statement for its 1997 Annual Meeting of
Stockholders are incorporated by reference into Part III of this report on
Form 10-K
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PART I
ITEM 1. GENERAL DESCRIPTION OF BUSINESS
INTRODUCTION
American Dental Technologies, Inc. ("ADT" or "Company") develops,
manufactures and markets high technology dental products designed for general
dentistry. ADT's primary products are air abrasive kinetic cavity preparation
systems ("KCP") and pulsed dental lasers, primarily the PulseMaster models.
ADT also develops, manufactures and markets precision air abrasive jet
machining ("AJM") systems for industrial applications.
ADT was incorporated in November 1989 as a Delaware corporation and is the
successor by merger in January 1990 to several related companies formed between
1986 and 1988 to develop and commercialize a low power pulsed dental laser
based on research by two of ADT's founders. ADT completed an initial public
offering in June 1991 and acquired laser manufacturing and research and
development capabilities after acquiring Incisive Technologies, Inc.
("Incisive") in December 1993. ADT develops and manufactures the KCP and
PulseMaster products at its own modern manufacturing facility located in Corpus
Christi, Texas.
Since 1992, ADT had been acquiring manufacturing rights, patents, patent
applications and other proprietary rights relating to air abrasive technology
in dentistry from Texas Airsonics, Inc. ("Texas Air"), its exclusive supplier
of the KCP. Texas Air developed and manufactured air abrasive products for
dental and industrial manufacturing markets. On July 31, 1996, ADT acquired
Texas Air and on December 31, 1996, merged Texas Air into ADT. The acquisition
of Texas Air is described in more detail under "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Business Combination" and in Note 2 to the Notes to Consolidated Financial
Statements.
PRODUCTS
KCP Cavity Preparation Systems
The KCP 1000 "whisperjet" cavity preparation system is ADT's primary air
abrasive product. ADT currently offers four KCP product models, including the
table-top KCP 10 "PrepJet", the KCP100, the KCP1000 and the KCP1000 PAC. ADT's
KCP products remove tooth decay and tooth structure, including enamel, by means
of a narrow stream of minute particles of alpha alumina propelled at high
velocity by compressed air and delivered to the tooth via a lightweight
handpiece. The KCP shapes restoration sites, removes old composites and
modifies underlying hard tissue, often helping to increase bond strength. It
is also used for sealant preparations, stain removal and intraoral porcelain
removal and repair. The KCP can often be used in place of a drill and may be
used in many cases without anesthesia. The dentist controls the cutting speed
by selecting particle size (27 or 50 micron) and air pressure (40 psi to 160
psi) with touch pads on a control panel. The air abrasive stream is activated
by a foot pedal. The KCP floor models are contained in a movable cabinet the
size of a medium suitcase and plug into a standard electrical outlet.
The KCP is best used in conjunction with modern tooth-colored composite
restoration materials. It is not recommended for removing large amalgam
fillings. The precision of the KCP and the manner in which it prepares
surfaces for restorations allow for earlier treatment of decay and less
destruction of the tooth while restoring it. In many cases, the KCP may be
used without anesthesia, allowing a dentist to treat teeth in different
quadrants of the mouth during a single visit. This is generally not possible
when conventional instruments and anesthesia are used.
ADT also markets a Plasma Arc Curing System ("PAC") as an accessory to its
KCP and as a stand alone unit. The PAC utilizes a high intensity light source
to rapidly cure composite fillings. Curing occurs in five to ten seconds, or
at least twice as fast as most conventional curing lights. The KCP1000 PAC
combines an air abrasive cavity preparation system together with a composite
curing light in a single instrument. This allows dentists to efficiently
switch from cavity preparation to curing.
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The KCP is sold primarily in the United States, certain Asian and Pacific
markets and Europe. The KCP represented approximately 67%, 49% and 31% of
ADT's total revenues in 1996, 1995 and 1994, respectively.
Nd:YAG Dental Lasers
PulseMaster - The PulseMaster is ADT's primary laser product line.
PulseMasters are neodymium yttrium-aluminum-garnet (Nd:YAG) lasers that deliver
pulses of laser energy through a flexible fiber optic delivery system that can
reach into difficult recesses of the mouth. Depending upon the model,
PulseMasters can deliver a 100-microsecond energy pulse at rates varying from
10 to 200 times per second. Various models deliver a maximum of up to three,
six and ten watts of average power. Each PulseMaster is contained in a movable
cabinet the size of a medium suitcase, weighs approximately 85 pounds and plugs
into a standard electrical outlet.
ADT's dental lasers, components and accessories are sold primarily in
certain Asian and Pacific markets, Europe and the United States. Lasers
represented approximately 26%, 47% and 46% of ADT's total revenues during 1996,
1995 and 1994, respectively.
ADT believes one important feature of its Nd:YAG dental lasers is their
ability to help reduce the pain associated with the procedures for which they
are used. Additionally, because the laser is more precise than standard dental
instruments, its use results in less cellular destruction. The laser minimizes
bleeding during soft tissue surgery, creating a cleaner field in which to
operate by eliminating time-consuming removal of blood from the operative site.
The laser also reduces the risk of post-operative infection.
ADT's dental lasers are used for both soft tissue and hard tissue
applications. Soft tissue procedures include removing excess or diseased gum
tissue, contouring gums, performing biopsies, preparing gums for crown and
bridge impressions, trimming the gums to fit crowns and bridges, treating gum
disease and for hemostasis (control of bleeding). Hard tissue applications
include removing early decay from teeth, etching, removing stains, increasing
hardness of dentin, and desensitizing and anesthetizing teeth. ADT has not
received clearance from the U.S. Food & Drug Administration ("FDA") to market
dental lasers in the United States for any hard tissue application, but does
market these instruments in certain other countries for such purposes. See
"Governmental Regulation."
Industrial Products
As a result of the acquisition of Texas Air, ADT now develops,
manufactures and markets precision air abrasive jet machining ("AJM") systems
for industrial applications. AJM has a wide range of applications, including
drilling, cutting, abrading, deburring, dressing, beveling, etching, shaping
and polishing. Its principal advantage over conventional machining is that the
AJM process, which accomplishes its work through kinetic particle displacement
(an erosion process), produces no heat, shock or vibration. This enables
precise work to be done on fragile materials without deburring or further
processing. Generally, the same is not true of drills, saws, laser or other
types of conventional machining equipment because all of these systems rely on
heat and/or friction to perform the work. These machining techniques generally
require further processing and in many instances do not provide the precision
available with AJM, particularly with fragile materials. AJM systems are often
used to remove the slag, burrs and flash resulting from conventional machining
processes. Some examples include deburring needles, beveling silicon wafers
and cutting fiber optics.
Industrial products accounted for less than five percent of ADT's total
revenues in 1996.
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MARKETING, SALES AND TRAINING
General
ADT markets its dental products to both general dental practitioners and
certain dental specialists primarily through independent distributors and, to a
lesser extent, through its own direct sales force. Primary markets have been
and are expected to be the United States, certain Asian and Pacific markets and
Europe.
Since July 1993, Patterson has been ADT's primary United States
distributor of the KCP. With 82 offices coast to coast, Patterson is the
largest dental distributor in the United States. During 1996, ADT established
relationships with other United States dental products distributors, including
Benco Dental Company and Henry Schein, Inc. Distributors use their
distribution networks to provide sales leads, shipping, installation and
technical service support for the KCP. ADT and its distributors work
cooperatively to develop prospects and close sales.
Since June 1993, ADT's products have been marketed in Japan and certain
other Asian and Pacific markets by Denics or its affiliates. In late 1996, ADT
and Denics entered into a joint venture agreement to distribute and market
dental products for ten years in certain Asian and Pacific markets, beginning
in April 1997. ADT will manage the joint venture and will supply products to
the joint venture at ADT's manufactured cost, plus ten percent. Capital will
be contributed to the joint venture equally and profits and cash distributions,
if any, will be shared equally. Denics will continue to exclusively market
ADT's products in Japan and to date has purchase commitments of approximately
$1,600,000 for 1997.
ADT's products are marketed in Europe through dental distribution groups
in various countries. In the Company's primary European market, Germany, ADT
utilizes two major distribution groups, Dental Liga GmbH ("Dental Liga") and
Orbis High Tech Dental GmbH ("OHT"). Dental Liga and OHT together purchased
approximately $2,700,000 of product from ADT during 1996.
The loss of ADT's relationship with any of its dental product distributors
or their failure to meet purchase commitments, could have a material adverse
effect on ADT's business.
ADT presently has several industrial product distributors. Such
distributors have been and are anticipated to be the primary source of sales
for ADT's industrial products in the future. Industrial product distributors
are supported by ADT primarily through advertising in the Thomas Register and
trade journals, and participation in trade shows.
ADT also sells some industrial products directly to customers through
advertisements or customer referrals and through original equipment
manufacturers of grinding equipment who purchase AJM systems to incorporate
into their equipment.
Installation, Training and Service
Because ADT's dental products represent new approaches to dentistry,
installation and training are considered to be significant aspects of its
marketing efforts. Shortly after any purchase, ADT, or the selling distributor,
installs the product, verifies that it is in proper working order and provides
training. ADT also encourages each purchaser to participate in ongoing
continuing education regarding the use of ADT's dental products and endeavors
to share new developments as soon as reliable scientific support has been
established.
ADT or its distributors generally provide warranty service for ADT's
products in the United States. To service its dental products, ADT has two
full-time service employees in the United States. It also has service
arrangements with independent distributors and equipment repair companies for
products in other markets. If such arrangements are unavailable, certain of
ADT's sales personnel
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are trained to make minor service repairs. To date, ADT has not experienced
significant service problems. Generally, the warranty for lasers is one year
on the dental laser system and 60 days on the optic fiber. Generally, the
warranty for a KCP or a PAC is one year. ADT provides a limited five year
warranty that a PAC will deliver full curing energy in the calibrated time of
ten seconds or less.
Support of Educational Activities
Because ADT's dental products represent new approaches to dentistry, ADT
believes a substantial effort is required to educate dentists regarding the
advantages of its technology. ADT actively supports educational activities
relating to the use of its products.
Dr. Terry Myers, ADT's Senior Vice President - Dental Division, is the
executive director of The Institute for Advanced Dental Technologies, formerly
The Institute for Laser Dentistry (the "Institute"). The Institute was
originally founded to advance the professional understanding of laser
dentistry. Under the auspices of the Institute, Dr. Myers lectures at dental
meetings and institutions throughout the world and publishes professional
papers and articles. The Institute also supervises the training of clinical
instructors, provides clinical instructors to lead educational programs and
evaluates developments in dental technology.
Important educational activities include the Institute's clinical training
seminars on the fundamentals of laser dentistry, educational courses on air
abrasive cavity preparation and enamel and dentin modification, and regional
continuing education programs on both dental laser and air abrasive
technologies. Generally the programs are open to any interested dental
professional, taught by practicing dentists and others qualified by the
Institute as instructors and held either in the instructors' dental offices or
at a local hotel. Programs may last as long as two and one-half days or just
for an evening. At a laser seminar, the instructor lectures on laser physics,
tissue interaction and safety, clinical applications and limitations, and
demonstrates clinical procedures that the individual clinical instructor
selects. At an air abrasive course, the instructor lectures on the advantages,
clinical applications and limitations of air abrasive technology in operative
dentistry, and demonstrates clinical procedures using the KCP. ADT supports
these programs by providing financial support to the Institute, soliciting
enrollments and assisting in the preparation of course materials. Following
the completion of the program, an ADT sales representative is typically
available to answer questions concerning ADT's products.
Another important activity is the Institute's involvement in the
formulation and adoption of nationally and internationally recognized dental
laser educational standards. The Institute works closely with the Academy of
Laser Dentistry (the "Academy"), a non-profit professional organization for the
advancement of dental lasers. The Institute is one of the few organizations
recognized by the Academy as qualified to conduct dental laser educational
courses recommended by the Academy.
The Institute is also designated as a nationally approved sponsor by the
Academy of General Dentistry. The formal continuing education programs of the
Institute are accepted by the Academy of General Dentistry for
Fellowship/Mastership credit. The current term of approval extends to December
31, 1999. In addition, the Institute is an American Dental Association
Continuing Education Recognition Program recognized provider.
COMPETITION
In general, ADT's products are subject to intense competition, both from
other advanced dental technology companies and from makers of conventional
dental equipment. ADT believes there are approximately five companies which
presently sell competing dental air abrasive products and several other
companies have announced plans to market dental air abrasive systems. ADT
believes there are approximately eight competing companies which presently
offer Nd:YAG, argon, erbium, holmium or CO2 lasers for use in dentistry. To
the best of the Company's knowledge, ADT's dental air abrasive and dental laser
revenues exceeded those of each of these competitors for 1996.
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ADT's KCP, PAC and PulseMaster products must also compete with
conventional treatment methods using dental instruments or equipment which are
generally less expensive and with which dentists are more familiar. In the
industrial field, there are numerous companies which produce AJM equipment.
Many of these competing manufacturers and suppliers may have been in
business longer, have greater resources and/or have a larger distribution
network than ADT. ADT's competitive position is dependent upon its pricing and
marketing practices, its ability to make ongoing improvements in its existing
products, to develop new products, and to successfully promote the capabilities
and treatment benefits of its products. While ADT believes its products are
competitive in terms of capabilities, quality and price, competition has, and
may in the future, adversely affect ADT's business.
PATENTS
ADT believes its patents provide a competitive advantage in those
countries where they have been issued. ADT believes its air abrasive
technology patents and other patent rights provide a proprietary means to
utilize that technology in dentistry. In the United States, ADT has method
patents covering the majority of dental applications for which pulsed lasers
are used. For patents in force or applications on file on or before June 8,
1995, the initial life of each patent is 17 years. For applications filed
after June 8, 1995, the initial term of any patent issued is 20 years from the
first effective filing date of the application.
KCP
ADT owns the following United States patents related to dental air
abrasive systems and methods for using an air abrasive stream for dentistry
like that employed in the KCP cavity preparation system.
<TABLE>
<CAPTION>
Description Patent Number Issue Date
----------- ------------- ----------
<S> <C> <C>
Method for preparing tooth structure for bonding 5,275,561 1/01/94
Dental treatment system 5,330,354 7/19/94
Combination dental air abrasive and laser system 5,334,016 8/02/94
Dental air abrasive system 5,334,019 8/02/94
Dental treatment system 5,350,299 9/27/94
Servo valve for air abrasive system 5,525,058 6/11/96
</TABLE>
ADT also owns the exclusive rights to several United States patents
covering proprietary technology which may be utilized in dental air abrasive
cavity preparation systems as listed below.
<TABLE>
<CAPTION>
Description Patent Number Issue Date
----------- ------------- ----------
<S> <C> <C>
Tube flow shut-off 4,635,897 01/13/87
Particle feed device with reserve supply 4,708,534 11/24/87
Abrasive jet machining 4,733,503 03/29/88
Abrasive jet machining 4,893,440 01/16/90
</TABLE>
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Laser
ADT owns the following United States patents related to dental lasers.
These patents cover methods of performing dental procedures with a pulsed
laser, dental laser assembly systems, and a disposable dental laser handpiece.
<TABLE>
<CAPTION>
Description Patent Number Issue Date
----------- ------------- ----------
<S> <C> <C>
Removing stains and incipient carious lesions (decay) 4,521,194 06/04/85
Removing tooth decay and removing intraoral soft tissue 4,818,230 04/04/89
Performing root canal and apicoectomy procedures 4,940,411 07/10/90
Desensitizing and anesthetizing teeth 5,055,048 10/08/91
Etching dentin 5,122,060 06/16/92
Etching enamel 5,123,845 06/23/92
Sealing openings in roots of teeth 5,180,304 01/19/93
Dual dental laser assembly 5,207,576 05/04/93
Disposable dental laser handpiece 5,228,852 07/20/93
Sterilizing and closing accessory tooth canals 5,232,367 08/03/93
Holmium and Erbium doped lasers for dentistry 5,257,935 11/02/93
Merging hydroxyapitite to teeth or bone 5,275,564 01/04/94
Erbium doped YAG laser delivery system 5,310,344 05/10/94
Enlarging and shaping a root canal 5,324,200 06/28/94
Holmium and Erbium doped lasers for dentistry 5,342,198 08/30/94
Intracavity modulated pulsed laser with a variable
controllable modulation frequency 5,390,204 02/14/95
Dual wave length dental laser 5,507,739 04/16/96
</TABLE>
ADT has Australian and Canadian patents that cover holmium and erbium
doped lasers with wavelengths between two and three microns.
Industrial Patents
ADT owns or is licensed to use several United States and international
patents related to AJM. The technology covered by the patents allows ADT's
industrial products to (i) provide a consistent abrasive powder flow; (ii)
precisely adjust powder flow independently of air volume; (iii) consistently
allow for a wide range of abrasive powder sizes; (iv) use smaller orifices than
other existing AJM technology; or (v) work at lower and higher pressures than
other AJM technology. These patents are listed below.
United States Patents
<TABLE>
<CAPTION>
Description Patent Number Issue Date
----------- ------------- ----------
<S> <C> <C>
System for storing and feeding abrasive 4,708,534 11/24/87
High pressure abrasive jet unit 4,733,503 03/29/88
Abrasive jet machining 4,893,440 01/16/90
Dental air abrasive system 5,330,354 07/19/94
Dental air abrasive system 5,350,299 09/27/94
Servo valve for air abrasive system 5,525,058 06/11/96
International Patents
<CAPTION>
Description Patent Number Issue Date
----------- ------------- ----------
<S> <C> <C>
Helical particle feed (Canada ) 1,213,144 10/28/86
Pinch tube shut-off device (Canada ) 1,216,272 01/06/87
System for storing and feeding abrasive (Great Britain) 2,145,389 10/28/87
System for storing and feeding abrasive (Canada) 1,229,984 12/08/87
System for storing and feeding abrasive (France) 84 13194 03/16/90
System for storing and feeding abrasive (Japan) 1,571,789 07/25/90
High pressure abrasive jet unit (Canada) 1,277,837 12/18/90
High pressure abrasive jet unit (France) 306,492 09/22/93
High pressure abrasive jet unit (Germany) 3787529.9 09/22/93
</TABLE>
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SUPPLIERS AND MANUFACTURING
ADT manufactures, assembles and services its products at its Company owned
facility in Corpus Christi, Texas. ADT has modern machining operation
capability allowing it to control the production of certain non-standard parts.
ADT's products are manufactured from parts, components and subassemblies
obtained from a number of unaffiliated suppliers and/or fabricated internally
at its manufacturing facility. ADT uses numerous suppliers for standard off
the shelf parts and for fabrication of certain parts. Although most of the
parts and components used in its products are available from multiple sources,
ADT presently obtains several parts and components from single sources. Lack
of availability of certain parts and components could result in production
delays. While the loss of ADT's relationship with a particular supplier might
result in some production delays, it should not materially affect ADT's
business.
RESEARCH AND DEVELOPMENT
Most research and development, prototype production, and testing
activities take place at the Texas facility, although some research and
development work is performed for ADT by consultants. Basic research and
development related to ADT's dental products had in the past been performed by
suppliers under agreements with ADT and was partially funded by ADT. The
Incisive and Texas Air acquisitions provided ADT direct research and
development capabilities. The Texas facility has an engineering and CAD/CAM
drafting staff and is expected to manufacture ADT's prototype requirements.
Generally, ADT expects to conduct its own research and development activities.
ADT will continue to work with various domestic and international dental
schools, consultants and researchers to analyze dental applications and to
develop product enhancements and complimentary products.
ADT's research and development expenditures for 1996, 1995 and 1994 were
$668,796, $784,319 and $1,194,468, respectively. ADT's current research and
development efforts are focused on new and expanded applications for the laser
and KCP in dentistry, enhanced laser technology, and potential complimentary
products for the dental market.
GOVERNMENTAL REGULATION
ADT's dental products are subject to significant governmental regulation
in the United States and certain other countries. In order to conduct clinical
tests and to market products for therapeutic use, ADT must comply with
procedures and standards established by the FDA and comparable state and
foreign regulatory agencies. Changes in existing regulations or adoption of
additional regulations may adversely affect ADT's ability to market its
existing products or to market enhanced or new dental products.
United States Regulatory Requirements
The FDA grants clearance to market through two methods. One method is a
pre-market notification filing under Section 510(k) of the Food, Drug and
Cosmetic Act (the "Act"), in which applicants must prove that the device for
which clearance is sought is substantially equivalent to devices already
cleared by the FDA or devices in the market prior to enactment of the Medical
Device Amendments Act of 1976. A 510(k) clearance, if granted, commonly
requires about 180 days.
The other method of clearance is a pre-market approval ("PMA"). Under the
PMA method, the applicant normally must obtain an Investigational Device
Exemption ("IDE") or a waiver thereof before beginning the substantial clinical
testing on humans required to establish the safety and efficacy of the product.
Obtaining a PMA may take several years or may never be granted.
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The Act also regulates the labeling, manufacturing practices, record
keeping and reporting of manufacturers and sellers of products subject to it.
The regulation of labeling extends to any promotional activities sponsored, or
marketing materials distributed, by or on behalf of the manufacturer or seller.
Generally, such regulation does not extend to legitimate scientific inquiry or
education, even if assisted by a manufacturer or seller. The distinction
between labeling under the Act and inquiry or education is often difficult to
determine. ADT believes it is in compliance with the Act. A determination by
the FDA that a manufacturer or seller is in violation of the Act may result in
administrative, civil, or criminal actions against it. Such actions, if
successful, may result in an agreement or order terminating applications,
delays in the processing of pending IDE, 510(k) and PMA applications, as well
as fines and civil penalties.
ADT is also subject to regulation under the Radiation Control for Health
and Safety Act administered by the FDA, which requires various warning labels
on each laser sold to an end-user. The FDA is empowered to seek fines and
other remedies for violations of the regulatory requirements.
FDA clearance to market the KCP for hard-tissue applications was granted
under a 510(k) application in late 1992. Since the instrument is intended only
for hard tissue procedures, no further need for clearance is anticipated.
Material changes to the KCP affecting safety or efficacy may, however, require
further FDA clearance. Clearance to market the PAC was granted by the FDA
under a 510(k) in August 1995.
The FDA granted 510(k) clearance to market the PulseMaster dental lasers
for soft-tissue procedures in December 1992. ADT filed for and in 1994
received an IDE from the FDA to conduct clinical trials using ADT's lasers for
the treatment of certain kinds of tooth decay. Depending upon the results of
these clinical trials and its business plans, ADT may file a PMA application
for such treatment during 1997. In February 1996, the FDA's Dental Products
Panel refused to approve a similar PMA application of a competitor. In April
1996, ADT filed a 510(k) to use its lasers as an adjunct for root planing and
scaling. When or whether the FDA will grant marketing clearance for these or
any other procedures is unknown.
Certain of ADT's competitors may have applied to the FDA to market Nd:YAG
and other lasers for various hard tissue procedures. While the status of these
other PMA applications is unknown, ADT believes receipt of FDA clearance for
hard tissue procedures by competitors might adversely affect ADT's domestic
laser sales.
Foreign Regulatory Requirements
The KCP and PulseMasters have been granted Germany's TuV and MedGv
approvals, which are recognized by most European countries, and may be sold in
Germany and many other European markets. In the latter part of 1996, approval
to market the KCP in Japan was obtained. ADT's dental lasers comply with
government regulations in most major countries in Europe, Asia, the Pacific
Rim, and North and South America and are marketed for both hard and soft tissue
applications, except in Japan, where (as in the United States) they have not
been cleared for hard-tissue procedures. Additional foreign authorizations to
market its dental products are being sought where needed. In some of ADT's
markets, approvals are not difficult to obtain and in others, no approval is
required. Regulation of medical devices in other countries varies between
countries such as Japan, which has standards similar to the FDA, to countries
which have no regulations. Regulation of medical devices in other countries is
also subject to change and there can be no assurance ADT will continue to be
able to comply with such requirements.
PRODUCT LIABILITY EXPOSURE
ADT's business involves the inherent risk of product liability claims. If
such claims arise, they could have an adverse effect on ADT. ADT currently
maintains product liability insurance on a "claims made" basis with coverage
per occurrence and in the aggregate annually of $2,000,000 in North America and
$1,000,000 in all other areas. There is no assurance that such coverage will
be sufficient to protect ADT from all risks to which it may be subject or that
product liability insurance will be available at a reasonable cost, if at all,
in the future.
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FOREIGN OPERATIONS -
See "American Dental Technologies, Inc. Notes to Financial Statements,
Note 8."
EMPLOYEES
On March 1, 1997, ADT had 69 full-time employees and 3 part-time
employees. Of these employees, 20 were engaged in direct sales and marketing
activities and 38 in manufacturing activities. The remaining employees are in
finance, administration, customer service, and research and development. ADT
has no collective bargaining agreements with any unions and believes that its
overall relations with its employees are good.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth information concerning each of the current
executive officers of ADT who are elected to serve at the discretion of the
Board of Directors.
<TABLE>
<CAPTION>
Date of Election
Name Age Position to Present Position
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ben J. Gallant 62 President, Chief Executive Officer & Director November 1996
Diane M. Miller 35 Chief Financial Officer December 1993
John E. Vickers 50 Sr. Vice President - Operations, Director November 1996
Terry D. Myers 49 Sr. Vice President - Dental Division November 1996
William S. Parker 51 Vice President - Marketing & Sales November 1996
Johannes Homolko 45 Director of European Operations February 1993
Raymond F. Winter 51 Secretary January 1993
William D. Myers 55 Chairman of the Board of Directors January 1990
</TABLE>
Ben J. Gallant - Mr. Gallant was elected President of ADT in September 1996 and
Chief Executive Officer in November 1996. He became a director in July 1996.
Mr. Gallant was a founder of Texas Air, served as a director and chairman of
the board since that company's inception in 1982, and was elected president and
chief executive officer in 1991. Prior to their sale to Texas Air in 1993, Mr.
Gallant held numerous patents and patents pending for air abrasive jet
machining ("AJM") technology. He is chiefly responsible for the design and
development of ADT's KCP and industrial product lines. Until its sale in 1992,
he also owned Dynamic Chemicals International, Inc., a private chemical
manufacturing and distribution company based in Corpus Christi, Texas.
Diane M. Miller -- Ms. Miller is a certified public accountant who was elected
Chief Financial Officer in December 1993. She had been the Controller of ADT
since March 1992. Prior to joining ADT, Ms. Miller spent eight years with the
accounting firm of Ernst & Young, most recently as an audit manager.
John E. Vickers III - Mr. Vickers was elected Senior Vice President -
Operations in November 1996 and became a director in July 1996. Mr. Vickers
had served as Texas Air's chief financial officer and legal counsel since June
1993. He also had various operating responsibilities with Texas Air. From
December 1991 until September 1994, Mr. Vickers was of counsel to the law firm
of Novak, Vickers and Burt. Mr. Vickers had been engaged in the practice of
law for 25 years.
Terry D. Myers, D.D.S. -- Dr. Myers became Senior Vice President - Dental
Division in November 1996. Dr. Myers has been a dentist for more than 20
years. He is one of the founders of ADT and a co-inventor of the Company's
first dental laser. Dr. Myers had been Director of Education and Training
since November 1993. He has been the executive director of The Institute for
Advanced Dental Technologies since it was founded in 1990. Directly and
through the Institute, he develops and leads clinical education and training
seminars, lectures at dental meetings and at institutions and publishes
professional papers, articles and video tapes relating to laser and air
abrasive dentistry.
10
<PAGE> 11
William S. Parker - Mr. Parker was elected Vice President - Marketing and Sales
in November 1996. Mr. Parker had been New Product Manager for ADT since
joining the Company in June 1991. He was responsible for the development and
marketing of the KCP and PAC product lines.
Johannes Homolko -- Mr. Homolko joined ADT in July 1991 as Marketing and
Communications Manager for Germany. In July 1992, Mr. Homolko became Director
of Marketing worldwide. He is currently Director of European Operations. From
1988 until he joined ADT, Mr. Homolko was a senior product manager for the
Vacutainer Division of Becton, Dickinson and Co., a worldwide health care
manufacturer and provider of health care products, and was responsible in
Europe for three major product lines.
Raymond F. Winter -- Mr. Winter became Secretary of ADT in January 1993. Mr.
Winter has been in-house general counsel to ADT since May 1991. Mr. Winter was
a partner in the law firm of Goldsmith & Winter from October 1990 until its
dissolution in December 1993 and before that was a partner in the law firm of
Goldsmith, Yaker, Goldsmith & Winter. Mr. Winter has been engaged in the
practice of law for more than 25 years.
William D. Myers, M.D. - Dr. Myers is one of the founders of ADT and a
co-inventor of the Company's first dental laser. He has been Chairman of the
Board of ADT since January 1990. Dr. Myers has been a practicing
ophthalmologist for more than 20 years and is the founder and director of the
Michigan Eyecare Institute. Dr. William Myers and Dr. Terry Myers are
brothers.
ITEM 2. DESCRIPTION OF PROPERTIES
ADT's principal executive offices are located at 28411 Northwestern
Highway, Suite 1100, Southfield, Michigan 48034, where the Company has leased
approximately 5,000 square feet under a three-year lease which expires in April
1998.
ADT owns an approximately 25,000 square foot manufacturing facility
located at 5555 Bear Lane, Corpus Christi, Texas 78405.
ITEM 3. LEGAL PROCEEDINGS
On December 20, 1996, ADT filed a lawsuit against Kreativ, Inc.
("Kreativ") and two individuals in the United States District Court for the
Eastern District of Michigan, Southern Division. ADT is seeking injunctive
relief and money damages because of the wrongful activities of Kreativ and
those individuals, including without limitation: for disparagement of ADT's
business reputation and KCP products; false advertising; unfair and deceptive
business practices and trade defamation. In January 1997, the federal court
awarded ADT a preliminary injunction ordering Kreativ and the two individuals
to stop making certain patently false statements which misrepresent the ability
of ADT's KCP to perform several classes of cavity preparation. The court also
ordered Kreativ to print a retraction. ADT intends to vigorously pursue this
litigation. Discovery is incomplete and ADT is unable to estimate the amount of
potential gain that may result, if any.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of stockholders during the
fourth quarter of 1996. However, in the first quarter of 1997, stockholders of
ADT were requested to provide their written consent in lieu of a special
meeting of stockholders to approve an amendment to the Company's Certificate of
Incorporation decreasing the amount of authorized common stock from 50,000,000
to 12,500,000 shares, to increase the common stock par value from $0.01 to
$0.04 per share; and to effect a one-for-four reverse stock split. The results
of the voting are as follows:
For: 23,341,519 Against: 477,929 Abstain: 42,021 Broker Non-Votes: none
A certificate of amendment to ADT's Certificate of Incorporation will be
filed with the Delaware Secretary of State and the one-for-four reverse stock
split is expected to become effective on March 17, 1997.
11
<PAGE> 12
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
ADT's common stock is traded on The Nasdaq SmallCap Market (Symbol:
ADLI). The following table sets forth certain information as to the high and
low sales prices per share of ADT common stock as reported by Nasdaq for each
quarterly period during the last two fiscal years.
<TABLE>
<CAPTION>
Closing Price
High Low
------------------
<S> <C> <C>
1995
First Quarter $0.625 $0.250
Second Quarter 1.6875 0.375
Third Quarter 1.125 0.750
Fourth Quarter 0.9375 0.5625
1996
First Quarter $2.0625 $1.375
Second Quarter 2.5625 1.375
Third Quarter 3.6875 1.750
Fourth Quarter 2.250 1.375
</TABLE>
As of March 14, 1997, there were approximately 4,000 beneficial and record
holders of ADT common stock.
ADT has not paid cash dividends to holders of common stock since its
conversion from an S Corporation to a C Corporation in June 1991. The ADT
Board of Directors presently intends to retain all earnings to finance
operations and does not expect to authorize cash dividends in the foreseeable
future. Any payment of cash dividends in the future will depend upon earnings,
capital requirements and other factors considered relevant by the Board of
Directors.
ITEM 6. SELECTED FINANCIAL INFORMATION
The following selected financial data as of and for each of the five years
ended December 31, 1996 is derived from the audited financial statements of
ADT. Operating results for prior years are not necessarily indicative of the
results that may be expected for any other periods. The data should be read in
conjunction with the financial statements and related notes included in this
report and with Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
1996 1995 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Data:
Net sales $ 20,474 $13,325 $11,163 $10,681 $ 12,450
Net income (loss) 5,628(1) (1,274) (4,181) (6,802)(2) (14,830)
Net income (loss)
per common share $ 0.22 $ (0.08) $(0.31) $ (0.79) $ (1.98)
Weighted average number
of common and common
equivalent shares 25,137(6) 15,346(7) 13,462(8) 8,566 7,487
Balance Sheet Data:
Total assets $ 21,280(3) $12,984 $11,137 $12,371(4) $ 8,166
Long-term obligations 577 3,664 4,030 3,413
Stockholders' equity (5) 16,809(6) 1,832(7) 2,190(8) 3,661(9) 1,289
Working capital (deficit) 5,153 (1,437)(10) 12 (320) (1,145)
</TABLE>
- -----------------
Footnotes on next page
12
<PAGE> 13
(1) Includes $2,700,000 related party royalty income.
(2) Includes $2,000,000 litigation settlement expense.
(3) Includes goodwill of $6,124,999 and other assets of $2,447,330 recorded
in connection with the acquisition of Texas Airsonics, Inc. on July 31,
1996.
(4) Includes goodwill of $4,224,461 and other assets of $628,720 recorded in
connection with the acquisition of Incisive Technologies, Inc. on December
30, 1993.
(5) No dividends were paid during the periods presented. However, $41,453 in
accrued dividends on Series A convertible preferred stock has been
recorded.
(6) Includes 11,429,772 shares of common stock issued in connection with the
acquisition of Texas Airsonics, Inc.
(7) Includes 888,888 shares of restricted common stock issued in a private
placement.
(8) Includes 2,999,000 shares of restricted common stock issued in a private
placement.
(9) Includes 1,534,991 shares of common stock issued in connection with the
acquisition of Incisive Technologies, Inc., the sale of $2,000,000 of
Series A preferred stock, and the conversion of $1,117,179 of notes
payable to related parties into 359,220 shares of common stock.
(10) Includes $1,500,000 current note payable, proceeds of which were utilized
for a $1,410,000 non-current deposit related to litigation.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Business Combination
On July 31, 1996, the Company acquired 100% of the outstanding stock of
Texas Airsonics, Inc. ("Texas Air") in exchange for 11,429,772 shares of common
stock and warrants to purchase 6,996,913 additional shares of common stock at
$1.4104 per share for a period commencing August 1, 1997 and ending July 31,
1999. The acquisition has been accounted for as a purchase, and accordingly,
the total value of common stock and warrants issued ($8,572,329) has been
allocated to the acquired identifiable assets and assumed liabilities based on
their estimated fair values as of the acquisition date. The excess
consideration of $6,124,999 has been accounted for as goodwill and will be
amortized over a fifteen year period. The Company expects to benefit from
improved gross margins and cash flow from the manufacturing operations acquired
from Texas Air. The foregoing statement is a "forward looking statement"
within the meaning of the Securities Exchange Act of 1934, as amended, and is
subject to uncertainties. Such uncertainties include, without limitation, the
lack of product acceptance, the extent to which competition may negatively
affect prices and sales volumes and the Company's ability to successfully
integrate Texas Air's business into the Company and to retain key personnel.
Results of Operations
For the year ended December 31, 1996, the Company's net sales increased
54% compared to 1995. Net sales in 1995 increased 19% compared to 1994.
The sales increase in 1996 is due primarily to an increase of
approximately 89% in the volume of KCPs sold, including a 298% increase in the
United States, compared to the same period for 1995 due to increased market
acceptance. This increase was partially offset by lower sales in Germany, due
primarily to unfavorable changes in the German health care reimbursement system
13
<PAGE> 14
and dealers reducing inventory levels. The volume of KCPs sold increased 95%
in 1995 compared to 1994 after the Company introduced a new model air abrasive
unit, the KCP 1000 whisperjet, in the fourth quarter of 1994. The Company's
laser product sales volumes for 1996 were approximately the same as in 1995
and increased 95% for 1995 over 1994, after the Company introduced a new lower
cost laser in the fourth quarter of 1994, the PulseMaster 600 LE. The effects
of the increased KCP volume on net sales in 1996 and 1995 were partially offset
by a 9% and 14% decrease, respectively, in the average price of lasers sold.
Management believes that the sales growth and profitability anticipated
from its laser product line will require broader market acceptance of laser
products in general, increased market share, additional regulatory approvals
and additional cost reductions. The Company is continuing its efforts to
obtain additional regulatory approvals in the United States and Japan and to
increase the Company's market share to improve laser sales growth and to
achieve profitability in the laser product line. To reduce costs, the Company
recently consolidated its California laser manufacturing operations into the
Texas facility.
Management anticipates that sales will continue to improve in 1997
compared to 1996, primarily from sales of KCPs in the United States.
Internationally, the Company anticipates lower sales in 1997 due to dealer
inventory reductions, a transition to the joint venture in the Pacific Rim, and
the establishment of new dealers. The foregoing statements are "forward
looking statements" within the meaning of the Securities Exchange Act of 1934,
as amended, and are subject to uncertainties. Such uncertainties include,
without limitation, the lack of product acceptance, the potential failure of
distributors to meet purchase commitments, the potential loss of distributor
relationships, the potential failure to receive or maintain necessary
regulatory approvals, and the extent to which competition may negatively affect
prices and sales volumes.
Gross profit as a percentage of net sales was 49% for the year ended
December 31, 1996, compared to 47% in 1995 and 42% in 1994. On July 31, 1996,
the Company acquired Texas Air, the manufacturer of the Company's KCP product
line which increased the gross margins on KCP products due to the addition of
the manufacturing margin after the acquisition date. The increase in gross
profit as a percentage of net sales for 1995 relates primarily to the reduced
cost of KCP products purchased from Texas Air. The improvements in gross
margins were partially offset by increases in sales of the KCP 1000 PAC, a
lower margin product and decreases in the average prices of lasers sold.
Selling, general and administrative expenses were $5,786,296 in 1996,
$6,957,844 in 1995 and $7,949,138 in 1994. The change in selling, general and
administrative expenses in 1996 was due to an increase in cost reimbursements
from Texas Air prior to the acquisition and a reduction in legal expenses,
which were partially offset by Texas Air's selling, general and administrative
expenses after the acquisition. Pursuant to a manufacturing agreement, Texas
Air reimbursed ADT $1,220,000 for shared research and development, legal, and
marketing expenses in 1996 prior to the July 31, 1996 acquisition. In
addition, there were reductions in legal expenses and the elimination of a
contingency reserve of approximately $1,300,000, primarily due to settlement of
litigation with Sunrise Technologies, Inc. The 12.5% decline in 1995 is
primarily due to Texas Air sharing research and development, legal, and
marketing expenses of approximately $895,000 and reductions in leased
facilities, services from outside professionals, insurance, and other general
expenses. During 1995, the Company incurred expenses of approximately $700,000
related to selling and marketing incentive programs for the introduction of new
products. The Company remains committed to controlling costs.
As part of its efforts to consolidate management and manufacturing
operations after the acquisition of Texas Air in July 1996, the Company
incurred $560,000 in restructuring expenses related to the employment
termination of the Company's previous chief executive officer and the
14
<PAGE> 15
severance of approximately ten employees resulting from the relocation of the
California laser manufacturing operations to the Texas facility. Approximately
$100,000 of the restructuring costs were paid in 1996. The Company expects
approximately $250,000 of these costs will be paid in 1997 and the remainder in
1998.
Research and development expenses were $668,796 in 1996, $784,319 in 1995
and $1,194,468 in 1994. The decreases in 1996 and 1995 primarily relate to a
sharing of these expenses with Texas Air prior to the acquisition of Texas Air
in July 1996. In 1994, the Company developed a new product line and several new
products, many of which were completed during that year. The Company continues
to support clinical research and training in various areas of laser and air
abrasive dentistry.
On June 10, 1993, the Company had agreed with Denics, to form a joint
venture to distribute dental products in certain Asian and Pacific markets. The
agreement, as amended, also granted Denics territorial manufacturing rights for
all dental laser and air abrasive products owned by the Company, in Japan. In
consideration, Denics provided the Company a $3,000,000 non-refundable prepaid
royalty deposit for future air abrasive products manufactured in Japan.
Formation of the joint venture was delayed and a revised joint venture agreement
was signed in the fourth quarter of 1996. Denics acknowledged that the Company
had fully performed all its obligations under the original agreements and that
the Company had earned the prepaid royalty. Accordingly, as of December 31,
1996, the Company recognized $2,700,000, net of foreign taxes, of related party
royalty income. Denics manufactured dental lasers in the third quarter of 1994
through 1995, and pursuant to the agreements, the Company earned a royalty on
those units sold in Japan and certain Asian and Pacific markets. Related party
royalty income was $261,000 and $285,000 for 1995 and 1994. There was no
similar related party royalty income for 1996 because Denics purchased products
directly from the Company rather than manufacturing them. Management expects
that during 1997, Denics will continue to purchase products directly from the
Company for Japan rather than manufacturing them and there will be no related
party royalty income.
Interest expense was $110,556 in 1996, $110,415 in 1995 and $49,518 in
1994. The increases in 1996 and 1995 compared to 1994 are related to interest
expense on the note payable to a bank and the note payable to Texas Air,
respectively.
Liquidity and Capital Resources
The Company's operating activities provided $203,709 in cash resources in
1996 compared to $124,255 provided in 1995. The cash provided by operations in
1996 was due to income of $5,628,786 resulting primarily from higher United
States KCP sales plus $1,270,885 related to non-cash depreciation and
amortization expense. Cash provided by operations was reduced primarily by
changes in operating assets and liabilities, including an increase in accounts
receivable of $1,373,980, a decrease in accounts payable of $2,128,263, a
decrease in deferred royalty income of $3,000,000, and a decrease in other
accrued liabilities of $636,246. The increase in accounts receivable is due
principally to the 54% increase in sales. The decrease in accounts payable
resulted primarily from the elimination of $792,000 to Texas Air as a result of
the acquisition and $550,000 for the settlement of various outstanding attorney
fees. Other accrued liabilities decreased primarily due to customer deposits of
approximately $450,000 and settlement of litigation of approximately $500,000.
A noncash $3,000,000 royalty from Denics was recognized in 1996.
The Company has working capital of $5,153,364 at December 31, 1996 compared
to a working capital deficit of $1,437,290 at December 31, 1995. The increase
in working capital is primarily a result of net income of $5,628,786, the return
of a non-current deposit of $1,410,000, and the working capital of Texas Air
acquired by the Company. Significant 1996 investing activities included the
expansion of the Company's manufacturing facility in Corpus Christi, Texas and
the acquisition of equipment.
15
<PAGE> 16
In October 1996, the Company obtained a $2,500,000 one year revolving line
of credit from a bank, with interest at prime (8.25% at December 31, 1996).
The Company's borrowing base is 80% of eligible accounts receivable and 50% of
inventory. The line of credit is secured by a pledge of the Company's accounts
receivable, inventory and fixed assets, along with the guarantee of the
Company's President. As of December 31, 1996, $500,000 was outstanding, with
an additional $2,000,000 available under the borrowing base.
On August 7, 1995, the Company borrowed $1,500,000 from Texas Air with
interest payable at prime and due on a quarterly basis. Approximately
$1,410,000 of these loan proceeds were deposited with a California court to
stay enforcement of a 1995 judgment against the Company, pending an appeal. In
early August 1996, the judgment was dissolved, the case was settled, the funds
were released from the court, and the loan was paid in full. The Company's
obligations to Texas Air had been secured by a pledge of all the Company's
assets which was released upon repayment of the loan.
As of December 31, 1996, the Company has $600,000 outstanding under a
$1,000,000 note payable to Denics. Interest is payable each June 30 and
December 31 at 3% above the discount rate in Japan (0.5% at December 31, 1996).
Borrowings are being repaid in annual principal installments of $200,000 over
a five year period which began in June 1995 and are secured by an assignment of
the Company's Japanese patents and related technologies.
At December 31, 1996, the Company had a deferred tax asset of $8,203,000,
including $6,976,000 of net operating loss carryforwards ("NOL's") and a
valuation allowance of $8,158,000. The NOL's expire in various amounts in 2006
through 2010. The NOL's and temporary differences are both available
to offset future taxable income.
The Company believes, based upon its current business plan, that current
cash, available financing resources and cash generated through operations
should be sufficient to meet the Company's anticipated short term liquidity
needs, as well as its long term liquidity needs for the foreseeable future.
16
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
Report of Independent Auditors
Stockholders and Board of Directors
American Dental Technologies, Inc.
We have audited the accompanying consolidated balance sheets of American Dental
Technologies, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule. These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Dental Technologies, Inc. at December 31, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects the
information set forth therein.
Ernst & Young LLP
Detroit, Michigan
March 4, 1997
17
<PAGE> 18
American Dental Technologies, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
Net sales
Trade $15,375,663 $ 9,653,536 $ 7,843,638
Related party (Note 3) 5,099,313 3,672,000 3,320,000
----------- ----------- -----------
20,474,976 13,325,536 11,163,638
Cost of sales:
Trade 9,329,352 3,686,930 4,438,810
Related party (Note 2) 1,126,436 3,352,000 2,081,000
----------- ----------- -----------
10,455,788 7,038,930 6,519,810
----------- ----------- -----------
Gross profit 10,019,188 6,286,606 4,643,828
Selling, general and administrative 5,786,296 6,957,844 7,949,138
Restructuring expense (Note 2) 560,000
Research and development 668,796 784,319 1,194,468
----------- ----------- -----------
Income (loss) from operations 3,004,096 (1,455,557) (4,499,778)
Other income (expense)
Royalty income:
Related party (Note 3) 2,700,000 261,000 285,000
Other 35,246 30,806 82,686
Interest expense (110,556) (110,415) (49,518)
----------- ----------- -----------
Net income (loss) $ 5,628,786 $(1,274,166) $(4,181,610)
=========== =========== ===========
Net income (loss) per share $0.22 $(0.08) $(0.31)
=========== =========== ===========
</TABLE>
See accompanying notes.
18
<PAGE> 19
American Dental Technologies, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,832,192 $ 1,665,718
Accounts receivable:
Trade, less allowance of $280,000
in 1996 and $350,000 in 1995 2,691,242 1,220,010
Related parties (Note 3) 782,469 724,283
----------- -----------
3,473,711 1,944,293
Inventories (Note 1) 3,204,806 1,905,856
Prepaid expenses and other current assets 537,283 534,074
----------- -----------
Total current assets 9,047,992 6,049,941
Prepaid foreign taxes 225,000
Deposit (Notes 2 and 6) 1,410,267
Property and equipment, net (Note 1) 1,192,454 262,042
Intangible assets, net (Notes 1 and 2):
Goodwill 9,400,452 3,661,200
Air abrasive technology rights 1,088,958 1,267,998
Other 217,696 108,248
----------- -----------
10,707,106 5,037,446
Investment in joint venture (Note 3) 333,334
----------- -----------
Total assets $21,280,886 $12,984,696
=========== ===========
</TABLE>
See accompanying notes.
19
<PAGE> 20
American Dental Technologies, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1996 1995
--------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to related parties (Notes 2 and 3) $ 200,000 $ 1,700,000
Note payable (Note 4) 500,000
Accounts payable:
Trade 2,080,895 2,839,548
Related parties (Note 2) 884,374
------------ ------------
2,080,895 3,723,922
Compensation and employee benefits 237,488 346,668
Taxes other than income 414,027 607,177
Contingency reserves (Note 6) 500,000
Other accrued liabilities 462,218 609,464
------------ ------------
Total current liabilities 3,894,628 7,487,231
Deferred royalty income (Note 3) 3,000,000
Other non-current liabilities (Note 4) 177,175 64,993
Notes payable to related party,
less current portion (Note 3) 400,000 600,000
Stockholders' equity:
Preferred stock, $.01 par value, authorized
10,000,000 shares; none outstanding
Common stock, $.01 par value, authorized
50,000,000 shares; outstanding: 27,745,757
shares in 1996; and 15,738,858 shares in 1995 277,457 157,387
Additional paid-in capital 40,515,943 31,288,188
Accumulated deficit (23,984,317) (29,613,103)
------------ ------------
Total stockholders' equity 16,809,083 1,832,472
------------ ------------
Total liabilities and stockholders' equity $ 21,280,886 $ 12,984,696
============ ============
</TABLE>
See accompanying notes.
20
<PAGE> 21
American Dental Technologies, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31
1996 1995 1994
------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 5,628,786 $ (1,274,166) $ (4,181,610)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 542,686 411,886 818,642
Amortization 728,199 471,822 472,605
Rescinded employee stock grant (273,003)
(Gain) loss on disposal of equipment (1,335) (11,833) 6,055
Stock issued for services 16,500
Advances from Texas Airsonics, Inc. prior
to acquisition 399,474
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (1,373,980) 284,173 (942,344)
Decrease (increase) in inventories (239,740) (486,081) 390,571
Decrease (increase) in prepaid expenses and
other current assets 216,276 (62,869) (258,423)
Decrease (increase) in prepaid foreign taxes 225,000 (225,000)
(Decrease) increase in accounts payable (2,128,263) 754,955 180,401
(Decrease) increase in compensation
and employee benefits (109,180) 170,796 (136,827)
Decrease in taxes other than income (193,150) (194,217) (210,622)
(Decrease) increase in other accrued liabilities (636,246) 339,264 (527,115)
(Decrease) increase in other non-current liabilities 145,182 (70,975)
Decrease in deferred royalty income (3,000,000)
----------- ------------ ------------
Net cash provided by (used in) operating activities 203,709 124,255 (4,661,670)
INVESTING ACTIVITIES
Proceeds from sale of equipment 1,335 31,644 4,250
Purchases of equipment (399,123) (24,173) (114,396)
Increase in intangible assets (367,071)
Cash obtained upon merger 217,772
Decrease (increase) in non-current deposits (Notes
2 and 6) 1,410,267 (1,410,267)
----------- ------------ ------------
Net cash provided by (used in) investing activities 863,180 (1,402,796) (110,146)
FINANCING ACTIVITIES
Payments on note payable to related party (200,000) (200,000)
Payments on note payable (1,290,000)
Proceeds from note payable 500,000
Proceeds from notes payable to related party 1,500,000 1,000,000
Proceeds from sale of common stock 800,000 2,914,000
Proceeds from exercise of stock options 89,585 5,000 1,066
----------- ------------ ------------
Net cash (used in ) provided by financing activities (900,415) 2,105,000 3,915,066
----------- ------------ ------------
Increase (decrease) in cash 166,474 826,459 (856,750)
Cash at beginning of year 1,665,718 839,259 1,696,009
----------- ------------ ------------
Cash at end of year $ 1,832,192 $ 1,665,718 $ 839,259
=========== ============ ============
</TABLE>
See accompanying notes.
21
<PAGE> 22
American Dental Technologies, Inc.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Series A Preferred Stock Common Stock Additional
------------------------ ----------------- Paid-In Unearned Accumulated
Shares Amount Shares Amount Capital Compensation Deficit Total
------------------------ ----------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 860,240 $ 8,602 10,654,569 $ 106,545 $28,556,813 $(883,248) $(24,127,177) $ 3,661,535
Net loss for 1994 (4,181,610) (4,181,610)
Rescinded stock grant (250,000) (2,500) (1,153,751) 883,248 (273,003)
Exercise of stock options 26,692 267 799 1,066
Accrued undeclared dividends on
Series A Preferred Stock (30,150) (30,150)
Exercise of conversion from
Series A Preferred Stock
to Common Stock (860,240) (8,602) 860,240 8,602
Issuance of common stock for
intellectual property rights 130,612 1,306 97,694 99,000
Issuance of common stock (Note 5) 2,999,000 29,990 2,884,010 2,914,000
---------------------------------------- --------- --------- ------------ -----------
Balance at December 31, 1994 14,421,113 144,210 30,385,565 (28,338,937) 2,190,838
Net loss for 1995 (1,274,166) (1,274,166)
Issuance of common stock for
intellectual property rights 400,000 4,000 90,300 94,300
Issuance of common stock (Note 5) 907,745 9,077 807,423 816,500
Exercise of stock options 10,000 100 4,900 5,000
---------------------------------------- --------- --------- ------------ -----------
Balance at December 31, 1995 15,738,858 157,387 31,288,188 (29,613,103) 1,832,472
Net income for 1996 5,628,786 5,628,786
Exercise of stock options 102,239 1,023 88,562 89,585
Issuance of common stock for
intellectual property rights 104,918 1,049 88,651 89,700
Issuance of common stock for
property (Note 3) 155,780 1,558 261,319 262,877
Issuance of common stock for
Texas Airsonics, Inc. (Note 2) 11,429,772 114,298 8,458,031 8,572,329
Issuance of common stock for
investment in joint venture
(Note 3) 214,190 2,142 331,192 333,334
----------------------------------------------------------------------------------------------
Balance at December 31, 1996 27,745,757 $ 277,457 $40,515,943 $(23,984,317) $16,809,083
==============================================================================================
</TABLE>
See accompanying notes.
22
<PAGE> 23
Notes to Consolidated Financial Statements
December 31, 1996
1. Organization and Significant Accounting Policies
Principles of Consolidation
American Dental Technologies, Inc. (the "Company") develops, manufactures,
markets and sells high technology products for dentistry. The consolidated
financial statements include the accounts and operations of the Company and its
subsidiaries. All intercompany transactions and balances have been eliminated.
Inventories
Inventories are stated at the lower of cost, determined generally by the
first-in first-out method, or market. At December 31, inventories consisted of
the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Finished goods $1,426,776 $1,261,853
Work in process 75,559 39,638
Raw materials, parts and supplies 1,702,471 604,365
---------- ----------
$3,204,806 $1,905,856
========== ==========
</TABLE>
Inventories at December 31, 1996 and 1995 are net of valuation allowances of
$395,000 and $935,000, respectively.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed by the straight-line method over the estimated useful
lives of the related assets, which range from three to thirty-nine years for
financial reporting purposes and three to thirty-nine years for income tax
purposes. At December 31, property and equipment consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Building and improvements $ 757,439
Demonstration dental products $ 950,578
Office furniture and equipment 2,076,935 1,377,097
---------- -----------
2,834,374 2,327,675
Accumulated depreciation (1,641,920) (2,065,633)
---------- -----------
$1,192,454 $ 262,042
========== ===========
</TABLE>
Intangible Assets
Intangible assets consist of goodwill, air abrasive technology rights, patents,
distribution rights and organization costs and are stated at cost less
accumulated amortization. The Company is amortizing goodwill over 15 years,
air abrasive technology rights over 10 years and other intangible assets over
lives ranging from 10 to 17 years. Accumulated amortization was $2,254,871 and
$1,529,400 at December 31, 1996 and 1995, respectively.
On January 1, 1996, the Company adopted Financial Accounting Standards Board
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of. The Company periodically evaluates
intangible assets for indicators of impairment in value in accordance with FASB
No. 121. When impairment is indicated, the Company revalues the assets based
on their fair value. The adoption of FASB No. 121 did not materially affect
the financial statements.
Revenue Recognition
Revenue from dental product and part sales is recognized when title is
transferred to the customer, generally upon shipment. The Company recognizes
revenue on certain export sales to Denics, a Japanese company (see Note 3),
under terms which require shipment to a local independent warehouse.
23
<PAGE> 24
Notes to Consolidated Financial Statements
December 31, 1996
1. Organization and Significant Accounting Policies (continued)
Foreign Currency Transactions
Gains and losses resulting from the effect of exchange rate changes on
transactions denominated in foreign currencies are included in other (expense)
income in the year in which the exchange rates change. Transactions
denominated in foreign currencies resulted in net foreign currency translation
losses of approximately $48,000, $65,000, and $37,400 in 1996, 1995 and 1994,
respectively.
Net Income (Loss) Per Share
The computation of net income (loss) per share is based on the weighted average
number of outstanding common shares during the period plus, when the effect is
dilutive, common stock equivalents consisting of certain shares subject to
stock options and warrants. The weighted average number of common and
equivalent shares used in the computation of net income (loss) per share was
25,137,519 in 1996, 15,346,716 in 1995 and 13,462,803 in 1994. The net loss
used in the computation of the net loss per share is adjusted by preferred
stock dividend requirements of $30,150 in 1994.
Stock Based Compensation
The Company grants stock options for a fixed number of shares to employees with
an exercise price no less than the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock option grants.
Advertising
The Company expenses advertising costs as incurred. Advertising expense
approximated $530,000, $338,200 and $416,300 in 1996, 1995 and 1994,
respectively.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from these estimates.
Fair Value of Financial Instruments
The fair value of the Company's cash, accounts receivable, accounts payable and
note payable to the bank approximates their carrying value due to their short
term nature. The fair value of the Company's note payable to Denics Co., Ltd.
("Denics") approximates $532,000 as compared to its carrying value of $600,000.
The fair value of the note payable to a related party was estimated using
discounted cash flow analysis based on current incremental borrowing rates for
similar types of borrowing arrangements.
Reclassifications
Certain amounts in prior year financial statements have been reclassified to
conform with the presentation used in 1996.
2. Texas Airsonics, Inc. Acquisition
On July 31, 1996, the Company acquired 100% of the outstanding stock of Texas
Airsonics, Inc. ("Texas Air") in exchange for 11,429,772 shares of the
Company's common stock and warrants to purchase 6,996,913 additional shares of
common stock at $1.4104 per share for a period commencing
24
<PAGE> 25
Notes to Consolidated Financial Statements
December 31, 1996
2. Texas Airsonics, Inc. Acquisition (continued)
August 1, 1997 and ending July 31, 1999. The acquisition has been accounted
for as a purchase, and accordingly, the total value of common stock and
warrants issued ($8,572,329) has been allocated to the acquired identifiable
assets and assumed liabilities based on their estimated fair values as of the
acquisition date. The excess consideration of $6,124,999 has been accounted
for as goodwill and will be amortized over a fifteen year period. The results
of operations for Texas Air have been included in the Consolidated Statements
of Operations for the Company from the acquisition date.
The following unaudited pro forma summary of operations is presented as though
Texas Air was acquired at the beginning of each period.
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
1996 1995
------------ -----------
<S> <C> <C>
Revenues $ 20,928,697 $14,053,537
Net income (loss) 5,425,507 (1,957,756)
Net income (loss) per share $ .17 $(.07)
</TABLE>
On August 7, 1995, the Company obtained a $1,500,000 note from Texas Air with
interest payable at prime. Approximately $1,410,000 of these loan proceeds had
been deposited with a California court to stay enforcement of a judgment
against the ADT, pending an appeal. In August 1996, the judgment was
dissolved, the case was settled (Note 6), the funds were released by the court,
and the loan was paid in full. ADT's obligations to Texas Air had been secured
by a pledge of all ADT's assets, which was released upon repayment of the loan.
The Company's purchases of KCP units and related parts from Texas Air were
approximately $3,650,000 for the seven months ended July 31, 1996 and
$3,663,000 and $1,852,000 for the years ended December 31, 1995 and 1994,
respectively. Texas Air shared research and development, legal, and marketing
costs of $1,220,000 through July 31, 1996 and $895,000 in 1995. The Company
also had accounts payable of $792,000 to Texas Air at December 31, 1995.
As part of its efforts to consolidate management and manufacturing
operations after the acquisition of Texas Air in July 1996, the Company
incurred $560,000 in restructuring expenses related to the employment
termination of the Company's previous chief executive officer and the severance
of approximately ten employees resulting from the relocation of the California
laser manufacturing operations to the Texas facility. Approximately $100,000
of the restructuring costs were paid in 1996. The Company expects
approximately $250,000 of these costs will be paid in 1997 and the remainder in
1998.
3. Agreements with Related Parties
Denics Co., Ltd.
On June 10, 1993, the Company had agreed with Denics, to form a joint venture
to distribute dental products in certain Asian and Pacific markets. The
agreement, as amended, also granted Denics territorial manufacturing rights for
all dental laser and air abrasive products owned by the Company, in Japan. In
consideration, Denics provided the Company a $3,000,000 non-refundable
prepaid royalty deposit for future air abrasive products manufactured in Japan.
Formation of the joint venture was delayed and a revised joint venture
agreement was signed in the fourth quarter of 1996. Denics acknowledged that
the Company had fully performed all its obligations under the original
agreements and that the Company had earned the prepaid royalty. Accordingly,
as of December 31, 1996, the Company recognized $2,700,000, net of foreign
taxes, of related party royalty income.
25
<PAGE> 26
Notes to Consolidated Financial Statements
December 31, 1996
3. Agreements with Related Parties (continued)
Denics Co., Ltd. (continued)
Denics manufactured dental lasers in the third quarter of 1994 through 1995,
and pursuant to the agreements, the Company earned royalties on those units
sold in Japan and certain Asian and Pacific markets. Related party royalty
income was $261,000 and $285,000 for 1995 and 1994. There was no similar
related party royalty income in 1996.
On October 31, 1996, the Company entered into a joint venture agreement with
Denics to distribute dental products in certain Asian and Pacific markets
beginning April 1, 1997. Under the terms of the agreement, the Company will
issue $1,000,000 of common stock to Denics, in equal installments of $333,333
in December 1996, April 1997 and April 1998, as consideration for 50% ownership
of the joint venture. The Company will be responsible for the management of
the joint venture. The joint venture is to exist for an initial term of ten
years and may continue thereafter by mutual consent of both parties.
The Company had a $1,000,000 note payable to Denics, with interest at 3% above
the discount rate in Japan (0.5% at December 31, 1996). As of December 31,
1996, $600,000 was outstanding. Borrowings are being repaid in annual
installments of principal of $200,000 over a five year period which began in
June 1995. Borrowings are secured by an assignment of the Company's Japanese
patent rights and related technologies.
The Company has accounts receivable of $782,469 and $640,059 from Denics at
December 31, 1996 and 1995, respectively.
Other
On April 15, 1996, the Company acquired an ophthalmic excimer laser from a
principal shareholder and director. The laser was placed in a surgical center
to perform photo-refractive keratotomy (PRK). The purchase price of the laser
was approximately $525,800, which was to be paid in two installments of
restricted common stock together with a warrant to purchase an equal number of
shares of common stock at market value, exercisable until April 1999. The
first $262,900 installment of 155,780 shares, together with a warrant to
acquire 155,780 shares at an exercise price of $1.6875 per share was made on
April 15, 1996. The second installment was due in April 1997, however, the
Company determined that this venture would not meet its anticipated
performance. The second installment of restricted common stock and warrants
was canceled and the laser was returned in 1997 pursuant to the terms of the
purchase agreement. The Company recorded an impairment expense of
approximately $175,000 on the disposal of this asset included in depreciation
expense in 1996.
The Company obtained consulting and research services from related parties and
paid approximately $190,000, $260,800 and $254,000 in 1996, 1995 and 1994,
respectively, for such services.
4. Line of Credit and Other Non-Current Liabilities
In October 1996, the Company obtained a $2,500,000 one year revolving line of
credit from a bank, with interest at prime (8.25% at December 31, 1996). The
Company's borrowing base is 80% of eligible accounts receivable and 50% of
inventory. The line of credit is secured by a pledge of the company's accounts
receivable, inventory and fixed assets. As of December 31, 1996, $500,000 was
outstanding.
26
<PAGE> 27
Notes to Consolidated Financial Statements
December 31, 1996
4. Line of Credit and Other Non-Current Liabilities (continued)
The Company leases certain equipment under capital leases. Equipment related
to these capital leases had a net book value of approximately $203,000 at
December 31, 1996. Future minimum lease payments under capital and operating
leases as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year
---- Operating Capital
Leases Leases
--------- --------
<S> <C> <C>
1997 $126,611 $ 74,382
1998 57,061 52,905
1999 49,231
2000 49,231
2001 and thereafter 53,335
-------- --------
$183,672 279,084
========
Less amount representing interest (44,091)
--------
$234,993
========
</TABLE>
Other non-current liabilities at December 31, 1996 consisted of the following:
<TABLE>
<S> <C>
Current portion $ 57,818
Non-current portion 177,175
--------
Total capital lease obligations $234,993
========
</TABLE>
Rental expense for operating leases for 1996, 1995 and 1994 approximated
$257,000, $113,000 and $214,000, respectively.
The Company paid interest of approximately $135,000, $104,000 and $20,200 in
1996, 1995 and 1994, respectively.
5. Stockholders' Equity, Stock Options and Warrants
In July 1995, the Company received $800,000 when it completed a private
placement transaction with the Chairman of the Board and two principal
stockholders. The Company issued these investors 888,888 shares of common
stock together with non transferable warrants to acquire 1,777,776 additional
shares of stock at exercise prices ranging from $1.75 to $2.00 per share,
exercisable on or before July 7, 1998. Simultaneously, the exercise date on
existing common stock purchase warrants held by these same stockholders was
extended from April 21, 1996 to April 21, 1998. In August 1995, the Company
canceled existing common stock purchase warrants held by these same
stockholders at exercise prices ranging from $1.75 to $2.00 and reissued the
common stock purchase warrants at an exercise price of $1.00 per share.
In April 1994, the Company issued 2,999,000 shares of common stock with
warrants to purchase an equal number of shares of common stock at $2.00 per
share, exercisable over a two year period, to private investors for $2,914,000.
Several of the private investors are principal stockholders and current or
former directors of the Company.
The Company established its Nonqualified Stock Option Plan in January 1990, and
775,000 shares of common stock were reserved for issuance to employees,
officers, directors, consultants, and other key personnel. In 1991, the plan
was amended to increase the number of shares available for issuance under the
Plan to 1,150,000.
The Company established its Stock Option Plan for Employees in June 1991 and
68,181 shares of common stock were reserved for issuance.
27
<PAGE> 28
Notes to Consolidated Financial Statements
December 31, 1996
5. Stockholders' Equity, Stock Options and Warrants (continued)
The Company established its Long-Term Incentive Plan in May 1993, and 1,000,000
shares of common stock were reserved for issuance to employees, officers,
directors and other key personnel. An additional 1,000,000 and 500,000 shares
of common stock were reserved in July 1996 and May 1994, respectively,
increasing the number of shares available for issuance to 2,500,000.
The Company has also authorized and granted 325,568 stock options exclusive of
the above described plans, of which 194,887 options have been exercised or
canceled and 130,681 options were outstanding at December 31, 1996.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options.
Under APB 25, because the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant,
no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required
by Statement 123 and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that Statement. The
fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1995 and 1996, respectively: risk-free interest rate of 6.5%;
dividend yield of 0%; volatility factors of the expected market price of the
Company's common stock of .8 and .5 and a weighted-average expected life of
the option of five years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the option
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Pro forma net income (loss) $5,197,430 $(1,496,085)
Pro forma earnings (loss) per share:
Primary and fully diluted $.21 $(.10)
</TABLE>
28
<PAGE> 29
Notes to Consolidated Financial Statements
December 31, 1996
5. Stockholders' Equity, Stock Options and Warrants (continued)
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
Number Weighted-Average
of Shares Exercise Price
----------- ----------------
<S> <C> <C>
Outstanding at January 1, 1994 2,057,039 $3.77
Options granted 950,436 1.89
Options exercised (26,692) .04
Options canceled (599,990) 5.35
----------
Outstanding at December 31, 1994 2,380,793 2.67
==========
Exercisable at December 31, 1994 1,488,345 3.01
==========
Options granted 1,278,800 .91
Options exercised (10,000) .50
Options canceled (1,244,212) 2.34
----------
Outstanding at December 31, 1995 2,405,381 1.91
==========
Exercisable at December 31, 1995 1,821,720 2.14
==========
Options granted 764,582 1.69
Options exercised (102,239) .87
Options canceled (763,092) 3.43
----------
Outstanding at December 31, 1996 2,304,632 1.38
==========
Exercisable at December 31, 1996 2,304,632 $1.38
==========
</TABLE>
The weighted-average fair value of options granted during the year was $.87 and
$.30 in 1996 and 1995, respectively. Exercise prices for options outstanding
as of December 31, 1996 ranged from $.50 to $12.50. The weighted-average
remaining contractual life of those options is 5.3 years.
<TABLE>
<CAPTION>
Warrant activity is summarized as follows:
Weighted-Average
Shares Exercise Price
----------- ----------------
<S> <C> <C>
Outstanding at January 1, 1994
Warrants issued 4,054,000 $2.00
Warrants canceled (55,000) 2.00
----------
Outstanding at December 31, 1994 3,999,000 2.00
==========
Exercisable at December 31, 1994 3,999,000 2.00
==========
Warrants issued 7,119,552 1.19
Warrants canceled (3,841,776) 1.90
----------
Outstanding at December 31, 1995 7,276,776 1.27
==========
Exercisable at December 31, 1995 7,276,776 1.27
==========
Warrants issued 7,545,693 1.39
Warrants canceled (3,435,000) 1.56
==========
Outstanding at December 31, 1996 11,387,469 1.26
==========
Exercisable at December 31, 1996 4,390,556 $1.02
==========
</TABLE>
29
<PAGE> 30
Notes to Consolidated Financial Statements
December 31, 1996
5. Stockholders' Equity, Stock Options and Warrants (continued)
The weighted-average fair value of warrants granted during the year was $.56 in
1996 and 1995. Exercise prices for warrants outstanding as of December 31,
1996 ranged from $1.00 to $1.6875. The weighted-average remaining contractual
life of those warrants is 2.3 years.
6. Litigation and Contingencies
On July 30, 1996, ADT and Sunrise Technologies International, Inc. ("Sunrise")
settled all lawsuits pending between them. A pending appeal relating to
disputes arising out of a February 1994 settlement agreement between the
parties has been dismissed and Sunrise has relinquished and forgiven the
$940,178 judgment it received against ADT in August 1995. The approximately
$1,410,000 cash deposit posted by ADT with the court, pending the appeal of the
case, has been released and the loan referenced in Note 2 was paid in full. In
addition, all three patent cases between the parties have been dismissed, with
prejudice. Mutual general releases have also been exchanged. Related patent
claims pending between ADT and Danville Manufacturing, Inc. and Sullivan Dental
Products Inc. have also been dismissed.
ADT has licensed Sunrise under its dental air abrasive method and systems
patents in return for a seven percent royalty on all air abrasive products
manufactured (by or on behalf of Sunrise), sold, or leased by Sunrise, in a
country where ADT has patents or patent applications on any dental air abrasive
products or methods. Sunrise has acknowledged the validity of ADT's method and
system patents. ADT has acknowledged that Sunrise's current products are not
infringing ADT's apparatus patents, or any other non-dental air abrasive
patents owned by ADT. Sunrise's patent license is non-exclusive, may not be
sub-licensed and is non-transferable for 18 months.
A lawsuit by Dr. Robert Cameron and certain other dentists alleging
misrepresentations as to the use of ADT's dLase 300 for certain dental
procedures pending in the United States District Court for the Eastern District
of Michigan, Southern Division, was settled in December 1995. In April 1996,
the case was dismissed with prejudice and ADT was released from all claims.
The Company recorded a $500,000 contingency reserve at December 31, 1995 based
on its best estimate of the legal and other related costs to resolve legal
matters. This reserve was eliminated in 1996 upon the settlement of
outstanding litigation.
In February 1996, the Company was notified by Great American Leasing Corp.
(formerly Corporate Leasing International, Inc. or "CLI") of previously
unasserted claims for indemnification pursuant to an April 1991 Vendor Program
Agreement and a Remarketing Agreement between the parties. To date, CLI has
failed to substantiate the nature and amount of the claims. ADT believes it
has fully and completely satisfied all obligations to CLI and will vigorously
pursue numerous legal and equitable claims and defenses against CLI if these
claims ever become the subject of litigation. Management believes that the
loss, if any, from these claims will not be material to the Company's business.
7. Income Taxes
At December 31, 1996, the Company had a $20,518,000 net operating loss
carryforward for federal income tax purposes, which expire in various amounts
in the years 2006 through 2010.
Deferred tax assets represent the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. Significant components of
the Company's deferred tax assets are as follows:
30
<PAGE> 31
Notes to Consolidated Financial Statements
December 31, 1996
7. Income Taxes (continued)
<TABLE>
<CAPTION>
December 31
1996 1995
-------------------------
<S> <C> <C> <C>
Allowance for doubtful accounts $ 108,000 $ 142,000
Inventory valuation reserves 134,000 318,000
Depreciation 354,000 290,000
Compensation and employee benefits 174,000 63,000
Deferred royalties 925,000
Other 457,000 692,000
Net operating loss carryforwards 6,976,000 7,644,000
---------- -----------
Deferred tax asset $8,203,000 $10,074,000
Valuation allowance (8,158,000) (10,074,000)
---------- -----------
Net deferred tax asset $ 45,000 $ -
========== ===========
The Company's 1996 income tax provision included the following:
Current $ 45,000
Deferred Credit (45,000)
--------
$ -
========
</TABLE>
8. Operations by Geographic Area and Significant Customers
The Company develops, manufactures, markets and sells high technology products
for dentistry. Its operations constitute a single business segment. The
Company has operations in various foreign countries which market the Company's
dental products in their respective geographic areas. The Company does not
typically require collateral from its customers.
Sales into Germany, through two regional distribution groups, Dental Liga GmbH
and Orbis High Tech Dental GmbH, were approximately 13%, 40%, and 33% of
consolidated sales in 1996, 1995 and 1994. Sales to Denics for certain Asian
and Pacific markets were approximately 25%, 28% and 30% of consolidated sales
in 1996, 1995 and 1994, respectively. Sales to Patterson Dental Company, the
major domestic distributor of the Company's kinetic cavity preparation units,
were approximately 28%, 10% and 20% of consolidated sales in 1996, 1995 and
1994, respectively.
Financial information, summarized by geographic area, is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net sales:
United States $11,446,862 $ 2,980,292 $ 3,751,827
Europe 3,692,606 6,532,237 3,717,125
Other international 5,335,508 3,813,007 3,694,686
----------- ----------- -----------
$20,474,976 $13,325,536 $11,163,638
=========== =========== ===========
Gross profit:
United States $ 5,537,487 $ 1,133,772 $ 1,529,430
Europe 1,995,814 3,310,644 1,731,868
Other international 2,485,887 1,842,190 1,382,530
----------- ----------- -----------
$10,019,188 $ 6,286,606 $ 4,643,828
=========== =========== ===========
Accounts receivable:
United States $ 2,485,529 $ 711,335 $ 679,917
Europe 157,959 548,640 764,663
Other international 830,223 684,318 783,886
----------- ----------- -----------
$ 3,473,711 $ 1,944,293 $ 2,228,466
=========== =========== ===========
Other identifiable assets:
United States $16,860,080 $ 9,513,529 $ 8,661,670
Europe 599,547 1,252,974 247,402
Other international 347,548 273,900
----------- ----------- -----------
$17,807,175 $11,040,403 $ 8,909,072
=========== =========== ===========
</TABLE>
31
<PAGE> 32
Notes to Consolidated Financial Statements
December 31, 1996
9. Subsequent Events
In March 1996, stockholders approved an amendment to the certificate of
incorporation decreasing the authorized common stock from 50,000,000 to
12,500,000 shares, increasing the common stock par value from $0.01 to $0.04
per share and approving a one-for-four reverse stock split. The reverse stock
split will become effective when the amendment is filed with the Delaware
Secretary of State, which is anticipated on March 17, 1997. Upon
effectiveness, each four shares of $0.01 par value common stock will
automatically be reclassified into one share of $0.04 par value common stock.
Appropriate adjustments will also be made to the number and price of
outstanding warrants and options. Cash payments will be made in lieu of
fractional shares.
10. Selected Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31 June 30 September 30 December 31
1996 1996 1996 1996
----------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $5,254,047 $4,919,955 $4,046,803 $6,254,171
Gross profit 2,398,621 1,854,977 1,806,840 3,958,750
Net income 448,310 689,941(1) 748,999(1) 3,741,536(2)(3)
Net income per common
and common equivalent share $.03 $.03 $.02 $.12
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31 June 30 September 30 December 31
1995 1995 1995 1995
--------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $4,392,000 $3,460,836 $2,286,035 $ 3,186,665
Gross profit 2,184,627 1,900,165 1,019,997 1,181,817
Net income (loss) 176,196 202,068 (954,332) (698,098)(4)
Net income (loss) per common
and common equivalent share $.01 $.01 $(.06) $(.04)
</TABLE>
- -----------------
(1) Pursuant to its agreement, Texas Air shared research and development,
legal, and marketing expenses of approximately $1,220,000 through July 31,
1996.
(2) Includes $2,700,000 related party royalty income in December 1996 (Note
3).
(3) Includes $560,000 of restructuring expenses for the consolidation of
management and manufacturing operations in 1996 (Note 2).
(4) During 1995, the Company incurred expenses of approximately $700,000
related to selling and marketing incentive programs for the introduction
of the new products. Pursuant to its agreement, Texas Air shared research
and development, legal, and marketing expenses of approximately $895,000
in 1995.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
32
<PAGE> 33
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information included in the Company's definitive Proxy Statement to be
distributed in connection with its Annual Meeting of Stockholders to be held
May 5, 1997 (the "1997 Proxy Statement"), under the headings, "Election of
Directors" and "Compliance with Section 16(a) of the Exchange Act" is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information is included in the 1997 Proxy Statement under the heading
"Executive Compensation" (excluding the Compensation Committee Report on 1996
Cancellation and Regrant of Options) and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information included in the 1997 Proxy Statement under the headings
"Security Ownership of Management" and "Principal Stockholders of the Company"
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information included in the 1997 Proxy Statement of the Company under
the heading "Certain Transactions" is incorporated herein by reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements: The following financial statements of
American Dental Technologies, Inc. for the year ended December 31, 1996 are
included in Item 8, "Financial Statements and Supplementary Data":
Report of Independent Auditors
Consolidated Statements of Operations for the Years Ended December 31, 1996,
1995, and 1994
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the Years Ended December
31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996,
1995, and 1994
Notes to Consolidated Financial Statements
2. Financial Statement Schedules: The following financial statement
schedule is attached to this report.
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, not required,
or the information is included in the financial statements or the notes
thereto.
3. Exhibits: Certain of the following Exhibits have been previously filed
with the Securities and Exchange Commission pursuant to the requirements of the
Securities Act of 1933 and the Securities Exchange Act of 1934. Such exhibits
are identified by the parenthetical references following the listing of each
such exhibit and are incorporated herein by reference.
33
<PAGE> 34
Exhibit Number Description of Document
- -------------- -----------------------
2.1 Restated Agreement and Plan of Reorganization and associated Restated
Merger Agreement dated as of November 22, 1995, among American Dental
Technologies, Inc., ADT Merger Corp. and Texas Airsonics, Inc.
(Registration No. 333-6663, Annex A to the Joint Proxy
Statement/Prospectus)
3.1 Certificate of Incorporation of American Dental Technologies, Inc.
filed on November 21, 1989, with amendments, filed with the Delaware
Secretary of State and effective on January 12, 1990; May 15, 1991; June
4, 1991; June 1, 1993; and July 29, 1996 (Form 8-K filed August 9,
1996, Exhibit 3.1)
3.2 Restated By-Laws of American Dental Laser, Inc. as amended on May 20,
1991 (Registration No. 33-40140, Exhibit 3.3)
3.3 Amendments to the Restated By-Laws of the Company, dated December 15,
1993 (Form 10-K for the year ended December 31, 1993, Exhibit 3.4)
3.4 Certificate of Designation, Preferences and Rights of Series A
Preferred Stock of American Dental Technologies, Inc., dated February
18, 1994 (Form 10-K for the year ended December 31, 1993, Exhibit 3.5)
4.1 Form of Common Stock Purchase Warrant, April 1994 (Form 10-Q for the
quarter ended June 30, 1994, Exhibit 4.1)
4.2 Form of revised April 1994 Common Stock Purchase Warrants, August
1995 (Form 10-K for the year ended December 31, 1995, Exhibit 4.5)
4.3 Form of revised July 1995 Common Stock Purchase Warrants, August 1995
(Form 10-K for the year ended December 31, 1995, Exhibit 4.6)
4.4 Form of Merger Warrant (Registration No. 333-6663, Exhibit 4.7)
4.5 Revolving Credit Agreement with The International Bank dated October 17,
1996
4.6 Revolving Credit Promissory Note to The International Bank dated
October 17, 1996
4.7 Deed of Trust to The International Bank dated October 17, 1996
4.8 Security Agreement to The International Bank dated October 17, 1996
4.9 Continuing Limited Guaranty Agreement of Benjamin J. Gallant dated
October 17, 1996
10.1* American Dental Laser, Inc. Amended and Restated Nonqualified Stock
Option Plan. (Registration No. 33-40140, Exhibit No. 10.16)
10.2* American Dental Laser, Inc. Stock Option Plan for Employees.
(Registration No. 33-40140, Exhibit No. 10.18)
10.3 U.S. Patent No. 4,521,194 issued June 4, 1985. (Registration No.
33-40140, Exhibit No. 10.38)
10.4 U.S. Patent No. 4,818,230 issued April 4, 1989. (Registration No.
33-40140, Exhibit No. 10.39)
10.5 U.S. Patent No. 4,940,411 issued July 10, 1990. (Registration No.
33-40140, Exhibit No. 10.40)
34
<PAGE> 35
10.6 U.S. Patent Number 5,055,048 issued October 8, 1991 (Form 10-K for the
year ended December 31, 1991, Exhibit 10.36)
10.7 U.S. Patent No. 4,635,897 issued January 13, 1987. (Form 10-K for the
year ended December 31, 1992, Exhibit 10.42)
10.8 U.S. Patent No. 4,708,534 issued November 24, 1987. (Form 10-K for the
year ended December 31, 1992, Exhibit 10.43)
10.9 U.S. Patent No. 4,733,503 issued March 29, 1988. (Form 10-K for the
year ended December 31, 1992, Exhibit 10.44)
10.10 U.S. Patent No. 4,893,440 issued January 16, 1990. (Form 10-K for the
year ended December 31, 1992, Exhibit 10.45)
10.11 U.S. Patent No. 5,122,060 issued June 16, 1992. (Form 10-K for the
year ended December 31, 1992, Exhibit 10.47)
10.12 U.S. Patent No. 5,123,845 issued June 23, 1992. (Form 10-K for the
year ended December 31, 1992, Exhibit 10.48)
10.13 U.S. Patent No. 5,180,304 issued January 19, 1993. (Form 10-K for the
year ended December 31, 1992, Exhibit 10.59)
10.14 Settlement Agreement dated February 4, 1993 between American Dental
Laser, Inc. and Sunrise Technologies, Inc. (Form 8-K dated February 15,
1993, Exhibit 28.1)
10.15 Purchase Agreement dated as of March 15, 1993 for American Dental
Laser Japan, Inc. stock between American Dental Laser, Inc., Daniel S.
Goldsmith and Walter J. Goldsmith. (Form 10-K for the year ended
December 31, 1992, Exhibit 10.63)
10.16* Amended and Restated Long-Term Incentive Plan (Form 10-Q for the
quarter ended Sepember 30, 1996, Exhibit 4.1)
10.17 U.S. Patent No. 5,207,576, issued May 4, 1993 (Form 10-K for the year
ended December 31, 1993, Exhibit 10.67)
10.18 Memorandum Agreement dated June 10, 1993 between the Company and
Dental Innovate Corporation (Form 10-Q for the quarter ended June 30,
1993, Exhibit 10.1)
10.19 U.S. Patent No. 5,228,852, issued July 20, 1993 (Form 10-K for the
year ended December 31, 1993, Exhibit 10.69)
10.20 Distribution Agreement between the Company and Patterson Dental
Company, dated July 1, 1993 (Form 10-K for the year ended December 31,
1993, Exhibit 10.70)
10.21 Supplemental Agreement dated July 27, 1993 between the Company and
Dental Innovate Corporation (Form 10-Q for the quarter ended June 30,
1993, Exhibit 10.2)
10.22 U.S. Patent No. 5,232,367, issued August 3, 1993 (Form 10-K for the
year ended December 31, 1993, Exhibit 10.72)
10.23 Amendment Agreement dated August 16, 1993 between American Dental
Technologies, Inc. and Dental Innovate Corporation (Form 10-Q for the
quarter ended September 30, 1993, Exhibit 10.1)
35
<PAGE> 36
10.24 U.S. Patent No. 5,257,935, issued November 2, 1993 (Form 10-K for the
year ended December 31, 1993, Exhibit 10.75)
10.25 U.S. Patent No. 5,275,561, issued January 4, 1994 (Form 10-K for the
year ended December 31, 1993, Exhibit 10.79)
10.26 U.S. Patent No. 5,275,564, issued January 4, 1994 (Form 10-K for the
year ended December 31, 1993, Exhibit 10.80)
10.27 Letter agreement between the Company and Denics Co., Ltd., dated
February 1994 (Form 10-K for the year ended December 31, 1993, Exhibit
10.81)
10.28 U.S. Patent No. 5,310,344, issued May 10, 1994 (Form 10-K for the
year ended December 31, 1994, Exhibit 10.82)
10.29 U.S. Patent No. 5,324,200, issued June 28, 1994 (Form 10-K for the
year ended December 31, 1994, Exhibit 10.83)
10.30 U.S. Patent No. 5,330,354, issued July 19, 1994 (Form 10-K for the
year ended December 31, 1994, Exhibit 10.84)
10.31 U.S. Patent No. 5,334,016, issued August 2, 1994 (Form 10-K for the
year ended December 31, 1994, Exhibit 10.85)
10.32 U.S. Patent No. 5,334,019, issued August 2, 1994 (Form 10-K for the
year ended December 31, 1994, Exhibit 10.86)
10.33 U.S. Patent No. 5,342,198, issued August 30, 1994 (Form 10-K for the
year ended December 31, 1994, Exhibit 10.87)
10.34 U.S. Patent No. 5,350,299, issued September 27, 1994 (Form 10-K for
the year ended December 31, 1994, Exhibit 10.88)
10.35 U.S. Patent No. 5,390,204 issued February 14, 1995 (Form 10-K for the
year ended December 31, 1995, Exhibit 10.45)
10.36 Second Memorandum Agreement dated February 24, 1995 between the
Company and Dental Innovate Corporation (Form 10-K for the year ended
December 31, 1995, Exhibit 10.46)
10.37 Lease Agreement, 28411 Northwestern Highway, Suite 1100, Southfield,
Michigan, dated April 7, 1995 (Form 10-K for the year ended December 31,
1995, Exhibit 10.47)
10.38 Distribution Agreement between the Company and Orbis High Tech Dental
GmbH (Form 10-K for the year ended December 31, 1995, Exhibit 10.50)
10.39 First Supplement to Purchase Agreement dated as of January 1, 1996
between American Dental Technologies, Inc., Daniel S. Goldsmith and
Walter J. Goldsmith (Form 10-K for the year ended December 31, 1995,
Exhibit 10.51)
10.40 Third Memorandum Agreement dated February 23, 1996 between the Company
and Denics Co., Ltd. (Form 10-K for the year ended December 31, 1995,
Exhibit 10.52)
10.41 U.S. Patent No. 5,507,739, issued April 14, 1996
10.42 U.S. Patent No. 5,525,058, issued June 11, 1996
36
<PAGE> 37
10.43 Voting Agreement between William D. Myers and Ben J. Gallant
(Registration No. 333-6663, Exhibit 9.1)
10.44 Ben J. Gallant Employment Agreement
10.45 License Agreement between Texas Airsonics, Inc., a wholly owned
subsidiary of American Dental Technologies, Inc. and Texas Airsonics,
L.P.
10.46 Settlement Agreement between American Dental Technologies, Inc. and
Sunrise Technologies International, Inc., dated July 30, 1996 (Form 10-Q
for the quarter ended June 30, 1996, Exhibit 10.3)
10.47 Fourth Memorandum Agreement dated October 31, 1996, between the
Company and Denics Co., Ltd.
10.48 Joint Venture Agreement dated October 31, 1996, between the Company and
Denics Co., Ltd.
10.49 Letter dated October 30, 1996 between the Company and Anthony D.
Fiorillo
10.50 Settlement Agreement between the Company and Sunrise Technologies
International, Inc., dated July 30, 1996
11.1 Statement Re: Computation of Net Income (Loss) Per Share
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Auditors
27.1 Financial Data Schedule
- -----------
*Identifies current management contracts or compensatory plans or arrangements.
(b) Reports on Form 8-K: A report on Form 8-K was filed October 1, 1996
announcing the resignation of Anthony D. Fiorillo as President and the
designation of Ben J. Gallant as the Company's President, effective September
24, 1996.
37
<PAGE> 38
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Southfield, State of Michigan, on the 14th day of March, 1997.
AMERICAN DENTAL TECHNOLOGIES, INC.
/s/ Ben J. Gallant
---------------------------------
Ben J. Gallant, President and CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 14, 1997.
/s/ Ben J. Gallant
- -------------------------
Ben J. Gallant President, CEO and Director
(Principal Executive Officer)
/s/ Diane M. Miller
- -------------------------
Diane M. Miller Chief Financial Officer,
Principal Financial Officer and
Principal Accounting Officer
/s/ William D. Myers
- -------------------------
William D. Myers Chairman of the Board
and Director
/s/ Anthony D. Fiorillo
- -------------------------
Anthony D. Fiorillo Director
/s/ Wayne A. Johnson II
- -------------------------
Wayne A. Johnson II Director
/s/ J. Bernard Machen
- -------------------------
J. Bernard Machen Director
/s/ Charles A. Nichols
- -------------------------
Charles A. Nichols Director
/s/ John E. Vickers III
- -------------------------
John E. Vickers III Director
/s/ Bertrand R. Williams, Sr.
- -------------------------
Bertrand R. Williams, Sr. Director
38
<PAGE> 39
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
American Dental Technologies, Inc.
<TABLE>
<CAPTION>
Column Column Column Column Column
A B C D E
- ------------------------------------ ------------ -------------- ------------- -----------
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE OF PERIOD
- ------------------------------------ ------------ -------------- ------------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1994
Valuation allowance for accounts
receivable $ 270,000 $ 553,000 $ 403,000(1) $ 420,000
Valuation allowance for inventories 300,000 450,000(2) 750,000
Valuation allowances for
deferred taxes 8,047,000 1,483,000 9,530,000
Year Ended December 31, 1995
Valuation allowance for accounts
receivable 420,000 40,438 110,438(3) 350,000
Valuation allowance for inventories 750,000 230,000 45,000(2) 935,000
Valuation allowances for
deferred taxes 9,530,000 544,000 10,074,000
Year Ended December 31, 1996
Valuation allowance for accounts
receivable 350,000 30,000 100,000(1) 280,000
Valuation allowance for inventories 935,000 $ 175,000 715,000(2) 395,000
Valuation allowances for
deferred taxes $ 10,074,000 $1,916,000(4) $ 8,158,000
</TABLE>
- --------------
(1) Uncollectible accounts charged off net of recoveries.
(2) Inventory valuation write-offs.
(3) Reduction in valuation allowance.
(4) Utilization of NOL on current year income.
<PAGE> 40
EXHIBIT INDEX
4.5 Revolving Credit Agreement with The
International Bank dated October 17, 1996
4.6 Revolving Credit Promissory Note to The
International Bank dated October 17, 1996
4.7 Deed of Trust to The International Bank
dated October 17, 1996
4.8 Security Agreement to The International
Bank dated October 17, 1996
4.9 Continuing Limited Guaranty Agreement
of Benjamin J. Gallant dated October 17, 1996
10.41 U.S. Patent No. 5,507,739, issued April 14, 1996
10.42 U.S. Patent No. 5,525,058, issued June 11, 1996
10.44 Ben J. Gallant Employment Agreement
10.45 License Agreement between Texas
Airsonics, Inc., a wholly owned subsidiary of
American Dental Technologies, Inc. and Texas
Airsonics, L.P.
10.47 Fourth Memorandum Agreement dated
October 31, 1996, between the Company and Denics
Co., Ltd.
10.48 Joint Venture Agreement dated October 31, 1996,
between the Company and Denics Co., Ltd.
10.49 Letter dated October 30, 1996 between
the Company and Anthony D. Fiorillo
10.50 Settlement Agreement between the Company and Sunrise
Technologies International, Inc., dated July 30, 1996
11.1 Statement Re: Computation of Net Income (Loss) Per Share
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Auditors
27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 4.5
REVOLVING CREDIT AGREEMENT
This Agreement, made this 17th day of October, 1996, among THE
INTERNATIONAL BANK ("Lender"), and TEXAS AIRSONICS, INC. and AMERICAN DENTAL
TECHNOLOGIES, INC., a ("Borrowers"), whose address is 5555 Bear Lane, Corpus
Christi, Texas 78405 and BENJAMIN J. GALLANT (the "Guarantors"); WITNESSETH:
SECTION ONE: LINE OF CREDIT
1.01 Amount. Subject to the further terms and provisions hereof,
Lender agrees to and does hereby grant to and establish in favor of Borrowers a
line of credit under which Lender shall be committed to make loans or advances
to Borrowers, or to either of them, from time to time; provided, Lender shall
never be required to make any advance under such line of credit when such
advance together with the principal amount then unpaid and owing under the line
of credit by reason of previous advances would exceed the amount which Lender
is then committed to loan based on the loan value (also known as "Borrowing
Base") of collateral pledged to Lender as set forth in SECTION TWO hereof.
Further provided, in no event shall the Lender ever be required to make any
advance to Borrowers under the line of credit when such advance, together with
the principal amount then unpaid and owing under the line of credit by reason
of previous advances, would exceed TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
($2,500,000.00). Said line of credit is sometimes hereafter referred to as the
"$2,500,000.00 line of credit" or merely the "line of credit". Further, on and
after October 15, 1997 Lender shall not be obligated to make any additional
advances on the line of credit.
1.02 Repayment. Principal advanced and owing under the line of
credit shall be repayable in accordance with the terms hereof, but in any event
on October 15, 1997. Interest accrued and owing on advanced and unpaid
principal shall be due and payable monthly on the 15th day of each month and at
maturity. In order to evidence the obligation to repay Lender all advances,
together with interest thereon, made by Lender pursuant to the said line of
credit, Borrowers shall execute and deliver to Lender a promissory note in the
form attached hereto as EXHIBIT "A". The line of credit shall be repaid in
accordance with such note. Each of the Borrowers shall be jointly and
severally liable under the note and for repayment of the loan hereunder.
1.03 Interest Rate. All amounts advanced hereunder on the line of
credit loan shall bear interest, prior to maturity from the date advanced until
repaid, at a variable rate which is to be determined from time to time and
which is equal to the Wall Street Journal "prime rate" as such prime rate
changes from time to time, not to exceed the legal maximum that may be paid by
Borrowers, and as otherwise set forth in the said form of promissory note.
After maturity, all unpaid principal and all past due interest shall bear
interest until paid at the rate set forth in said note.
1.04 Conditions Precedent. The performance of every covenant to be
performed by Borrowers and Guarantor, and the truth of every representation
made by Borrowers and Guarantor, shall be a condition precedent to each and
every advance to be made by Lender under the terms hereof, or to any other
obligation whatsoever of Lender under the terms hereof; and, Lender shall not
be required to make any advance to Borrowers at a time that any of Borrowers or
the Guarantor are then in default on any obligation to Lender, or in default
hereunder or under any instrument executed pursuant hereto.
SECTION TWO: FUNDING AND ADVANCES
2.01 Borrowing Base. The amount which Borrowers are entitled to
borrow from time to time under the line of credit shall be the then current
loan value of inventory and accounts receivable collateral (the "Borrowing
Base") pledged to Lender to secure indebtedness owing to Lender by both
Borrowers, provided that in no event is Lender to be required to make any
advance which would cause the outstanding principal balance owing by Borrowers
at any one time to be in excess of $2,500,000.00. On and after October 15,
1997, Lender shall not be obligated to advance any additional funds. The
Borrowing Base shall be redetermined monthly
<PAGE> 2
and shall be, as to both Borrowers combined: (1) eighty percent (80%) of
eligible accounts receivable pledged to the Lender; plus (2) fifty percent
(50%) of the value of gross inventory. The term "eligible accounts receivable"
shall mean all billed gross trade accounts receivable, less: (a) balances over
90 days past due; (b) accounts owed by companies related to or affiliated with
Borrowers or the Guarantor or owed by their employees or by Borrowers' or
Guarantor's employees; (c) accounts owing by any one debtor which exceeds
twenty-five percent (25%) of the total billed gross accounts receivable,
except for Patterson Dental Company and other approved by Lender; (d) accounts
receivable which are disputed by the account debtor; and (e) and any accounts
which the Lender in its sole discretion considers not eligible. A company
shall be deemed "related" or "affiliated" if either of Borrowers or Borrowers
combined own 20% or more of the equity in such company. For the purposes
hereof, an account receivable shall be considered due on the date of the
original invoice therefor. Gross inventory shall be valued at cost, with the
loan value thereof to be 50% of such cost as indicated above.
2.02 Monthly Reports. Within fifteen (15) days following the end
of each calendar month, each of the Borrowers shall furnish to Lender a listing
of all trade accounts receivable with ageing, and a listing of inventory with
the cost for each item, such listings to be as of the close of business at the
end of such calendar month. Listings of accounts receivable shall include the
customer name, address, invoice number, date of the invoice and balance owing
thereon. Based on such monthly listings, the Borrowing Base will be
redetermined monthly. In the event the principal balance owing on Borrowers'
line of credit note exceeds the Borrowing Base as such is redetermined, then
Borrowers will make such payment on the note as is necessary to reduce the
principal balance to an amount equal to or less than the redetermined Borrowing
Base, such payment to be made within five (5) days of the furnishing of the
monthly listings report from which the Borrowing Base was redetermined.
2.03 Advances. Advances shall be made to Borrowers, or to any one
of the Borrowers, as requested from time to time by Benjamin J. Gallant. Such
requests may be by telephone facsimile bearing the signature of Benjamin J.
Gallant.
SECTION THREE: SECURITY, GUARANTEES
3.01 Personal Property Collateral. The loan provided hereunder and
all other present and future indebtedness of each of the Borrowers to Lender
shall be secured by first liens on all present and future accounts receivable
and inventory of each of the Borrowers. Each of the Borrowers shall execute a
Security Agreement for such purposes.
3.02 Guaranty. The loan hereunder shall be jointly and severally
guaranteed by Benjamin J. Gallant on a form of guaranty normally used by Lender.
3.03 Real Estate. The loan hereunder and all other present and
future indebtedness of Texas AirSonics, Inc. to Lender shall be secured by a
first lien Deed of Trust from Texas Airsonics, Inc. covering Lot 1, Block 2,
Industrial Technology Park Unit 1, Corpus Christi, Nueces County, Texas.
SECTION FOUR: FURTHER COVENANTS, CONDITIONS AND REPRESENTATIONS
4.01 Representations. In addition to the other covenants and
representations herein, each of the Borrowers makes the following
representations, covenants, or agreements to Lender, which representations,
covenants, or agreements each of the Borrowers covenant to keep during the time
that any indebtedness to be loaned to Borrowers pursuant hereto remains unpaid
(including renewals and extensions), to-wit:
(a) That American Dental Technologies, Inc. is a corporation duly
organized and existing under the laws of the State of Delaware,
and that Texas AirSonics, Inc. is a corporation duly organized
and existing under the laws of the State of Texas, and that Texas
AirSonics, Inc. is the wholly-owned subsidiary of American
Dental Technologies, Inc.;
-2-
<PAGE> 3
(b) That it is authorized to execute this Agreement and the
various instruments to be executed pursuant hereto;
(c) That it has corporate authority and power to own its
property and conduct its business as it is currently carried
on;
(d) That the performance of its obligations under this
Agreement will not conflict with any provision of law, nor
with the Articles of Incorporation and Bylaws of the corporation,
nor with any contractual agreement binding on the corporation;
(e) That it will pay all taxes, assessments and other
liabilities, as and when same become due except as they are
contested in good faith;
(f) That it will not become a party to any merger or
consolidation nor will it sell, transfer, convey or lease all
or substantially all of its business assets, nor will it purchase
or otherwise acquire all or substantially all of the business
assets of any other corporation or entity except as approved in
writing by Lender;
(g) That it will not pay any salaries, bonuses or other
remuneration substantially in excess of that heretofore paid
by it to its officers and employees;
(h) That it will not become a guarantor or surety, or pledge
its credit on any undertaking of another, or make any loans
or advances to any other, except trade credit extended in the
normal course of business;
(i) That, except for presently existing indebtedness, without
prior written consent the combined borrowings of
Borrowers from third party lenders will not exceed $250,000.00 at
any one time.
4.02 Financial Condition. Each of the Borrowers and the Guarantor
represents that, at the present time, it or he is not a party to any material
pending or threatened litigation, nor a party to any proceeding or action for
the assessment or collection of a material amount of additional taxes, and that
it or he does not know of any material contingent liabilities not provided for
or disclosed in the financial statements heretofore provided Lender. Each of
Borrowers and the Guarantor also represents to Lender that the latest financial
statements furnished heretofore to Lender fairly represent its or his financial
condition for the period as of the date stated, all in accordance with
generally accepted accounting principles consistently applied; and that no
substantial adverse changes have occurred since the date of the last financial
statement furnished to Lender.
4.03 Financial Statements of Borrower. Each of the Borrowers shall
keep proper books of record and account in which complete and correct entries
shall be made of each Borrowers' transactions in accordance with generally
accepted accounting principles and shall furnish or cause to be furnished to
Lender unaudited quarterly financial statements within forty-five (45) days
after the end of each quarter, and a yearly audited financial statement within
ninety (90) days of the end of the fiscal year, such financial statements to be
certified by the chief financial officer of each of the Borrowers. Each such
financial statement shall include a balance sheet, cash flow statement and
contingent liabilities, and be in a form suitable to the Lender.
4.04 Accounts Payable Listings. Each of the Borrowers shall
furnish to Lender within fifteen (15) days following the end of each calendar
month a listing of each Borrower's accounts payable, with ageing, such listing
to be as of the end of the previous calendar month. The listing shall include
customer name, invoice date, invoice number and balance owing thereon.
4.05 Financial Statements of Guarantor. The Guarantor agrees to
furnish Lender within thirty (30) days after the end of each year financial
statements, prepared in accordance with generally accepted accounting
principles, relative to the Guarantor individually. Each such financial
statement shall include a balance sheet, cash flow statement and contingent
liabilities, shall be in a form suitable to the Lender, and shall be signed by
the Guarantor.
-3-
<PAGE> 4
SECTION FIVE: DEFAULT
5.01 Events of Default. In addition to any other provision for
acceleration of maturity contained in notes and collateral instruments to be
executed by Borrower, Lender at its election may declare all sums owing by
Borrower immediately due and payable upon the happening of any of the following
events:
(a) Lender shall determine that any material representation or
warranty by either of the Borrowers or by any Guarantor
herein or elsewhere contained, or any material representation or
warranty contained in any collateral instruments required
hereunder shall not be correct in any respect;
(b) Default by either of the Borrowers or by any Guarantor
in the payment of any obligation owing Lender;
(c) Failure of either of the Borrowers or Guarantor to
timely perform any act or duty or furnish any report required
under the terms of this Agreement or under the terms of any note,
security agreement or other instrument to be executed pursuant
hereto; or
(d) Lender, acting in good faith, deems itself to be
adversely affected and insecure by reason of any material change
in either of the Borrower's net worth or the net worth of any
guarantor, or by reason of any other material change of condition
whether or not described herein.
SECTION SIX: MISCELLANEOUS
6.01 Survival of Representations. All representations, covenants
or warranties of Borrowers and Guarantor shall survive the execution and
delivery of this Agreement and any notes, security agreements or other
instruments executed and delivered pursuant hereto; and no investigation by
Lender, nor information it might have determined from any other source
available to it, shall diminish or otherwise affect the right of Lender to rely
on such representations and warranties and to enforce same.
6.02 Non-Merger. The covenants contained in the instruments made a
part hereof by reference which are to be executed from time to time in
connection with this loan are expressly adopted as covenants between the
parties hereto as a part of this Agreement. The provisions of this Agreement
shall not be merged into the execution of any note, mortgage or other
instrument executed pursuant hereto, but shall continue to define the
relationship of the parties hereto even after the execution of such
instruments. The covenants contained in this Agreement are not in lieu of
covenants contained in the instruments to be executed in connection herewith
even though they may pertain to the same subject matters; rather, said
covenants shall be cumulative of each other and shall be construed so as to not
result in a conflict of terms, if possible, and only if a conflict cannot be so
avoided will it then be considered that the express provisions of this
Agreement shall be given controlling effect.
6.03 Assignability. The rights of Borrowers hereunder shall not be
assignable without the express prior written consent of Lender. Lender shall
have the right to assign its rights hereunder and assign any and all notes
executed in favor of Lender hereunder, as well as the right to assign undivided
interests therein.
6.04 Non-Waiver. No delay on the part of Lender or its assigns in
the exercise of any rights shall operate as a waiver, nor shall any single or
partial exercise of any right preclude the other or additional exercise of any
right. In the event of any default, Lender may enforce its security interests
as to such collateral as it may elect. Its election to foreclose its lien on a
particular collateral shall not be a waiver of its right to foreclose its lien
in any other collateral. Only when all indebtedness owing Lender by Borrowers
has been fully paid will Lender ever be required to release any collateral.
6.05 Amendment. This Agreement shall not be amended except in writing
signed by the parties.
-4-
<PAGE> 5
6.06 Other Documents. In addition to the instruments specifically
mentioned herein, Borrowers shall execute and deliver such other and further
documents deemed necessary by Lender to evidence and secure the indebtedness of
Borrowers to Lender contemplated herein, and to otherwise effect the
transactions herein contemplated.
6.07 Expenses. Borrowers agree to pay all reasonable expenses and
fees, including attorneys' fees, incurred by Lender in connection with the
making of the loan referred to herein as well as all other reasonable expenses
incurred by Lender in connection herewith.
6.08 Certificates. Prior to the first advance hereunder, each of
the Borrowers shall furnish Lender certified copies of resolutions adopted by
its Board of Directors authorizing or ratifying Borrower's entering into this
Agreement and the transactions herein contemplated; and shall also furnish a
certificate of good standing.
6.09 Binding. This Agreement shall be binding on the parties
hereto, and their respective heirs, representatives, successors and assigns;
and shall inure to the benefit of Borrowers and of Lender and Lender's
successors and assigns.
EXECUTED in multiple originals the date first set forth above.
THIS WRITTEN LOAN AGREEMENT AND THE PROMISSORY NOTES, SECURITY AGREEMENTS,
GUARANTY AGREEMENTS AND OTHER LOAN DOCUMENTS EXECUTED BY THE PARTIES REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
BORROWERS: LENDER:
TEXAS AIRSONICS, INC. THE INTERNATIONAL BANK
By: Benjamin J. Gallant By: Scott Heitkamp
------------------------------- ------------------------------
Name: Benjamin J. Gallant Name: Scott Heitkamp
--------------------------- -------------------------
Title: President and CEO Title: Executive Vice President
-------------------------- -------------------------
AMERICAN DENTAL TECHNOLOGIES,
INC.
By: Benjamin J.Gallant
-------------------------------
Name: Benjamin J.Gallant
--------------------------
Title: President
-------------------------
GUARANTOR:
Benjamin J. Gallant
- ---------------------------------
Benjamin J. Gallant, Individually
-5-
<PAGE> 1
EXHIBIT 4.6
REVOLVING CREDIT PROMISSORY NOTE
$2,500,000.00 October 17, 1996
For value received TEXAS AIRSONICS, INC. and AMERICAN DENTAL
TECHNOLOGIES, INC., (hereinafter called "Maker" whether one or more) promises
to pay to the order of THE INTERNATIONAL BANK, ("Payee") at its office in
Corpus Christi, Nueces County, Texas, in lawful money of the United States the
sum of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS, or so much thereof as may be
advanced and unpaid hereon from time to time, together with interest on the
unpaid principal balance hereon outstanding from time to time prior to maturity
at a rate which is the lesser from time to time of: (i) a variable rate which
is THE REFERENCE RATE as such varies from time to time, such variable rate to
change at the same time and with changes in the said Reference Rate; or (ii)
the maximum legal rate which may be lawfully contracted for, charged or
received hereon from time to time under applicable law; or (iii) 24% per annum.
The term "Reference Rate" shall mean that variable rate of interest per annum
established by the largest U. S. Banks ("Reference Banks") from time to time as
their "prime rate" as reported from time to time in the Money Rates Section of
the Southwest Edition of the Wall Street Journal. In the event more than one
rate is published as said "prime rate" the average of such rates shall be used
in determining the Reference Rate. Such rate is set by the Reference Banks as
a general reference rate of interest, taking into account such factors as the
Reference Banks may deem appropriate, it being understood that many of the
Reference Banks' commercial or other loans are priced in relation to such rate,
that it is not necessarily the lowest or best rate actually charged to any
customer and that the Reference Banks may make various commercial or other
loans at rates of interest having no relationship to such rate. In the event
that Reference Banks do not have a rate designated by them as their "prime
rate", then the "Reference Rate" under the note shall be deemed to be the
variable rate of interest per annum which is the general reference rate
designated by Reference Banks as their "base rate", "prime rate", "reference
rate", or other similar rate which is comparable to the Reference Rate as
described above.
All interest rates hereunder shall be computed on a full calendar year
(365/366 days) basis. Article 5069 Chapter 15 V.A.T.S. shall not in any event
apply to the loan evidenced hereby. After maturity hereof, unpaid principal
and accrued interest shall bear interest from maturity until paid at the rate
of eighteen percent (18%) per annum, calculated on a full calendar year
basis.
Principal and accrued interest shall be due and payable ON DEMAND, but
if no demand then principal shall be due and payable on or before October 15,
1997, and accrued interest shall be due and payable on a monthly basis
commencing November 15, 1996, and on the same day of each succeeding month
thereafter, and at maturity.
All payments hereon shall be first applied to accrued interest with
the remainder, if any, applied to unpaid principal. Principal and accrued
interest may be prepaid in whole or in part from time to time without penalty
or premium.
This note evidences funds to be advanced to Maker pursuant to a
Revolving Credit Agreement of even date.
Payment hereof is secured and guaranteed as set forth in such Agreement.
This note shall evidence the Maker's, endorsers', sureties' and
guarantors' joint and several obligation to pay all advances, together with
interest thereon, made by Payee to Maker (or to either of them) or for Maker's
account (or for the account of either of them). Interest shall accrue on
principal only from the date advanced until paid. Each of Texas AirSonics,
Inc. and American Dental Technologies, Inc. shall be jointly and severally
liable hereunder.
The Maker and all endorsers, guarantors and sureties hereof authorize
Payee from time to time to make advances to the Maker hereof without any
requirement that Payee notify them or any of them of such advances, provided
the total principal owing hereunder shall not exceed at any one time the face
amount of this note. The amount owing hereunder at any given time shall be
determined by the total of all advances made less any principal payments made
plus the unpaid accrued interest thereon as determined by the provisions
hereof.
At the option of the holder hereof, the maturity of this note may be
accelerated and all unpaid amounts of principal and accrued interest shall
become immediately due and payable, without presentment or demand or notice to
any person obligated as Maker or any other person obligated hereon, upon the
occurrence of any of the following events: default in the payment of any
indebtedness or any part thereof owing to holder by any person obligated as
Maker or any other person obligated hereon, whether evidenced by this note or
otherwise; or failure to perform or keep any of the material conditions and
covenants contained in any document given to secure indebtedness owing to
holder by any person obligated as Maker or any other person obligated hereon or
any document evidencing loan agreements made in connection herewith; or
insolvency or making of any general assignment for the benefit of creditors by
any person obligated as Maker or any other person obligated hereon; or the
filing of any petition or commencement of any proceeding by or against any
person obligated as Maker or any other person obligated hereon for any relief,
discharge, rearrangement, reorganization or otherwise under any bankruptcy or
insolvency laws; or the levying on, seizure or freezing of any account of any
person obligated as Maker or any other person obligated hereon by any agency or
instrumentality of the State or Federal government; or the issuance of any writ
of attachment or garnishment relating to or affecting any of the property or
assets of any person obligated as Maker or any other person obligated hereon;
or if the holder hereof in good faith deems itself insecure.
<PAGE> 2
Page 2
$2,500,000.00 Revolving Credit Promissory Note
Maker: Texas AirSonics, Inc. and American Dental Technologies, Inc.
Payee: The International Bank
Maker and all sureties, endorsers and guarantors of this note hereby
severally waive demand, presentment for payment, notice of nonpayment,
protest, notice of protest, notice of intention to accelerate maturity, notice
of acceleration of maturity, and all other notice, and diligence in collecting
this note or filing suit thereon or enforcing any security given therefor, and
agree to any substitution, exchange or release of any security now or hereafter
given for this note or the release of any party primarily or secondarily liable
hereon. Maker and all sureties, endorsers and guarantors of this note further
severally agree that it will not be necessary for the payee or any holder
hereof, in order to enforce payment of this note, to first institute or exhaust
its remedies against any person obligated as Maker or other party liable
therefor or to enforce its rights against any security for this note and hereby
consent to the renewal and extension or modification from time to time of this
note (regardless of the number or length of time of the renewals, extensions or
modifications), and to any other indulgence with respect hereto, without notice
of any such renewal, extension, modification or indulgence. All persons
obligated hereon, whether as a maker, endorser, surety, guarantor or otherwise,
shall be jointly and severally liable for repayment of the indebtedness
evidenced by or arising under this note.
In the event that this note is placed into the hands of an attorney
for collection, or if collected through probate, bankruptcy or other judicial
proceedings, then there shall be additionally owing hereon all expenses and
costs of collection, including reasonable attorney's fees.
It is expressly provided and stipulated that, notwithstanding any
provision of this Note or any loan agreement or in any deed of trust,
assignment, security agreement or other agreement securing payment of this
note, in no event shall the aggregate of all interest paid by the Maker to the
holder hereof or contracted for, chargeable or receivable hereunder ever exceed
the maximum legal rate of interest which may lawfully be charged Maker under
the laws of the State of Texas or the United States (whichever may permit the
higher rate) on the principal balance of this note from time to time advanced
and remaining unpaid. In this connection, it is expressly stipulated and
agreed that it is the intent of the payee and the Maker in the execution and
delivery of this note to contract in strict compliance with usury laws of the
State of Texas or the United States (whichever may permit the higher rate). In
the event said maximum legal rate is calculated under Texas statutes, the
applicable rate ceiling (maximum rate) shall be the indicated (weekly) rate
ceiling from time to time in effect, as provided in Article 5069-1.04 V.A.T.S.,
as amended. In furtherance thereof, none of the terms of this note or any loan
agreement or in any deed of trust, assignment, security agreement or other
agreement securing payment of this note, shall ever be construed to create a
contract to pay for the use, forbearance or detention of money, interest at a
rate in excess of the maximum legal interest rate permitted to be charged to
the Maker under such laws. The Maker or any guarantors, endorsers or other
parties now or hereafter becoming liable for payment of this note shall never
be liable for interest in excess of the maximum interest that may lawfully be
charged under such laws, and the provisions of this paragraph shall govern over
all other provisions of this note or any loan agreement or any deed of trust,
assignment, security agreement or other agreement securing payment of this
note, should such provisions be in apparent conflict herewith. All sums paid
or agreed to be paid to payee or the holder of this note for the use,
forbearance or detention of the indebtedness of Maker under the terms of this
note or otherwise shall be amortized, prorated, allocated and spread throughout
the full term of such indebtedness until payment in full so that the actual
rate of interest with respect to such indebtedness is uniform throughout the
term hereof, and, in conjunction therewith, if the loan evidenced by this note
should ever be deemed to consist of two or more loans, then any sum paid or
agreed to be paid to the holder hereof for the use, forbearance or detention of
the indebtedness of Maker to payee under the terms of this note which is deemed
to be excessive interest with respect to one or more of such loans shall be
allocated to the loans for which a maximum lawful rate of interest has not been
contracted for, charged or received or for which no maximum rate of interest
exists.
TEXAS AIRSONICS, INC.
By: Benjamin J. Gallant
---------------------
Benjamin J. Gallant
President and CEO
AMERICAN DENTAL TECHNOLOGIES, INC.
By: Benjamin J. Gallant
---------------------
Benjamin J. Gallant
President
<PAGE> 1
EXHIBIT 4.7
DEED OF TRUST
STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF NUECES )
That TEXAS AIRSONICS, INC., whose address is 5555 Bear Lane, Corpus Christi,
Texas 78405, hereinafter called "Mortgagor" (whether one or more) for the
purpose of securing the indebtedness hereinafter described, and in
consideration of the sum of TEN DOLLARS ($10.00) to Mortgagor in hand paid by
the Trustee hereinafter named, the receipt of which is hereby acknowledged, and
for the further consideration of the uses, purposes and trusts hereinafter set
forth, has granted, sold and conveyed, and by these presents does grant, sell
and convey unto The International Bank, Trustee, whose address is P. O. Drawer
4956, Corpus Christi, Texas 78469 and his or its substitutes or successors, all
of the following described property, to-wit:
(a) That land located in Nueces County, Texas more particularly
described as follows:
Lot One (1), Block Two (2), INDUSTRIAL TECHNOLOGY PARK UNIT 1, a
subdivision of the City of Corpus Christi, Nueces County, Texas
as shown by the map or plat thereof recorded in Volume 46,
Pages 105-107, Map Records, Nueces County, Texas.
(b) All improvements now or hereafter situated on said land, and all
the rights, hereditaments and appurtenances in anywise
appertaining or belonging thereto.
(c) All proceeds now or hereafter arising from the foregoing listed
properties and types of properties.
All of the above types and items of properties are herein
referred to as the "property".
This conveyance is subject to all lawful restrictive covenants and
easements, if any, of record in the office of the County Clerk of the County in
which said land is located and presently in force and affecting said land.
There is also excepted herefrom all oil, gas and other minerals, if any,
heretofore conveyed to others or reserved by Mortgagor's predecessors in title
as shown by the records of said Clerk.
TO HAVE AND TO HOLD the above described property, together with the
rights, privileges and appurtenances thereto belonging unto the said Trustee,
and to the said Trustee's substitutes or successors forever. And Mortgagor
does hereby bind itself and its successors to warrant and forever defend the
property unto the said Trustee, and the Trustee's substitutes or successors and
assigns forever, against the claim, or claims, of all persons claiming or to
claim the same or any part thereof.
This conveyance, however, is made in TRUST to secure payment of the following:
(a) That certain promissory note of even date herewith executed by
Texas AirSonics, Inc. and American Dental Technologies, Inc.
payable to the order of THE INTERNATIONAL BANK (herein called
"Beneficiary") whose address is P. O. Drawer 4956, Corpus
Christi, Texas 78469, described as follows, to-wit:
In the original principal sum of TWO MILLION FIVE HUNDRED
THOUSAND DOLLARS ($2,500,000.00) maturing October 15, 1997.
(b) Any sums which may hereafter be advanced by Beneficiary under the
terms hereof together with interest thereon and attorney's fees as
hereinafter provided;
(c) Any additional loans made by Beneficiary to Mortgagor,
however evidenced; and in this connection it is contemplated that
Beneficiary may lend additional sums to Mortgagor from time to
time, but shall not be obligated to do so, and Mortgagor
agrees that if Mortgagor should become indebted to Beneficiary in
any such additional sum or sums the same shall be secured by this
instrument as well as any other security which Beneficiary may
now or hereafter hold for the payment thereof; and,
(d) Any and all other indebtedness, obligations or other
liabilities of Mortgagor to Beneficiary now or hereafter owing,
whether direct or indirect, primary or secondary, fixed or
contingent, matured or unmatured, joint or several, regardless of
how evidenced or arising.
(e) Any and all renewals and extensions of the foregoing, regardless
of the number of or length of time of such renewals and
extensions, and regardless of whether or not Mortgagor joins in
or executes an agreement relating to such renewals and extensions.
<PAGE> 2
Provided, notwithstanding the foregoing, the liens and security interests
herein provided shall not secure any indebtedness arising under or by reason of
loans pursuant to Subtitles Two or Three, such being Chapters 2 through 15, of
the Texas Credit Code, Article 5069 V.A.T.S.
Should Mortgagor do and perform all of the covenants and agreements
herein contained, and make prompt payment of said indebtedness as the same
shall become due and payable, then this conveyance shall become null and void
and of no further force and effect, and shall be released at the expense of
Mortgagor, by the holder thereof, herein called "Beneficiary" (whether one or
more).
Mortgagor covenants and agrees as follows:
That Mortgagor is lawfully seized of said property, and has the right to
convey the same; that said property is free from all liens and encumbrances
except as may herein be specifically set forth.
To protect the title and possession of said property and to pay when due
all taxes and assessments now existing or hereafter levied or assessed upon
said property, or the interest therein created by this Deed of Trust, and to
preserve and maintain the lien hereby created prior to all other liens except
as may herein be specifically provided, and to not place or allow the creation
or placement of any other liens on said property without the prior written
approval of Beneficiary.
To keep the improvements on said land, and any goods covered hereby,
in good repair and condition, and not to permit or commit any waste thereof;
to keep all buildings occupied so as not to impair the insurance carried
thereon.
To insure and keep insured all improvements now or hereafter created
upon said land, and the goods covered hereby, against loss or damage by fire
and windstorm, and any other hazard or hazards (including but not limited to
flood insurance if in a special flood hazard area designated by HUD) as may be
reasonably required from time to time by Beneficiary during the term of the
indebtedness hereby secured, to the extent of the amount of the indebtedness
hereby secured, or to the extent necessary to prevent Mortgagor from being a
co-insurer under the insurance policies, whichever is the greater, in such form
and with such insurance company or companies as may be approved by Beneficiary,
and to deliver to Beneficiary the policies of such insurance having attached to
said policies such mortgage indemnity clause as Beneficiary shall direct; to
deliver renewals of such policies to Beneficiary at least ten (10) days before
any such insurance policies shall expire; any proceeds which Beneficiary may
receive under any such policy, or policies, may be applied by Beneficiary at
his own option, to reduce the indebtedness hereby secured, whether then matured
or to mature in the future, and in such manner as Beneficiary may elect, or
Beneficiary may permit Mortgagor to use said proceeds to repair or replace all
improvements damaged or destroyed and covered by said policy.
To comply with all terms and conditions of any loan agreement made in
connection with the indebtedness secured hereby.
If requested by Beneficiary to provide within 30 days of a request being
made, an appraisal by an MAI appraiser or other appraiser approved by
Beneficiary, and Mortgagor agrees that if Mortgagor does not timely comply with
a request made for an appraisal that Beneficiary may obtain such appraisal at
Mortgagor's expense.
To provide Beneficiary on at least an annual basis, with each
Mortgagor's and each Maker's financial statements including a current balance
sheet, current income statement and current statement of sources and uses of
cash.
Within 15 days of demand made by Beneficiary, to make an initial deposit
in a reasonable amount determined by Beneficiary and then monthly payments to a
fund for taxes and insurance premiums on the property. Monthly payments will
be made on the payment date specified in the note, and each payment will be
1/12 of the amount that Beneficiary estimates will be required annually for
payment of taxes and insurance premiums. The fund will accrue no interest, and
Beneficiary will hold it without bond in escrow and use it to pay the taxes and
insurance premiums. If Mortgagor has complied with the requirements of this
paragraph, Beneficiary must pay the taxes before delinquency. Mortgagor agrees
to make additional deposits on demand if the fund is ever insufficient for its
purpose. If an excess accumulates in the fund, Beneficiary may either credit
it to future monthly deposits until the excess is exhausted or refund it to
Mortgagor. Before Mortgagor makes the final payment on the note, Beneficiary
will credit to that payment the whole amount then in the fund or, at
Beneficiary's option, refund it after the note is paid. If this Deed of Trust
is foreclosed, any balance in the fund over that needed to pay taxes, including
taxes accruing but not yet payable, and to pay insurance premiums will be first
applied to the balance, if any, of indebtedness secured hereby and the
remainder, if any, refunded to Mortgagor. Deposits to the fund described in
this paragraph are in addition to the monthly payments provided for in the
note.
To the extent not prohibited by law, Mortgagor will pay, or reimburse
Beneficiary for, all costs and expenses, of every character, incurred or
expended from time to time (including, but not limited to, the fees and
expenses of counsel for Beneficiary) in connection with the negotiation,
preparation, execution, filing, recording, refiling and re-recording of this
Deed of Trust and all related financing statements and the making, servicing
and collection of the debt secured hereby; any and all stamp, mortgage and
recording taxes; the costs of any title insurance or lien insurance purchased
by Beneficiary in connection herewith; all costs of negotiation, preparation,
execution and delivery of any and all amendments, modifications, supplements,
consents, waivers or other documents or writings relating to the transactions
contemplated by this Deed of Trust; and all costs (including attorneys' fees)
of reviewing title opinions and security opinions relating to the debt secured
hereby.
-2-
<PAGE> 3
With respect to any substances defined as or included in the definition
of "hazardous substances," "hazardous wastes," "hazardous materials" or "toxic
substances" under any applicable federal, state or local laws, ordinances or
regulations (including, without limitation, friable asbestos and asbestos
deemed hazardous by federal or state regulations) (such substances collectively
referred to hereinafter as "Hazardous Materials" and such laws, ordinances and
regulations together with all rules, orders and permits pursuant thereto
collectively referred to hereinafter as "Hazardous Materials Laws"), Mortgagor:
(a) represents that (except as to Hazardous Materials violations that have
been remedied as required by governmental authorities having
jurisdiction of the matter) neither Mortgagor nor any affiliate,
employee, or agent of Mortgagor nor, to the best of Mortgagor's
knowledge, any of Mortgagor's predecessors in title (i) has ever
stored, buried, installed, transported, treated or disposed of any
Hazardous Materials at, to or from the property in violation of any
applicable Hazardous Materials Laws, (ii) has ever caused or was
legally responsible for the release, discharge, emission, leak, spill
or dumping of any Hazardous Materials at or from the property except
for those releases allowed under applicable Hazardous Materials Laws,
or (iii) has ever received notification from any federal, state or
other governmental authority of the presence or potential or actual
release of any Hazardous Materials at or from the property;
(b) covenants to (i) comply with all applicable Hazardous
Materials Laws with respect to the manufacture, storage, transmission,
presence, discharge and removal of Hazardous Materials at or from the
property, (ii) pay promptly when due the costs of any required removal
of any Hazardous Materials from the property and to keep the property
free of any lien imposed pursuant to any Hazardous Materials Laws,
(iii) not locate nor allow location of any underground storage tanks
on the property, and (iv) notify Beneficiary promptly in writing of
the commencement of any legal or regulatory proceedings relating to
Hazardous Materials affecting the property; and
(c) agrees to indemnify and to hold harmless Beneficiary,
its officers, employees, agents, successors and assigns (the
"Indemnitees") from and against, and to reimburse the Indemnitees with
respect to, any and all claims, demands, causes of action, loss,
damage, liabilities, costs, and expenses (including attorneys' fees
and court costs) of any and every kind or character, known or unknown,
fixed or contingent, asserted against or incurred by the Indemnitees
at any time or from time to time, whether as beneficiary under the
Deed of Trust, as mortgagee in possession, or as successor-in-interest
to Mortgagor by foreclosure deed or deed in lieu of foreclosure, by
reason of or arising out of any violation of any Hazardous Materials
Laws (including, without limitation, all claims, demands, loss,
damage, liabilities, costs and expenses in connection with the
presence on the property or release from or to the property of
Hazardous Materials disposed of or otherwise released), regardless of
whether the act, omission, event, or circumstance constituted a
violation of applicable law at the time of existence or occurrence.
Mortgagor's obligations hereunder shall arise upon the discovery of
the presence of any Hazardous Materials, whether or not any federal
agency or any state or local environmental agency has taken or
threatened any action in connection with the presence of any Hazardous
Materials. The foregoing indemnity shall survive the repayment of the
indebtedness secured hereby and the release of the lien of the Deed of
Trust and shall survive the transfer of any or all right, title and
interest in and to the property by Mortgagor to any other party.
In the event Mortgagor fails, after reasonable notice, to pay any amounts
described in clause (b)(ii) immediately above, Beneficiary may, but shall not
be obligated to, cause the Hazardous Materials to be removed from the property
and the cost of such removal shall be added to the indebtedness secured hereby
(regardless of whether such addition increases the outstanding balance of the
indebtedness secured hereby to an amount in excess of the face amount of any
notes described herein). Beneficiary shall have the right at reasonable times
and reasonable intervals, following reasonable advance notice to Mortgagor, to
conduct an environmental audit of the property and Mortgagor shall cooperate in
the conduct of such environmental audit. Mortgagor shall pay the cost of
environmental audits of the property conducted for the benefit or at the
request of Beneficiary.
That in the event Mortgagor shall fall to keep the improvements on the
land hereby conveyed or the goods covered hereby in good repair and condition,
or to pay promptly when due all taxes and assessments, as aforesaid, or to
preserve the lien status as herein warranted on said property, or to keep the
buildings, improvements and goods insured, as aforesaid, or to deliver the
policy, or policies, of insurance or the renewal thereof to Beneficiary, as
aforesaid, or to promptly, fully and timely observe or perform any covenant or
obligation of Mortgagor contained herein, then Beneficiary may, at its option,
but without being required to do so, make such repairs, pay such taxes and
assessments, purchase any tax title thereon. remove any other liens, and
prosecute or defend any suits in relation to the preservation of the lien
status herein warranted on said property, or insure and keep insured the
improvements thereon in an amount not to exceed that above stipulated, or
perform such other covenants and obligations.
Mortgagor will reimburse Beneficiary for all amounts expended by
Beneficiary to satisfy any obligation of Mortgagor under this Deed of Trust or
to protect the Property. In addition, whether or not a default shall have
occurred, Mortgagor will pay, or reimburse Beneficiary for, all costs and
expenses, of every character incurred or expended from time to time in
connection with the evaluation, monitoring, administration and protection of
the Property, the exercise by Beneficiary of any of its rights and remedies
hereunder or at law (including, but not limited to all appraisal fees,
consulting fees, brokerage fees and commissions, insurance premiums, Uniform
Commercial Code search fees, fees incident to title searches and reports,
investigation costs, escrow fees, attorneys' fees, legal expenses, fees of
auditors and accountants, court costs, fees of governmental authorities,
auctioneer fees and expenses, and all fees and expenses incurred in connection
with the marshalling, guarding, management,
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<PAGE> 4
operation, removal, maintenance, cleanup, storage, auction and liquidation
of the Property). Any amounts to be paid or reimbursed by Mortgagor to
Beneficiary shall be a demand obligation owing by Mortgagor to Beneficiary and,
to the extent not prohibited by law, shall bear interest from the date of
expenditure by Beneficiary until paid at the same rate provided for past-due
principal and interest in the principal obligation (the "Past Due Rate"). The
principal obligation shall be (1) the note secured hereby; (2) if more than one
note is secured hereby, the note with the largest face amount; and (3) if no
note is secured hereby, the obligation with the largest face amount.
That in the event of default in the payment of any installment,
principal or interest, of any note or other indebtedness hereby secured, in
accordance with the terms thereof, or of a breach under the terms of any loan
agreement made in connection with indebtedness secured hereby, or of a breach
of any of the covenants herein contained to be performed by Mortgagor, then and
in any of such events Beneficiary may elect, Mortgagor hereby expressly waiving
presentment and demand for payment, to declare the entire principal
indebtedness hereby secured with all interest accrued thereon and all other
sums hereby secured immediately due and payable, and in the event of default in
the payment of said indebtedness when due or declared due, it shall thereupon,
or at any time thereafter, be the duty of the Trustee, or the Trustee's
successor or substitute as hereinafter provided, at the request of Beneficiary
(which request is hereby conclusively presumed), to enforce this trust; and
after advertising the time, place and terms of the sale of the above-described
and conveyed property then subject to the lien hereof which is to be sold as
directed by the Beneficiary, and mailing and filing notices as required by
Section 51.002, Texas Property Code, as then amended (successor to Article
3810, Texas Revised Civil Statutes), and otherwise complying with that statute,
the Trustee may sell the above-described property then subject to the lien
hereof, or such portions thereof as directed by Beneficiary, at public auction
in accordance with such notices on the first Tuesday in any month between the
hours of ten o'clock A.M. and four o'clock P.M., to the highest bidder for
cash, selling all of the property as an entirety or in such parcels as the
Trustee acting may elect, and make due conveyance to the Purchaser or
Purchasers, with general warranty binding Mortgagor, and Mortgagor's
successors, heirs and assigns; and out of the money arising from such sale, the
Trustee acting shall pay first all the expenses of advertising the sale and
making the conveyance, including a reasonable commission not to exceed five
percent (5%) to the Trustee, which commission shall be due and owing in
addition to the attorney's fees provided for in said note, and then to
Beneficiary the full amount of principal, interest, attorney's fees and other
charges due and unpaid on said note and all other indebtedness secured hereby,
rendering the balance (except for any amounts required by law to be paid
before payment to Mortgagor) of the sales price, if any, to Mortgagor, and
Mortgagor's successors, heirs or assigns; and the recitals in the conveyance to
the Purchaser or Purchasers shall be full and conclusive evidence of the truth
of the matters therein stated, and all prerequisites to said sale shall be
presumed to have been performed, and such sale and conveyance shall be
conclusive against Mortgagor and Mortgagor's successors, heirs and assigns.
Mortgagor will remain liable for any deficiency remaining after a sale or other
disposition hereunder.
It is agreed that in the event a foreclosure hereunder should be
commenced by the Trustee, or the Trustee's substitute or successor, Beneficiary
may at any time before the sale of said property direct the said Trustee to
abandon the sale, and may then institute suit for the collection of said note,
and for the foreclosure of this Deed of Trust lien; it is further agreed that
if Beneficiary should institute a suit for the collection thereof, and for a
foreclosure of this Deed of Trust lien, that he may at any time before the
entry of a final judgment in said suit dismiss the same, and require the
Trustee, or the Trustee's substitute or successor, to sell the property in
accordance with the provisions of this Deed of Trust. Sale of a part or parcel
of the property covered hereby shall not exhaust the power of sale, and sales
may be made from time to time until all property covered hereby is sold, or
until all indebtedness secured hereby is paid in full.
Beneficiary, if it is the highest bidder, shall have the right to
purchase at any sale of the property and to have the amount for which such
property is sold credited on the debt then owing.
Beneficiary in any event is hereby authorized to appoint a substitute
trustee, or a successor trustee, to act instead of the Trustee named herein
without other formality than the designation in writing of a substitute or
successor trustee; and the authority hereby conferred shall extend to the
appointment of other successor or substitute trustees successively until the
indebtedness hereby secured has been paid in full, or until said property is
sold hereunder, and each substitute and successor trustee shall succeed to all
of the rights and powers of the original trustee named herein.
In the event any sale is made of the property, or any portion thereof,
under the terms of this Deed of Trust, Mortgagor, its successors, heirs and
assigns, shall forthwith upon the making of such sale surrender and deliver
possession of the property so sold to the Purchaser at such sale, and in the
event of their failure to do so they shall thereupon from and after the making
of such sale be and continue as tenants at will of such Purchaser, and in the
event of their failure to surrender possession of said property upon demand,
the Purchaser, and the Purchaser's successors, heirs and assigns, shall be
entitled to institute and maintain an action for forcible detainer of said
property in the Justice of the Peace Court in the Justice Precinct in which
such property, or any part thereof, is situated.
It is agreed that the lien hereby created shall take precedence over
and be a prior lien to any other lien of any character (except for any lien
herein specifically stated to which this Deed of Trust is subject to). whether
vendor's, materialmen's or mechanic's lien hereafter created on the property,
and in the event the proceeds of the indebtedness secured hereby as set forth
herein are used to pay off and satisfy any liens heretofore existing on said
property, then Beneficiary is, and shall be, subrogated to all of the rights,
liens and remedies of the holders of the indebtedness so paid.
It is further agreed that if Mortgagor, its successors, heirs or
assigns, while the owner of the hereinabove described property, should commit
an act of bankruptcy, or authorize the filing of a voluntary petition in
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<PAGE> 5
bankruptcy, or should an act of bankruptcy be committed and involuntary
proceedings instituted or threatened, or should the property be taken over by a
receiver for Mortgagor, its heirs, successors or assigns, all indebtedness
secured hereby shall, at the option of Beneficiary, immediately become due and
payable, and the acting Trustee may then proceed to sell the property under the
provisions of this Deed of Trust.
It is agreed that an extension, or extensions, may be made of the
time of payment of all, or any part, of the indebtedness secured hereby, and
that any part of the property may be released from this lien without altering
or affecting the priority of the lien created by this Deed of Trust in favor of
any junior encumbrancer, mortgagee or purchaser, or any person acquiring an
interest in the property hereby conveyed, or any part thereof; it being the
intention of the parties hereto to preserve this lien on the land herein
described and all improvements thereon, and that may be hereafter constructed
thereon, first and superior to any liens that may hereafter be placed thereon,
or that may be fixed, given or imposed by law thereon after the execution of
this instrument notwithstanding any such extension of the time of payment, or
the release of a portion of said property from this lien.
In the event any portion of the indebtedness hereinabove described
cannot be lawfully secured by the lien herein granted, it is agreed that the
first payments made on said indebtedness shall be applied to the discharge of
that portion of said indebtedness.
Beneficiary shall be entitled to receive any and all sums which may
become payable to Mortgagor for the condemnation of the hereinabove described
property, or any part thereof, for public or quasi-public use, or by virtue of
private sale in lieu thereof, and any sums which may be awarded or become
payable to Mortgagor for damages caused by public works or construction on or
near the said property. All such sums are hereby assigned to Beneficiary, who
may, after deducting therefrom all expenses actually incurred, including
attorney's fees, release same to Mortgagor or apply the same to the reduction
of the indebtedness hereby secured, whether then matured or to mature in the
future, or on any money obligation hereunder, as and in such manner as
Beneficiary may elect. Beneficiary shall not be, in any event or circumstances,
liable or responsible for failure to collect, or exercise diligence in the
collection of, any such sums.
Nothing herein or in said note shall ever entitle Beneficiary, upon
the arising of any contingency whatsoever, to receive or collect interest in
excess of the highest rate allowed by the laws of the State of Texas on the
principal indebtedness hereby secured or on any money obligation hereunder and
in no event shall Mortgagor be obligated to pay interest thereon in excess of
such rate. To the extent permitted by applicable law, determination of the
legal maximum amount of interest shall at all time be made by amortizing,
prorating, allocating and spreading in equal parts during the period of the
full stated term of the Note, all interest at any time contracted for, charged
or received with respect to the Note and the indebtedness, so that the actual
rate of interest with respect to the note and indebtedness is uniform
throughout the stated term of the Note.
The term "Mortgagor" as used in this instrument will be construed as
singular or plural to correspond with the number of persons executing this
instrument as Mortgagor. If more than one person executes this instrument as
Mortgagor, his, her, their, or its duties and liabilities under this instrument
will be joint and several, and the grants of liens and security interests
herein made shall cover each such person's joint interest as well as his
several interest in the property mortgaged hereunder. It is intended that the
lien on each particular person's interest executing this instrument as
Mortgagor shall cover the entire indebtedness described herein as being secured
hereby; and it is not intended that the interest of such a particular person in
the property covered hereby shall secure only that particular person's
liability on the indebtedness; nor is it intended that any such particular
person may have that particular person's interest in the property released from
the liens hereof unless and until the entire indebtedness secured hereby has
been satisfied. The terms "Beneficiary" and "Mortgagor" as used in this
instrument include the heirs, executors or administrators, successors,
representatives, receivers, trustees, and assigns of those parties. This
instrument is binding upon the Mortgagor, the Mortgagor's successors, heirs and
assigns (subject to the prohibition of assignment of the property as set forth
herein), and will inure to the benefit of the Trustee and the Trustee's
successors and substitutes and Beneficiary and Beneficiary's successors and
assigns.
Mortgagor assigns to Beneficiary absolutely, not only as collateral,
all present and future rent and other income and receipts from the property and
all present and future accounts evidencing or arising from said rents, income
and receipts. Leases are not assigned. Mortgagor warrants the validity and
enforceability of the assignment. Mortgagor may as Beneficiary's licensee
collect rent and other income and receipts as long as Mortgagor is not in
default under the indebtedness secured hereby or this deed of trust. Mortgagor
will apply all rent and other income and receipts to payment of the
indebtedness secured hereby and performance of this deed of trust, but if the
rent and other income and receipts exceed the amount due under the indebtedness
secured hereby and deed of trust, Mortgagor may retain the excess. If Mortgagor
defaults in payment of the indebtedness secured hereby or performance of this
deed of trust, Beneficiary may terminate Mortgagor's license to collect and
then as Mortgagor's agent may rent the property if it is vacant and collect
all rent and other income and receipts. Beneficiary neither has nor assumes any
obligations as lessor or landlord with respect to any occupant of the property.
Beneficiary shall apply all rent and other income and receipts collected under
this paragraph first to expenses incurred in exercising Beneficiary's rights
and remedies and then to Mortgagor's obligations under the indebtedness secured
hereby and this deed of trust in the order determined by Beneficiary.
Beneficiary is not required to act under this paragraph, and acting under this
paragraph does not waive any of Beneficiary's other rights or remedies. If
Mortgagor becomes a voluntary or involuntary bankrupt, Beneficiary's filing a
proof of claim in bankruptcy will be tantamount to the appointment of a
receiver under Texas law.
Mortgagor waives the benefit of all laws now in existence or that
hereafter may be enacted providing for (i) any appraisement before sale of any
portion of the property, commonly known as Appraisement Laws, and (ii) the
benefit of all laws that may be hereinafter enacted in any manner extending the
time for the enforcement of the
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<PAGE> 6
collection of the indebtedness or creating or extending a period of
redemption from any sale made with respect to the indebtedness, commonly known
as Stay Laws and Redemption Laws, to the extent Mortgagor may lawfully waive
such laws.
Acceptance by Beneficiary of any payment in an amount less than the
amount then due shall be deemed as acceptance on account only and the failure
to pay the entire amount then due shall be and continue to be a default by
Mortgagor; and at any time thereafter, and until the entire amount then due has
been paid, Beneficiary shall be entitled to exercise all rights and remedies
conferred it in this instrument or at law upon the occurrence of a default.
Beneficiary shall have the additional right, upon the commencement of
any action to enforce the lien or security interest herein given, to have
appointed by a court of competent jurisdiction, a receiver to take possession
of the property and to collect all rents, issues, income, and profits arising
from or pertaining to the property. This provision is a right created by this
deed of trust and is cumulative of and is not to affect in any manner the right
of Beneficiary to the appointment of a receiver under any applicable law or
statute.
In the event Mortgagor conveys or contracts to convey the property
covered hereby, or any interest in the property covered hereby, including a
leasehold interest, to a party or parties not appearing in this instrument
without the written consent thereto of Beneficiary, then Beneficiary, at its
election exercised any time after such event and without notice to Mortgagor,
may declare the entire indebtedness secured hereby at once due and payable.
Mortgagor shall not be entitled to release of the liens hereof on any
portion of the property covered hereby (commonly known as "partial releases")
upon payment of a portion of the indebtedness secured hereby; and the Mortgagor
shall be entitled to release of any property covered hereby only upon
satisfaction in full of the entire indebtedness secured hereby.
Dated effective the 17th day of October, A.D., 1996.
TEXAS AIRSONICS, INC.
By: Benjamin J. Gallant
-------------------------
Benjamin J. Gallant
President and CEO
STATE OF TEXAS )
)
COUNTY OF NUECES )
This instrument was acknowledged before me on the 17th day of October,
1996, by BENJAMIN J. GALLANT, as President and CEO of TEXAS AIRSONICS, INC., a
Texas corporation, on behalf of said corporation.
DELMA LINDLEY
Notary Public
SEAL STATE OF TEXAS Delma Lindley
MY Comm. Exp. Feb. 19, 1997 -----------------------------
Notary Public, State of Texas
Return to:
The International Bank
P. O. Drawer 4956
Corpus Christi, Texas 78469
-6-
<PAGE> 1
EXHIBIT 4.8
SECURITY AGREEMENT
Date: October 17, 1996
<TABLE>
<S><C>
A. PARTIES
1. Debtor: AMERICAN DENTAL TECHNOLOGIES, INC.
---------------------------------------------------------------------------
Check one: [ ] individual [ ] partnership [ X ] corporation [ ] other
2. Address: 28411 Northwestern Highway, Suite 1100, Southfield, Michigan 48034
--------------------------------------------------------------------------
Address shown is [ ] place of business [ X ] chief executive office (if more than
one place of business) [ ] residence
3. Secured Party: THE INTERNATIONAL BANK
--------------------------------------------------------------------
4. Address: P. O. Drawer 4956, Corpus Christi, Texas 78469
--------------------------------------------------------------------------
(Information concerning this security interest may be obtained at the
office of the Secured Party shown above).
</TABLE>
B. AGREEMENT
Subject to the applicable terms of this Security Agreement, Debtor grants
to Secured Party a security interest in the collateral to secure the
payment of the obligations. A carbon, photographic, or other
reproduction of this Security Agreement may be filed as a financing
statement.
C. OBLIGATIONS
1. The following are the obligations secured by this Agreement:
a. All past, present, and future advances, of whatever, type, by Secured
Party to Debtor, and extensions and renewals thereof.
b. All existing and future liabilities of whatever type, of Debtor to
Secured Party, and including (but not limited to) liability for
overdrafts and as indorser and surety.
c. All costs incurred by Secured Party to obtain, preserve, and enforce
this security interest, collect the obligation, and maintain and
preserve the collateral, including (but not limited to) taxes,
assessments, insurance premiums, repairs, reasonable attorney's fees
and legal expenses, feed, rent, storage costs, and expenses of sale.
d. Interest on the above amounts, as agreed between Secured Party and
Debtor, or if no such agreement, at the maximum rate permitted by law.
2. List notes included in the obligations as of the date of this Agreement
(show date and amount):
a. Revolving Credit Promissory Note of even date herewith in the
principal face amount of $2,500,000.00 executed by Texas AirSonics,
Inc. and American Dental Technologies, Inc. payable to the order of
Secured Party.
D. COLLATERAL
1. The security interest is granted in the following collateral:
All of Debtor's present and future and now or hereafter acquired
accounts receivable and inventory; and all proceeds of the foregoing.
2. Classify goods under one or more of the following Uniform Commercial
Code categories:
[ ] Consumer goods [ ] Equipment (farm use) [ X ] Inventory
[ ] Equipment (business use) [ ] Farm products
E. AGREEMENTS OF DEBTOR
1. Debtor will: take adequate care of the collateral; insure the collateral
for such hazards and in such amounts as Secured Party directs, policies
to be satisfactory to Secured Party; pay all costs necessary to obtain,
preserve, and enforce this security interest, collect the obligation,
and preserve the collateral, including (but not limited to) taxes,
assessments, insurance premiums, repairs, reasonable attorneys' fees and
legal expenses, feed, rent, storage costs, and expenses of sale; furnish
Secured Party with any information on the collateral requested by
Secured Party; allow Secured Party to inspect the collateral, and
inspect and copy all records relating to the collateral and the
obligation; sign any papers furnished by Secured Party which are
necessary to obtain and maintain this security interest; assist Secured
Party in complying with the Federal Assignment of Claims Act, where
necessary to enable Secured Party to become an assignee under such Act;
take necessary steps to preserve the liability of account debtors,
obligors, and secondary
<PAGE> 2
parties whose obligations are part of the collateral; transfer
possession of all instruments, documents, and chattel paper which are
part of the collateral to Secured Party immediately, or as to those
hereafter acquired, immediately following acquisition; perfect a
security interest (using a method satisfactory to Secured Party) in
goods covered by chattel paper which is part of the collateral; notify
Secured Party of any change occurring in or to the collateral, or in any
fact or circumstance warranted or represented by Debtor in this
agreement or furnished to Secured Party, or if any event of default
occurs.
2. Debtor will not (without Secured Party's consent): remove the collateral
from the locations specified herein; allow the collateral to become an
accession to other goods; sell, lease, otherwise transfer, manufacture,
process, assemble, or furnish under contracts of service, the collateral,
except goods identified herein as inventory; allow the collateral to
be affixed to real estate, except goods identified herein as fixtures.
3. Debtor warrants: no financing statement has been filed with respect to
the collateral, other than relating to this security interest; Debtor is
absolute owner of the collateral, and it is not encumbered other
than by this security interest (and the same will be true of collateral
acquired hereafter when acquired); none of the collateral is affixed to
real estate or an accession to other goods, nor will collateral acquired
hereafter be affixed to real estate or an accession to other goods when
acquired, unless Debtor has furnished Secured Party the consents or
disclaimers necessary to make this security interest valid against persons
holding interests in the real estate or other goods: all account debtors
and obligors, whose obligations are part of the collateral, are to the
extent permitted by law prevented from asserting against Secured Party any
claims or defenses they have against sellers, or can be so prevented by
Secured Party taking action provided by law for such purposes.
F. RIGHTS OF SECURED PARTY
Secured Party may, in its discretion, after default: terminate, on notice
to Debtor, Debtor's authority to sell, lease, otherwise transfer,
manufacture, process or assemble, or furnish under contracts of service,
inventory collateral, or any other collateral as to which such permission has
been given; require Debtor to give possession or control of the collateral to
Secured Party; indorse as Debtor's agent any instruments or chattel paper in
the collateral; notify account debtors and obligors on instruments to make
payment direct to Secured Party; contact account debtors directly to verify
information furnished by Debtor; take control of proceeds and use cash
proceeds to reduce any part of the obligation; take any action Debtor is
required to take or otherwise necessary to obtain, preserve, and enforce this
security interest, and maintain and preserve the collateral, without notice
to Debtor, and add costs of same to the obligation (but Secured Party is
under no duty to take any such action); release collateral in its possession
to Debtor, temporarily or otherwise; take control of funds generated by the
collateral, such as dividends, interest, and proceeds or refunds from
insurance, and use same to reduce any part of the obligation; vote any stock
which is part of the collateral, and exercise all other rights which an owner
of such stock may exercise; waive any of its rights hereunder without such
waiver prohibiting the later exercise of the same or similar rights; revoke
any permission or waiver previously granted to Debtor.
G. MISCELLANEOUS
The rights and privileges of Secured Party shall inure to its successors
and assigns. All representations, warranties, and agreements of Debtor are
joint and several if Debtor is more than one and shall bind Debtor's personal
representatives, heirs, successors, and assigns. Definitions in the Uniform
Commercial Code apply to words and phrases in this agreement; if Code
definitions conflict, Article 9 definitions apply. Debtor waives
presentment, demand, notice of dishonor, protest, and extension of time
without notice as to any instruments and chattel paper in the collateral.
Notice mailed to Debtor's address in Item A2, or to Debtor's most recent
changed address on file with Secured Party, at least five (5) days prior to
the related action (or, if the Uniform Commercial Code specifies a longer
period, such longer period prior to the related action), shall be deemed
reasonable.
H. DEFAULT
1. Any of the following is an event of default: failure of Debtor to pay
any note in the obligation in accordance with its terms, or any other
liability in the obligation on demand, or to perform any act or duty
required by this agreement; falsity of any warranty or representation in
this agreement when made; substantial change in any fact warranted or
represented in this agreement; involvement of Debtor in bankruptcy or
insolvency proceedings, death, dissolution, or other termination of
Debtor's existence; merger or consolidation of Debtor with another;
substantial loss, theft, destruction, sale, reduction in value,
encumbrance of, damage to, or change in the collateral; modification of
any contract, the rights to which are part of the collateral; levy on,
seizure, or attachment of the collateral; judgment against Debtor; filing
any financing statement with regard to the collateral, other than relating
to this security interest; Secured Party's belief that the prospect of
payment of any part of the obligation, or the performance of any part of
this agreement, is impaired.
2. When an event of default occurs, the entire obligation becomes immediately
due and payable at Secured Party's option without notice to Debtor, and
Secured Party may proceed to enforce payment of same and exercise any and
all of the rights and remedies available to a secured party under the
Uniform Commercial Code as well as all other rights and remedies. When
Debtor is in default, Debtor, upon demand by Secured Party, shall assemble
the collateral and make it available to Secured Party at a place
reasonably convenient to both parties. Debtor is entitled to any surplus
and shall be liable to Secured Party for any deficiency.
-2-
<PAGE> 3
I. FIRST AND PRIOR LIEN
This security interest grants to Secured Party, a first and prior lien to
secure the payment of the notes and obligations listed herein, and extensions
and renewals thereof. If Secured Party disposes of the collateral following
default, the proceeds of such disposition available to satisfy the
indebtedness shall be applied first to the notes herein, and renewals and
extension thereof, in the order of execution, and there after to all
remaining indebtedness and obligations secured hereby, in the order in which
such remaining indebtedness and obligations were executed or contracted. For
the purpose of this paragraph, an extended or renewed note will be considered
executed on the date of the original note.
DEBTOR:
AMERICAN DENTAL TECHNOLOGIES, INC.
By: Benjamin J. Gallant, President
-------------------------------
Benjamin J. Gallant, President
-------------------------------
Typed Name and Title
-3-
<PAGE> 1
EXHIBIT 4.9
CONTINUING LIMITED GUARANTY AGREEMENT
1. The undersigned (hereinafter called "Guarantor") for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
to induce THE INTERNATIONAL BANK, (hereinafter called "Lender"), with offices
at Corpus Christi, Texas, at its option, at any time or from time to time, to
loan monies or otherwise extend credit with or without security, to or for the
account of TEXAS AIRSONICS, INC. and AMERICAN DENTAL TECHNOLOGIES, INC.
(hereinafter jointly called "Borrower"), and at the special insistence and
request of Lender, Guarantor hereby unconditionally guarantees the prompt
payment, at the said office of Lender in Nueces County, Texas, when due of the
following (hereinafter called the "Indebtedness"):
All the obligations, including, but not limited to principal, interest
and costs of collection including attorneys' fees, evidenced by or
arising pursuant to the following described Revolving Credit Promissory
Note executed by Borrower payable to the order of Lender together with
any and all renewals, extensions and/or rearrangements from time to time
thereof, with or without notice to Guarantor:
Date: October 17, 1996 Original Principal Sum: $2,500,000.00
In addition to the other obligations of Guarantor imposed by this
Guaranty Agreement, Guarantor agrees to pay the costs of collection,
including reasonable attorneys' fees, incurred by Lender in collection
of the Indebtedness from Guarantor.
2. This guaranty is an absolute, completed and continuing one, and no notice
of the Indebtedness or any extension of credit already or hereafter contracted
by or extended to the Borrower need be given to the Guarantor. Lender may
extend credit to Borrower in excess of the amount guaranteed hereunder.
Borrower and Lender may rearrange, extend and/or renew from time to time any
or all of the Indebtedness without notice to the Guarantor and in such event
Guarantor will remain fully bound hereunder on such Indebtedness regardless of
the number of rearrangements, renewals and extensions. The Guarantor hereby
expressly waives marshalling of assets and liabilities, sale in inverse order of
alienation, presentment, demand, protest, notice of intention to accelerate
maturity, notice of acceleration of maturity, and notice of protest and dishonor
on any and all forms of such Indebtedness, and also notice of acceptance of this
guaranty, acceptance on the part of Lender being conclusively presumed by its
request for this guaranty and delivery of the same to it.
3. Guarantor authorizes Lender, without notice or demand and without affecting
Guarantor's liability hereunder, to take and hold security for the payment of
this guaranty and/or the Indebtedness guaranteed, and exchange, enforce, waive
and release any such security; and to apply such security and direct the order
or manner of sale thereof as Lender in its discretion may determine; and
to obtain a guaranty of the Indebtedness from any one or more other persons,
corporations or entities whomsoever and at any time or times to enforce, waive,
rearrange, modify, limit or release such other persons, corporations or entities
from their obligations under such guaranties. If at any time there be other
debt of Borrower to Lender not guaranteed hereby, then Lender may apply all
amounts realized by Lender from Borrower, from other guarantors or from
collateral to such other debt. Provided, if a particular instrument (such as a
guaranty or security agreement) expressly requires application of amounts
received by Lender different than permitted under the preceding sentence, then
such amounts shall be applied as provided in such instrument. Guarantor agrees
that if the maturity of any Indebtedness hereby guaranteed is accelerated by
bankruptcy or otherwise, such maturity shall also be deemed accelerated for the
purpose of this guaranty without demand or notice to Guarantor.
4. Guarantor waives any right to require Lender to (a) proceed against the
Borrower or (b) proceed against or exhaust any security held to secure the
Indebtedness, or (c) exercise any right of set-off against Borrower, or (d)
pursue any other remedy in Lender's power whatsoever. Guarantor waives any
defense arising by reason of any disability, lack of corporate authority or
power, or other defense of the Borrower or of any other guarantor of the
Indebtedness, and shall remain liable hereon regardless of whether Borrower or
any other guarantor be found not liable thereon for any reason. Until all the
Indebtedness shall have been paid in full, Guarantor shall have no right of
subrogation, and waives any right to enforce any remedy which Lender now has or
may hereafter have against the Borrower, and waives any benefit of and any
right to participate in any security now or hereafter held by Lender. A
payment received by Lender from Guarantor shall be effective to reduce
Guarantor's liability hereunder only if accompanied by a written transmittal
document received by Lender advising Lender that such payment is made hereunder
for such purpose. Without limiting any other provisions hereof, Guarantor
waives any rights Guarantor has under, or any requirements imposed by, Chapter
34 of the Texas Business and Commerce Code, as in effect on the date of this
Guaranty or as it may be amended from time to time.
5. Guarantor hereby grants to the Lender a right of set-off (which right
of set-off herein granted shall be in addition to and not in lieu of any other
right of set-off Lender may have) against the balance of every deposit account
(whether interest bearing or non-interest bearing and whether a demand deposit
or time deposit), now or hereafter existing, of the Guarantor with the Lender
and any other claim of the Guarantor against the Lender, now or hereafter
existing. The grant of the above right of set-off shall not in anywise limit
or be construed as limiting Lender to collect payment of any liability of
Guarantor incurred hereby only by way of set-off, but it is expressly
understood and provided that all such liability shall constitute the absolute
and unconditional obligation of Guarantor. Guarantor hereby subordinates all
indebtedness owing to the Guarantor from Borrower to all Indebtedness of
Borrower to Lender, and shall not attempt to set off or reduce any obligations
to Lender because of such indebtedness. The Guarantor further subordinates any
lien or security interest that he may have on any collateral or security of the
Borrower or any other party to the liens and security interests on said
collateral and security in favor of the Lender. Upon an event of default on
the Indebtedness and for so long as such default exists, Guarantor agrees not
to accept any payment on the subordinated indebtedness nor realize upon any
collateral therefor. If the Guarantor should receive any such payment,
satisfaction or security for indebtedness of the Borrower to the Guarantor in
violation of the terms hereof, the Guarantor agrees forthwith to deliver the
same to the Lender in the form received, endorsed or assigned as may be
appropriate for application on account of, or as security for, the
Indebtedness, and until so delivered, agree to hold the same in trust for the
Lender.
6. The term of this Agreement shall be for so long as any of the Indebtedness
remains outstanding and unpaid. It is further agreed that maturity of the
Indebtedness, as such may be extended from time to time by agreement between
Lender and Borrower as aforesaid, shall be the same with respect to Guarantor
as with respect to Borrower.
7. Notwithstanding anything herein or in any notes, contracts, agreements
or other instruments of Borrower to the contrary, Guarantor is not obligated to
and shall never be required to pay interest on amounts owing by Borrower to
Lender in excess of the maximum permissible to be paid by a guarantor of the
Indebtedness under applicable law; and if payment by Guarantor of the
Indebtedness of Borrower shall involve transcending the limit of validity
prescribed by law for a guarantor, then, ipso facto, the obligation to be
fulfilled shall be reduced as to Guarantor to the limit of such validity.
8. Guarantor warrants to Lender that Guarantor has independent means of
obtaining financial and other information about Borrower, and agrees that
Guarantor has not been induced to sign this guaranty by reason of information
regarding Borrower furnished by Lender, and agrees that Lender shall not in the
future be required to furnish Guarantor with any information regarding Borrower
nor notify Guarantor of any adverse changes as to Borrower's financial
condition or otherwise.
9. This Guaranty does not supersede, cancel, amend, discharge or limit
any other guaranty or similar obligation of Guarantor in favor of Lender, but
this Guaranty is in addition to and cumulative of any other such guaranty. If
more than one person or entity executes this instrument as Guarantor, their
liabilities and obligations hereunder shall be joint and several. If other
persons or entities have executed other instruments guaranteeing any
indebtedness of Borrower to Lender, this Guaranty and instrument is in addition
to such other instruments. Guarantor's liability hereunder shall be joint and
several with the liability of Borrower and all endorsers and other sureties and
guarantors whether or not the liability of other sureties and guarantors may be
limited. This guaranty is and shall be in every particular available to the
successors and assigns of Lender and is and shall always be fully binding upon
the heirs, successors and legal representatives of Guarantor.
Dated effective the 17th day of October, 1996.
GUARANTOR:
Benjamin J. Gallant
----------------------------------
Benjamin J. Gallant, Individually
<PAGE> 1
EXHIBIT 10.41
UNITED STATES PATENT [19] [11] PATENT NUMBER: 5,507,739
VASSILIADIS ET AL. [45] DATE OF PATENT: APR. 16, 1996
- --------------------------------------------------------------------------------
[54] DENTAL LASER
[75] Inventors: ARTHUR VASSILIADIS, Mountain View;
DAVID R. HENNINGS, Newcastle; JOSEPH
W. SCHAFFER, Mountain View; DAVID J.
FULLMER, Foster City; MICHAEL H.
BREWER, Felton, all of Calif.; TERRY D.
MYERS, Bloomfield Hills; WILLIAM D.
MYERS, Birmingham, both of Mich.
[73] Assignee: AMERICAN DENTAL TECHNOLOGIES, INC.,
Southfield, Mich.
[21] Appl. No.: 898,730
[22] Filed: JUN. 15, 1992
(Under 37 CFR 1.47)
[51] INT. CL.(6) ............................ A61B 17/36
[52] U.S. CL. .......................606/3; 602/2; 607/89;
372/23
[58] FIELD OF SEARCH .....................606/2, 3, 10-19;
607/89; 372/21-23
[56] REFERENCES CITED
U.S. PATENT DOCUMENTS
4,757,507 6/1988 Wondrazek..................372/23
4,791,927 12/1988 Menger......................606/3
4,940,411 7/1990 Vassiliadis et al. .........606/3
5,009,658 4/1991 Damgaard-Iversen et al. ....606/3
5,066,291 11/1991 Stewart ....................606/3
5,125,922 6/1992 Dwyer ......................606/2
Primary Examiner - Stephen C. Pellegrino
Assistant Examiner - M. Peffley
Attorney, Agent, or Firm - Gifford, Krass, Groh, Sprinkle, Patmore, Anderson &
Citkowski
[57] ABSTRACT
A duel wavelength laser is disclosed for use in dental therapeutic
applications. The dual wavelength laser includes a laser cavity in which a
laser crystal is disposed and preferably the laser crystal if an Nd:YAG laser,
which, upon excitation, lases at two different wavelengths, each of which has a
different gain. A shutter, or alternatively an optical filter, is selectively
disposed within the optical path of the laser crystal whereupon the higher gain
wavelength is selectively suppressed. Thus, with the shutter or optical filter
removed from the optical path, the laser lases at its higher gain wavelength.
Conversely, with the shutter or filter positioned within the optical path, the
higher gain wavelength is effectively suppressed so that the laser crystal
lases at the lower gain wavelength.
6 CLAIMS, 1 DRAWING SHEET
[SCHEMATIC DRAWING]
<PAGE> 2
U.S. PATENT APR. 16, 1996 5,507,739
[SCHEMATIC DRAWING]
FIG - 1
[SCHEMATIC DRAWING]
FIG - 2
<PAGE> 3
5,507,739
1
DENTAL LASER
BACKGROUND OF THE INVENTION
1. Field of the Invention
The present invention relates generally to lasers and, more
particularly, to a dual wavelength laser for use in dental therapeutic
applications.
2. Description of the Prior Art
There are a number of previously known lasers that are used in dental
applications. One such laser is a neodymium doped yttrium aluminum garnet
laser (Nd:YAG) which, when excited, produces a pulsed output used for dental
therapeutic applications. These dental therapeutic applications include, for
example, the cutting and eradication of soft tissue, desensitization of teeth,
endontic procedures and other dental procedures.
For an Nd:YAG laser crystal, as well as other laser crystals, the
wavelength of the emission is a function of the stimulated emission section and
thus the gain of the laser crystal. For an Nd:YAG laser, the highest gain
wavelength is 1.06 microns so that, upon excitation, the Nd:YAG laser crystal
will normally lase at its highest gain wavelength and thus at 1.06 microns.
The Nd:YAG laser, however, when excited, can also lase at different
wavelengths, such as 1.32, 0.96 and 1.44 microns. All of these other
wavelengths, however, have a higher lasing threshold, and thus lower gain, than
the 1.06 wavelength so that normally the Nd:YAG laser, once excited, lases at
its maximum gain wavelength, i.e. 1.06 microns.
For many dental therapeutic applications, the 1.06 micron wavelength of
the Nd:YAG laser has proven superior to the other, lower gain wavelengths of
the Nd:YAG laser. In other applications, especially the cutting of soft
tissue, however, the Nd:YAG laser operated at 1.32 microns has proven superior
to the 1.06 microns wavelength due to the higher water absorption at 1.32
microns versus 1.06 microns.
Consequently, it would be desirable to have two lasers in the dental
office, i.e. one laser which lases at 1.06 microns and a second laser which
lases at 1.32 microns. Such a situation, however, is very costly due to the
high cost of each laser.
SUMMARY OF THE PRESENT INVENTION
The present invention overcomes the above mentioned disadvantages of
the previously known dental lasers by providing a single laser which can be
selectively excited to lase at either 1.06 or 1.32 microns.
In brief, the dental therapeutic laser of the present invention
comprises a laser cavity in which an elongated laser crystal is disposed.
Preferably, the laser crystal is a neodymium doped yttrium aluminum garnet
crystal (Nd:YAG).
Conventional means, such as a flash lamp, are then used to excite the
crystal so that the crystal lases at two wavelengths. Means are then provided
for selectively suppressing the higher gain 1.06 microns wavelength so that the
laser continues to lase at its next lower gain wavelength of 1.32 microns.
In one form of the invention, a three mirror resonator with a shutter
assembly is employed to selectively obtain laser operation at either 1.06 or
1.32 microns. In the three mirror resonator, one mirror is positioned in
alignment with one end of the laser crystal which reflects between 10% and 98%
of the laser emission at both 1.06 and 1.32 microns.
A pair of axially spaced mirrors are then positioned adjacent the
opposite end of the laser rod. The first mirror, i.e. the mirror closest to
the laser rod is coated with a material which produces high reflection of laser
emission at 1.32 microns and, simultaneously, is highly transmissive at 1.06
microns. Thus, laser emission at 1.32 microns is normally reflected by the
first mirror back toward the laser rod while the laser emission at 1.06 microns
passes through the first mirror.
The second mirror is highly reflective of laser emissions at 1.06
microns. In addition, an optical shutter is selectively disposed between the
two mirrors.
With the shutter positioned in between the mirrors, the shutter
effectively suppresses the laser emission at the higher gain 1.06 wavelength
whereupon laser operation at 1.32 microns will continue. Conversely, with the
shutter removed from the optical path, the 1.06 microns wavelength laser
emission will be effectively reflected by the second mirror so that, due to the
higher gain of the 1.06 wavelength, laser emission will continue at the 1.06
wavelength.
In a second embodiment of the invention, a partial reflector is
positioned in the optical path adjacent one end of the laser rod while a single
mirror is positioned in the optical path at the opposite end of the laser rod.
This single mirror, furthermore, is highly reflective of laser emission at both
1.06 microns and 1.32 microns.
An optical filter is then selectively disposed in the optical path
between the end of the laser rod and the mirror. This optical filter includes
a coating which is highly absorbent of laser emission at 1.06 microns and,
conversely, highly transmissive of laser emission at 1.32 microns. Thus, with
the optical filter removed from the optical path, laser emission proceeds at
the dominant or high gain 1.06 microns wavelength. Conversely, with the
optical filter positioned within the optical path, the higher gain 1.06 microns
wavelength laser emission is effectively suppressed while simultaneously
permitting resonance at the lower gain 1.32 microns wavelength.
Any conventional means, such as a solenoid assembly, can be used to
selectively position either the shutter or the filter within the optical path.
BRIEF DESCRIPTION OF THE DRAWING
A better understanding of the present invention will be had upon
reference to the following detailed description, when read in conjunction with
the accompanying drawings, wherein like reference characters refer to like
parts throughout the several views, and in which:
FIG. 1 is a longitudinal partial diagrammatic view illustrating a first
preferred embodiment of the present invention and illustrating the laser
operation at a lower gain wavelength; and
FIG. 2 is a longitudinal sectional view similar to FIG. 1, but showing
a second preferred embodiment of the present invention.
DETAILED DESCRIPTION OF PREFERRED
EMBODIMENTS OF THE PRESENT
INVENTION
With reference first to FIG. 1, a first preferred embodiment of the
present invention is thereshown and comprises an elongated laser rod or crystal
10 disposed in a laser cavity.
<PAGE> 4
5,507,739
3
A conventional flash lamp 12 is used to excite or stimulate the laser rod 10
into laser emission.
The laser rod 10 is preferably a neodymium doped yttrium aluminum
garnet (Nd:YAG) laser which, when excited, lases at a number of different
wavelengths, namely 0.96, 1.06, 1.32 and 1.44 microns. However, of all these
wavelengths, the stimulated emission cross section, and thus the gain, of the
1.06 wavelength is many times greater than the emission cross section at the
other wavelengths. Similarly, laser emission at 1.32 microns enjoys the second
highest stimulated emission cross section and thus the second highest gain
after the 1.06 microns wavelength.
A partial reflector 14 is positioned within the optical path 16 of the
laser rod 10. This partial reflector 14 reflects between 10% and 98% of the
laser emission from the rod 10 at both 1.06 and 1.32 microns. Consequently, a
portion of the laser emission impinging upon the partial reflector 14 passes
through the reflector 14, as shown at 18, and forms the laser emission from the
laser cavity.
Still referring to FIG. 1, a first mirror 20 is positioned within the
optical path 16 of the laser rod 10 adjacent the opposite end 22 of the rod 10.
A coating is provided on one side 24 of the mirror 20 which is highly
reflective at 1.32 microns and preferably has a reflectance of about 99.5% at
1.32 microns. Simultaneously, the coating on the side 24 of the mirror 20 is
highly transmissive to laser radiation at 1.06 microns and preferably transmits
more than 95% of laser emission at 1.06 microns. The opposite side 26 of the
mirror 20 is also highly transmissive of laser radiation at 1.06 microns.
A second mirror 28 is also positioned within the optical path 16 of the
laser rod 10 at a position spaced outwardly from the mirror 20. One side 29 of
the mirror 28 is highly reflective of laser radiation at 1.06 microns as well
as other wavelengths.
Still referring to FIG. 1, an optical shutter 30 is selectively moved
between a position within the optical path 16, as shown in solid line, and to
a position outside of the optical path 16, as shown in phantom line, by a
solenoid assembly 32. This optical shutter 30 is constructed of a material
which is highly absorbent, and thus non-reflective and non-transmissive of
laser emission. Preferably, the shutter 30 is constructed of an opaque
material, such as aluminum.
The operation of the FIG. 1 embodiment will now be described. With the
shutter 30 positioned in the optical path as shown in solid line in FIG. 1, the
laser rod 10 is excited by the flash lamp 12. Once excited, the laser rod 10
emits laser radiation at a number of different frequencies, including 1.06
microns and 1.32 microns. The partial reflector 14 and first mirror 20 form a
resonator for the laser at 1.32 microns due to the high reflectivity of the
mirror 20 at 1.32 microns. Simultaneously, the laser emission at the higher
gain wavelength of 1.06 microns passes through the first mirror and is absorbed
by the opaque shutter 30. Since the higher gain 1.06 micron laser emission is
suppressed by the shutter 30, laser emission at 1.32 microns wavelength is
emitted from the laser cavity as shown at 18.
Conversely, with the shutter 30 moved to the position shown in phantom
line, the second mirror 28 and partial reflector form a resonator for the
higher gain laser emission at 1.06 microns. Since the gain of the laser
emission at 1.06 microns is many fold the gain of the emission at 1.32 microns,
the laser emission will continue at 1.06 microns along the optical path 18 from
the laser cavity.
With reference now to FIG. 2, a second embodiment of the present
invention is thereshown. In the second embodiment, a flash lamp or other
excitation means 12 is used to excite the laser rod 10 which, as before, is an
Nd:YAG laser crystal. The partial reflector 14 is also positioned in the
optical path 16 adjacent one end of the laser rod 10.
Unlike the FIG. 1 embodiment, however, a single mirror 40 is provided
in the optical path 16 of the laser rod 10 adjacent its end 22. This mirror 40
includes a surface 42 which is highly reflective at both 1.06 microns and 1.32
microns.
An optical filter 44 is selectively moved by a solenoid mechanism 46,
or other electromechanical means, between a position shown in solid line in
which the filter 44 is positioned within the optical path 16 between the end 22
of the laser rod 10 and the mirror 40, and a position shown in phantom line in
which the optical filter 44 is removed from the optical path 16. The filter 44
is constructed of a material which has high absorption of laser emission at
1.06 microns but which is also highly transmissive of laser emission at 1.32
microns.
Preferably, the optical filter 44 is constructed of a thin material,
such as yttrium iron garnet, and is anti-reflection coated on both of its sides
for both wavelengths 1.06 microns and 1.32 microns.
In operation, with the filter 44 positioned within the optical path 16
(solid line in FIG. 2) the optical filter 44 effectively absorbs and thus
suppresses the higher gain laser emission at 1.06 microns. Simultaneously, the
reflector 14 and mirror 40 form a resonator for the lower gain laser emission
at 1.32 microns.
Conversely, with the filter 44 moved to its second position removed
from the optical path 16 (phantom line in FIG. 2) the mirror 40 and partial
reflector 14 form a resonator for the laser emission at the higher gain 1.06
microns wavelength.
Alternatively, a thin dichroic mirror which reflects at 1.06, but
transmits at 1.32 microns can replace the filter 44.
From the foregoing, it can be seen that the present invention provides
a simple and yet highly effective laser assembly for dental uses in which a
single laser rod can be selectively excited to lase at either 1.06 microns
or 1.32 microns wavelengths. This thus allows greater flexibility in
selection of the appropriate wavelengths for the desired dental therapeutic
application.
The present invention can also be used to obtain dual or even multiple
wavelength laser operation for lasers other than Nd:YAG lasers. For example, a
holmium doped YAG laser lases at both 2.1 microns and 3.9 microns. Selective
suppression of either wavelength will allow operation of the other wavelength.
Similarly, an erbium doped YAG laser lases at 1.65 microns, 2.3 microns
and 2.9 microns. By selectively suppressing two of the wavelengths, laser
operation continues at the third wavelength.
Having described our invention, however, many modifications thereto
will become apparent to those skilled in the art to which it pertains without
deviation from the spirit of the invention as defined by the scope of the
appended claims.
We claim:
1. A laser for use in dental therapeutic applications comprising:
a laser cavity,
a laser crystal, said crystal being disposed in said cavity and
capable of lasing at two different wavelengths,
means for exciting said crystal so that said crystal lases at said
two wavelengths,
means for selectively suppressing one of said wavelengths so that
said crystal continues to lase at the other of two wavelengths
wherein said laser crystal is elongated and emits laser
radiation out each end, a partial reflector positioned in
alignment with one end of said crystal and wherein said
suppressing means comprises a first and second mirror being
positioned in alignment with the
<PAGE> 5
5,507,739
5
other end of said laser crystal, said first mirror being spaced
from said second end of said crystal by a distance which is
resonant with said first wavelength, said second mirror being
spaced from said second end of said crystal by a distance which is
resonant with said second wavelength, said first mirror being
substantially transparent to said second wavelength, an optically
opaque shutter and means for selectively positioning said shutter
between said first and second mirrors.
2. The invention as defined in claim 1 wherein said laser crystal
comprises a neodymium doped yttrium aluminum garnet crystal.
3. The invention as defined in claim 2 wherein one wavelength
comprises 1.06 microns and the other wavelength comprises 1.32 microns.
4. The invention as defined in claim 1 and comprising a coating on
said first mirror which is highly reflective at said first wavelength and highly
transmissive at said second wavelength.
5. The invention as defined in claim 1 and comprising a coating on said
reflector which is partially reflective at both wavelengths.
6. The invention as defined in claim 1 wherein said positioning means
comprises a solenoid.
* * * * *
<PAGE> 6
UNITED STATES PATENT AND TRADEMARK OFFICE
CERTIFICATE OF CORRECTION
PATENT NO. : 5,507,739
DATED : April 16, 1996
INVENTOR(S) : Vassiliadis et al.
It is certified that error appears in the above-identified patent and
that said Letters Patent is hereby corrected as shown below:
Column 1, line 21, after "emission", insert --cross--
[SEAL] SIGNED AND SEALED THIS
SEVENTEENTH DAY OF SEPTEMBER, 1996
Attest: Bruce Lehman
Mary Green
BRUCE LEHMAN
Attesting Officer
Commissioner of Patents and Trademarks
<PAGE> 1
EXHIBIT 10.42
UNITED STATES PATENT [19] [11] PATENT NUMBER: 5,525,058
GALLANT ET AL. [45] DATE OF PATENT: *JUN. 11, 1996
- --------------------------------------------------------------------------------
[54] DENTAL TREATMENT SYSTEM
[75] Inventors: BEN J. GALLANT, Portland, Tex.; ALAN N.
GLEEMAN, Mountain View, Calif.;
WILLIAM S. PARKER, Ann Arbor, Mich.
[73] Assignee: AMERICAN DENTAL TECHNOLOGIES, INC.,
Southfield, Mich.
[*] Notice: The term of this patent shall not extend
beyond the expiration date of Pat. No.
5,330,354.
[21] Appl. No.: 276,964
[22] Filed: JUL. 19, 1994
RELATED U.S. APPLICATION DATA
[63] Continuation-in-part of Ser. No. 859,158, Mar. 27, 1992,
Pat. No. 5,330,354, and a continuation-in-part of Ser. No.
29,732, Mar. 25, 1993, Pat. No. 5,350,299.
[51] INT. CL.(6) ....................................A61C 3/02
[52] U.S. CL. .................................433/88; 451/101
[58] FIELD OF SEARCH ..............433/88; 451/75, 451/101,102
[56] REFERENCES CITED
U.S. PATENT DOCUMENTS
2,661,537 12/1953 Angell .........................32/58
2,696,049 12/1954 Black ..........................32/58
3,852,918 12/1974 Black ..........................51/12
3,882,638 5/1975 Black ..........................51/12
3,971,375 7/1976 Hill .......................128/173.1
4,276,023 6/1981 Phillips et al ................433/85
4,492,575 1/1985 Mabille .......................435/88
4,494,932 1/1985 Rzewinski .....................433/88
4,635,897 1/1987 Gallant ........................251/5
4,708,534 11/1987 Gallant .......................406/75
4,767,404 8/1988 Renton ........................604/48
4,826,431 5/1989 Fujimura et al. ...............433/29
4,893,440 1/1990 Gallant et al. ................51/436
4,901,758 2/1990 Cook et al. ................137/487.5
4,940,411 7/1990 Vassiliadis ..................433/215
5,055,048 10/1991 Vassiliadis ..................433/215
5,205,743 4/1993 Ludvigsson et al. .............433/92
5,330,354 7/1994 Gallant .......................433/88
5,350,299 9/1994 Gallant .......................433/88
OTHER PUBLICATIONS
7 pages of advertising material of Proportion-Air of McCordsville, IN, entitled
"Proportion-Air Applications". 8-page brochure (including cover) entitled
"QB1/QB2T Servo Control Valves"; Proportion-Air, Inc., McCordsville, IN.
2-page advertisement entitled "BB Applications" Proportion-Air, Inc.,
McCordsville, IN, Nov. 23, 1991.
1-page advertisement entitled "Web Tensioning Using Dancer Arm Feedback",
Proportion-Air, Inc., McCordsville, IN, Mar. 16, 1992.
2-pages of advertising, headed Proportion-Air, Inc. Article entitled "Servo
Valves" by Eddie Harmon, in Motion Control, Apr. 1993, pages 37, 38, 41.
Primary Examiner-Ren Yan
Attorney, Agent, or Firm-Synnestvedt & Lechner
[57] ABSTRACT
Treating teeth or associated tooth structure by the use of an abrasive-laden
fluid stream which provides fluid at high pressure to a manifold with
selectively operable valves, delivers fluid at a selected pressure to a mixer
for fluid and abrasive and delivers the mix to a handpiece for application of
abrasive-laden air to a tooth or tooth structure. Low pressure priming air
pressurizes the air abrasive device. A path for pure air bypasses the
air/abrasive device. A control allows for delivery of air or air and abrasive
as desired. Fluid pressure is controlled by a manually-operable servo system.
Following treatment with the air/abrasive, a purge line purges the system
downstream from the abrasive device of excess abrasive particles. A vacuum
removes abrasive particles and debris from the patient's mouth. The abrasive
delivery device may include a hand-held nozzle having fluid ports operable by
the fingers of the operator to control system functions. The vacuum includes a
ridge, disposable collection chamber for sterile disposal of abrasive and
debris and may include a common filter for the purge circuit and the system for
removal of abrasive particles and debris. Connection to the existing suction
system in the dental office or use of a water powered venturi to provide
suction is disclosed. Pressure regulating and relief means insure
instantaneous change of pressure levels.
5 CLAIMS, 10 DRAWING SHEETS
[SCHEMATIC DRAWING]
<PAGE> 2
U.S. PATENT JUN. 11, 1996 SHEET 1 OF 10 5,525,058
FIG. 1
[SCHEMATIC DRAWING]
FIG. 2
[SCHEMATIC DRAWING]
FIG. 3
[SCHEMATIC DRAWING]
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U.S. PATENT JUN. 11, 1996 SHEET 2 OF 10 5,525,058
[SCHEMATIC DRAWING]
FIG. 4
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U.S. PATENT JUN. 11, 1996 SHEET 3 OF 10 5,525,058
[SCHEMATIC DRAWING]
FIG. 5
<PAGE> 5
U.S. PATENT JUN. 11, 1996 SHEET 4 OF 10 5,525,058
[SCHEMATIC DRAWING]
FIG. 5A
<PAGE> 6
U.S. PATENT JUN. 11, 1996 SHEET 5 OF 10 5,525,058
[SCHEMATIC DRAWING]
FIG. 5B
<PAGE> 7
U.S. PATENT JUN. 11, 1996 SHEET 6 OF 10 5,525,058
[SCHEMATIC DRAWING]
FIG. 6
[SCHEMATIC DRAWING]
FIG. 6A
<PAGE> 8
U.S. PATENT JUN. 11, 1996 SHEET 7 OF 10 5,525,058
[SCHEMATIC DRAWING]
FIG. 7
<PAGE> 9
U.S. PATENT JUN. 11, 1996 SHEET 8 OF 10 5,525,058
[SCHEMATIC DRAWING]
FIG. 8
<PAGE> 10
U.S. PATENT JUN. 11, 1996 SHEET 9 OF 10 5,525,058
[SCHEMATIC DRAWING]
FIG. 9
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U.S. PATENT JUN. 11, 1996 SHEET 10 OF 10 5,525,058
[SCHEMATIC DRAWING]
FIG. 10
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5,525,058
1
DENTAL TREATMENT SYSTEM
RELATED APPLICATION
This application is a continuation-in-part of application Ser. No.
07/859,158, filed Mar. 27, 1992, now U.S. Pat No. 5,330,354 and of application
Ser. No. 08/029,732, filed Mar. 25, 1993, now U.S. Pat. No. 5,350,299 both of
Ben J. Gallant, the specifications of which are included herein by reference.
FIELD OF THE INVENTION
The present invention relates to systems used in the practice of dentistry,
and more particularly, to systems for cutting, excavating and etching teeth or
associated tooth structure by means of finely divided abrasive materials carried
in a fluid stream.
BACKGROUND OF THE INVENTION
The use of abrasive-laden fluid streams to treat teeth has long been
known. For example, U.S. Pat. No. 2,661,537 to Angell describes equipment for
treating teeth with a relatively high-pressure stream laden with abrasive
particles. While the use of such equipment has gained a significant degree of
success in connection with the cleaning of teeth, there has heretofore been an
overall lack of success in the dental industry with respect to the use of such
equipment for cutting, excavating or etching teeth. Applicant has found that
this lack of success can be attributed to several heretofore unrecognized
disadvantages associated with equipment of the type described in Angell.
For example, cutting or etching of teeth with gas/abrasive streams
frequently requires a source of fluid at pressures of at least about 120 psig.
Unfortunately, however, compressed air in the range of about 60 to 80 psig is
generally the highest pressure available in dental operatories. In order to
overcome this limitation, the Angell patent describes the use of cylinders
containing CO gas at a pressure of about 800 psig as a source of pressurized
fluid. Applicant has found that there are numerous disadvantages associated
with the use of pressurized gas in this form. For example, applicant has found
that one important factor in successfully achieving cutting, etching and/or
excavating tooth enamel is proper regulation and control of the pressure at
which such operations are carried out. Such precise control and regulation is
difficult to achieve in the system described in Angell. One reason for this
difficulty is the very large pressure differentials between the pressure needed
to operate the system (e.g. 100 to 120 psig) and the pressure at which the gas
is delivered (800 psig). In particular, the accuracy of pressure regulation
equipment is frequently inversely proportional to the pressure differential
across the regulating device. Thus, the precision of the regulated pressure
frequently decreases as the pressure differential increases.
Another disadvantage of the equipment described in Angell is that it is
capable of providing only two pressure levels for the fluid utilized to operate
the system. Applicant has found that this is another reason for the lack of
success achieved by prior devices. It is highly desirable to operate at more
than two distinct and different pressure levels because of the multiplicity of
dental procedures performed by the dentist. The equipment described in Angell,
however, is capable of supplying fluid at only two distinct pressure levels. As
a result, the required precision in operating the dental instrument is
deficient. Another disadvantage arises on account of the provision for the
supply of gas in compressed form in cylinders. In view of the considerable
volume of gas being used, cylinder replacement becomes a severe inconvenience.
Thus, applicant has found that the use of equipment as described in Angell is a
disadvantage in treatment operations involving the use of abrasive-laden fluid
streams.
The prior art use of abrasive-laden fluid streams for treatment of teeth
has also suffered from the disadvantageous of having significant excess and/or
post-use abrasive particles in the area of the mouth during operation. The
presence of such abrasive particles is not only uncomfortable to the patient
being treated, but it may also constitute a hinderance to the dentist conducting
the operation. This disadvantage is particularly relevant for cutting and
abrading of teeth since the relatively high pressures required for such
operations sometimes result in a cloud or mist of excess or post-use abrasive
particles which make it difficult for the dentist to see the area being
treated. This difficulty has heretofore not been fully overcome.
OBJECTS AND SUMMARY OF THE INVENTION
In view of the deficiencies of the prior art, it is thus an object of the
present invention to provide improved dental systems which utilize pressurized
fluid streams containing abrasive particles for effectively and efficiently
abrading, etching and cutting teeth or associated tooth structure. As used
herein, by associated tooth structure is meant fillings, composites, facings,
crowns, caps, amalgam and the like.
It is a further object of the invention to bring together the components
needed to produce a novel and effective dental tool capable of overcoming past
deficiencies of systems using abrasive-laden fluid streams.
It is a further object of this invention to provide dental apparatus for
treating teeth via an abrasive-laden stream of high pressure fluid, such as
air, in which the disadvantages associated with the presence of excess
abrasive particles are eliminated or substantially reduced.
It is a further object of the present invention to provide dental apparatus
which utilize pressurized fluid streams containing abrasive particles wherein
the apparatus is capable of operating selectively at two or more precisely
controlled pressure levels.
Yet another object of the invention is the use of a common suction system
for purging the equipment of excess abrasive particles and collection of
post-use abrasive particles. The common suction system may include connection
means for connection to the office suction and waste collection systems
pre-existing within the dental office. Advantageously, suction may be provided
by a water venturi which draws off abrasive particles and debris into the
water stream passing through the venturi.
These and other objects are satisfied by the preferred system aspects of
the present invention. The present system is directed to the treatment of teeth
by means of abrasive particles carried by a gas stream. According to one
preferred embodiment, the system comprises, in combination which a source of
air: means for increasing the pressure of said air to an initial pressure; a
pressure selection means for selectively providing said air at at least a
first or a second pressure, each of said first and second pressures being less
than about said initial pressure; an abrasive delivery means for combining the
abrasive particles with said air at one of said first or second pressures to
provide an abrasive-laden air stream; and nozzle means for delivering said
abrasive-laden air
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steam to the teeth to be treated. According to another preferred embodiment,
the system comprises, in combination with a source of air at an initial
pressure: a pressure selection means for selectively providing said fluid at
least a first, a second, or a third pressure, each of said first, second and
third pressures being less than about said initial pressure; an abrasive
delivery means for combining finely divided abrasive particles with said air at
one of said pressures to provide an abrasive-laden air stream; and nozzle
means for delivering said abrasive-laden air stream to the teeth to be treated.
Another aspect of the present invention, which is preferably used in
combination with the treatment system aspects hereof, is directed to evacuation
systems especially well adapted for removing excess and/or post-use abrasive
particles from in and around the area of the mouth during dental operations.
Such systems preferably comprise a vacuum conduit having a first, relatively
large diameter outer conduit member and a second, relatively small diameter
inner conduit member, wherein said first and second members are moveable in a
longitudinal direction with respect to one another. In this configuration, the
outer conduit member may be placed adjacent to the chin, cheek, or lips of the
patient receiving treatment while the inner conduit member may be selectively
positioned within the mouth of the patient being treated.
The evacuation system may include integral vacuum means and may optionally
and additionally include means for connection to the dental office suction
system for the evacuation of particulate debris and abrasive.
Another aspect of the present invention, which is optionally but not
necessarily used in combination with one or more of the other aspects hereof,
is directed to a system for controlling the pressure of the abrasive/air mixture
leaving the delivery nozzle means. Such control systems preferably include
pneumatic control means, such as fluid discharge ports on the handle of the
dental apparatus for activating or deactivating the flow of pressurized fluid
therein.
In another preferred aspect, the system includes as the pressure control
means a servo valve system comprising a servo valve through which the fluid is
supplied to the nozzle, the servo valve being settable to any of a plurality
of selectable conditions by manually-operable controls, to select any of
a corresponding set of pressure for the fluid supplied to the nozzle;
preferably also included are means for sensing the pressure of the fluid
leaving the servo valve and visual display means controlled by the sensing
means for indicating the pressure of fluid selected.
BRIEF DESCRIPTION OF THE DRAWINGS
FIG. 1 is block diagram showing the elements of one embodiment of the
delivery system of the present invention.
FIG. 2 is a block diagram showing one embodiment of the pressure selector
means 11 illustrated in FIG. 1.
FIG. 3 is a block diagram showing one embodiment of one aspect of the
pressure selector means shown in FIG. 2.
FIG. 4 is a block diagram showing a second embodiment of one aspect of the
pressure selecting means illustrated in FIG. 2.
FIG. 5 and 5A are block diagrams showing a preferred embodiment of the
treatment systems of the present invention, including the control systems
therefor.
FIG. 5B is a view showing the abrasive delivery system with attendant
controls.
FIG. 6 is a block diagram illustrating one embodiment of the treatment
system of the present invention in combination with one embodiment of the
evacuation system of the present invention.
FIG. 6A is a block diagram illustrating a second embodiment of an
evacuation system of the present invention.
FIG. 7 is a cross-sectional view of a two-stage evacuation nozzle according
to one embodiment of the present invention.
FIG. 8 is a schematic block diagram showing the locating and general
arrangement of a presently-preferred servo valve system for controlling and
indicating the pressure of the fluid supplied to the jet.
FIG. 9 and 10 are more detailed schematic diagrams of parts of the servo
valve pressure control system.
DETAILED DESCRIPTION OF PREFERRED EMBODIMENTS
The present invention is directed generally to dental treatment systems and
dental components adapted for use in connection with such systems. As the term
is used herein, "treatment" refers to any operation for altering the physical
condition of the teeth or gums by impacting same with an abrasive-laden fluid
stream. As the term is used herein, "teeth" refers to teeth in their natural
state as well as teeth that have been filled or otherwise modified by earlier
dental treatment.
FIG.1 is a schematic representation of a system embodying the present
invention and utilizing a stream of operating fluid delivered through a conduit
100. The illustrated system comprises the following components: fluid supply
means 101 connected to the conduit 100 for providing a stream of said fluid in a
second conduit 102 at an initial pressure; pressure selection means 103
connected to the stream within conduit 102 for selectively providing a fluid
stream within a conduit 104 at least at a first or second pressure, each of said
pressures being less than about the initial pressure of the stream in conduit
102; means 105 connected to conduit 104 for combining said fluid stream within
conduit 104 with abrasive particles to produce an abrasive-laden fluid stream
within a delivery conduit 106; and handpiece means 107 connected to conduit 106
for discarding or delivering a stream or fluid jet 108 against the tooth or
tooth structure of the patient to be treated.
Preferably, pressure selection means 103 also comprises means for
selectively providing a substantially abrasive-free stream of pressurized fluid
to said handpiece means 107 by means of a conduit 109. Thus, preferred systems
of the type disclosed in FIG. 1 may alternatively and selectively be operated
in a first mode wherein the abrasive-laden stream is provided to handpiece
means 107 or a second mode wherein a substantially abrasive-free stream is
provided to the handpiece. Applicant has discovered that highly desirable and
beneficial characteristics are associated with dental treatment systems
having such a pressure selection means. For example, the systems of the present
invention are designed to provide abrasive-laden fluid streams for cutting of
teeth, such as is required in preparation for filling of cavities with amalgam
or the like. As the cavity is expanded by the abrasive-laden steam, the
abrasive particles may sometimes tend to settle or collect in the cavity and
produce a layer of abrasive particles in the cavity. The presence of this
layer, in turn, may reduce the effectiveness of the cutting operation under
certain conditions. Accordingly, it is a highly desirable aspect to the present
invention that the
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dental treatment system of the present type be selectively operable between an
abrasive-laden mode and an abrasive-free mode so that such layer can be readily
removed by blowing with a stream of air. It has been found that the use of
abrasive-free air acts to dry the tooth undergoing treatment which allows for
better cutting and abrading efficiency.
As described above, an important consideration in achieving successful
operation of dental treatment systems is the degree to which the system permits
precise control and regulation of the fluid operating pressure. This
consideration is important because the regulation of fluid operating pressure.
this consideration is important because the regulation of fluid pressure helps
to control the action of the abrasive-laden stream on the tooth. However, the
rate at which abrasive particles are delivered to the fluid stream is also
frequently an important variable in achieving successful system operation. That
is, fluid pressure and abrasive delivery rate each have an influence upon the
cutting or abrading characteristics of the fluid stream. Moreover, it has been
discovered that a specific correspondence or relationship between fluid pressure
and abrasive delivery rate each have an influence upon the cutting or abrading
characteristics of the fluid stream. Moreover, it has been discovered that a
specific correspondence or relationship between fluid pressure and abrasive
delivery rate should exist in order to achieve results which are consistently
commercially acceptable. Improper matching of these two operating parameters can
preclude effective operation of the dental system. The pressure selection means
103 of the present invention preferably includes means for providing a control
signal 110 for controlling the rate at which abrasive delivery means 105
provides abrasive to the fluid stream within conduit 104. The present system
preferably operates such that the control signal 110 be modulated according
to the pressure selected. In this way, the systems of the present invention are
capable of producing an abrasive delivery rate which is precisely matched
to the pressure selected and hence to the desired operation. In general, it can
be said that at relatively low pressures, abrasive powder tends to accumulate
at relatively low pressures, abrasive powder tends to accumulate at relatively
low points in the system, whereas by moving air at a faster rate, higher
pressures above a given pressure, depending upon the design of the systems,
will be effective to move all of the powder available.
The present system optionally includes means 112 (illustrated in FIGS. 6
and 7) in juxtaposition to the mouth of the person being treated for removing
excess and/or post-use abrasive particles from in and around the mouth.
The present systems also optionally may include or are associated with a
dental laser of the type described, for example, in U.S. Pat. Nos. 5,055,048,
issued Oct. 8, 1991 and 4,940,411, issued Jul. 10, 1990. According to such
preferred embodiments, the present treatment systems further include means for
directing a beam of laser light toward the teeth of the patient being treated.
In this way, the dentist or other dental professional may utilize the present
system to alternatively and selectively treat the teeth of the patient with an
abrasive-laden fluid stream or a dental laser.
The components of the present systems may be housed, either together or
separately, in one or more suitable housings. In certain embodiments, however,
it is preferred that the dental treatment systems be incorporated into a
stand-alone, portable unit which can be transported to numerous locations and
connected to the appropriate local power supply and fluid source. In such
embodiments, it is preferred that the components are housed together on or in a
relatively compact housing.
A. Fluid Supply Means
The nature and character of the fluid supply means 101 of the present
invention may vary widely, depending upon numerous factors, such as the
particular operating fluid being used. The material which comprises the
fluid stream supplied through conduit 100 may also vary widely within the scope
hereof, depending upon such factors as cost and availability, and the use of a
wide variety of materials are within the scope hereof. It is preferred,
however, that the fluid of the present invention comprise a gaseous material,
and even more preferably air.
It will be also appreciated that the construction of fluid supply means 101
may vary depending upon factors such as the pressure of the operating fluid
being used. For example, it is contemplated that in certain embodiments the
fluid source within conduit 100 is provided at a pressure which is sufficiently
high to operate the dental systems of the present invention without further
compression. In such embodiments, the fluid supply means 101 may simply
comprise, for example, a supply conduit for transporting the fluid from its
source to the pressure selection means 103. As mentioned above, however, the
preferred fluid, i.e., air, is generally only available in dental operatories
at pressures limited to about 60 to at most about 90 psig. This source of
operating fluid is preferred because of its ready availability and low cost.
While air at such pressures may be acceptable for numerous dental applications,
applicant has found that such pressures are insufficient to perform the
preferred etching and cutting operations for which the present system is
especially well adapted. In particular, applicant has found that successful
cutting, abrading and etching operations require a source of gas at a pressure
of from about 80 to 200 psig. According to preferred embodiments, therefore, the
preferred fluid source comprised operatory air at a pressure of less than about
80 to about 90 psig and the fluid supply means 101 comprises means for
increasing the pressure of the operatory air to greater than about 80 psig, and
even more preferably to a pressure of from about 80 to about 200 psig.
The pressure increasing means of the present invention may comprise any one
of several well known structures for increasing the pressure of the selected
fluid medium. The selection of any particular pressure increasing means will
depend upon numerous factors such as flow rate, pressure differentials, sealing
methods, methods of lubrication, power consumption, serviceability and cost. It
is contemplated, therefore, that the pressure increasing means may take
numerous forms within the scope hereof. For embodiments in which the
operating fluid is a gas, it is contemplated that the pressure increasing means
may comprise, for example: fans, both axial and centrifugal; compressors, both
axial and centrifugal; rotary blowers; reciprocating compressors, both single
stage and two stage; and ejectors. For embodiments in which the preferred fluid
is air, the preferred means for increasing the fluid pressure comprises an air
pressure intensifier of the type sold, for example, by Haskel Incorporated of
Burbank, Calif. 97502, under Model No. MAA-2.5.
The fluid supply means 101 according to preferred embodiments also includes
means for storing the pressurized fluid. The fluid supply means 101 also
preferably includes means for stabilizing the pressure of fluid stream with in
conduit 102. According to simple and effective embodiments of the present
invention, the means for storing the pressurized fluid also acts as the means
for stabilizing the pressure of fluid stream 102. For example, the air exiting
the pressure increasing means in the preferred embodiment is transported to a
fluid supply tank adapted to maintain a reservoir of the pressurized air. This
fluid supply tank not only provides a high pressure reservoir, it also
serves to buffer or dampen the pressure spikes or fluctuations frequently
encountered with dental operatory air. For preferred
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embodiments, especially those in which the present system is a substantially
portable system, the fluid supply tank comprises an air storage bottle capable
of maintaining at least one cubic feet of air at a pressure of about 250 psi.
In this way, fluctuations in the pressure of the fluid exiting the fluid supply
means is minimized.
B. Means For Selectively Reducing the Fluid Pressure
With reference to FIG. 2, an important aspect of the present dental
treatment systems resides in the provision of means 103 for selectively
reducing the pressure of the fluid stream within conduit 102. In particular,
means 103 makes the operating fluid selectively available at least at two and
preferably at least three discrete pressure levels, said discrete pressure
levels each preferably being less than about the initial pressure level of the
fluid provided by the fluid supply means 101 but substantially above
atmospheric. While it is contemplated that numerous structures may be adaptable
for use as the pressure selection means, it is preferred that the pressure
selection means 103 comprise inlet manifold means 114 connected to said fluid
supply means 101 for providing at least first and second flow paths 116 and 117
for the operating fluid. Each of said first and second flow paths 116 and 117
preferably include pressure regulating means 118 and 119 for precisely
regulating the pressure in a downstream portion of the flow path. Unless the
context clearly indicates otherwise, the term "downstream" refers to that
region of the flow path downstream of the pressure regulating means and
"upstream" refers to that region of the flow path upstream of the pressure
regulating means. Each flow path is thus divided by its respective pressure
regulating means into a high pressure upstream portion and a low pressure
downstream portion. According to highly preferred embodiments, the flow paths
are connected in parallel configuration. That is, the manifold means 114 is
configured such that the upstream pressure in said first flow path 116 is
substantially equivalent to about the upstream pressure in said second flow
path 117.
The preferred selective pressure reduction means 103 is readily adaptable
and well suited for selectively providing the operating fluid at three or more
pressure levels, with each of said pressure levels being less than about the
initial pressure of the fluid provided by the fluid supply means. Applicant has
found that such an embodiment is especially beneficial for the provision of a
dental treatment system well adapted for use in each of the following three
dental operations: cutting, etching and abrading. Thus, it is highly preferred
that the inlet manifold means 114 include means for providing a first flow path,
a second flow path and a third flow path, each of said flow paths being
connected in a parallel configuration. The use of such a configuration according
to the preferred aspects of the present invention permits the utilization of
three distinct, precisely controllable operating pressures for the dental
instrument. Applicant has found that this is an important feature of such
preferred embodiments since it allows flexibility of use while simultaneously
preserving precise control and regulation of the necessary fluid stream. For use
in applications where the cleaning of the teeth is contemplated, a fourth
parallel flow path may be provided with pressure in the fourth flow path being
regulated to a level which is lower than the other pressure levels.
With particular reference now to FIG. 3, the selective pressure reduction
means 103 of the present invention also preferably includes selective valve
means 120 and 121 in a portion, and preferably a downstream portion, of each
of the flow paths 116 and 117 for selectively blocking and unblocking the flow
of fluid through the respective flow paths. It is contemplated that numerous
valves of the type known and available in the industry are adaptable for use
for this purpose, and all such valves are within the scope of the present
invention. According to preferred embodiments hereof, as disclosed more fully
hereinafter, the valves of the present invention are preferably high pressure
solenoid operated valves of a type well known in the art. Each of the flow
paths also preferably includes in a downstream portion thereof, means 124 and
125 for preventing back flow of said pressurized fluid. The back-flow
prevention means are preferably located in a portion of said flow path which is
downstream of said valve means 120 and 121. In a typical arrangement, means 124
and 125 each comprise a check valve in the flow path immediately downstream of
valve means 120 and 121, respectively, each such check valve being of any type
and construction well known in the art. Additionally, a filters 122 for
removing unwanted debris or particles from the fluid should be included in a
downstream portion of the flow paths. The filters are of particular importance
in the prevention of the migration of abrasive back into the solenoid operated
valves and the check valves, thus avoiding equipment failure.
Another aspect of the invention illustrated in FIG. 1 involves the supply
of gas at a pressure close to but somewhat below the lower of any of the
operating pressures established by the selective pressure reduction means,
directly to the inlet of the abrasive particle delivery systems. For reasons
which will become apparent in the following, it is of importance that at start
up, prior to the selection of any particular operating pressure level, the
abrasive particle delivery system be immediately activated by the supply of
regulated air under pressure. For this purpose, in systems where operatory air
at pressures of about 80 psig is available in conduit 100, a branch conduit 123
delivers regulated air directly from line 100 to air/abrasive unit 105. In order
to regulate the pressure of this air supply, a pressure regulator 126 is
provided which maintains the pressure in line 123 at a preset limit, for
example, between about 60 and about 80 psig.
The selective pressure reducing means 103 preferably comprises control
means 127 for providing a control signal (indicated by dashed lines) to the
valve means 120 and 121, thereby selectively opening and/or closing the valve
means. In the preferred embodiments in which the valve means is a solenoid
operated valve, the control means comprises a solenoid for each of said valves
and an electrically operated circuit for opening and closing the solenoid
valve, as more fully described hereinafter.
The pressure reducing means 103 also preferably includes an exit manifold
means 128 connected to flow paths 116 and 117. The function of the exit manifold
means 28 is to provide a source of fluid 104 at the selected pressure to the
air/abrasive means 105. Thus, the exit manifold means 128 preferably comprises a
conduit connected between a downstream portion of each of said flow paths 116
and 117 and said abrasive delivery means.
The selective pressure reduction means 103 also preferably includes
pressure relief means for relieving fluid pressure in excess of that selected
for the particular operation. Important functions of the pressure relief means
are to ensure that pressure of the fluid is immediately adjusted to the selected
pressure and, in addition, that it does not unexpectedly and unwantedly rise,
because of a malfunction in the system, substantially beyond that pressure
selected by
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the dentist or other dental professional. Control means is also preferably
provided for selectively controlling the relief means such that the activating
pressure of the relief means corresponds to or is slightly greater than the
maximum pressure in the pressure range selected by the dentists. As the term
is used herein, "activating pressure" refers to the pressure at which the
pressure relief system relieves the build-up of pressure in the system.
It will be appreciated that the provision of such pressure relief means
according to the present invention constitutes an important aspect of certain
embodiments hereof. For example, the relief means provides a way of immediately
establishing a selected pressure and gives the health professional a confidence
that the desired pressure level is reliably at the pressure selected. In
addition, it would be undesirable and potentially detrimental to the patient
if the operating pressure in the dental treatment system was suddenly and
unintentionally raised above the selected operating pressure. If such were to
occur, the rate of flow and the pressure of the jet stream leaving the dental
handpiece would unexpectedly increase beyond the desired pressure range. This
unexpected and undesired increase may not only reduce the efficacy of the
desired dental treatment, it may also, depending upon the extent of the pressure
increase, cause harm and injury to the patient being treated. Accordingly, it is
important and highly desirable that the dental treatment systems of the present
invention include mechanisms for ensuring that desired pressure is reliably
established and that such an unexpected pressure increase does not occur.
An preferred configuration of the downstream portion of pressure
selection means 103 is illustrated in FIG. 4. According to the embodiment of
FIG. 4 and also indicated in FIG. 1, the system includes means for providing a
substantially abrasive-free stream 109 to handpiece 107. Applicant has found
that the provision of such means, particularly when such means is operable
separately and independently of remaining portions of the pressure selection
means, is highly desirable, as described hereinbefore. Accordingly, with
reference to FIG. 4, the substantially abrasive-free delivery means comprises,
for example, conduit 129 leading from a downstream portion of flow path 116 and
selective valve means 131 in the flow path for selectively blocking and
unblocking the flow of fluid therethrough. The conduit 129 also contains a
pressure regulator 130 to regulate the pressure of the abrasive-free air
flowing to the nozzle. Control means 127 is connected to valve means 131 for
selectively and independently operating the valve means 131. A check valve 132
and filter 133 are preferably located downstream of valve means 131 for
preventing the back flow of fluid or contaminants and abrasives therethrough.
As further illustrated in FIG. 4, the pressure relief means comprises a
pressure relief means associated with each selectable pressure range. For
example, relief means 134 and 135 are connected to exit manifold means 128 for
relieving fluid pressure in the exit manifold to the extent such pressure is in
excess of the fluid pressure selected. The exit manifold 128 will, depending
upon the operating pressure selected, be subject to at least a relatively high
pressure and a relatively low pressure. When the relatively low pressure is
selected, no difficulty is presented. On the other hand, the presence of the
low pressure relief means in fluid communication with the exit manifold would,
in the absence of the pressure relief blocking means of the present invention,
prevent operation in the relatively high pressure mode. Accordingly, each
pressure relief means 134 and 135 is preferably connected to control means 127
such that the relief means is operative when the pressure range of its
associated flow path is selected and inoperative when a higher pressure range
is selected. Thus, each pressure relief means 134 and 135 preferably includes a
valve means connected to control means 127 for selectively blocking and
unblocking flow of pressurized fluid to the respective pressure relief
mechanism, depending upon the pressure selected for operating the system. In
operation, therefore, the valve means for each relief mechanism is activated to
the unblocked position when the operating pressure range associated with that
relief means is selected. Conversely, the valve means remains in the
unactivated, blocked position when all higher pressure ranges are selected,
thus assuring that the desired pressure will be immediately and reliably
available to the operator.
C. Control System, Abrasive Delivery and Pressure Relief Means
With reference now to FIGS. 5 and 5A, a preferred embodiment showing
details of the selective pressure reducing means, including control systems and
pressure relief means thereof is disclosed. As fully explained hereinafter, the
system illustrated provides for selective delivery of air and abrasive at three
discrete pressure levels or a supply of air free of abrasive. Turning first to
FIG. 5, the illustrated system includes a source of fluid, preferably air, at
a pressure of about 60 to about 90 psig and air supply means 101 which includes
means for increasing the pressure of the air so as to supply a stream of air
through line 102 at a pressure of from about 80 to about 200 psig. A valve 138
operated by a solenoid 139 is positioned upstream from the supply means 101.
Valve 138 is a normally closed valve (hereinafter an NC valve) which is
actuated to the opened position by the solenoid 139 upon the closing of a main
switch 140. The opening of valve 138 allows the flow of air to a pressure
regulator 141 in conduit 123 and to supply means 101 and conduit 102, a check
valve 142 to an inlet manifold means comprising the common manifold conduit
143 which corresponds to manifold 20 in FIG. 2 and manifold branch conduits
144 through 146 and the connections therefor.
Each branch conduit 144 though 146 comprises a flow path for the
pressurized air and includes therein pressure regulators 148 through 150 for
regulating the pressure in a downstream portion of the respective conduit.
Although the downstream pressures in conduits 144 through 146 may vary depending
upon the particular operations contemplated, it is preferred that they be
regulated to a pressure within a high pressure range, a mid pressure range and
a low pressure range, respectively. More particularly, a high pressure range of
about 160 to 180 psig is preferred for cutting and excavating of tooth enamel, a
mid pressure range of about 120 to 140 psig is preferred for etching tooth
enamel and a low pressure range of about 80 to 100 psig is preferred for
cleaning teeth. In addition, manifold branch line 152, in which a pressure
regulator 153 is located, provides for delivery of a supply of regulated air
free of abrasives and a manifold branch line 154 in which a regulator 155 is
located, provides for delivery of air free of abrasive to the teeth or for the
evacuation of abrasive from the system downstream from the abrasive unit, as
will be explained hereinafter.
Immediately downstream of the pressure regulators 148 through 150 and 153
are NC valves 148A through 150A operated by solenoids 148B through 150B,
respectively. Downstream of the valves 148A through 150A are found check valves
156 through 158, respectively.
Exit manifold means comprising manifold conduit 160 and pressure gauge 161
is connected to and in fluid com-
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11
munication with a downstream portion of each of the conduits 144 through 146.
Also connected to and in fluid communication with manifold conduit 160 is a
pressure relief means comprising three relief valves 162 through 164 protected
by NC valves 166 through 168 operated by solenoids 169 through 171,
respectively.
Exit manifold conduit 160 leads from each of conduits 144 through 146
to abrasive delivery means 105 for producing a stream of abrasive-laden gas at
the desired pressure to a handpiece 107 through a conduit 172.
From the foregoing, it can be seen that upon closure of main switch
140, NC valve 138 is opened. This allows operatory air to flow through
pressure regulator 141 directly to manifold 160 to pressurize the air abrasive
delivery system which is preferably of the kind illustrated and claimed in U.S.
Pat. No. 4,708,534 and as generally disclosed in FIG. 5B.
The system may further be provided with a switch 101A located in
conjunction with the air reservoir within fluid supply means 101. Switch 101A
prevents operation of the system, except when there is an adequate pressure
level within the reservoir.
With particular reference to FIG. 5B, the preferred form of abrasive
delivery system 105 will be described briefly. The system includes a sealed
lower chamber 175 mounted on a base 176 and an abrasive powder supply vessel
177 which is bolted or otherwise fastened to the top of chamber 175. Located
within chamber 175 is an upwardly open cylindrical particle feed receptacle 178
which is mounted on a vibratory device 179, as particularly described in the
aforesaid U.S. Pat. No. 4,708,534. Cylindrical feed receptacle 178 is provided
on its inner surface with a helical feed groove 180, the lower end of which
communicates with the bottom of the cylinder and the top of which is in
communication with a feed tube 181 which delivers the particulate material
through a section of resilient, flexible tubing 182 to an exit tube 183 which
passes through the wall of vessel 175. Joined to tube 183 is a second section
of resilient flexible tubing 184 which is in turn connected to a duct 172 which
leads to handpiece 107, as is illustrated in FIG. 5.
Powder supply receptacle 177 is adapted to receive and contain a supply
of particulate abrasive matter, generally indicated by the reference character
P and to supply the same in a uniform manner to the bottom of cylindrical feed
device 178 through a feed tube 186 in a manner more particularly described in
U.S. Pat. No. 4,708,534.
In order to bring the powder delivery system up to a pressure at which
it is primed for operation, air under pressure, for example, of about 80 psi,
is delivered to chamber 175 by way of a connection 187 which is connected to
line 160 which is pressurized upon closure of valve 138 when main control
switch 140 is closed. A branch conduit 188 also supplies air at the same
pressure to the powder supply chamber 177 by means of a connection 189 which
communicates with the interior of the supply chamber 177.
Vibratory device 179 is an electrically operated device which is
preferably activated off handpiece 107 by means to be described hereinafter.
In general, the rate of vibratory feed is controlled by way of a preset
adjustable control device 190 mounted on the equipment control panel in a
convenient location. Device 190 may be set manually by the operator to a
desired vibratory rate or optionally may be a pressure responsive device which
automatically adjusts through connections to switch 191 so that an appropriate
rate is provided for the operating pressure level as selected on switch 191.
The abrasive delivery system is also preferably provided with a
normally closed value 192 which is preferably a pinch valve of the kind
illustrated more particularly in FIG. 10 of the aforesaid U.S. Pat. No.
4,708,534. Pinch valve 192 is controlled by a solenoid 193 either directly or
through a fluid pressure device. The solenoid 193 is preferably energized upon
closure of a switch activated off the handpiece to maintain pinch valve 192 in
the open position whenever vibrator 179 is in operation.
In summary, when the main switch 140 is closed, chambers 175 and 177
are immediately pressurized at the low end of the operating pressure range so
that the abrasive delivery system is readied for the delivery of a
particulate-laden air stream through resilient tube 184 to conduit 185 when
desired by the operator. Upon activation of the vibrator and opening of pinch
valve 192 by the control circuitry, described hereinafter, particulate material
advances upwardly within spiral groove 180 through duct 181 where it enters
resilient, flexible tubing 182 and exit tube 183, where it exits container 175
and passes through tube 184 to join conduit 185.
It will be appreciated by those skilled in the art that it may be
desirable to use different abrasives and/or different particle size abrasives
for different dental operations. For example, it may be desirable to utilize
abrasive particles having one set of characteristics for a first dental
operation and a second set of characteristics for a second dental operation.
While it is possible to manually change the type of abrasive being used, it is
preferred that the abrasive delivery system of the present invention include
means for selectively providing either a first abrasive particle or a second
abrasive particle for mixing with the fluid stream. One apparatus capable of
achieving this result is disclosed in U.S. Pat. No. 2,661,537 to Angell, which
is incorporated herein by reference.
As explained above, closure of main switch 140 also allows the
operatory air to be delivered to the air pressure intensifier 101 which
preferably increases the pressure of the available air to be supplied to a
level of approximately 200 psig. Air at this pressure is then delivered
through conduit 143.
FIG. 5 further illustrates the system provided for controlling the
selective pressure reduction means and for selective delivery to the handpiece
of pure air under pressure or a pressurized air and abrasive mix as required.
The control system preferably involves the use of separate pressure selector
switch 191 and additionally includes controls on the dental handpiece 107,
operation of the selective pressure reduction means being described first.
The pressure selector switch 191 is located in any convenient position
on the control panel or optionally and/or additionally may be incorporated in a
foot actuated switching device of a type well known in the art. As is
illustrated in FIG. 5, when switch 191 is in the open position (as shown), the
NC valves 148A through 150A remain closed and the flow of operating fluid
through any one of valves 148A through 150A is thus blocked.
With switch 191 in any one of the closed positions, the appropriate
solenoid 148B through 150B is energized, thereby allowing fluid to flow through
the appropriate conduit 144 through 146. As seen in FIGS. 5 and 5A, conduit
144 through 146 deliver air to manifold 160 at a pressure established by the
respective pressure regulator 148 through 150.
Since the pressure in conduit 160 can be within any one of the three
above described pressure ranges, the pressure
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13
relief means includes first, second and third relief valves for relieving
pressure in excess of said first, second and third pressure in excess of said
first, second and third pressure ranges, respectively. The first relief valve
162 is calibrated with an activation pressure which corresponds to or is
slightly greater than the maximum operating pressure in the downstream portion
of flow path 144, while relief valves 163 and 164 are calibrated to have
activation pressures which correspond to or are slightly greater than the
maximum operating pressure in the downstream portions of flow paths 145 and
146, respectively. When a control signal is transmitted to solenoid 148 to
open valve 148A, solenoid 169 is activated by the same control signal, thereby
opening blocking valve means 166. However, blocking valves 167 and 168 remain
closed, thereby isolating the relief valves 163 and 164 from the operating
fluid when the system is operated in the high pressure mode. It will be
understood that similar operation occurs in the mid- or low-pressure modes.
As indicated above, means are provided to deliver air at relatively low
pressure as established by pressure regulator 153 through the conduit 152.
This conduit bypasses the abrasive supply unit 105, delivering a regulated
supply of air at a relatively low pressure directly to the inlet of the
handpiece 107 to provide the operator with a stream of abrasive-free air useful
for drying the region of the tooth as is frequently desired. For this purpose,
normally closed valve 151A in line 152 is opening by energization of a solenoid
151B which is preferably controlled by a pressure operated switch activated by
closure of one of a group of control ports on handpiece 107, as described
below. Line 152 is further provided with a filter 152A and check valve 159 to
isolate the valve components from the air and abrasive mixture.
In one condition of operation of the system, as will be described
subsequently, the air delivered through line 152 may also be used to create a
vacuum downstream from the abrasive delivery system so as to effect removal of
the mixture of abrasive and/or debris from the interior of the handpiece.
As indicated just above, a plurality of control ports provided on the
handpiece 107 enable certain functions of the system of the present invention.
According to the preferred embodiment of the invention, shown in FIG. 5, the
handpiece is preferably provided with four fluid control ports 194 through 197,
each of which is conveniently located to be closed by a finger of the operator.
Ports 194 through 197 are located in series-circuit relationship with a
relatively low pressure supply of air, supplied for example, through branching
conduit 154 and regulated by pressure regulator 155 (FIG. 5). The ports 194
through 197 control three normally open diaphragm operated pressure switches
198, 199 and 201 and one diaphragm operated latching switch 200, each of which
receives pressurized air from conduit 154. So long as handpiece ports 194
through 197 are uncovered, air at a relatively low pressure passes through the
diaphragm chamber of each of the switches 198 through 201 and exits through the
ports. However, upon closure of a selected one of ports 194, 195 and 197, one
or more of the normally open switches 198, 199 and 201 will be closed on
account of the increase in pressure to which the diaphragm in the switch is
subjected. In the case of latching switch 200, momentary closure of port 196
is effective to latch switch 200 in the closed position if initially opened and
to return it to the open position if closed.
As illustrated in FIG. 5A, port 194 is a lamp activation port which
communicates with the diaphragm chamber of switch 198 which, when closed,
energizes a circuit which lights a lamp 202 (which may include a fiber optic
device) which casts a beam of light through an opening in the distal end of
handpiece 107 for the purpose of illuminating the area of a tooth or related
tooth structure being worked on by the operator. So long as port 194 is
closed, the lamp 202 remains illuminated.
Port 195 is a light and air activation port which is in communication
with normally open lamp switch 198 through a conduit 204 and 205 and in
communication with the diaphragm chamber of normally open diaphragm operated
switch 198 by means of conduits 204 and 205 so as to effect closure of switches
198 and 199 when port 195 is closed, thus turning on lamp 202 and activating
solenoid 212 so as to close valve 213 to deliver air free of abrasive from
conduit 152 to the handpiece.
Port 196 is a powder evacuation activator port which is in
communication with latching switch 200 by means of conduit 206 and may also be
in communication with the light switch 199 by means of a branch conduit 207.
Upon closure of port 196, the light will be turned on and switch 200 closed to
energize a solenoid 191A which activates switch 191 to turn on vacuum 221, as
described hereinafter in reference of FIG. 6.
Port 197 is the port for activation of the powder delivery system and
is in communication with normally open diaphragm operated switch 201 via lines
208 and 211. Closure of switch 201 by placing a finger over port 197 energizes
solenoid 193 to open pinch valve 192 and turns on vibrator 179.
Simultaneously, solenoid 212 is energized to close normally opened purge valve
213. The relatively high pressure air abrasive mixture is directed through
conduit 172 and out through nozzle 107A. Since the pressure of the air and
abrasive mix is high relative to the pressure of the air in line 152, check
valve 159 blocks flow of pure air through line 152. However, as soon as the
user removes his finger from port 197 to terminate the delivery of the air and
abrasive mix, pure air again flows past the check valve 159. Opening of the
switch deenergizes solenoid 212 to open pinch valve 214 so that air flows out
through purge line 214. Because there is a small orifice in the tip of
handpiece 107 relative to the cross-section of the purge line, the rush of air
creates a vacuum.
As indicated in FIGS. 5 and 5A, the various branch circuits are
provided with check valves to insure that closure of a particular port
activates only through switches which are required to perform the functions
indicated. In addition, filters 152A and 217 provided in lines 152 and 160
insure that abrasive does not enter the manifold system.
Although the use of the above-described fluid ports constitute a
preferred method of control, it should be understood that electrically operated
switches positioned on the handpiece and utilizing a low voltage power source
could be employed without departing from the scope of the invention.
D. Dental Handpiece Means
It will be appreciated by those skilled in the art that the particular
form of the handpiece 107 may vary widely, depending upon factors such as cost
and portability. In general, it is preferred that the handpiece be adapted to
be carried and manipulated by the dentist or other dental professional. For
this reason, handpiece 107 is generally formed in the shape of an elongate
cylinder connected to the abrasive/fluid delivery means 105 by way of the
conduit 172 (see FIG. 5), which conduit should be flexible for ease of
manipulation. A central bore in the handpiece transports the
<PAGE> 19
5,525,058
15
abrasive-laden fluid to a nozzle means 107A disposed at the distal end thereof.
In addition, the handpiece is provided with a fiber optic channel to
accommodate lamp 202 and a fiber optic device which terminates at the distal
end of portion 107A for the purpose of directing light in the area of impact of
the abrasive particles. The nozzle means 107A may be, for example,
frusto-conically shaped, thereby providing a cross-sectional flow area which
reduces gradually from that of about the central bore to a relatively small
opening in the end of the nozzle. This reduction in flow area results in a
concomitant increase in fluid velocity, thereby producing a stream or jet of
abrasive-laden fluid 108 which is effective for cutting, etching or cleaning
teeth or related tooth structure, depending upon the operating pressure of the
system. The particular configuration and construction of such handpieces is
generally well known, and all such constructions are within the scope of the
present invention. One such handpiece is shown in U.S. Pat. No. 2,696,049,
which is incorporated herein by reference. As illustrated in the '049 patent,
the nozzle portion of the delivery means is preferably readily removably
attached to the handpiece. Such removability is beneficial in several
respects. First, it will be appreciated that the flow of high velocity
abrasives through the nozzle 107A of the present dental treatment systems will
tend to cause wear and abrasion of the internal channel of the nozzle. This
could, in turn, reduce the efficacy of the system. Accordingly, the provision
of a removable nozzle permits replacement of the nozzle as needed to maintain
the efficacy of the system. In addition, applicant contemplates that the
nozzle 107A may, in certain embodiments, be comprised of a relatively
inexpensive material, such as plastic. In such embodiments, it is expected
that the nozzle would be discarded after each use. The provision of such a low
cost, inexpensive replaceable nozzle has the obvious advantage of reducing a
likelihood of the spread of infectious disease from one patient to the next.
It is contemplated that the removability of the present nozzle may be achieved
by providing the nozzle with a threaded portion, as disclosed in the '049
patent, or other means, such as providing a bayonet type attachment between the
nozzle and the remainder of the handle portion. In addition, the entire
handpiece should be separable from conduit 172 and from its associated control
lines to permit autoclaving.
According to another preferred embodiment of the present invention, the
portion of the nozzle which comes in contact with the abrasive-laden fluid
stream may be formed of a hard, abrasion-resistant material, such as carbide.
Thus, the nozzle itself can be formed of such carbide material, or formed of
less expensive materials which are lined with carbide or similar
abrasion-resistant materials.
E. System for Evacuating Abrasive Material
In its preferred form, the dental treatment system of the present
invention includes the provision of means for effectively and efficiently
evacuating excess abrasive particles from the area of the mouth after
treatment. As noted, above, the failure of prior art dental treatment systems
to effectively deal with the continued removal of abrasive particles from the
mouth has contributed to the lack of acceptance of the systems. With
particular reference to FIGS. 6, 6A and 7, the invention preferably includes a
two-piece vacuum nozzle means, generally indicated at 220, adapted to be placed
in the mouth of a patient and a means for creating a vacuum within the nozzle
means so as to draw away the abrasive particles and debris.
According to FIG. 7, nozzle means 220 preferably includes an outer
tubular housing section 222 and an inner tubular section 223 co-axially mounted
within section 222 by means such as a support plate 224. Preferably, inner
tubular member 223 has an outwardly flared portion 225 which is intended to be
positioned adjacent to the region of the patient's mouth during treatment. A
plurality of spaced apart openings 226 are located in a plate 224.
Preferably, inner tubular conduit section 223 is frictionally fitted
within a sleeve or collar 227 which is joined to support plate 224. The
frictionally interfitting portions provide a means permitting longitudinal
adjustment of inner tubular member relative to the outer section 222 so as to
permit movement of the flared portion 225 to accommodate patients having
different sized mouths and/or to allow for adjustment to bring the flare
portion into different areas of the mouth.
Evacuator nozzle 220 is connected to a flexible hose 230 which is
coupled onto the end of the outer tubular housing section 222. Preferably, the
cross-sectional area of the openings 226 and the cross-sectional area of the
inner tubular section 223 should roughly equal the cross-sectional area of
tube 230 so as to avoid an unwanted choking down of the air drawn from the
patient's mouth. As indicated in FIG. 6, conduit 230 preferably is connected
to the vacuum means 221 which comprises a conventional electric motor operated
vacuum system which, in one embodiment, includes a rigid, removable disposable
container 232 within which the used abrasive and debris is collected. A valve
233 within conduit 230 blocks flow through the conduit. As indicated in FIG.
6, valve 233 is manually operated. In addition, pressure selector switch 191
operates electric motor for vacuum 221 so as to draw air from the nozzle 107A
and the patient's mouth area as soon as a particular pressure is selected,
thereby avoiding the possibility of excess abrasive escaping to the atmosphere.
With the system described, substantially all abrasive delivered to the
patient's mouth, as well as the debris created by the cleaning, abrading and
cutting operations, is captured by the vacuum system and delivered to the rigid
disposable container 232 which is preferably readily sealable for separate
handling and disposable at a medical disposal waste site, if necessary.
FIG. 6 also illustrates purge line 214 which, as explained above, is
opened so as to convey away abrasive from the system downstream from the air
abrasive means 105 when the operator removes his finger from handpiece port
197. Desirably, a filter 233 filters out any abrasive drawn through conduits
230 or 214 by vacuum means 221.
FIG. 6A illustrates an alternative form of means for creating a
vacuum. According to FIG. 6A, the vacuum means comprises a water venturi shown
at 221. Both conduits 214 and 230 are connected to the throat of the venturi.
The flow of water through the venturi creates a subatmospheric pressure in the
throat drawing excess abrasive from evacuator nozzle 220 and purge line 214.
With reference back to FIG. 6, the system may also comprise a branch
passage 234 which has a connector 235 which permits connection to the standard
suction system 236 available in most dental offices.
The operation of the illustrative embodiment of the invention will now
be briefly summarized with particular reference to FIGS. 5A and 5B.
When main power switch 140 is turned on, solenoid 139 effects the
opening of valve 138 delivering air under pressure of between about 60 and 90
psig to the pressure
<PAGE> 20
5,525,058
17
intensifier 101. Simultaneously, a regulated supply of air is delivered
through conduits 123 and 160 to the air abrasive delivery unit priming this
unit by pressurizing chamber 175 and power supply 177.
The operator chooses the particular operating pressure for delivery of the
air-abrasive mixture through use of selector switch 191 which may be
conveniently located on the instrument panel or, alternatively, through a
four-position foot activated switch, not shown, having four actuating positions
which are connected in parallel with the contacts of switch 191.
At this point, the device is fully primed for operation which is achieved
through selective control by closure of an appropriate port on the dental
handpiece 107. If the operator wishes to only illuminate the tooth or related
tooth structure to be worked on, he closes finger port 194 which effects closure
of the lamp circuit to light lamp 202. If the operator then wishes to direct a
jet of drying air to the tooth or tooth structure, finger port 195 is closed
which effects energization of the lamp circuit and a closure of purge valve 213.
Closure of port 196 latches switch 200 in the closed position which
activates the vacuum system of FIG. 6. Finally, when the operator is ready to
apply the air abrasive mix to the tooth or tooth region, the covers port 197
which energizes solenoid 193 to open pinch valve 192, turns on vibrator 179 and
closes normally open purge valve 213. When port 197 is uncovered, the flow of
air and abrasives stops, the purge valve 213 is opened and air through line 152
purges portions of the system downstream of abrasive unit 105 of abrasive
materials.
In the illustrative embodiment, the vacuum system is activated whenever
pressure selection switch 191 is turned on with the result that abrasive
particles and tooth debris are drawn from the region of the patient's mouth
whenever an air/abrasive mixture is delivered by the handpiece as well as when
drying air alone is delivered and when the operator is merely inspecting the
area being treated.
Through the unique combination of pressure relief valves 162 through 164
and blocking valves 166 through 168, the pressure chosen for use in the
treatment of teeth may be readily and rapidly changed by use of selector switch
191. When switching from a higher to a lower operating pressure, the change
occurs immediately, enabling the operator to work confidently and without delay.
Still further, switch over from cutting and abrading to the use of air for
cleaning and drying the tooth region being worked on or the use of the light
only can be readily and rapidly accomplished by controls conveniently located on
the dental handpiece.
FIGS. 8 and 9 show a more-recently developed and presently preferred
embodiment of the pressure-selection apparatus 103 of FIG. 1, now to be
described.
The pressure-selection means 103 shown in the broken-line block in FIG. 8
contains a servo valve 300 of known form, as described below, supplied with the
high-pressure fluid from fluid supply means 101 over line 103 as shown in FIG.
1. Also provided to the servo value 300, from system power supply 302 over line
304, is the operating supply power for the apparatus, and a ground connector 306
is also provided. Servo valve 300 serves to provide fluid under pressure over
line 104 to the abrasive supply 105, whence the abrasive-laden fluid travels
over line 106 to operator's handpiece 107 to form operating jet 108, numerals
corresponding to those in FIG. 1 indicating corresponding parts.
The pressure supplied to line 104 by servo valve 300 is controlled by
command signals supplied to it over command line 310 from control and display
circuit 314. Operator control of circuit 314 is enabled by operator interface
316; the operator increases the pressure in steps by sequential pushing of the
UP button 320, and decreases it in steps by sequential pushing of DOWN button
322.
The valve is preferably of the type QB1TFEE30 made by Proportion-Air Inc.
of McCordsville, Ind. It contains a valving arrangement which can be set by a
command voltage to variety of states (in this example, 6 states) in which it
produces different pressures in its output flow of fluid. The valve also
includes a sensor which senses the valve output pressures to produce an internal
feedback voltage indicative of output pressure, compares the feedback voltage
with the command voltage to produce an error signal, and moves the valving
mechanism in the direction to reduce this error to substantially zero, thus
assuring that the commanded output pressure is produced.
FIG. 9 shows the preferred arrangement for controlling the servo valve 330
in accordance with the operator's commands. The UP and DOWN pushbuttons are
electrically connected to a conventional 3-bit up-down counter 360, which has
seven output states (binary 0-6), of which only 1-6 are used. A set of seven
fixed d-c voltage sources 366, 368, 370, 374, 376, 378 are provided, as from
taps on a regulated voltage divider; the zero voltage is not used, except before
initial selection of a pressure. These fixed voltages are applied to a selector
390, which passes to the command voltage lead 310 a fixed voltage corresponding
to the count put out by the 3-bit counter in response to the operator's
operation of the UP-DOWN buttons; that is, for each of the counts 1-6 a
different corresponding one of the fixed voltages is supplied to command lead
310 by the selector. The selected voltage then causes the servo valve to move
toward, and remain at, the desired condition for producing the desired valve
output pressure. The selector may be a conventional type CD 4051 integrated
circuit, commonly a available commercially.
The remainder of the circuit is primarily to display the next pressure
called for by the operator (the "target" pressure) as well as the pressure
actually at the servo valve output. For this purpose, the 3-bit counter 360
supplies its output to a display logic circuit 379, which functions as follows.
When the operator wishes to change the pressure to a new value, he operates the
UP-DOWN buttons while a corresponding one of the barograph LED lamps 382, 384,
386, 388, 390, 392 connected to the display logic circuit flashes, until it
reaches the desired pressure, at which time he stops pushing the buttons, and
all lamps up to and including the one representing the desired pressure stay ON.
To provide the flashing functions, each LED illumination circuit may be provided
with a gate through which intermittent voltage from a flasher-voltage generator
in the logic display circuit is provided to any open gate; the binary number
being supplied from the 3-bit counter, through a selector circuit in the logic
display circuit, determines which gate is open and hence which lamp flashes,
indicating the existing pressure. The lamps 381 through 392 may correspond, for
example to 40, 80, 100, 120, 140 and 160 pounds per square inch of servo valve
output pressure, respectively, and if the pressure is initially at 100 psi, the
lamps for 40, 80 and 100 psi will all be lit; if the operator then presses the
UP button twice, the 140 psi lamp will flash until the servo valve output
pressure reaches 140, at which time all of the 40, 80, 100, 120 and 140 psi
lamps will be steadily illuminated.
The change from flashing of the "target" lamp to the all-steady lamp
condition is accomplished in response to an analog monitoring voltage received
on line 400 from the servo valve. This analog monitoring voltage is convention-
<PAGE> 21
5,525,058
19
ally available in servo valves, including the model specified above. The
received monitoring voltage is applied to an input of each of a set of
comparators 540, 542, 544, 546, 548 and 550, one for each voltage level.
Each comparator is also supplied with a fixed output voltage from the
respective sources 500, 502, 504, 506, 508 and 510. The voltage of each such
source is somewhat above the corresponding fixed voltage in the command-voltage
set 366 through 378, but below the next higher fixed voltage in that set. That
is, the fixed voltage for the lowest comparator 500 is 0.94 v., which is greater
than zero but less than the 1.25 v. of the command set, and so on for the other
fixed voltages. As a result, as the monitor voltage increases from zero due to
increasing servo output voltage, the comparator output lines 540 through 552 are
progressively actuated; that is, all of lines 640 through 652 connected to
comparators which have fixed voltage inputs less than the monitor feed back
voltage are activated at any time. The display logic circuit 379 is thereby
enabled to turn on steadily all lamps corresponding to the actuated output
lines of the comparators, as desired for this type of display.
The control and display circuit 314 of FIG. 8 may be located on a panel of
the main system cabinet, or in some cases in the handpiece itself for convenient
use.
A switch (not shown in FIGS. 8-10), actuated for example by a foot pedal,
may be used to supply the jet with clean abrasive-free air for the fluid jet
when desired, and simultaneously to shut off the flow from the abrasive tank.
Referring now to FIG. 10 showing a preferred form of display logic circuit,
numerals corresponding to those in earlier figures designate corresponding
parts. Shown are the 3-bit counter 360, the selector 390, the lamps 381-392,
the gates 540-550, the fixed voltage sources 500-510 and the analog monitor
voltage line 400 as shown also in FIGS. 8 and 9. The display logic unit is
shown in more detail in the broken-line box 379. Included therein is a flasher
700 which, when turned on, generates a pulsating current for flashing the lamps.
The flasher is turned on, by way of flasher control 710, when the bit-change
sensor 702 senses a change in the output of the 3-bit counter 360 due to a
change in command by an operator pressing an up or down control button 320 or
322. Which lamp is flashed is determined by conventional selector 716, under
the control of the output signal supplied to it from 3-bit counter 360 over line
724. In this way the desired "target" lamp is caused to flash.
When the servo valve responds to the command voltage and adjusts itself to
the target pressure, the analog voltage returned from the sensor valve over line
400 corresponds with the command voltage; the voltage on line 400 is supplied to
one input of a comparator 750 over line 400A, the other input of which is
supplied with the command voltage from selector 390. When the servo valve
pressure corresponds to the commanded value, the comparator senses this and
produces an output to flasher control 710 to shut off the flasher, as desired
upon attainment of the target pressure.
Also, one may employ additionally, in some embodiments, a suction system
for removing abrasive material from the mouth, as described and claimed in the
above cited application Ser. No. 08/029,732, of Ben J. Gallant, the description
of which is included herein by reference.
While the invention has been described with reference to specific
embodiments in the interest of complete definiteness, it will be understood that
it may be embodied in a variety of forms different from those specifically shown
and described, without departing from the spirit and scope of the invention.
What is claimed is:
1. A system for performing a dental procedure on teeth or associated tooth
structure by means of abrasive particles carried by a fluid stream, comprising:
(a) a source of fluid under pressure;
(b) a source of abrasive particles;
(c) abrasive-mixing means supplied with said fluid under pressure and said
abrasive particles, for combining said fluid under pressure with said
abrasive particles to produce an abrasive-laden fluid stream;
(d) nozzle means for delivering said abrasive-laden stream to the teeth or
tooth structure undergoing said dental procedure; and
(e) pressure control means supplied with said fluid under pressure for
controlling the pressure of said fluid supplied to said abrasive-mixing
means;
(f) wherein said pressure control means comprises a servo valve having a
fluid inlet, a fluid outlet, electrically controllable valve means
positioned between said fluid inlet and said fluid outlet, and an
electrical control terminal, said valve means being responsive to
changes in the level of an electrical command signal at said
electrical control terminal for adjusting said valve means to any
selected one of a plurality of selected conditions, to set said
pressure of said fluid supplied to said abrasive-mixing means to any
of a corresponding plurality of selected pressure values.
2. The system of claim 1, comprising manually controllable means for
adjusting said command signal level to select said pressure.
3. The system of claim 2, wherein said manually controllable means
comprises pushbutton controls for adjusting said command signal level.
4. The system of claim 1, comprising means for visually displaying the
output pressure of said servo valve.
5. The system of claim 1, comprising means for producing a flashing light
indicator of the selected target pressure level toward which the servo valve
output pressure is moving.
* * * * *
<PAGE> 1
EXHIBIT 10.44
EMPLOYMENT AGREEMENT
This Agreement shall be effective as of the 1st day of August, 1996,
between AMERICAN DENTAL TECHNOLOGIES, INC. a Delaware corporation (the
"Company" or "ADT"), and BEN J. GALLANT ("Gallant").
WHEREAS, the Company is engaged in the business of designing,
manufacturing and marketing dental laser products and dental air abrasive
products.
WHEREAS, Gallant is a significant stockholder of the Company and, subject
to the terms of this Agreement, shall be employed by the Company.
WHEREAS, the parties desire to enter into this Agreement to confirm their
respective rights and obligations.
NOW THEREFORE, in consideration of the mutual covenants and promises
recited herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment. Subject to the terms and conditions of this Agreement, the
Company shall employ Gallant as the President and Chief Executive Officer of
the Company's wholly owned subsidiary, Texas Airsonics, Inc. and as a member of
the Company's Executive Committee.
2. Term and Compensation. The term of this Agreement shall be three years
from the effective date, or through July 31, 1999 (the "Term"). During the
Term, Gallant's compensation shall be in pari pasui with that of Anthony D.
Fiorillo. Gallant shall receive the following compensation from the Company in
consideration of the performance of Gallant's duties hereunder:
(a) beginning on the effective date hereof, an annual base salary (before
appropriate payroll deductions) of $225,000 per year, payable in 24
semi-monthly installments in accordance with the normal payroll practices of
the Company;
(b) beginning on the effective date hereof, Company shall maintain an
existing $400,000 life insurance (or comparable policy) on Gallant's life for
the benefit of his designated beneficiaries and shall timely pay the premium
when due;
(c) beginning on the effective date hereof, Company shall provide Gallant
with an automobile allowance of $750 per month;
(d) beginning on the effective date hereof, all other benefits of
employment generally available to the Company's executive employees (which
shall be no less favorable to Gallant than those generally available to ADT's
other executive employees) shall be available to Gallant, including without
limitation, group health and 401(k) benefit plans and a paid vacation of four
weeks per year;
(e) beginning on the effective date hereof, reimbursement for reasonable
out-of-pocket expenses incurred by Gallant in connection with the Company's
business, including expenses for travel, food and lodging while away from home,
subject to compliance with such procedures as the Company may from time to time
reasonably establish for its employees; and
(f) for so long as Gallant shall be a member of ADT's board of directors,
reasonable out-of-pocket expenses incurred by Gallant in connection with his
participation on such board, provided however, Gallant shall receive no other
compensation from ADT for services as a director.
<PAGE> 2
3. Duties. Gallant hereby convenants and undertakes as follows:
(a) During the Term, Gallant shall devote his full energies, interest,
abilities and productive time to the Company and shall not, without the
Company's prior written consent, render to others services of any kind for
compensation, or engage in any other business activity that would materially
interfere with the performance of his duties under this Agreement or that could
adversely affect the Company.
(b) During the Term, Gallant shall not, directly or indirectly, whether
as a partner, employee, creditor, shareholder or otherwise (i) promote,
participate or engage in any activity or other business competitive with the
Company's business, or (ii) take any action to establish, form or become
employed by a competing business during the Term, or within 12 months after the
end of the Term.
4. Confidential Information/Non-Competition.
(a) In the course of his employment, Gallant will have access to
confidential information and trade secrets relating to the Company's business.
Except as required in the course of his employment by the Company, Gallant will
not, without the Company's prior written consent, either during his employment
by Company or for 12 months after termination of that employment, directly or
indirectly disclose to any third person any such confidential information or
trade secrets.
(b) In the course of his employment, Gallant will have access to
confidential records and data pertaining to the Company's customers and to the
relationship between these customers and the Company's products. Such
information is considered secret and is disclosed to Gallant in confidence.
During his employment by the Company and for 12 months after termination of
that employment, Gallant shall not directly or indirectly disclose or use any
such information, except as required in the course of his employment by the
Company. In addition, during, and for the 12 months after termination of his
employment, Gallant shall not induce or attempt to induce any agent, sales
representatives or distributor of the Company to discontinue representing the
Company for the purpose of representing any competitor of the Company.
(c) Due to his employment by the Company, Gallant will have access to
trade secrets and confidential information and its methods of doing business.
In consideration of his access to this information, Gallant agrees that for a
period of 12 months after termination of his employment, he shall not be
employed directly or indirectly by Kreativ, Inc.; Danville Engineering, Inc.;
Sunrise Technologies International, Inc.; Excel Technology, Inc.; Luxar
Corporation; or HGM Dental Laser Systems, Inc. and he shall not directly
compete with the Company in the field of dental-laser or air abrasive
technology within the United States. Gallant acknowledges that direct
competition includes design, development, production, promotion or sale of
products or services competitive with those of the Company.
(d) As used in this Agreement, the terms "confidential information" shall
not include information that (i) is now, or hereafter becomes, through no act
or failure to act on the part of Gallant or persons under his control,
generally known or available to the public, (ii) was acquired by Gallant before
receiving such information from the Company (or through his affiliation with,
or in his capacity as an employee of, the Company) and without restriction as
to use or disclosure, (iii) is hereafter rightfully furnished to Gallant by a
third party without restriction as to use or disclosure, (iv) is required to be
disclosed pursuant to law, provided Gallant uses reasonable efforts to give the
Company reasonable prior notice of such required disclosure, or (v) is
disclosed with the prior written consent of the Company.
5. Intangibles. All processes, inventions, patents, copyrights,
trademarks and other intangible rights that are already owned (or otherwise
owned) by the Company or that may be conceived or developed by Gallant, either
alone or with others, during the Term, whether or not conceived or developed
during Gallant's working hours, and with respect to which the equipment,
supplies, facilities or trade secret information of the Company was used, or
that relate, at the time of conception or reduction-to-practice of the
invention, to the business of the Company or to the Company's actual or
demonstrably anticipated research and development, or that result from any work
<PAGE> 3
performed by Gallant for the Company or its predecessor, shall be the sole
property of the Company. Gallant shall disclose to the Company all inventions
conceived during the term of employment and, for one year thereafter, inventions
that arise from property of the Company under this section, provided that such
disclosure shall be received by the Company in confidence. Gallant shall
execute all documents, including patent applications and assignments, required
by the Company to establish the Company's rights under this section.
6. Indemnification
(a) The Company shall indemnify, defend and hold harmless Gallant against
all losses, claims, demands, liabilities and expenses (including reasonable
legal and other expenses incurred in defending such claims or liabilities),
whether or not resulting in any liability to Gallant, that he may incur,
arising out of or based upon any breach by the Company of the terms of this
Agreement or arising out of or related to the proper performance of Gallant's
duties in accordance with the terms of this Agreement.
(b) Gallant shall indemnify, defend and hold harmless the Company, its
officers, directors, employees and agents against all losses, claims, demands,
liabilities and expenses (including reasonable legal and other expenses
incurred in defending such claims or liabilities), whether or not resulting in
any liability to the Company, its officers, directors, employees or agents,
that they or any of them may incur, arising out of or based upon breach by
Gallant of any of the terms of this Agreement.
7. Duration. The Term of this Agreement shall continue, until the first
to occur of:
(a) Three years from the date hereof; except as provided in sub-paragraph
(b) below.
(b) In the event Gallant shall commit any material criminal act, fraud,
dishonesty or malfeasance with respect to the Company or his employment,
Company may terminate this Agreement.
8. Disputes.
(a) In the event (i) Gallant's employment is terminated without cause,
(ii) Company materially changes his duties as President and Chief Executive
Officer of Texas Airsonics, Inc., or (iii) Company liquidates, dissolves,
merges with, or transfers substantially all of its assets to a corporation
which does not assume Company's obligations under this Agreement; Gallant will
continue to be entitled to his base salary and health insurance coverage.
(b) If either party institutes any action against the other relating to
this Agreement, the unsuccessful party in such action or proceeding shall
reimburse the successful party for its disbursements incurred in connection
therewith, including without limitation, reasonable attorneys' fees, to be
fixed by the court.
9. Assignment. This Agreement is personal to the Company and Gallant and
no party shall have the right, power or authority to assign this Agreement, or
any portion hereof or any monies due or to become due hereunder, or to delegate
any duties or obligations arising hereunder, whether voluntarily, involuntarily
or by operation of law, without the prior written approval of the other
parties.
10. Miscellaneous.
(a) Each provision of this Agreement is intended to be severable. If any
provision hereof shall be determined by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, such provision shall be severed
from this Agreement and shall not affect the remainder of this Agreement unless
the essential purposes of this Agreement would thereby be confounded.
(b) No consent or waiver, express or implied, by either party to or of
any breach or default by the other party in the performance by the other of its
obligations hereunder shall be valid unless in writing, and no such consent or
waiver shall be deemed or construed to be a consent or waiver to or of any such
breach or default in the performance by such other party of the same or any
<PAGE> 4
other obligations of such party hereunder. Failure on the part of any party to
complain of any act or failure to act of the other party or to declare the other
party in default, irrespective of how long such failure continues, shall not
constitute a waiver by such party of its rights hereunder. The granting of any
consent or approval in any one instance by or on behalf of a party shall not be
construed to waive or limit the need for such consent in any other or subsequent
instance.
(c) This Agreement is entered into in the State of Michigan and shall
be governed by the laws thereof. The venue of any action or proceeding brought
by Company against Gallant arising out of this Agreement shall be in the County
of Oakland, Michigan. The venue of any action or proceeding brought by Gallant
against Company arising out of this Agreement shall be in the County of Nueces,
Texas.
(d) This constitutes the entire agreement between the parties with
regard to Gallant's employment. Any modification of this Agreement must be in
writing and signed by the party to be charged thereby.
(e) Nothing in this Agreement changes, alters or amends Gallant's rights
under an existing February 12, 1993 agreement with Company.
(f) All notices, requests and communications required or permitted
hereunder shall be in writing and be sufficiently given and deemed to have been
received upon personal delivery or, if mailed, upon the first to occur of
actual receipt or 48 hours after being placed in the United States mail,
postage prepaid, registered or certified mail, with return receipt requested,
addressed to the above parties as follows:
American Dental Technologies, Inc. Ben J. Gallant
Attention: Anthony D. Fiorillo 5555 Bear Lane
28411 Northwestern Hwy., #1100 Corpus Christi, Texas 78405
Southfield, Michigan 48034-5541
(g) The headings of this Agreement are inserted for convenience of
reference only and shall not affect the construction of anything herein
contained.
(h) This Agreement may be executed in counterparts, each of which when so
executed shall be deemed an original and all of which together shall constitute
but one agreement.
IT WITNESS WHEREOF, the parties have hereunto set their hands as of the
day and year first above written.
American Dental Technologies, Inc.
/s/ Anthony D. Fiorillo
-----------------------------------
Anthony D. Fiorillo, President and
Chief Executive Officer
/s/ Ben J. Gallant
-----------------------------------
Ben J. Gallant
<PAGE> 1
EXHIBIT 10.45
LICENSE AGREEMENT
AGREEMENT dated as of August 1, 1996 between Texas Airsonics L.P., a
limited partnership, wherein Charles A. Nichols, Wayne Johnson II and Ben J.
Gallant are general partners, having a place of business at 3141 Gollihar,
Corpus Christi, Texas 78415 ("Licensor"), Texas Airsonics, Inc., a Texas
corporation having a place of business at 5555 Bear Lane, Corpus Christi, Texas
78405 ("Licensee"), and a wholly owned subsidiary of American Dental
Technologies, Inc. ("ADT"), a Delaware corporation having a place of business
at 28411 Northwestern Highway, Suite 1100, Southfield, Michigan 48034.
WHEREAS, pursuant to Article 12 of the Agreement and Plan of
Reorganization entered into as of November 22, 1995 ("Merger Agreement")
between Licensee and ADT, all industrial patent rights of Licensee are to be
transferred to Licensor subject to a license agreement and are being
transferred concurrent with this Agreement; and
WHEREAS, the Merger Agreement has been approved by the shareholders of ADT
and Licensee and, therefore; Licensee, Licensor and ADT are desirous of
implementing the terms of the Merger Agreement;
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants and conditions hereinafter contained, the parties hereby covenant and
agree as follows:
1. Definitions
(a) Whenever used in this Agreement, unless otherwise clearly indicated in
the context, the following terms shall have the meanings defined in this
Article 1.
(b) Effective Time has the same meaning as provided in the Merger
Agreement by and between Licensee, ADT and ADT Merger Corp., a Texas
corporation, wherein Licensee will become a wholly-owned subsidiary of ADT.
(c) Patent Rights means Licensor's rights in or under the patents and
patent applications now licensable by Licensor as listed in the Patent Schedule
attached hereto as Exhibit A. Patent Rights also means Licensor's rights in the
patents and patent applications acquired by license from ADT as listed in the
License Schedule attached hereto as Exhibit B. The rights in the patents and
patent applications listed in Exhibits A and B shall extend to any divisions,
continuations, reissues or re-examination certificates thereof and in any and
all patents issuing thereon throughout all countries of the world.
(d) Industrial Products means any product sold by Licensee and ADT, their
affiliates or assigns, which is not intended for ultimate use in the dental
field.
2. License
(a) Licensor hereby grants, and Licensee hereby accepts, upon the terms
and conditions set forth in this Agreement, the sole and exclusive license to
use the Patent Rights in manufacture, use and sale of Industrial Products.
(b) Licensee shall, at its sole expense, diligently prosecute patent
applications and maintain patents within the Patent Rights listed in Exhibit A
during the term of this Agreement. In no event shall Licensee be obligated to
continue prosecution of any application beyond the level of a final rejection
by the appropriate examining authority. In the event that Licensee elects not
to proceed with the prosecution of any application listed in Exhibit A beyond
the level of final rejection by the appropriate examining authority, Licensee
shall give timely notice to Licensor of its intention and shall afford Licensor
the right to continue prosecution at Licensor's sole expense.
1
<PAGE> 2
(c) Modifications by Licensee: Licensee may, in such manner as it deems
fit and at its sole cost and expense, modify, alter, change or improve any
component or assembly of components which comprises the licensed Industrial
Products and use the same by itself or in combination with any other product,
component or assembly of the components in accordance with paragraph 2(a)
hereof and the covenants and conditions of this Agreement.
3. Financial Terms
(a) Licensee Fee: Licensee shall pay to Licensor a Licensee Fee of eight
percent (8%) of Licensee's Revenues, as hereinafter defined from Industrial
Products sold or otherwise put into use.
(b) "Licensee's Revenues" Defined: As used herein, the term "Licensee's
Revenues" shall mean all sums invoiced by Licensee to its customers of
Industrial Products, whether from sales, rentals, leases, licenses or
otherwise, less only returns, uncompleted on-approval sales, shipping charges
and sales, use and excise taxes and customs duties separately stated on
invoices to Licensee's customers.
(c) Method of Payment; Books and Records: The License Fee shall be paid
to Licensor in accordance with the following terms and conditions:
(i) Statements: License Fees shall become payable to Licensor upon the
shipment of Industrial Products by Licensee to Licensee's customers. Within
thirty (30) days of the end of each fiscal quarter of each of Licensee's fiscal
years during the term of this Agreement, Licensee shall deliver to Licensor a
statement showing in reasonable detail all shipments in respect of Industrial
Products made during such period and all License Fees which are payable by
virtue of such shipments. Each such statement shall be accompanied by
Licensee's check in payment of the License Fees for such period.
(ii) Books and Records: Licensee shall keep and maintain accurate and
complete books and records relating to all matters affecting License Fees
payable hereunder. Licensor and Licensor's agents and representatives shall
have the right, at reasonable times and on reasonable notice, to audit such
books at Licensee's offices. Except as may be required in connection with the
resolution of any dispute arising under this Agreement, Licensor shall keep in
confidence all information furnished to it, either in the form of the statement
of License Fees delivered by Licensee, or any information which it might gain
or gather from the examination or audit of Licensee's books. If any audit
discloses any error, the parties shall, by appropriate payment forthwith,
adjust the same. If any such audit discloses errors exceeding ten percent
(10%) of the amount paid to Licensor as License Fees for the audited period,
the cost of such audit shall be borne by Licensee. Otherwise, such cost shall
be borne by Licensor.
(iii) Currency; Exchange Rate: The amounts payable hereunder shall be
paid by a check of the party drawn in United States dollars. To the extent
required under this Agreement, all amounts stated in a currency other than
United States dollars shall be translated into United States dollars, applying
a quarterly average conversion rate of exchange, calculated using the
prevailing New York rate(s) on the last day of each month in the quarter in
which any such computation must be made.
2
<PAGE> 3
4. Term
(a) Unless sooner terminated, this Agreement shall remain in effect for a
term of six (6) years from the Effective Time.
(b) Termination for Breach or Default: If Licensee shall materially
breach or default under this Agreement, the Licensor may give written notice of
its intention to terminate this Agreement, stating in reasonable detail the
nature of the breach or default. If Licensee fails to cure or remedy its
breach or default within thirty (30) days of receipt, Licensor may, while such
breach or default continues, terminate this Agreement forthwith on written
notice. Failure to timely pay the License Fee due hereunder shall be a
material breach or default.
(c) Termination for Other Events: In the event ADT is acquired or
transfers or sells substantially all (2/3's or more) of its dental business
(including a merger with, or acquisition by another company) within three (3)
years from the Effective Time, this Agreement shall terminate immediately upon
such transfer or sale. In such event, Licensor shall be the sole owner of the
Patents and Patent Rights listed in Exhibit A and its License Rights in the
patents and Patent Rights of Exhibit B shall become irrevocable.
(d) Assignment of Patent Rights: Texas Airsonics L.P. shall assign,
transfer and convey the entire Patent Rights to ADT, if, at six (6) years and
one (1) day from the Effective Time there exists no material breach or default
by Licensee or ADT hereunder.
5. Relationship
Nothing contained in this Agreement shall be construed by the parties
hereto, or by any third party, as constituting the parties as principal and
agent, partners or joint venturers, nor shall anything herein (except as
otherwise specifically provided) render either party liable for the debts and
obligations of the other, it being understood and agreed that the only
relationship between the parties is that of Licensor and Licensee.
6. Rights and Responsibilities of Parties
(a) Licensee shall be responsible for all manufacturing, marketing and
support activities and the expense attendant thereto.
(b) Licensee shall be solely responsible for any liability imposed on
Licensor, Licensee or any third party arising from the design, manufacture,
distribution or use of any of the Industrial Products. Licensee shall defend,
indemnify and hold Licensor harmless from and against any and all claim for
loss, liability, damage or expense (including reasonable attorneys' fees)
arising out of or in connection with this covenant.
7. Assignment
Prior to three (3) years and one (1) day from the Effective Time, this
Agreement and all rights and duties hereunder are personal to each party and
shall not, without the prior written consent of the other party, be assigned or
sublicensed. However, either party may, without such consent, assign its
rights or obligations under this Agreement to a corporation controlling,
controlled by or under common control with the assigning party; and provided
further that in the event of any such assignment without consent, the parties
hereto shall continue to be liable as guarantors of their respective
obligations hereunder.
3
<PAGE> 4
8. Waiver
None of the terms of this Agreement may be waived or modified, except by
an express agreement in writing signed by both parties. The failure of either
party hereto to enforce, or the delay by either party in enforcing any of its
rights under this Agreement shall not be deemed a continuing waiver or a
modification thereof and either party may, within the time provided by
applicable law, commence appropriate legal proceedings to enforce any or all of
such rights.
9. Infringement by Third Parties
If any party shall learn of any infringement or apparent infringement of
any patent of the Patent Rights of Exhibit A or other proprietary right
relating to the Industrial Products by any third party, it shall promptly
notify the other party stating in reasonable detail the facts known to it. In
any such case, Licensee may take such steps as it deems appropriate, in its
name and at its expense, and in its sole discretion, against the person or
persons thought to be infringing, including, without limitation commencement,
prosecution and settlement of legal actions or proceedings, and Licensee shall
be entitled to:
(i) reimburse itself from all amounts recovered by way of settlement or by
court aware for all expenses incurred in such action or proceedings; and
(ii) retain ninety-two percent (92%) of all amounts recovered (after such
reimbursement) by way of settlement or, by court award, with the balance paid
to Licensor. Licensor shall cooperate in such proceedings in all respects
reasonably requested by Licensee.
10. Name
Licensee consents to the use of the name Texas Airsonics, by Licensor, as
its business or tradename during the term of this Agreement but gives no
consent to use of the name as a trademark on products or as a service mark
promoting in any manner the marketing of services. In the event this Agreement
is terminated pursuant to the provisions of Section 4(c), Licensor shall have
the exclusive use of the name Texas Airsonics and Licensee shall cease using
the name.
11. Inclusive Reference
Any provision herein in which reference is made to Licensee shall be
deemed to include, and be binding upon, ADT, ADT Merger Corp., their successors
and assigns.
12. Future Licenses
In the event this Agreement is terminated pursuant to the provisions of
Section 4(c), Licensee shall grant Licensor a royalty free, exclusive and
irrevocable license for all, non-dental applications to all patents and/or
patent applications, know-how, proprietary information and technology developed
by Licensee, after the Effective Time, to the date of the termination of this
Agreement.
13. Entire Agreement
This Agreement and the License Schedule incorporated herein constitute the
entire Agreement between the parties with respect to the subject matter
thereof. There are no representations, promises, warranties, covenants, or
undertakings other than those contained in this Agreement.
14. Survival
All provisions of this Agreement relating to confidentially,
indemnification or the rights and obligations of the parties after termination
of this Agreement shall be deemed to survive such termination.
4
<PAGE> 5
15. Notices
All notices, reports and other documents provided for herein shall be
deemed to have been given or made when mailed, postage prepaid, or delivered by
telex or cable, addressed to the parties at their respective addresses set
forth above or such other addresses as either of the parties hereto may
designate in writing to the other from time to time for such purpose.
16. Construction
The operation and interpretation of this Agreement shall be governed by
the laws of the State of Texas. The titles of the Sections of this Agreement
are for convenience only and shall not define or limit any of the terms or
provisions hereof.
17. Arbitration
Any dispute or disagreement between the parties hereto arising out of or
connected by this Agreement shall be decided by arbitration. Arbitration may
be brought by Licensor in Corpus Christi, Texas and by Licensee and ADT in
Oakland County, Michigan. The arbitration will be conducted by an arbitrator
appointed by the American Arbitration Association and pursuant to the rules of
the American Arbitration Association. The decision rendered by the arbitrator
will be final and non-appealable. The substantially prevailing party shall be
awarded its costs incurred in the arbitration proceeding, including reasonable
attorney fees.
IN WITNESS WHEREOF, the parties hereto have signed and sealed this License
Agreement the day and year first above written.
TEXAS AIRSONICS L.P. TEXAS AIRSONICS L.P.
By: Ben J. Gallant By: Charles A. Nichols
------------------------------- ------------------------------
Title: General Partner Title: General Partner
---------------------------- ---------------------------
TEXAS AIRSONICS L.P.
By: Wayne Johnson III
-------------------------------
Title: General Partner
----------------------------
AMERICAN DENTAL TECHNOLOGIES, INC. TEXAS AIRSONICS, INC.
By: Anthony D. Fiorillo By: Ben J. Gallant
------------------------------- ------------------------------
Title: President Title: President
---------------------------- ---------------------------
5
<PAGE> 6
LICENSE SCHEDULE / EXHIBIT A
PATENTS
Canadian Patent No: 1,213,144
Issue Date: October 28, 1986
Subject: HELICAL PARTICLE FEED
Canadian Patent No.: 1,216,272
Issue Date: January 6, 1987
Subject: PINCH TUBE SHUT-OFF DEVICE
British Patent No.: 2,145,389
Issue Date: October 28, 1987
Subject: SYSTEM FOR STORING & FEEDING ABRASIVE
U.S. Patent No.: 4,708,534
Filing Date: November 24, 1987
Subject: SYSTEM FOR STORING & FEEDING ABRASIVE
Canadian Patent No.: 1,229,984
Issue Date: December 8, 1987
Subject: SYSTEM FOR STORING & FEEDING ABRASIVE
U.S. Patent No.: 4,733,503
Issue Date: March 29, 1988
Subject: HIGH PRESSURE ABRASIVE JET UNIT
U.S. Patent No.: 4,893,440
Issue Date: January 16, 1990
Subject: ABRASIVE JET MACHINING
French Patent No.: 84 13194
Issue Date: March 16, 1990
Subject: SYSTEM FOR STORING & FEEDING ABRASIVE
Japanese Patent No.: 1,571,789
Issue Date: July 25, 1990
Subject: SYSTEM FOR STORING & FEEDING ABRASIVE
Canadian Patent No.: 1,277,837
Filing Date: December 18, 1990
Subject: HIGH PRESSURE ABRASIVE JET UNIT
French Patent No.: 306,492
Issue Date: September 22, 1993
Subject: HIGH PRESSURE ABRASIVE JET UNIT
German Patent No.: 3787529.9
Issue Date: September 22, 1993
Subject: HIGH PRESSURE ABRASIVE JET UNIT
British Patent No.: 306,492
Issue Date: September 22, 1993
Subject: HIGH PRESSURE ABRASIVE JET UNIT
PATENT APPLICATIONS
German Serial No.: 341445.8
Filing Date: August 27, 1984
Subject: SYSTEM FOR STORING & FEEDING ABRASIVE
<PAGE> 7
LICENSE SCHEDULE / EXHIBIT B
PATENTS
U.S. Patent No.: 5,330,354
Issue Date: July 19, 1994
Subject: Air Abrasive Dental System
U.S. Patent No.: 5,350,299
Issue Date: September 27, 1994
Subject: Air Abrasive Dental System
PATENT APPLICATIONS
Australian Serial No.: 39397/93
Filing Date: March 26, 1993
Subject: Air Abrasive Dental System
Canadian Serial No.: 2,132,972
Filing Date: March 26, 1993
Subject: Air Abrasive Dental System
European Serial No.: 93 908651.8
Designating all EP countries
Filing Date: March 26, 1993
Subject: Air Abrasive Dental System
Japanese Serial No.: 05 517615
Filing Date: March 26, 1993
Subject: Air Abrasive Dental System
Korean Serial No.: 94 703416
Filing Date: March 26, 1993
Subject: Air Abrasive Dental System
New Zealand Serial No.: 251630
Filing Date: March 26, 1993
Subject: Air Abrasive Dental System
U.S. Serial No: 08/276,964
Filing Date: July 19, 1994
Subject: Servo Valve for Air Abrasive System
PCT Serial No.: PCT/US95/09146
Designating all PCT countries
Filing Date: July 17, 1995
Subject: Servo Valve for Air Abrasive System
<PAGE> 1
EXHIBIT 10.47
FOURTH MEMORANDUM AGREEMENT
This Fourth Memorandum Agreement ("this Agreement") is made and entered
into as of 31st day of October, 1996, by and between American Dental
Technologies, Inc. ("ADT"), a Delaware corporation, and Denics Co., Ltd.
("Denics"), a Japanese corporation (formerly referred to as Dental Innovate
Corporation).
RECITALS
WHEREAS, ADT and DENICS entered into a Memorandum Agreement on June 10,
1993 (the "Memorandum Agreement'), as amended by an Amendment Agreement dated
August 16, 1993 (the "Amendment Agreement") with respect to, inter alia, the
granting of a license by ADT to DENICS for the manufacture and sale of the KCP
2000 ("KCP") and the formation of a joint venture;
WHEREAS, ADT and DENICS entered into a Supplemental Agreement on July 27,
1993 (the "Supplemental Agreement"), as amended by a Letter Agreement dated
July 27, 1993 (the "1993 Letter Agreement") and the Amendment Agreement with
respect to, inter alia, the granting of a license by ADT to DENICS for the
manufacture and sale of the dLase 300, 400 and 800 ("dLase") and for the
PulseMaster 300, 600 and 1000 ("PulseMaster");
WHEREAS, ADT and DENICS entered into a Letter Agreement in February 1994
(the "1994 Letter Agreement") with respect to certain purchases of
PulseMasters, a loan by DENICS to ADT, and other matters;
WHEREAS, ADT and DENICS entered into a Second Memorandum Agreement dated
February 24, 1995 (the "Second Memorandum Agreement") with respect to, inter
alia, certain purchases of the Products by DENICS during fiscal year 1995;
WHEREAS, ADT AND DENICS entered into a Third Memorandum Agreement dated
February 23, 1996 (the "Third Memorandum Agreement") with respect to certain
purchases of Products and other matters; and
WHEREAS, DENICS and ADT wish to clarify and provide for certain other
matters;
NOW THEREFORE, in consideration of the premises and the covenants,
representations, warranties and agreements herein contained, and intending to
be legally bound hereby, the parties agree as follows:
<PAGE> 2
1. DEFINITIONS
The term "Prior Agreements" as used herein shall refer collectively to the
Memorandum Agreement, the Supplemental Agreement, the 1993 Letter Agreement,
the Amendment Agreement, the 1994 Letter Agreement, the Second Memorandum
Agreement, and the Third Memorandum Agreement.
2. LICENSING FOR MANUFACTURE AND SALE OF PRODUCTS IN JAPAN
DENICS shall have the exclusive right to assemble, manufacture and sell
the Products in Japan. As used in all prior agreements, Products shall include
all air abrasive and laser products which ADT manufactures, sells or has the
right to manufacture or sell presently or in the future. When DENICS assembles
and/or manufactures such Products, DENICS shall pay ADT a licensing fee of 6%
of the distributor's retail price of any laser or other Product assembled
and/or manufactured to be sold by DENICS (except those sold to ADT or its
affiliated companies) and 8% of the distributor's actual retail price of any
air abrasive product assembled and/or manufactured to be sold by DENICS (except
those sold to ADT or its affiliated companies). In consideration for the
expanded licensing of Products, all terms contained in Prior Agreements
concerning royalties for products manufactured and sold by DENICS in Japan are
considered completed and hereby terminated.
3. OTHER RIGHTS
Except as set forth above, this Fourth Supplemental Agreement does not
alter or modify any other rights of DENICS or ADT under the Prior Agreements
which shall be binding on the successors, assigns and affiliates of the
parties.
IN WITNESS WHEREOF, this Fourth Memorandum Agreement is executed effective
on the date of approval of the ADT Board of Directors.
AMERICAN DENTAL TECHNOLOGIES, INC.
/s/ Ben J. Gallant
-------------------------------
By: Ben J. Gallant, President
DENICS CO., LTD.
/s/ Kengo Iwai
-------------------------------
By: Kengo Iwai, President
<PAGE> 1
EXHIBIT 10.48
JOINT VENTURE AGREEMENT
This agreement is entered into between Denics Co., Ltd. ("Denics") and
American Dental Technologies, Inc. ("ADT") effective April 1, 1997.
WHEREAS, pursuant to paragraph 2 of the Third Memorandum Agreement dated
February 23, 1996 between ADT and Denics, ADT has the right to buy into the
joint venture for the PAC Rim territories; and
WHEREAS, ADT is hereby exercising its right to buy into the joint venture
for the PAC Rim territories,
NOW THEREFORE, the parties agree as follows:
1. Purpose. The purpose of the joint venture will be to
distribute and market dental products in the PAC Rim which is
defined to mean the following countries:
A. China (including Hong Kong)
B. Taiwan
C. Korea (North and South)
D. India
E. Pakistan
F. Australia
G. New Zealand
H. Singapore
I. Thailand
J. Malaysia
K. Indonesia
2. Ownership. The joint venture will be owned 50% by Denics and
50% by ADT. Denics and ADT shall each be entitled to 50% of the
profits and cash distributions. Denics and ADT shall each
contribute 50% of the mutually agreed amount of capital necessary
to operate the joint venture. All assets and inventory of Denics
Pacific Ltd. will be transferred to the joint venture.
3. Management. ADT shall be the manager of the joint venture and
shall have all powers reasonably necessary to conduct the
operations of the joint venture for the benefits of ADT and
Denics. ADT hereby appoints Ben J. Gallant to act on its behalf
with full authority to direct and bind the joint venture.
4. Term. The joint venture shall commence on April 1, 1997 and
shall continue until March 31, 2006, unless extended by the mutual
agreement of both parties.
<PAGE> 2
5. Purchase of Joint Venture Interest. The parties have agreed
that the price ADT will pay for its one-half interest in the joint
venture is $1,000,000 USD. ADT will issue shares of ADT common
stock to Denics in payment therefore as follows:
On December 31, 1996; $333,333.33 USD of ADT common
stock based upon the average closing price of the stock
for the prior 10 trading days.
On April 1, 1997, $333,333.33 USD and on April 1,
1998, $333,333.34 USD of ADT common stock based upon the
average closing price of the stock for the 10 trading
days prior to each date.
ADT, at its sole option, can pay such amounts in cash.
6. Price for Equipment and Parts Supplied by ADT. ADT agrees to supply
equipment and parts to the joint venture at ADT's manufactured cost plus
10%.
Executed as of 31st day of October, 1996 and effective April 1, 1997, but
binding upon approval by the Board of Directors of ADT.
AMERICAN DENTAL TECHNOLOGIES, INC.
/s/ Ben J. Gallant
------------------------------
By: Ben J. Gallant, President
DENICS CO., LTD.
/s/ Kengo Iwai
------------------------------
By: Kengo Iwai, President
<PAGE> 1
EXHIBIT 10.49
October 30, 1996
Mr. Anthony D. Fiorillo
Dear Tony:
As you know we have mutually agreed to terminate your Employment Agreement with
American Dental Technologies, Inc. ("ADT"). This termination and your
resignation as Chief Executive Officer, will be effective as of the end of the
business day on October 31, 1996.
1. You will receive $9,375 on the fifth and twentieth of each month, commencing
November 1996 and ending October 1998. You will cooperate with ADT, which at
its expense, will arrange for you to have the standard health insurance
coverage (COBRA) available to terminated ADT employees (or comparable health
insurance coverage if COBRA cannot be provided), through October 31, 1998, or
the receipt of written notification that you have qualified for health
insurance coverage through a subsequent employer, whichever first occurs. If
you die before October 31, 1998, the payments above will be paid to your
surviving spouse or to your estate. In addition, through October 31, 1998, ADT
will contribute $15,000 per year toward the cost of your personal life
insurance policy for One Million Dollars ($1,000,000), however, to the extent
such cost exceeds $15,000 per year, you must pay any excess. Each party shall
be responsible for and hold the other party harmless with respect to all
federal, state and foreign tax obligations which may arise or be incurred as a
result of this Agreement.
2. You agree to provide part time consulting services to ADT, from November 1,
1996 through October 31, 1998, as and when reasonably requested by ADT. You
are free to engage in other business pursuits so long as they are not
competitive with ADT's business and do not interfere with the consulting
services requested by ADT.
3. All reasonable out-of-pocket expenses must be pre-approved and submitted for
reimbursement in accordance with ADT's existing reimbursement policy. If
approved by management, you will then be reimbursed for such expenses.
4. You agree to continue to be bound by and comply with, Paragraphs 8 through
13 of your Employment Agreement, all of which expressly survive termination of
said agreement, and with the Non-Disclosure Agreement attached thereto as
Exhibit 1.
5. All your existing stock options (to acquire up to 600,000 shares of ADT
common stock) will continue, in accordance with their respective terms, as long
as this consulting agreement continues to be effective.
This letter contains all the terms and conditions of the mutual termination of
your Employment Agreement and of our consulting arrangement. If you agree,
please sign and date this document and return it to me at your earliest
convenience for approval by the Board of Directors.
Sincerely,
/s/ Ben J. Gallant
-----------------------------
Ben J. Gallant
President & Chief Operating Officer
Agreed and Accepted:
/s/ Anthony D. Fiorillo
- ----------------------------
Anthony D. Fiorillo
<PAGE> 1
EXHIBIT 10.50
SETTLEMENT AGREEMENT
THIS AGREEMENT is made effective this 30th day of July, 1996, by and
between American Dental Technologies (hereinafter, "ADT"), a Delaware
corporation, having offices at 28411 Northwestern Highway, Suite 1100,
Southfield, Michigan 48034-5541, and Sunrise Technologies International, Inc.
(hereinafter, "SUNRISE"), a Delaware corporation, having offices at 47257
Fremont Boulevard, Fremont, California.
WITNESSETH:
WHEREAS, ADT and SUNRISE are presently engaged in the following litigation:
(a) Appellate Action No. AO72262, entitled "Sunrise Technologies
International, Inc. Plaintiff/Cross-Defendant and Respondent v. American Dental
Technologies, Inc., f/k/a American Dental Laser, Inc., Defendant/Cross-Claimant
and Appellant," now pending in the Court of Appeal of the State of California,
First Appellate District, Division Four, as appealed from the lower court Civil
Action No. H-172132-2, entitled, "Sunrise Technologies International, Inc. et
al. v. American Dental Technologies," which was litigated in the Superior Court
for the County of Alameda - Southern Division (collectively hereinafter, "State
Court Action"); and
(b) Civil Action No. C94-1512 (EFL), entitled "Sunrise
Technologies International, Inc. and Danville Manufacturing v. American Dental
Technologies, Inc.," now pending in the United States District Court for the
Northern District of California, Civil Action No. C94-1513 (EFL), entitled,
"Sunrise Technologies International, Inc. and Danville Manufacturing v. American
Dental Technologies, Inc.," now pending in the United States District Court for
the Northern District of California; and Civil Action No. C95-2048-EFL, entitled
"American Dental Technologies, Inc. v. Sunrise Technologies International, Inc.
et al." (collectively hereinafter, "Federal Court Actions");
WHEREAS, a judgment was entered against ADT in the lower court proceedings
of the State Court Action in the sum of $940,178.00, plus taxable costs and
interest, ADT having posted a cash deposit with the state court pending an
appeal in the State Court Action in the sum of $1,410,267.00.
WHEREAS, ADT and SUNRISE desire to settle and terminate the foregoing
litigation and as part of such settlement SUNRISE desires to obtain certain
patent licenses from ADT;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, ADT and SUNRISE agree as follows:
1
<PAGE> 2
STATE COURT ACTION
1. SUNRISE shall relinquish and forgive the judgment in the State
Court Action in its full amount of $940,178.00, plus costs, interest and
attorney fees. SUNRISE shall release ADT, its officers, agents, affiliates, and
attorneys from any and all claims and counterclaims arising prior to the
effective date of this Agreement which were made or which could have been made
arising out of the subject matter of the State Court Action, including all such
claims for damages, costs, interest and attorney fees. SUNRISE will execute all
documents necessary to dismiss the State Court Action with prejudice and to
release the full amount of the cash deposit (plus interest) posted on appeal by
ADT immediately upon execution of this Agreement, each party to bear its own
costs and attorney fees. SUNRISE represents and warrants that it has made no
assignment or hypothecation of any judgment or claims, including but not limited
to claims for attorney fees, arising out of the State Court Action to any
creditor, attorney or other third party and agrees to indemnify and hold ADT
harmless from any such third party claim. As used in this Agreement,
"affiliates" shall mean any corporation of which fifty percent (51%) or more of
the voting stock is owned or controlled by a party to this Agreement.
2. ADT shall release SUNRISE, its officers, agents, affiliates and
attorneys from any and all claims and counterclaims arising prior to the
effective date of this Agreement which were made or which could have been made
arising out of the subject matter of the State Court Action, including all such
claims for damages, costs, interest and attorney fees. ADT will execute all
documents necessary to dismiss the State Court Action with prejudice
immediately upon execution of this Agreement, each party to bear its own costs
and attorney fees. ADT represents and warrants that it has made no assignment
or hypothecation of any claims, including but not limited to claims for attorney
fees, existing out of the State Court Action to any creditor, attorney or other
third party and agrees to indemnify and hold SUNRISE harmless from any such
third party claim.
FEDERAL COURT ACTIONS
3. ADT shall release SUNRISE, its officers, agents, affiliates and
attorneys from any and all claims and counterclaims arising prior to the
effective date of this Agreement which were made or which could have been made
arising out of the subject matter of the Federal Court Actions, including all
such claims for damages, costs, interest and attorney fees. ADT further
releases SUNRISE with respect to SUNRISE's past Senior model and current
MicroPrep Associate and Director models, as described and identified in the
depositions of Mark Fernwood and Joseph Shaffer in the Federal Court Actions,
from any and all claims of infringement under patents issuing on any pending or
presently contemplated patent applications owned or controlled by ADT which
relate to air abrasive equipment or apparatus, other than such patents or
applications covering air abrasive dental systems or methods of treatment as
otherwise provided herein. ADT will execute all documents necessary to dismiss
2
<PAGE> 3
SUNRISE from the Federal Court Actions with prejudice immediately upon
execution of this Agreement, each party to bear its own costs and attorney
fees. In no event, however, shall this paragraph 3 be interpreted to constitute
a release of any liability or damages, directly or indirectly, arising out of
ADT's claims against Danville Manufacturing or a dismissal of any of the claims
in the Federal Court Actions against Danville Manufacturing. Notwithstanding,
upon execution of this Agreement, ADT will offer to dismiss without prejudice
all pending litigation by ADT against Danville Manufacturing in return for a
dismissal without prejudice by Danville Manufacturing of all pending litigation
by Danville Manufacturing against ADT; each party to bear its own costs and
attorneys fees. ADT represents and warrants that it has made no assignment or
hypothecation of any claims, including but not limited to claims for attorney
fees, arising out of the Federal Court Actions to any creditor, attorney or
other third party and agrees to indemnify and hold SUNRISE harmless from any
such third party claim.
4. SUNRISE shall release ADT, its officers, agents, affiliates and
attorneys from any and all claims and counterclaims arising prior to the
effective date of this Agreement which were made or which could have been made
arising out of the subject matter of the Federal Court Actions, including all
such claims for declaratory judgment, damages, costs, interest and attorney
fees. SUNRISE will execute all documents necessary to dismiss its claims in
the Federal Court Actions against ADT with prejudice immediately upon execution
of this Agreement, each party to bear its own costs and attorneys fees.
SUNRISE represents and warrants that it has made no assignment or
hypothecation of any claims, including but not limited to claims for attorney
fees, arising out of the State Court Action to any creditor, attorney or third
party and agrees to indemnify and hold ADT harmless from any such third party
claim.
5. The dismissals submitted to the Court pursuant to paragraphs 3 and 4
of this Agreement shall include (i) a stipulation by SUNRISE that the patents
asserted in Civil Action No. C95-2048 (HFL), to wit, U.S. Patent No. 5,330,354,
U.S. Patent No. 5,350,299 and U.S. Patent No. 5,525,058, and the patent
asserted in Civil Action No. C94-1513 (ELF), to wit, U.S. Patent No. 5,275,561,
are acknowledged by SUNRISE to be valid; (ii) an order commensurate in scope
with the stipulation of section (i) of this paragraph 5; (iii) a stipulation by
ADT that the patents asserted in Civil Action No. C94-1512 (EFL), to wit, U.S.
Patent No. 4,893,440, U.S. Patent No. 4,733,503, U.S. Patent No. 4,708,534 and
U.S. Patent No. 4,635,897, and any non-dental air abrasive patents or patent
applications presently owned by ADT are not infringed by SUNRISE's past Senior
model and current MicroPrep Associate and Director models as described and
identified in the depositions of Mark Fernwood and Joseph Shaffer in the
Federal Court Actions; and (iv) an order commensurate in scope with the
stipulation of section (iii) of this paragraph 5.
3
<PAGE> 4
PATENT LICENSE
6. ADT hereby grants to SUNRISE a nonexclusive license under U.S. Patent
No. 5,275,561, U.S. Patent No. 5,330,354, U.S. Patent No. 5,350,299 and U.S.
Patent No. 5,525,058, and any foreign counterparts, reexaminations, reissues,
continuations or continuations-in-part based on the disclosure of the patents of
this paragraph 6, for the life of such patents, to make, use, lease and sell
SUNRISE's current MicroPrep Associate and Director models as described and
identified in the depositions of Mark Fernwood and Joseph Shaffer in the Federal
Court Actions, and future models to the extent such future models do not
infringe any non-dental patents or patent applications (for example, on helical
powder feed mechanisms) of ADT, throughout the world, but excluding those
territories (Japan, China, including Hong Kong, Taiwan, North Korea, South
Korea, India, Pakistan, Australia, New Zealand, Singapore, Thailand, Malaysia
and Indonesia) presently covered by agreements between ADT and Denics Co., Ltd.,
a/k/a Dental Innovative Corporation, a Japanese corporation. The license
granted in this paragraph 6 is non-transferable by assignment, sublicense or
other means of transfer except as provided in paragraphs 7 and 8 of this
Agreement, provided, further, that the period in which SUNRISE is licensed under
this Agreement, SUNRISE shall have the right to have the products of this
paragraph 6 manufactured by a third party solely for SUNRISE. The license
granted in this paragraph 6 is subject to the payments provided in paragraph 9
of this Agreement. ADT represents and warrants that other than the patents
licensed in this paragraph 6, ADT does not presently own or hold licensable
rights in any other patents or patent applications covering the products of this
paragraph 6.
7. The license granted in paragraph 6 of this Agreement is
non-transferable for a period of eighteen (18) months from the effective date of
this Agreement and SUNRISE shall make no such transfer or promise to transfer
within such eighteen (18) month period, except as provided in paragraph 8 of
this Agreement. After the expiration of such eighteen (18) month period,
SUNRISE shall have the right to transfer the license of paragraph 6 of this
Agreement upon the following terms and conditions; the transferee shall assume
all obligations of SUNRISE under this Agreement, including the obligation to
make the payments required by paragraph 9 of this Agreement; provided, however,
that no such transfer of the license after such eighteen (18) month period has
expired, but before the expiration of twenty-four (24) months after the
effective date of this Agreement, shall be made conditioned on the subsequent
sale or transfer of all of SUNRISE's dental air abrasive products business.
8. SUNRISE may at any time transfer the license of paragraph 6 of this
Agreement if such transfer is made with the transfer of all of SUNRISE's dental
air abrasive products business (for the purposes of this Agreement, the phrase
"transfer of all of SUNRISE's dental air abrasive products business" shall mean
any such transfer by asset sale or exchange or by stock transfer or exchange,
and shall further include any merger by or into, or consolidation with,
SUNRISE); provided, however, that, if such transfer occurs within two (2) years
of the effective date of this Agreement, then SUNRISE shall pay to ADT, in cash,
a transfer fee
4
<PAGE> 5
equal to ten percent (10%) of the gross consideration for the transfer of the
license and the dental air abrasive products business received by SUNRISE,
regardless of the form of the consideration (provided that, in the event of a
merger, such gross consideration shall be based on the fair market value of the
shares thereupon issued by SUNRISE or thereupon issued to SUNRISE and/or its
shareholders) and the transferee or surviving entity shall assume all
obligations of SUNRISE under this Agreement, including the obligation to make
the payments required by paragraph 9 of this Agreement. In the event such
transfer of all of SUNRISE's dental air abrasive products business shall occur
more than two (2) years after the effective date of this Agreement, then
SUNRISE's only obligation upon transfer shall be to require such transferee or
continuing entity to assume all obligations of SUNRISE under this Agreement,
including the obligation to make the payments required by paragraph 9 of this
Agreement.
PAYMENTS
9. Beginning on January 1, 1997, SUNRISE, or its permitted successor or
assignee, shall pay to ADT the sum of seven percent (7%) on the net sales price
(defined as gross sales price less freight, duties and taxes) on all air
abrasive products manufactured, sold or leased by SUNRISE, or its permitted
successor or assignee, which are manufactured (by or on behalf of SUNRISE), sold
or leased in a country in which ADT, presently or in the future, owns or
controls patents or patent applications on any dental air abrasive products or
methods of treatment, until the expiration of all such patents/patent
applications. In the event that SUNRISE, or its permitted successor or
assignee, manufactures or has manufactured on its behalf, and sells or leases
(i.e., manufactures and sells or manufactures and leases), air abrasive products
wholly within a country where ADT holds no such patents or patent applications
or where all such patents have expired, then no such payments shall be required.
The payments required under this paragraph 9 of this Agreement shall accrue when
the subject products are delivered, invoiced or paid for, whichever occurs
first. All payments shall be made in U.S. dollars. In no event shall a
payment by SUNRISE under this paragraph 9 be required for products that are both
made and sold prior to January 1, 1997.
10. SUNRISE, and any permitted successor or assignee, shall (i) make the
payments required in paragraph 9 of this Agreement on February 15th, May 15th,
June 15th and November 15th for the proceeding accounting quarter, with the
first payment to be made on May 15, 1997. SUNRISE shall keep accurate books and
records reflecting transactions made under this Agreement and shall make reports
at the time of such payments fully supporting the calculation of payments made,
including the number of units sold or leased and the sales price used to
determine payments. ADT shall have the right to inspect such books and records
through an independent certified accountant, not to exceed one such audit per
year.
5
<PAGE> 6
TERMINATION
11. ADT may terminate the license granted by paragraph 6 of this
Agreement only in the event of a material breach of this Agreement by SUNRISE,
and then only if, upon receiving notice of such breach SUNRISE fails to cure
such breach within thirty (30) days of such notice, such right of termination
shall not be in lieu of other remedies such as specific performance.
PATENT MARKING
12. SUNRISE shall apply statutory notice to its MicroPrep air abrasive
units sold in the United States substantially as follows: "This unit and its use
is protected by one or more of the following U.S. Patents: 5,275,561, 5,330,354,
5,350,299 and 5,525,058."
NOTICE
13. All notices required to be given under this Agreement shall be given in
writing and shall be sent by regular mail, postage prepaid, certified mail or by
recognized overnight express mail service to the parties at the addresses below.
If to ADT, to:
Anthony D. Fiorillo
President and Chief Executive Officer
American Dental Technologies, Inc.
28411 Northwestern Highway, Suite 1100
Southfield, Michigan 48034-5541
Tel: (810) 353-5300
Fax: (810) 353-0663
With a copy to:
Dykema Gossett PLLC
1577 North Woodward Avenue
Suite 300
Bloomfield Hills, Michigan 48304
Attention: Robert L. Kelly, Esq.
Tel: (810) 540-0849
Fax: (810) 540-0763
6
<PAGE> 7
If to SUNRISE, to:
David W. Light
President and Chief Executive Officer
Sunrise Technologies International
47257 Fremont Boulevard
Fremont, California
Tel:
Fax:
With a copy to:
Daniel Johnson, Esq.
Cooley Godward Castro Huddleson & Tatum
Five Palo Alto Square, 4th Floor
Palo Alto, California 94306
Tel: (415) 843-5000
Fax: (415) 857-0663
14. A notice sent pursuant to paragraph 13 of this Agreement shall
be deemed given on the date it is mailed, unless the intended recipient can
establish that such notice was not timely received.
JURISDICTION
15. The Court in the Federal Court Actions shall retain
jurisdiction of the parties and this Agreement for purposes of resolving any
dispute which may arise hereunder.
GOVERNING LAW
16. This Agreement is made in the County of Oakland, State of
Michigan, and shall be governed by the laws of the State of Michigan without
regard to its conflict of laws principles.
WARRANTIES
17. Both parties represent that their undersigned representatives
have the full power and authority to enter into this Agreement. ADT represents
and warrants that it has the right
7
<PAGE> 8
and power to grant the license of paragraph 6 of this Agreement, but makes no
other warranties whatsoever regarding the patents so licensed.
RELATIONSHIP OF PARTIES
18. This Agreement is not intended by the parties to, and shall not,
constitute or create a joint venture, partnership or other business organization
and neither party shall be nor shall act as an agent of the other party.
Neither party shall use the other party's name in any marketing efforts.
SEVERABILITY
19. The invalidity of any provision of this Agreement shall not affect
the validity of any other provision of this Agreement.
COMPLETE AGREEMENT
20. This Agreement constitutes the entire agreement of the parties
regarding this subject matter and supersedes any and all prior or
contemporaneous oral or written agreements, understandings, negotiations or
discussions among the parties regarding this subject matter. Any amendments or
other modifications to this Agreement must be made in writing and must be duly
executed by an authorized representative or agent of each party.
COUNTERPARTS
21. This Agreement may be executed in multiple counterparts, each of
which shall be deemed to be an original, and all such counterparts shall
constitute but one instrument.
PERMITTED SUCCESSORS AND ASSIGNS
22. This Agreement, and all provisions herein, shall bind the parties
and their permitted successors and permitted assigns.
8
<PAGE> 9
The parties have executed this Agreement as effective the date first
written above by their duly authorized agents.
AMERICAN DENTAL SUNRISE TECHNOLOGIES
TECHNOLOGIES, INC. INTERNATIONAL, INC.
/s/ Anthony D. Fiorillo /s/ David W. Light
- ---------------------------- -------------------------------
By: Anthony D. Fiorillo By: David W. Light
President and Chief Executive Officer President and Chief Executive Officer
Date: July 30, 1996 Date: July 30, 1996
9
<PAGE> 1
EXHIBIT 11.1
AMERICAN DENTAL TECHNOLOGIES, INC.
STATEMENT RE: COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
PRIMARY NET LOSS PER SHARE
Weighted average shares outstanding 20,772,768 15,178,554 13,167,337
Net effect of dilutive stock options and
warrants based on the treasury
stock method using the average market price
or the initial public offering price 4,364,751 168,162 295,466
----------- ----------- -----------
Weighted average number of common and common
equivalent shares 25,137,519 15,346,716 13,462,803
----------- ----------- -----------
Net income (loss) $ 5,628,786 $(1,274,166) $(4,181,610)
Accrued dividends on Series A Preferred
Stock (30,150)
----------- ----------- -----------
Net income (loss) available for common
stockholder 5,628,786 (1,274,166) (4,211,760)
=========== =========== ===========
Net income (loss) per share $ 0.22 $ (.08) $ (.31)
=========== =========== ===========
</TABLE>
The fully diluted net loss per share calculation has not been presented
separately since it does not differ from the primary net loss per
share calculation.
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
JURISDICTION OF NAMES UNDER WHICH
NAME OF SUBSIDIARY INCORPORATION SUBSIDIARY DOES BUSINESS
------------------ --------------- ------------------------
<S> <C> <C>
1. American Dental Laser GmbH Germany American Dental Laser GmbH
2. American Dental Laser-Japan, Inc. United States American Dental Laser-Japan, Inc.
3. ADT Merger Corp. (changed on United States ADT Merger Corp. and
July 31, 1996 to Texas Airsonics, Inc.) Texas Airsonics, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Ernst & Young LLP (logo)
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
pertaining to the Amended and Restated Long-Term Incentive Plan (Form S-8
Nos. 33-66552, 33-86062 and 333-13061) and the Non-Qualified Stock Option
Plan and the Stock Option Plan for Employees (Form S-8 No. 33-52664) of
American Dental Technologies, Inc. of our report dated March 4, 1997 with
respect to the consolidated financial statements and schedule of American
Dental Technologies, Inc. included in the Annual Report (Form 10-K) for the
year ended December 31, 1996.
Ernst & Young LLP
March 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,832,192
<SECURITIES> 0
<RECEIVABLES> 3,753,711
<ALLOWANCES> 280,000
<INVENTORY> 3,204,806
<CURRENT-ASSETS> 9,047,992
<PP&E> 1,192,454
<DEPRECIATION> 1,641,920
<TOTAL-ASSETS> 21,280,886
<CURRENT-LIABILITIES> 3,894,628
<BONDS> 0
0
0
<COMMON> 277,457
<OTHER-SE> 16,531,626
<TOTAL-LIABILITY-AND-EQUITY> 21,280,886
<SALES> 20,474,976
<TOTAL-REVENUES> 20,474,976
<CGS> 10,455,788
<TOTAL-COSTS> 10,455,788
<OTHER-EXPENSES> 7,015,092
<LOSS-PROVISION> 0
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