<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
National Dentex Corporation
(Name of Registrant as Specified In Its Charter)
National Dentex Corporation
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
NATIONAL DENTEX CORPORATION
NOTICE OF SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, APRIL 8, 1997 AT 10:00 A.M.
TO ALL STOCKHOLDERS OF NATIONAL DENTEX CORPORATION:
Notice is hereby given that the 1997 Special Meeting in Lieu of Annual
Meeting of Stockholders of National Dentex Corporation (the "Company") will be
held at 111 Speen Street, Framingham, Massachusetts, on Tuesday, April 8, 1997
at 10:00 a.m. for the following purposes:
1. To fix the number of directors and to elect such number of directors
for the ensuing year and until their respective successors are chosen
and qualified;
2. To consider and approve the proposed amendment to the Company's 1992
Long Term Incentive Plan (the "LTIP") to increase the number of shares
of Common Stock reserved for issuance under the LTIP by 100,000 shares
(representing approximately 2.9% of the outstanding shares);
3. To consider and act upon the matter of ratifying the selection of
Arthur Andersen LLP as auditors of the Company for the fiscal year
ending December 31, 1997; and
4. To consider and act upon any other matters which may properly come
before the meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on February 18, 1997
as the record date for determining the stockholders entitled to notice of and to
vote at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND, THE COMPANY REQUESTS THAT YOU FILL IN,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
By Order of the Board of Directors
DONALD H. SIEGEL, Clerk
Dated: March 7, 1997 111 Speen Street
Framingham, Massachusetts 01701
<PAGE> 3
NATIONAL DENTEX CORPORATION
111 Speen Street
Framingham, Massachusetts 01701
---------------------------
PROXY STATEMENT
SOLICITATION OF PROXIES
This Proxy Statement is furnished to the stockholders of National Dentex
Corporation (the "Company") in connection with the solicitation of proxies by
the Board of Directors for use at the Special Meeting in Lieu of Annual Meeting
of Stockholders to be held on Tuesday, April 8, 1997 at 111 Speen Street,
Framingham, Massachusetts, at 10:00 a.m., and any adjournments or postponements
thereof (the "Meeting"). The solicitation of proxies by mail may be followed by
solicitation of certain stockholders by officers, directors or regular employees
of the Company by telephone or other verbal communications. The Company may also
request banks, brokers and their custodians, nominees and fiduciaries to solicit
customers of theirs for shares of the Company registered in the name of a
nominee. The cost of solicitation will be borne by the Company.
All proxies delivered pursuant to this solicitation are revocable at the
option of the person executing the same by filing a notice of such revocation
with the Clerk of the Company at any time before the voting of such proxy, or by
voting in person at the Meeting. Unless previously revoked, proxies so delivered
will be voted at the Meeting. Where a choice or instruction is specified by the
stockholder thereon, the proxy will be voted in accordance with such
specification. Where a choice or instruction is not specified by such
stockholder, the proxy will be voted as recommended by the directors.
This Proxy Statement, the related form of proxy and the Company's Annual
Report for the fiscal year ended December 31, 1996 are being mailed together on
or about March 7, 1997 to stockholders entitled to notice of and to vote at the
Meeting.
VOTING SECURITIES AND OWNERSHIP THEREOF
OUTSTANDING SHARES AND VOTING RIGHTS
Only stockholders of record at the close of business on February 18, 1997
are entitled to receive notice of and to vote at the Meeting. The transfer books
will not be closed. As of the close of business on February 18, 1997, there were
outstanding and entitled to vote 3,441,321 shares of Common Stock, $.01 par
value per share (the "Common Stock"). Each share is entitled to one vote.
<PAGE> 4
OWNERSHIP OF VOTING SECURITIES
The following table sets forth certain information as of February 18, 1997
with respect to the beneficial ownership of the Company's Common Stock by all
stockholders known by the Company to be beneficial owners of more than 5% of the
Company's Common Stock (based upon filings received by the Company pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), and the
beneficial ownership of shares of Common Stock by directors, by each of the
Named Executive Officers (as defined on page 11 hereof) and by all directors and
officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
NAME AND ADDRESS (NUMBER OF PERCENTAGE OF
OF BENEFICIAL OWNERS SHARES)(1) OUTSTANDING SHARES(1)
- ---------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
William M. Mullahy(2)*+................................... 186,622 5.4%
David V. Harkins*......................................... 42,238 1.2%
Jack R. Crosby(3)*........................................ 5,589 0.2%
William H. McClurg*....................................... 6,136 0.2%
David L. Brown(4)+........................................ 19,651 0.6%
Eloy V. Sepulveda(5)+..................................... 20,681 0.6%
James F. Dodd, III(6)+.................................... 14,500 0.4%
Donald E. Merz(7)+........................................ 17,254 0.5%
Wasatch Advisors, Inc..................................... 1,030,710 30.0%
68 South Main Street, Suite 400
Salt Lake City, UT 84101
Putnam Investments, Inc................................... 278,200 8.1%
One Post Office Square
Boston, MA 02109
AIM Management Group Inc.................................. 185,000 5.4%
11 Greenway Plaza
Suite 1919
Houston, TX 77046
The Kaufman Fund, Inc..................................... 180,000 5.2%
140 E. 45th Street
43rd Floor
New York, NY 10017
All executive officers and directors as a group
(12 persons)(8)......................................... 387,073 11.1%
</TABLE>
- ---------------
* Director or nominee for director of the Company. Such person's address is
c/o National Dentex Corporation, 111 Speen Street, Framingham, MA 01701.
+ Executive Officer of the Company. Such person's address is c/o National
Dentex Corporation, 111 Speen Street, Framingham, MA 01701.
(1) Unless otherwise indicated, each of the persons named on the table has sole
voting and investment power with respect to the shares set forth opposite
such person's name. With respect to each person or group, percentages are
calculated based on the number of shares outstanding plus shares which may
be acquired by such person or group within 60 days of February 18, 1997
pursuant to the exercise of presently exercisable or outstanding options,
warrants or conversion privileges. Information with respect to beneficial
ownership is based upon information furnished by such stockholder.
2
<PAGE> 5
(2) Includes 1,750 shares held by his son, Andrew Mullahy. Mr. Mullahy disclaims
beneficial ownership of such shares.
(3) Includes 5,589 shares held by Rust Capital, Ltd. Mr. Crosby is the President
of Rust Capital, Ltd. and under certain circumstances, he could be deemed to
be indirectly a beneficial owner of the shares of Common Stock held by Rust
Capital, Ltd; however, Mr. Crosby disclaims beneficial ownership of such
shares.
(4) Includes 7,000 shares upon which Mr. Brown holds options issued by the
Company, of which 4,666 are exercisable within 60 days of February 18, 1997.
(5) Includes 9,000 shares upon which Mr. Sepulveda holds options issued by the
Company, of which 6,332 shares are exercisable within 60 days of February
18, 1997. Also includes 200 shares held by Gloria Sepulveda, his wife. Mr.
Sepulveda disclaims beneficial ownership of such shares.
(6) Includes 4,500 shares upon which Mr. Dodd holds options issued by the
Company, of which 2,833 are exercisable within 60 days of February 18, 1997.
(7) Includes 6,000 shares upon which Mr. Merz holds options issued by the
Company, of which 4,000 are exercisable within 60 days of February 18, 1997.
Also includes 233 shares held by his son, Jeffrey Merz. Mr. Merz disclaims
beneficial ownership of such shares.
(8) Includes 46,500 shares upon which certain officers, other than the Named
Executive Officers, hold options issued by the Company, of which 19,165
shares are exercisable within 60 days of February 18, 1997.
PROPOSAL NO. 1
NUMBER AND ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" FIXING THE
NUMBER OF DIRECTORS AT FOUR AND FOR THE ELECTION AS DIRECTORS OF THE NOMINEES
LISTED BELOW.
NUMBER OF AND NOMINEES FOR DIRECTORS
It is the intention of the persons named as proxies to vote the proxies,
unless authority to vote is specifically withheld, to fix the number of
directors at four and to elect as directors the nominees listed below to serve
as such until the next annual meeting of stockholders and until their respective
successors are chosen and qualified. All of the nominees were elected directors
by the stockholders at the Company's Special Meeting in Lieu of Annual Meeting
of Stockholders in 1996. It is believed that each nominee will be able and
willing to serve during the ensuing year. If any one or more of them should be
unable or choose not to serve, the persons named as proxies may either vote to
fix the number of directors at such lesser number as will equal the number of
nominees able and willing to serve, or vote in favor of such other person or
persons as the Board of Directors at that time recommends.
The names and ages of the proposed nominees for director, their principal
occupations during the past five years, any other directorships held by such
person in any company subject to the reporting requirements of the Exchange Act,
or any company registered as an investment company under the Investment Company
Act of 1940, as amended, and the year in which they first became directors of
the Company, are as follows:
3
<PAGE> 6
<TABLE>
<CAPTION>
ELECTED
NAME AGE OFFICE DIRECTOR
- -------------------- ----- ------------------------------------------ --------
<S> <C> <C> <C>
William M. Mullahy 61 President, Chief Executive Officer and 1982
Director
David V. Harkins 56 Chairman of the Board and Director 1982
Jack R. Crosby 70 Director 1992
William H. McClurg 60 Director 1994
</TABLE>
Mr. Mullahy was a founder of the Company and has served as a director,
President and Chief Executive Officer since its inception. From 1963 to 1979,
Mr. Mullahy held a number of management positions with Warner-Lambert
Corporation and was President of the World-Wide Medical Electronics Group. From
1979 to 1984, Mr. Mullahy acted as an independent consultant for corporations in
turn-around situations, including North American Biologicals, Inc. and First
Alert, Inc. He has more than 20 years of sales and management experience in the
health care and dental industry.
Mr. Harkins was a founder of the Company and has served as Chairman of the
Board and as a director since its inception. Mr. Harkins was Treasurer of the
Company from its inception until 1991. Mr. Harkins has been associated with
Thomas H. Lee Company, a private merchant banking firm, as a senior managing
director since 1987. Prior to his association with the Company, Mr. Harkins was
active in the venture capital field and was associated with TA Associates, John
Hancock, and Massachusetts Capital Corporation, where he was President from 1976
to 1983. Mr. Harkins is currently on the Board of Directors of Stanley Furniture
Company, Inc. and EquiCredit Corporation.
Mr. Crosby is Chairman of The Rust Group, a private investment partnership
headquartered in Austin, Texas. Mr. Crosby is also Chairman and Chief Executive
Officer of Tescorp, Inc., a publicly-traded company engaged in acquiring
communications properties with emphasis on Latin America. Mr. Crosby serves as a
director of several public and privately held companies, including Prime Cable
Corporation. Mr. Crosby has been a director of the Company since 1992.
Mr. McClurg has been President of Load Controls, Inc., since 1984. Load
Controls, Inc. manufactures and sells electric motor power sensors and load
controls. Mr. McClurg has been a director of the Company since 1994.
A quorum being present, the affirmative vote of the holders of a plurality
of the shares of Common Stock voting in person or by proxy at the Meeting is
required to elect each director. Thus, abstentions or broker non-votes, if any,
will not be included in the totals and will have no effect on the outcome of the
vote.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
As permitted by the By-Laws of the Company, the Board has established
standing Compensation and Audit Committees. The Company does not have a standing
nominating committee or a committee performing similar functions.
The role of the Compensation Committee is described in detail below under
"Executive Compensation -- Report of Compensation Committee on Executive
Compensation."
The Audit Committee recommends to the Board of Directors the engagement of
independent auditors for the year subject to approval by the stockholders of the
Company, reviews the annual financial statements of the Company and any
recommended changes or modifications in control procedures and accounting
practices and policies, monitors with management and the auditors the Company's
system of internal control and its accounting and reporting practices, reviews
compliance with conflict-of-interest policy and other policies of the Company,
and reviews the capital structure of the Company.
4
<PAGE> 7
The Compensation Committee, of which Messrs. Harkins, Crosby and McClurg
were members, met four times during the Company's last fiscal year. The Audit
Committee, of which Messrs. Harkins, Crosby and McClurg were members, met two
times during the Company's last fiscal year.
During the Company's last fiscal year, the Board of Directors met four
times. All of the Directors attended 100% of the meetings of the Board of
Directors and all of the committee meetings of which they were members.
Any stockholder wishing to make a recommendation of a candidate for
election as a Company director should submit it to the President of the Company.
No director or executive officer is related by blood, marriage or adoption
to any other director or executive officer of the Company.
COMPENSATION OF DIRECTORS
"Non-affiliated" directors receive $12,000 annually in compensation and at
their election can take such compensation in cash or shares of Common Stock. Mr.
McClurg is the sole non-affiliated director for these purposes. "Affiliated"
directors (Messrs. Crosby, Harkins and Mullahy) do not receive any fee or
remuneration for services as a member of the Board of Directors or of any
committee of the Board of Directors. Affiliated and non-affiliated directors are
reimbursed for expenses incurred in connection with their services.
EXECUTIVE COMPENSATION
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has prepared the
following report on executive compensation:
REPORT OF THE COMMITTEE ON COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three directors who are not employees of the Company. The Committee
recommends to the Board the key goals and objectives for the Chief Executive
Officer; recommends compensation for the Chief Executive Officer and outside
directors; reviews and recommends to the Board compensation plans submitted by
the Chief Executive Officer for all executive officers; ensures that
compensation and benefits are at levels which enable the Company to attract,
retain and motivate high-quality employees; considers, reviews and recommends to
the Board the modification, amendment and establishment of compensation plans
and policies; and, upon recommendation of management, reviews and recommends to
the Board the number of shares, price per share, conditions and duration for
stock and option issuances under the Company's Long Term Incentive Plan and
other stock plans.
The Committee has attempted to design the components of the compensation
program to meet the Company's pay philosophy. Base salaries, the fixed regular
periodic component of pay, are conservatively pegged to levels that the
Committee believes are competitive with the average level of base salaries paid
to executives holding positions entailing similar responsibilities in
organizations of similar size. Factors considered in determining the appropriate
salary grade for each particular officer include level of responsibility, prior
experience and accomplishments and relative importance of the job in terms of
achieving corporate objectives. The individual salaries of executive officers
are reviewed annually by the Committee. Annual bonuses, which are directly
linked to the short-term financial performance of both the operating dental
laboratories and the Company as a whole, are designed to provide better than
competitive pay only for better than competitive financial performance. Finally,
the compensation program includes equity-based plans which reward execu-
5
<PAGE> 8
tives for delivering long-term value to the Company's stockholders. The
Employees' Stock Purchase Plan, and the Long Term Incentive Plan provide rewards
to executives and other employees only to the extent that the stockholders
similarly benefit.
The goals of the Company's compensation program are to:
- reward executives for long-term strategic management and the
enhancement of shareholder value through appropriate equity ownership
in the Company.
- integrate compensation programs with both the Company's annual and
longer-term strategic planning and measurement processes.
- support a performance-oriented environment that rewards performance
not only with respect to Company goals but also Company performance.
- attract and retain key executives critical to the long-term success of
the Company.
The Company has established cash incentive plans which reward dental
laboratory management and other designated key employees who directly influence
the financial performance of an individual dental laboratory, reward key
executives based upon the Company's achievement of corporate earning targets,
expressed in terms of pre-tax income, as compared to the Company's budget for
each year, and reward group managers based upon the achievement of earnings
within each group manager's group of dental laboratories.
The Committee's goal is to use compensation policies to closely align the
interests of management, including attainment of certain short-term performance
goals, with the interests of the Company's stockholders in building long-term
value. The Committee will review its compensation policies from time to time in
order to determine the reasonableness of the Company's compensation program and
to take into account factors which are unique to the Company.
With respect to Mr. Mullahy, the Company's President and Chief Executive
Officer, the Committee continued to hold Mr. Mullahy's 1996 salary constant. As
Chief Executive Officer, Mr. Mullahy had responsibility for the general
management of the Company and in the Committee's subjective judgment, this level
of base compensation was appropriate given the Company's continued growth in
sales and return on investment. In addition, Mr. Mullahy participated in the
Company's cash Executive Incentive Compensation Plan. His bonus award was based
solely upon the Company's level of achievement as compared to its budgeted
fiscal year pretax profit.
With respect to the other Named Executive Officers, the Committee reviewed
and recommended approval by the Board of the cash compensation proposals made
for such officers by Mr. Mullahy as Chief Executive Officer. These included an
increase in base salary for Mr. Brown, the Company's Chief Financial Officer, as
well as bonuses from the Executive Incentive Compensation Plan based on the same
short-term performance factors taken into account in determining Mr. Mullahy's
award. As a long-term incentive, the Committee also approved Mr. Mullahy's
recommendation of modest option grants of 1,500 to 2,000 shares for each of the
Named Executive Officers in April 1996.
In making its recommendations with respect to 1996, the Committee took note
of the fact that the Company's stock price performance over the past three years
continued to outperform the NASDAQ Industrial Index and the Company's Peer Group
Index.
Jack R. Crosby
David V. Harkins
William H. McClurg
Dated: February 18, 1997
6
<PAGE> 9
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
The Company has entered into employment and change of control severance
agreements with William M. Mullahy, David L. Brown and Richard F. Becker. The
Company's employment agreements with Messrs. Mullahy, Brown and Becker (the
"Agreements") each expire April 1, 1998, and provide for annual base salaries
which may be increased at the discretion of the Board of Directors.
The Agreements also provide for participation in the Company's Corporate
Executive Incentive Compensation Plan, reimbursement of expenses, and the same
benefits offered to the Company's executives generally. The Agreements provide
for automatic renewal after the expiration of their initial three-year terms
until termination by the Company or by the employee.
The Company's Change of Control Severance Agreements with Messrs. Mullahy,
Brown and Becker provide that each may receive severance benefits equal to two
times their respective base salaries in effect immediately prior to the date of
termination plus two times the average amount of the bonus payable for the two
fiscal years ending on or immediately prior to the date of termination in the
event that the executive is terminated by the Company without cause or the
executive terminates his employment agreement for certain specified reasons.
7
<PAGE> 10
COMPARISON OF CUMULATIVE TOTAL RETURN
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return on its Common Stock for the period from its initial public offering
(December 21, 1993) to December 31, 1996 with the cumulative total return of the
NASDAQ Industrial Index and a peer group index described more fully below.
COMPARISON OF CUMULATIVE TOTAL RETURN (1)
AMONG COMPANY ("NADX"), NASDAQ INDUSTRIAL INDEX AND PEER GROUP INDEX (2)
[GRAPHICAL MATERIAL OMITTED]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NADX NASDAQ PEERS
<S> <C> <C> <C>
12-21-93 100.00 100.00 100.00
12-31-93 112.50 102.94 105.65
12-31-94 118.75 96.29 85.27
12-31-95 306.25 123.23 98.88
12-31-96 251.56 141.75 115.50
</TABLE>
(1) Assumes $100 invested on December 21, 1993 in the Company's Common Stock,
the NASDAQ Industrial Index and the Peer Group Index, including reinvestment
of any dividends paid on the investment.
(2) The Peer Group Index consists of Dentsply International, Inc., Patterson
Dental Company and Sullivan Dental Products, Inc. The Company believes that
the companies included in the Peer Group Index represent the publicly traded
companies within the dental services industry.
8
<PAGE> 11
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the executive officers of the Company, their
ages, the positions and offices held by each such person, and the year each such
person first served as an executive officer of the Company:
<TABLE>
<CAPTION>
FIRST YEAR
AS AN
NAME AGE EXECUTIVE POSITIONS AND OFFICES HELD EXECUTIVE OFFICER
- ------------------------- ---- --------------------------------------- ------------------
<S> <C> <C> <C>
William M. Mullahy 61 President, Chief Executive Officer and 1982
Director
David L. Brown 56 Vice President, Treasurer and Chief 1984
Financial Officer, and Assistant Clerk
Richard F. Becker, Jr. 44 Vice President-Finance and Assistant 1990
Treasurer
Richard G. Mariacher 52 Vice President-Technical Services 1982
Arthur B. Champagne 56 Group Vice President 1986
James F. Dodd, III 57 Group Vice President 1993
Donald E. Merz 58 Group Vice President 1987
Eloy V. Sepulveda 61 Group Vice President 1994
Thomas E. Gildersleeve 27 Vice President, Business Development 1996
</TABLE>
- ---------------
The following is a brief account of the background of each executive
officer of the Company, with the exception of Mr. Mullahy, whose background is
summarized on page 5 above.
Mr. Brown has been Vice President and Chief Financial Officer of the
Company since October 1984 and Treasurer since 1991. From 1967 to 1983 he held a
number of financial positions with William Underwood Company, where he was
Corporate Controller from 1979 to 1983. Mr. Brown served as International
Controller for Charles River Breeding Laboratories for a brief period in 1984,
prior to joining the Company.
Mr. Becker served as Corporate Controller of the Company from 1984 to 1990,
Vice President and Corporate Controller from 1990 to 1996, and is currently Vice
President of Finance. Prior to joining the Company, Mr. Becker held a number of
financial management positions with Etonic, Inc. and Kendall Company,
subsidiaries of Colgate-Palmolive, Adage Corporation, William Underwood Company
and Rix Corporation.
Mr. Mariacher has served as Vice President-Technical Services of the
Company since its inception. Mr. Mariacher has been with the Company or its
predecessors for the past 31 years. He is the author of many technical articles,
past Chairman of the National Board for Certification of Dental Laboratories,
Technical Editor of Laboratory Management Today, serves on the Board of
Directors of the Cal-Lab Group and is a past delegate of the Federation of
Prosthodontics Organizations.
Mr. Champagne has been a Vice President of the Company since 1986 and has
operational responsibility for the Company's five dental laboratory locations in
New England. Mr. Champagne has been employed by the Company or its predecessors
for the past 38 years.
Mr. Dodd has been a Vice President of the Company since March 1993 and has
operational responsibility for the Company's dental laboratories in Delaware,
Colorado, Arizona, Pennsylvania, New Jersey, Tennessee and Alabama. He was the
founder and President of Dodd Dental Laboratories, Inc. ("Dodd"), a dental
laboratory, from 1963 until Dodd was acquired by the Company in February, 1992.
9
<PAGE> 12
Mr. Merz has been in the dental laboratory industry for the past 32 years
with the Company or its predecessors. He has been a Vice President of the
Company since 1987, and is responsible for overseeing the Company's six dental
laboratory operations in Iowa, Minnesota, Missouri, Indiana, Wisconsin and
Michigan.
Mr. Sepulveda has been employed by the Company or its predecessors for the
past 37 years. He has served as a Vice President since 1994 and has operational
responsibilities for the Company's eight dental laboratories in the states of
Texas, Florida, Louisiana, Oklahoma and Mississippi.
Mr. Gildersleeve has been employed by the Company since 1995 and has served
as Vice President, Business Development since 1996. Prior to joining the
Company, Mr. Gildersleeve served as an analyst at Sunbeam-Oster Corporation from
1992-1993. From 1993-1994, he was an associate at the Helios Group, a private
investment group, and acted as an operations consultant to a number of small
companies during 1994 and 1995.
The officers of the Company serve at the discretion of the Board of
Directors.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the past three fiscal years,
information concerning the annual and long-term compensation for services
rendered to the Company by those persons who were at December 31, 1996 (i) the
Chief Executive Officer of the Company and (ii) the four other most highly
compensated executive officers of the Company whose annual compensation during
1996 exceeded $100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
NAME AND PRINCIPAL --------------------------------- UNDERLYING COMPENSATION
POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) ($)(2)
- -------------------------------------- ------ --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
William M. Mullahy.................... 1996 $ 175,000 $ 85,000 -- $ 2,310
President and Chief Executive 1995 $ 175,000 $ 100,000 -- $ 2,310
Officer 1994 $ 175,000 $ 100,000 -- $ 2,310
David L. Brown........................ 1996 $ 93,250 $ 60,000 2,000 $ 1,865
Vice President, Treasurer and 1995 $ 73,000 $ 90,000 3,000 $ 1,460
Chief Financial Officer 1994 $ 73,000 $ 85,000 2,000 $ 1,460
Donald E. Merz........................ 1996 $ 58,000 $ 92,168 1,500 $ 1,160
Group Vice President 1995 $ 58,000 $ 98,192 3,000 $ 1,160
1994 $ 58,000 $ 89,498 1,500 $ 1,160
James F. Dodd, III.................... 1996 $ 100,000 $ 27,000 1,500 $ 2,000
Group Vice President 1995 $ 100,000 $ 30,000 2,000 $ 2,000
1994 $ 100,000 $ 18,000 1,000 $ 2,000
Eloy V. Sepulveda..................... 1996 $ 67,000 $ 92,036 2,000 $ 1,340
Group Vice President 1995 $ 67,000 $ 98,125 4,000 $ 1,340
1994 $ 67,000 $ 77,375 3,000 $ 1,340
</TABLE>
- ---------------
(1) Paid for services rendered in 1994, 1995 or 1996 under the Corporate
Executive Incentive Compensation Plan, as to Messrs. Mullahy, Brown, Merz,
Dodd and Sepulveda, under the Company's Laboratory Incentive Compensation
Plan, as to Messrs. Merz and Sepulveda, and under the Group Managers
Incentive Plan, as to Messrs. Merz, Dodd and Sepulveda.
10
<PAGE> 13
(2) Represents the Company's matching contribution for the account of the Named
Executive Officer under the Company's Dollars Plus Plan, a plan qualified
under 401(k) of the Internal Revenue Code of 1986, as amended (the "Code").
The matching contribution is 100% of the first 1% of salary contributed by
the employee and 50% of the next 2% of salary contributed.
OPTION GRANTS IN 1996
The following table shows the options granted to the Named Executive
Officers during the fiscal year ended December 31, 1996. These options were
granted on April 8, 1996, vest in equal portions over a three year period from
date of grant and expire ten years from date of grant.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATE OF
SECURITIES TOTAL STOCK PRICE
UNDERLYING OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM(3)
GRANTED EMPLOYEES IN PRICE EXPIRATION ------------------
NAME (#)(1) 1996(2) ($/SH) DATE 5% 10%
- ---------------------------------- ---------- ------------- --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
William M. Mullahy................ -- -- -- -- -- --
David L. Brown.................... 2,000 2.5% $ 19.75 4-8-06 $24,840 $62,960
Donald E. Merz.................... 1,500 1.8% $ 19.75 4-8-06 $18,630 $47,220
James F. Dodd, III................ 1,500 1.8% $ 19.75 4-8-06 $18,630 $47,220
Eloy V. Sepulveda................. 2,000 2.5% $ 19.75 4-8-06 $24,840 $62,960
</TABLE>
- ---------------
(1) All are incentive stock options.
(2) The Company granted options to purchase a total of 81,210 shares to its
employees in fiscal year 1996, including grants to executive officers.
(3) Net gains from potential stock option exercises are estimated based on
assumed rates of stock price appreciation over the options' terms, as set
forth in rules promulgated by the Securities and Exchange Commission, and
are not intended to forecast possible future appreciation of the Common
Stock. The actual net gains, if any, are dependent on the actual future
performance of the Common Stock and overall stock market conditions. There
can be no assurance that the assumed rates of stock price appreciation
utilized in calculating the amounts reflected in these columns will be
achieved.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning options
exercised during 1996 and the unexercised options held as of December 31, 1996,
by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
ACQUIRED VALUE YEAR END(#) AT FISCAL YEAR END(6)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ------------ --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William M. Mullahy....... 9,399 176,231 -- -- -- --
David L. Brown........... 8,000 178,000 3,000(2) 4,000 $29,125 $16,500
Donald E. Merz........... 6,500 144,625 2,500(3) 3,500 $23,813 $16,313
James F. Dodd, III....... 12,000 232,500 1,666(4) 2,834 $15,869 $11,068
Eloy V. Sepulveda........ 10,000 222,500 4,333(5) 4,667 $42,373 $17,752
</TABLE>
11
<PAGE> 14
- ---------------
(1) The value realized upon exercise of the options is determined by multiplying
the number of options exercised by the difference between the market price
of the Common Stock on the date of exercise of the options and the exercise
price of the options exercised.
(2) Mr. Brown's options were granted on February 1, 1994 (2,000 shares), April
4, 1995 (3,000 shares), and April 8, 1996 (2,000 shares) at exercise prices
of $9.50, $12.25 and $19.75, respectively, and expire February 1, 1999,
April 4, 2005, and April 8, 2006, respectively.
(3) Mr. Merz's options were granted on February 1, 1994 (1,500 shares), April 4,
1995 (3,000 shares), and April 8, 1996 (1,500 shares) at exercise prices of
$9.50, $12.25 and $19.75, respectively, and expire February 1, 1999, April
4, 2005, and April 8, 2006, respectively.
(4) Mr. Dodd's options were granted on February 1, 1994 (1,000 shares), April 4,
1995 (2,000 shares), and April 8, 1996 (1,500 shares) at exercise prices of
$9.50, $12.25 and $19.75, respectively, and expire February 1, 1999, April
4, 2005 and April 8, 2006, respectively.
(5) Mr. Sepulveda's options were granted on February 1, 1994 (3,000 shares),
April 4, 1995 (4,000 shares), and April 8, 1996 (2,000 shares) at exercise
prices of $9.50, $12.25 and $19.75, respectively, and expire February 1,
1999, April 4, 2005, and April 8, 2006, respectively.
(6) The value of unexercised in-the-money options at the end of fiscal year 1996
is determined by multiplying the number of options held by the difference
between the market price of the Common Stock underlying the options on
December 31, 1996 ($20.125 per share) and the exercise price of the options
granted.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers,
directors and greater than 10% shareholders ("Reporting Persons") to file
certain reports with respect to beneficial ownership of the Company's equity
securities. Based solely on a review of the Section 16 reports furnished to the
Company by its Reporting Persons and, where applicable, any written
representation by any of them that Annual Statements of Changes in Beneficial
Ownership on Form 5 were not required, the Company believes that all Section
16(a) filing requirements applicable to the Company's Reporting Persons during
and with respect to 1996 have been complied with on a timely basis.
PROPOSAL NO. 2
INCREASE IN SHARES RESERVED UNDER 1992 LONG TERM INCENTIVE PLAN
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE AMENDMENT TO THE 1992 LONG TERM INCENTIVE PLAN.
BACKGROUND OF THE PLAN
The Company has a 1992 Long Term Incentive Plan (the "LTIP"), which is
available to certain employees, officers and directors of the Company. The LTIP
was adopted by the Board of Directors of the Company on May 22, 1992, and
received stockholder approval on May 26, 1992. On August 30, 1995, the Board of
Directors approved an amendment to the LTIP to increase the number of shares
reserved for issuance under the plan from 150,000 to 235,000. This amendment was
approved by the stockholders on April 9, 1996. The LTIP permits grants of the
following types of stock-based incentive compensation: (a) stock options, (b)
stock appreciation rights, (c) restricted stock, (d) deferred stock, (e) stock
purchase rights and (f) other stock-based awards.
As of February 18, 1997, options for 4,157 shares granted under the LTIP
have been exercised and options for 218,719 shares remain outstanding. This
leaves only 12,124 shares available for future grants.
12
<PAGE> 15
PROPOSED AMENDMENT OF THE PLAN
The Board of Directors of the Company proposes to amend the LTIP, subject
to stockholder approval at the Meeting, to increase the number of shares of
Common Stock available for issuance under the LTIP by 100,000 shares. In all
other respects, the LTIP would remain unchanged.
CONCLUSION AND RECOMMENDATION
The Board of Directors recommends a vote "for" approval of the amendment.
The Board of Directors believes that the additional 100,000 shares, which
represent approximately 2.9% of the current number of outstanding shares of
Common Stock, are necessary (i) in order for the Company to continue to attract
and retain key personnel, (ii) in order to continue to more closely align the
interests of such personnel with those of the stockholders, and (iii) to be
available as a potential management incentive in the Company's acquisition
program.
A quorum being present, the affirmative vote of the holders of a majority
of the shares of Common Stock voting in person or by proxy on the amendment
shall be required for its approval. Thus, abstentions, if any, will have the
effect of a vote against the proposal.
PROPOSAL NO. 3
SELECTION OF AUDITORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS AUDITORS.
The Board of Directors has selected Arthur Andersen LLP to act as auditors
for the Company's current fiscal year. A quorum being present, the affirmative
vote of the holders of a majority of the shares of Common Stock voting in person
or by proxy on the appointment of the auditors shall be required for approval.
Thus, abstentions, if any, will have the effect of a vote against the proposal.
In the event the appointment of Arthur Andersen LLP as independent auditors
for fiscal year 1997 is not approved by the stockholders, the adverse vote will
be considered as a direction to the Board of Directors to select other auditors
for the following year. However, because of the difficulty in making any
substitution of auditors so long after the beginning of the current year, it is
contemplated that the appointment for the fiscal year 1997 will be permitted to
stand unless the Board finds other good reason for making a change.
A representative of Arthur Andersen LLP will be present at the Meeting and
will be provided the opportunity to make a statement if he desires to do so and
will be available to respond to appropriate questions from the stockholders.
The Company's consolidated financial statements for the fiscal year ended
December 31, 1996, were audited and reported upon by Arthur Andersen LLP. In
connection with that audit, Arthur Andersen LLP also reviewed the Company's
Annual Report, quarterly financial statements, and the Company's filings with
the Securities and Exchange Commission and consulted with management as to the
financial statement implications of matters under consideration.
13
<PAGE> 16
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters
which may come before the Meeting. If any other matters shall properly come
before the Meeting, it is the intention of the persons named in the enclosed
proxy to vote in accordance with their best judgment. The Board of Directors
knows of no matter to be acted upon at the Meeting that would give rise to
appraisal rights for dissenting stockholders.
STOCKHOLDER PROPOSALS
Any stockholder desiring to present a proposal for action at the Company's
1998 Annual Meeting of Stockholders must submit the proposal in writing so as to
be received by the Company at its principal executive offices no later than
November 6, 1997.
YOUR VOTE IS IMPORTANT TO US, WHETHER YOU OWN FEW OR
MANY SHARES. PLEASE FILL IN, DATE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
14
<PAGE> 17
NATIONAL DENTEX CORPORATION
PROXY FOR THE SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS
ON APRIL 8, 1997
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, having received the Notice of Special Meeting in Lieu of
Annual Meeting of Shareholders, Proxy Statement and the Annual Report of
National Dentex Corporation (the "Company"), hereby appoint(s) William M.
Mullahy and David L. Brown, or either of them, proxies for the undersigned,
with full power of substitution in each of them, to represent the undersigned at
the Special Meeting in Lieu of Annual Meeting of Shareholders of the Company to
be held at 111 Speen Street, Framingham, MA 01701 at 10:00 a.m. on Tuesday,
April 8, 1997, and at any adjournment or postponement thereof, and thereat to
vote and act in regard to all matters which may properly come before said
meeting (except those matters as to which authority is hereinafter withheld)
upon and in respect of all shares of Common Stock of the Company upon or in
respect of which the undersigned would be entitled to vote or act and with all
powers the undersigned would possess, if personally present, and especially
(but without limiting the general authorization and power hereby given) to
vote and act as indicated on the reverse.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER. IF NO INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 and 3.
The undersigned hereby confer(s) upon said proxies, and each of them,
discretionary authority to vote (a) upon any other matters or proposals not
known at the time of solicitation of this proxy which may properly come before
the meeting, and (b) with respect to the selection of Directors in the event of
any unforeseen emergency.
Attendance of the undersigned at said meeting or at any adjournment or
postponement thereof will not be deemed to revoke this proxy unless the
undersigned shall affirmatively indicate thereat his or her intention to vote
said shares in person. If a fiduciary capacity is attributed to the undersigned
hereon, this proxy will be deemed signed by the undersigned in that capacity.
- -------------------------------------------------------------------------------
PLEASE VOTE, DATE, SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
- -------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
<PAGE> 18
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- -------------------------------
NATIONAL DENTEX
CORPORATION
- -------------------------------
RECORD DATE SHARES:
1. Proposal to fix the number of directors
at four and to elect the following
persons as directors: With- For All
For hold Except
WILLIAM M. MULLAHY, JACK R. CROSBY,
WILLIAM H. MCCLURG AND DAVID V. HARKINS [ ] [ ] [ ]
To withhold authority to vote for any individual nominee, mark the "For All
Except" box and strike a line through that nominee's name in the list above.
2. Proposal to approve the amendment of the
Company's Long Term Incentive Plan to For Against Abstain
increase the number of shares available for
issuance by 100,000 shares. [ ] [ ] [ ]
3. Proposal to approve appointment of Arthur
Andersen LLP as auditors. [ ] [ ] [ ]
4. In their discretion on any other matters as may properly come before the
meeting or at any adjournment or postponement thereof.
Mark box at right if an address change or
comment has been noted on the reverse [ ]
side of this card.
--------------------------------
Please be sure to sign and date this Proxy. Date
- -------------------------------------------------------------------------------
- --------Shareholder sign here---------------------Co-owner sign here-----------
DETACH CARD DETACH CARD
NATIONAL DENTEX CORPORATION
Dear Shareholder,
Please take note of the important information enclosed with this Proxy
Card. This is your opportunity to vote on important matters related to
the management and operation of your Company. These are discussed
in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right
to vote your shares.
Please mark the boxes on the Proxy Card to indicate how your shares will
be voted. Then sign and date the card, detach it and return your proxy
vote in the enclosed postage paid envelope.
Your Proxy Card must be received prior to the Special Meeting in Lieu of
Annual Meeting of Shareholders which is scheduled to be held on April 8,
1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
NATIONAL DENTEX CORPORATION
