Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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Filed
by the Registrant x
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Filed
by a Party other than the Registrant o
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Check
the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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x Definitive
Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to
§240.14a-12
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Entrx
Corporation
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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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:
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Fee
paid previously with preliminary
materials.
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o 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:
ENTRX
CORPORATION
800
Nicollet Mall, Suite 2690
Minneapolis,
Minnesota 55402
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
to be
held on
May 4,
2009
Notice is
hereby furnished to the shareholders of Entrx Corporation, a Delaware
corporation (“Entrx”), of record as of the close of business on March 11, 2009,
of the Special Meeting of shareholders thereof, to be held at 10:00 a.m. on May
4, 2009, at the offices of Entrx, at 800 Nicollet Mall, Suite 2690, Minneapolis,
Minnesota, for the following purposes:
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1.
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To
consider and vote on two proposals to amend Entrx’s Restated and Amended
Certificate of Incorporation. The first amendment would effect
a reverse 1-for-500 share stock split of Entrx’s common
stock. The second amendment would effect a subsequent forward
500-for-1 share stock split of Entrx’s common stock. If both
proposals are approved, it will have the effect of reducing the number of
our shareholders from an estimated 2,350 to between 800 and 900, and the
number of our shareholders of record from approximately 520 to
approximately 53, by cashing out fractional shares after the reverse stock
split. If both proposals are approved, the shareholdings of a
person owning 500 shares or more of Entrx in any one account will be
unaffected, while the shares held by persons owning less than 500 shares
of Entrx in any one account will be bought out at the price of $0.35 per
share.
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2.
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To
transact such other business as may properly come before and is incidental
to the conduct of the meeting.
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Only shareholders of record as of the
close of business on March 11, 2009, or their legal representatives, are
entitled to notice and to vote at the Special Meeting or any adjournment
thereof. Each shareholder is entitled to one vote per share on all
matters to be voted on at the Special Meeting.
A Proxy, Proxy Statement, and the
2008 Annual Report on Form 10-K are enclosed herewith. You are
requested to complete and sign the Proxy, which is being solicited by the Board
of Directors and management of Entrx Corporation, and to return it in the
envelope provided. You can also vote by telephone by calling
800-776-9437 between the hours of 8:30 a.m. and 3:30 p.m. CDT, prior to May 1,
2009
By
Order of the Board of Directors
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/s/ Peter L. Hauser
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Chief
Executive Officer and
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Chairman
of the Board
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March
25, 2009
Important
Notice Regarding the Availability of Proxy Materials for the Shareholders
Meeting to be Held on May 4, 2009:
The
Proxy Statement and form of Proxy, and the Annual Report on Form 10-K for the
year ended December 31, 2008, which accompany this Notice, are also available
over the internet at www.vfnotice.com/entrxcorporation.
PROXY
STATEMENT
TABLE OF
CONTENTS
VOTING
INFORMATION
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1
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PROPOSALS
TO AMEND THE RESTATED AND AMENDED CERTIFICATE OF INCORPORATION OF ENTRX
CORPORATION TO EFFECT A REVERSE STOCK SPLIT FOLLOWED BY A FORWARD STOCK
SPLIT OF ENTRX'S COMMON STOCK
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4
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Summary
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4
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Negative
Aspects of the Reverse/Forward Stock Split
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7
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Effect
on Shareholders
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7
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Reasons
for the Reverse/Forward Stock Split
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8
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Structure
of the Reverse/Forward Stock Split
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9
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Background
and Purpose of the Reverse/Forward Stock Split
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10
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Effect
of the Reverse/Forward Stock Split on Entrx
Shareholders
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12
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Financial
Information
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14
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Fairness
of the Reverse/Forward Stock Split
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15
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Effect
of the Reverse/Forward Stock Split on Entrx
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17
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Stock
Certificates
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18
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Certain
Federal Income Tax Consequences
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18
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Appraisal
Rights
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20
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Reservation
of Rights
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20
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Board
of Directors’ Recommendation
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20
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OFFICERS
AND DIRECTORS
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COMMON
STOCK OWNERSHIP
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22
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Share
Ownership of Officers and Directors
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22
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Share
Ownership of Certain Beneficial Owners
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22
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SHAREHOLDER
PROPOSALS
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24
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ENTRX
CORPORATION
800
Nicollet Mall, Suite 2690
Minneapolis,
Minnesota 55402
PROXY
STATEMENT
SPECIAL
MEETING OF SHAREHOLDERS
This Proxy Statement is furnished to
the shareholders of Entrx Corporation (hereinafter referred to as “Entrx” or
“we”), in connection with the solicitation by the Board of Directors of Entrx of
proxies to be voted at the special meeting of Entrx shareholders (the
“Meeting”), to be held at 10:00 a.m. CDT on May 4, 2009 at the offices of Entrx
at 800 Nicollet Mall, Suite 2690, Minneapolis, Minnesota. This Proxy
Statement and the accompanying form of Proxy (the “Proxy”) were first mailed on
approximately March 30, 2009 to the shareholders of record of Entrx as of the
close of business on March 11, 2009.
VOTING
INFORMATION
Who
is entitled to vote?
The holders of common stock of Entrx
who are shareholders of record on March 11, 2009, may vote at the
Meeting. As of March 11, 2009, there were 7,656,147 shares of Entrx's
common stock outstanding.
What
are you voting on?
At the Meeting, you will be voting on a
proposal to amend Entrx’s Restated and Amended Certificate of Incorporation in
order to effect a reverse stock split of Entrx’s common stock, followed by a
proposal to amend Entrx’s Restated and Amended Certificate of Incorporation in
order to effect a forward stock split of Entrx’s common stock. If
both proposals are approved, it will result in a reduction of the number of our
shareholders from an estimated 2,350 to between 800 and 900, and the number of
our shareholders of record from an approximately 520 to approximately 53, by
cashing out fractional shares after the reverse stock split. If only
one or none of the proposals are approved, neither of the amendments will be
effected. The
purpose of these amendments is to cash out all of our shareholders owning less
than 500 shares of our common stock at $0.35 per share. If you own
more than 500 shares of Entrx’s common stock in any account, your share
ownership will not be affected in that account.
We may
also vote on other matters incidental to the conduct of the
Meeting.
How
does the Board recommend you vote on the proposals?
The Board recommends that you vote your
shares FOR the proposed
amendments to Entrx’s Restated and Amended Certificate of Incorporation in order
to effect a reverse, followed by a forward, stock split of Entrx’s common
stock.
Who
will be soliciting your vote?
The Board is soliciting your vote by
mail through this Proxy Statement. However, your vote may also be
solicited in person or by telephone by an officer of Entrx who will act without
special compensation. We have also engaged The Altman Group to
solicit proxies. For its services, we will pay The Altman Group a
base fee of approximately $8,000 plus estimated out-of-pocket expenses not to
exceed $2,000. We do not expect that The Altman Group will solicit
more than 150 shareholders. See “Summary – Discussion” on page
5. Other than the foregoing, no one has been engaged to directly or
indirectly make solicitations or recommendations relating to the reverse,
followed by a forward, stock split. Brokers/dealers, nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to beneficial owners of Entrx’s common stock, and will be reimbursed
for their expenses in connection with that activity. The cost of all
of this solicitation is being paid for by Entrx.
How
can you vote?
If you hold your shares as a
shareholder of record, you can vote in person at the Meeting or you can vote by
mail. You are a “shareholder of record” if you hold a stock
certificate which has your name and the number of shares you own on the face of
the certificate. If you hold your shares indirectly, through an
intermediary such as a bank, broker, trustee or other nominee, you are a
beneficial owner of those shares, and are normally referred to as a “street name
shareholder.” If you are a street name shareholder, you should
receive instructions from your bank, broker, trustee or other nominee describing
how to vote your shares.
How
do you vote?
By mail:
You can vote by mail by following the
instructions on the accompanying form of Proxy, signing the Proxy, and mailing
it to the address noted on the Proxy or by using the accompanying envelope
provided for that purpose. The persons named as proxies on the Proxy
will vote your shares in accordance with your instructions. If you
sign and submit your Proxy without giving instructions, the proxies named on the
Proxy will vote your shares as recommended by the Board of
Directors.
By telephone:
You can vote by telephone by calling
800-776-9437 on weekdays between the hours of 8:00 a.m. and 3:30 p.m. CDT, prior
to May 1, 2009. You should state that you are an Entrx Corporation
shareholder desiring to vote at the May 4, 2009 special meeting, and have the
accompanying proxy available when you call so that you can be properly
identified.
How
can you revoke your Proxy?
If you are a shareholder of record, you
can revoke your Proxy by:
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Submitting
a new Proxy received by us prior to the
meeting;
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If
you voted by telephone, by calling the same number you used to vote by
telephone until 3:30 p.m. CDT, April 30,
2009;
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Giving
written notice prior to the meeting to Entrx's Secretary, at 800 Nicollet
Mall, Suite 2690, Minneapolis, Minnesota 55402, stating that you are
revoking your Proxy; or
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Attending
the Meeting and voting your shares in
person.
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Merely
attending the meeting without voting will not revoke your
Proxy.
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If you are a street name shareholder,
you may revoke your Proxy only as instructed by the bank, broker or other
nominee holding your shares.
How
do you sign the Proxy?
Sign your name exactly as it appears on
the Proxy. If you are signing in a representative capacity (for
example, as a guardian, trustee, executor, administrator, attorney or the
officer or agent of a company), include your name and title or
capacity. If the shares are held in custody (for example, under the
Uniform Transfer to Minors Act), the custodian should sign the Proxy, not the
minor or other beneficiary.
If the shares are held in joint
ownership, both owners should sign the Proxy. If, however, only one
of the owners signs, that Proxy (referred to as the “first Proxy”) will be
counted, unless one or more of the other owners signs a Proxy or casts a vote
which is in conflict with the first Proxy, in which case the vote of the
majority of the owners in interest shall be entitled to vote or give authority
to vote all of the shares. If more than one owner votes, but the vote
is evenly split on an issue, the shares may be voted proportionately; that is,
one-half of the shares may be voted on one side of the issue, and the other half
on the other side.
What
does it mean if you receive more than one proxy or voting instruction
card?
It means your shares are registered
differently or are in more than one account. Please provide voting
instructions for each Proxy you receive to ensure all your shares are
voted.
What
constitutes a quorum?
A quorum of shareholders is necessary
to hold a valid meeting of shareholders. A majority of the
outstanding shares, present in person or represented by proxy, constitutes a
quorum for the Meeting. Abstentions and broker non-votes (as
described below) are counted as present for establishing a quorum.
How
many votes are needed for approval of the proposals?
Approval of each of the proposals to
amend Entrx’s Restated and Amended Certificate of Incorporation in order to
effect a reverse, followed by a forward, stock split of Entrx’s common stock,
requires the affirmative vote of the holders of a majority of the outstanding
shares of Entrx’s common stock, or 3,828,074 or more shares. Both
proposals must be affirmatively approved by shareholders owning a majority of
Entrx’s outstanding common shares.
Prior
vote on the proposals.
At a special meeting of the
shareholders held on January 28, 2008, we presented and conducted a vote upon a
proposal to effect a reverse stock split followed by a forward stock split
substantially identical to the one being presented in this Proxy
Statement. The proposal did not pass. The vote was
2,288,781 in favor and 800,106 against. Even though more shareholders
voted in favor of the proposal than voted against the proposal by a wide margin,
we failed to get the required affirmative vote of shareholders owning a majority
of our outstanding shares.
What
is a broker non-vote?
A broker non-vote with respect to a
proposal occurs when a broker submits a Proxy that does not indicate a vote on
that proposal because the broker did not receive instructions from the
beneficial owner on how to vote on that proposal and does not have discretionary
authority to vote in the absence of instructions.
How
are broker non-votes and abstentions counted?
A broker non-vote and an abstention
from voting on either proposal to amend Entrx’s Restated and Amended Certificate
of Incorporation will be treated the same as a vote against that
proposal. in order to effect a reverse, followed by a forward, split
of Entrx’s common stock.
How
can you attend the Meeting?
If you are a shareholder of record on
March 11, 2009, you can attend the Meeting by presenting acceptable
identification at the Meeting. If you are a street name shareholder
you may attend the Meeting by presenting acceptable identification along with
evidence of your beneficial ownership of Entrx common stock.
PROPOSALS
PROPOSALS
TO AMEND THE RESTATED AND AMENDED CERTIFICATE OF INCORPORATION OF ENTRX
CORPORATION TO EFFECT A REVERSE STOCK SPLIT FOLLOWED BY A FORWARD STOCK SPLIT OF
ENTRX'S COMMON STOCK
Summary
Term
Sheet
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We
are proposing to amend Entrx’s Restated and Amended Certificate of
Incorporation, first in order to effect a reverse stock split of our
common stock, and then to effect a forward stock split of our
common stock. Although presented as two separate proposals,
approval of each is contingent on the approval of the
other.
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We
plan to cause a reverse stock split of our common stock on a 1-for-500
share basis, whereby each 500 shares of our common stock will be converted
into one share.
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The
reverse stock split will result in shareholders who own less than 500
shares of our common stock holding only a fractional share (less than one
share).
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We
will purchase the fractional shares of our shareholders who held less than
500 shares before the reverse stock split. If you have several
accounts which hold shares of Entrx common stock, you will be cashed out
of any account which holds less than 500 shares, unless you consolidate
those accounts into an account or accounts which hold more than 500 shares
prior to the Effective Date of the reverse and forward stock split, as set
forth below.
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We
will not purchase any shares from our shareholders with respect to
accounts which hold 500 or more shares before the reverse stock
split.
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The
cash price for the fractional shares (the “Cash-Out Price”) will be based
upon a per share price of $0.35 prior to the reverse stock
split.
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Immediately
following the reverse stock split, and excluding those shareholders left
with only a fractional share who are cashed out, we will cause a forward
stock split of our common stock, whereby each share of our common stock
will be converted back into 500
shares.
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We
are effecting the reverse stock split in order to cash out shareholders
owning less than 500 shares of our common stock. We are
effecting the forward stock split so that we will not have any fractional
or odd-lot shares outstanding after the transaction, and so that
shareholders who are not cashed out will hold the same number of shares
they held prior to the reverse stock split, eliminating
confusion. See “Summary – Special Factors” on page
6.
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Shareholders
have no appraisal rights with respect to the proposed reverse and forward
stock splits. See “Appraisal Rights” on page
20.
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If
the reverse and forward stock split is effected, we estimate that 170,000
shares will be cashed out for an aggregate cost to the Company of
approximately $60,000. In addition, preparation and printing of
the notice, proxy and proxy statement, including legal fees, and the
solicitation of proxies, will cost an estimated $44,000. This
will be paid for out of the Company’s cash, which was $2,078,666 at
December 31, 2008. See “Background and Purpose of the
Reverse/Forward Stock Split” beginning on page 10, and “Financial
Information” beginning on page
14.
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The
Effective Date of the reverse and forward stock splits, if effected, will
be 6:01 p.m. (eastern daylight time) May 15, 2009. See “Summary
– Discussion” beginning on page 5.
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Only
shareholders who receive cash in the reverse stock split will experience
any income tax consequences. Generally, if all of your shares
are cashed out, you will experience a capital gain or loss, depending upon
your basis in the stock. If you still hold shares after the
reverse stock split, any payment you receive could be taxed at ordinary
income rates if it is considered essentially equivalent to a dividend or
not a substantially disproportionate redemption. See “Federal
Income Tax Consequences to Shareholders Who Are Not Cashed Out by the
Reverse/Forward Stock Split” on page 18, and “Federal Income Tax
Consequences to Cashed-Out Shareholders” beginning on page
18.
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We
proposed a substantially identical proposal at a special shareholders
meeting held on January 28, 2008. Although 2,288,781 shares
were voted in favor of the proposal, and only 800,106 were
voted against the proposal, the proposal did not pass, as we needed
3,808,074 shares, or a majority of the shares outstanding, to be voted in
favor of the proposal.
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None
of the shareholders, other than the management of Entrx, have expressed
either support for or opposition to the proposed reverse and forward stock
split, so passage is not assured.
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The
interest and role of the affiliates of Entrx, including Peter L. Hauser,
the Chief Executive Officer, are not materially affected, whether or not
the reverse and forward stock split takes place. See “Effect of
the Reverse/Forward Stock Split on Entrx Shareholders – Affiliates” on
page 13, and “Common Stock Ownership” beginning on page
22.
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As
a result of the foregoing, if you owned less than 500 shares in any account you
will receive cash for those fractional shares, and if you owned 500 shares or
more in any account you will retain those shares you owned prior to the
implementation of the reverse stock split.
Discussion
The Board
of Directors has authorized, and recommends for your approval a reverse
1-for-500 stock split followed immediately by a forward 500-for-1 stock split of
Entrx’s common stock;
The
proposed transaction involves successive amendments to Entrx’s Restate and
Amended Certificate of Incorporation designed to effect a reverse stock split
(the "Reverse Stock Split") pursuant to which each 500 shares of common stock
registered in the name of a shareholder at the effective time of the Reverse
Stock Split will be converted into one share of common stock, followed
immediately by a forward stock split (the "Forward Stock Split") pursuant to
which each share of common stock outstanding upon consummation of the Reverse
Stock Split will be converted into 500 shares of common stock. As permitted
under Delaware law, shares of common stock that would be converted into less
than one share in the Reverse Stock Split will instead be converted into the
right to receive a cash payment as described below (we often refer to the
Reverse Stock Split, the Forward Stock Split and these cash payments,
collectively, as the "Reverse/Forward Stock Split"). However, if a registered
shareholder holds 500 or more shares of common stock in an account at the
effective time of the Reverse Stock Split, any fractional share in such account
resulting from the Reverse Stock Split will not be cashed out and the total
number of shares held by such holder will not change as a result of the
Reverse/Forward Stock Split.
The Board
will have the discretion to determine whether to effect the Reverse/Forward
Stock Split, if approved by the shareholders, and reserves the right to abandon
such transaction even if approved by the shareholders (see "Reservation of
Rights” on page 20). The decision of the Board to abandon the
transaction will depend primarily upon the market price of the Company’s common
stock at the time the termination is announced, such as if the then market price
materially exceeds the buy-out price of $0.35 per share, or upon a materially
adverse and unforeseen event which would limit the Company’s financial ability
to purchase the fractional shares. If shareholders approve and the
Board elects to implement the Reverse/Forward Stock Split, the Reverse/Forward
Stock Split will be consummated as to shareholders of record as of 6:01 p.m.
(eastern daylight time) on May 15, 2009 (the "Effective Date"), upon the filing
of the necessary amendments to Entrx's Restated Certificate of Incorporation
with the Secretary of State of the State of Delaware. The form of
proposed amendments to Entrx's Restated Certificate of Incorporation necessary
to effect the Reverse/Forward Stock Split are attached to this Proxy Statement
as Appendix A.
Entrx
believes that the Reverse/Forward Stock Split will result in significantly
reduced shareholder record keeping and mailing expenses for Entrx and provide
holders of fewer than 500 shares with an efficient, cost-effective way to
cash-out their investments.
It is
currently estimated that following the Reverse/Forward Stock Split, Entrx will
have between 800 and 900 common stock shareholders, approximately 53 of whom
will be of record. Section 12(g)(4) of the Securities Exchange Act of
1934 provides that the Company can terminate its registration under that Act
upon the filing of a certificate to the Securities and Exchange Commission that
it has less than 300 shareholders. Upon such termination, our
obligations under the Securities Exchange Act of 1934, including our obligations
to file publicly available periodic reports with the Securities and Exchange
Commission and to provide our shareholders with proxy statements prior to
shareholder meetings, would cease. While we would have the ability to
terminate our registration under the Securities Exchange Act, we have no present
intention to do so.
We have
engaged The Altman Group, Inc, New York, New York, to solicit proxies from a
limited number of our shareholders by telephone, and to accept votes from these
shareholders over the telephone. The Altman Group, Inc.’s obligations
involve calling selected shareholders, reminding them of the Special Meeting to
be held on May 4, 2009, disclosing management’s recommendation to vote in favor
of the proposals to amend Entrx’s Restated and Amended Certificate of
Incorporation to effect a reverse followed by a forward stock split, encouraging
those shareholders to vote and, as applicable, accepting votes over the
telephone. The Altman Group, Inc. is not authorized to discuss the
relative merits of the proposals or to answer questions regarding the
information provided in this Proxy Statement. We estimate that we
will pay approximately $8,000 for this services, plus $2,000 in
expenses.
Special Factors
We are
effecting the reverse stock split in order to cash out shareholders owning less
than 500 shares of our common stock. This will allow shareholders
owning less than 500 shares to cash out without paying a commission, and will
hopefully leave the remaining shareholders with a sufficient financial interest
in Entrx to be attentive to their investment. We are effecting the
forward stock split so that we will not have any fractional or odd-lot shares
outstanding after the transaction, and so that the number of shares held by the
remaining shareholders will remain the same, eliminating
confusion. In addition, the forward split will eliminate the need for
our transfer agent to maintain an additional shareholders list with respect to
shareholders who would otherwise have had to submit their certificates
representing Entrx shares to the transfer agent for new certificates, and the
administrative burden of that process. The Board considered a tender
offer for shares held by shareholders owning less than 500 shares, but rejected
that alternative as being too expensive and likely to be ineffective, as few
shareholders owning small amounts of shares would respond to such an
offer. Consummation of the proposed Reverse/Forward Stock Split
will:
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Reduce
the number of shareholders of Entrx from 2,350 to approximately 800 to
900.
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Reduce
the number of outstanding shares of Entrx from 7,656,147 to approximately
7,485,000.
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Eliminate
shareholders owning less than 500
shares.
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Have
minimal effect on affiliates of Entrx, or on unaffiliated shareholders
owning 500 shares or more.
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The
Company believes that the proposed transaction is fair to the unaffiliated
shareholders of Entrx. Unaffiliated shareholders owning more than 500
shares in any account will not be adversely affected. Unaffiliated
shareholders owning less than 500 shares will be cashed out at a price in excess
of the current trailing three-year average market price without having to pay a
commission that would otherwise make a sale impractical. Neither the
Company nor any of its directors has retained an unaffiliated representative to
act solely on behalf of unaffiliated shareholders for the purpose of negotiating
the terms of the proposed transaction or preparing a report as to the fairness
of the proposed transaction.
The
proposed transaction is subject to the approval of shareholders owning a
majority of Entrx’s outstanding shares, including affiliated
shareholders. The Reverse/Forward Stock Split was approved by a
majority of members of the board of directors who are not employees of the
Company.
We have
not sought any report, opinion or appraisal from any third party in connection
with the Reverse/Forward Stock Split, nor have we made any provision to grant
unaffiliated holders of our common stock access to our corporate files, or to
obtain legal counsel or appraisal services at the expense of the
Company.
Negative
Aspects of the Reverse/Forward Stock Split
Shareholders
owning less than 500 shares should consider the following negative aspects of
the Reverse/Forward Stock Split:
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The
Cash-Out Price we pay for the fractional shares will be less than Entrx’s
book value, and may be less than the market price on the Effective
Date.
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You
will no longer be entitled to vote as a shareholder of
Entrx.
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You
will no longer be entitled to share in any assets, earnings or dividends
in Entrx.
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You
will no longer be entitled to the receipt of proxy statements or other
information material provided by Entrx to its
shareholders.
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Shareholders
owning 500 shares or more should consider the following negative aspects of the
Reverse/Forward Stock Split:
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While
we do not intend to do so, following the Reverse/Forward Stock Split, we
could terminate our registration under the Securities Exchange Act of
1934, in which case we would no longer be required to provide you with
information regarding the Company through the filing of proxy statements,
periodic reports and other reports required to be filed with the
Securities and Exchange Commission.
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Effect
on Shareholders
If
approved by shareholders at the Meeting and implemented by the Board, the
Reverse/Forward Stock Split will affect Entrx shareholders as
follows:
Shareholder before completion of the
Reverse/Forward Stock Split
|
|
Net effect after completion of the
Reverse/Forward Stock Split
|
Registered
shareholders holding 500 or more shares of common stock.
|
|
None. These
shareholders will end up holding the same number of shares that they held
prior to the Reverse Stock Split.
|
|
|
|
Registered
shareholders holding fewer than 500 shares of common
stock.
|
|
Shares
will be converted into the right to receive cash (see "Fairness of the
Reverse/Forward Stock Split" at page 15).
|
|
|
|
Shareholders
holding common stock in street name through a nominee (such as a bank or
broker).
|
|
In
connection with the Reverse/Forward Stock Split Entrx intends to treat
shareholders holding common stock in street name through a nominee (such
as a bank or broker) in the same manner as shareholders whose shares are
registered in their names. Nominees will be instructed to effect the
Reverse/Forward Stock Split for their beneficial holders. However,
nominees may have different procedures and shareholders holding shares in
street name should contact their
nominees.
|
Since we
are not aware of any affiliates of Entrx who own less than 500 shares, there
will be no difference between the effect that the Reverse/Forward Stock Split
will have on affiliates as compared to non-affiliates. See “Effect of
the Reverse/Forward Stock Split on Entrx Shareholders – Affiliates” on page
13.
Reasons
for the Reverse/Forward Stock Split
The Board
recommends that shareholders approve the Reverse/Forward Stock Split transaction
described herein for the following reasons. These, and other reasons, are
described in detail under "Background and Purpose of the Reverse/Forward Stock
Split" below.
Issue
|
|
Solution
|
Entrx
has a large number of shareholders. Specifically, of the
approximately 2,350 shareholders, approximately 1,500 own less than 500
shares and approximately 600 own less than 100
shares. Continuing to maintain accounts for these shareholders,
including costs associated with required shareholder mailings, will cost
Entrx approximately $8,000 per year.
|
|
The
Reverse/Forward Stock Split will reduce the number of shareholders which
own relatively few shares, resulting in a cost saving to
Entrx.
|
|
|
|
In
many cases it is relatively expensive for shareholders with fewer than 500
shares to sell their shares on the open market.
|
|
The
Reverse/Forward Stock Split cashes out shareholders with small accounts
without transaction costs such as brokerage fees. However, if these
shareholders do not want to cash out their holdings of common stock, they
may purchase additional shares on the open market to increase the number
of shares of common stock in their account to at least 500 shares, or if
applicable, consolidate/transfer their accounts into an account with at
least 500 shares of common stock.
|
|
|
|
We
have noted that shareholders who have a negligible financial interest in
Entrx do not follow their investment closely, and their shares are often
escheated to the various states.
|
|
The
Reverse/Forward Stock Split will leave a shareholder base which has a
greater incentive to focus their attention on Entrx and their
shareholdings, and avoid the escheating of shares held by shareholders
with a minimal financial
interest.
|
Since we are effecting a 500-for-one
Forward Stock Split immediately after the Reverse Stock Split, outstanding
certificates for shares of our common stock will continue to reference the
correct number of shares. There will be no need to submit outstanding
certificates representing 500 shares or more of our common stock for new
certificates.
The Board considered a tender offer for
shares held by shareholders owning less than 500 shares, but rejected that
alternative as being too expensive and likely to be ineffective, as few
shareholders owning small amounts of shares would respond to such an
offer. We made a substantially identical proposal for a
Reverse/Forward Stock Split at a shareholders meeting on January 28,
2008. We failed to get enough shareholders to vote in favor of the
proposal to get the required affirmative vote of a majority of the outstanding
shares. We believe that this was because of a lack of understanding
of the proposal, the short time between the mailing of the proxy statement and
the date of the meeting, and general shareholder and broker/dealer
apathy. We are attempting to provide more notice, and to contact many
of our shareholders by telephone or in person, urging them to vote on the
proposals as presented in this Proxy Statement.
Structure
of the Reverse/Forward Stock Split
The Reverse/Forward Stock Split
requires approval of two successive amendments to Entrx’s Restated and Amended
Certificate of Incorporation, the first of which effects a reverse stock split,
and the second of which effects a forward stock split of the common
stock. Each proposed amendment will be voted on separately, but only
will be deemed to be approved and become effective if both are approved by the
shareholders. If the Reverse/Forward Stock Split transaction is
approved by shareholders and implemented by the Board, the Reverse Stock Split
is expected to occur at 6:00 p.m. eastern daylight time on the Effective Date
and the Forward Stock Split is expected to occur at 6:01 p.m. eastern daylight
time on the Effective Date. Upon consummation of the Reverse Stock Split, each
registered shareholder on the Effective Date will receive one share of common
stock for each 500 shares of common stock held in his or her account at that
time. If a registered shareholder holds at least 500 shares of common stock in
his or her account, any fractional share in such account will not be cashed out
after the Reverse Stock Split and the total number of shares held by such holder
will not change as a result of the Reverse/Forward Stock Split. Any registered
shareholder who holds fewer than 500 shares of common stock in his or her
account at the time of the Reverse Stock Split (also referred to as a
"Cashed-Out Shareholder") will receive a cash payment instead of fractional
shares. This cash payment has been determined as described below under "Fairness
of the Reverse/Forward Stock Split" at page 14. Immediately following the
Reverse Stock Split, all shareholders who are not Cashed-Out Shareholders will
receive 500 shares of common stock for every one share of common stock they held
following the Reverse Stock Split. We intend for the Reverse/Forward Stock Split
to treat shareholders holding common stock in street name through a nominee
(such as a bank or broker) in the same manner as shareholders whose shares are
registered in their names, and nominees will be instructed to effect the
Reverse/Forward Stock Split for their beneficial holders. Accordingly, we also
refer to those street name holders who receive a cash payment instead of
fractional shares as "Cashed-Out Shareholders." However, nominees may have
different procedures, and shareholders holding shares in street name should
contact their nominees.
In
general, the Reverse/Forward Stock Split can be illustrated by the following
examples:
Hypothetical
Scenario
|
|
Result
|
Mr.
Anderson is a registered shareholder who holds 400 shares of common stock
in his account immediately prior to the Reverse/Forward Stock
Split.
|
|
Instead
of receiving a fractional share of common stock after the Reverse Stock
Split, Mr. Anderson's shares will be converted into the right to receive
cash. Applying the Cash-Out Price of $0.35 per share, Mr. Anderson would
receive $140 ($0.35 x 400 shares).
Note:
If Mr. Anderson wants to continue his investment in Entrx, he can, prior
to the Effective Date, buy at least 100 more shares and hold them in his
account with the 400 shares he already has, giving him 500 shares. Mr.
Anderson would have to act far enough in advance of the Reverse/Forward
Stock Split so that the purchase is completed and the additional shares
are credited in his account by the close of business (eastern standard
time) on the Effective Date.
|
Hypothetical
Scenario
|
|
Result
|
Ms.
Smith has two separate record accounts. As of the Effective Date, she
holds 300 shares of common stock in one account and 400 shares of common
stock in the other. All of her shares are registered in her name
only.
|
|
As
described above, Ms. Smith will receive cash payments equal to the
Cash-Out Price of $0.35 per share for her common stock in each record
account instead of receiving fractional shares. Accordingly, Ms. Smith
would receive two checks totaling $245 (300 x $0.35 = $105; 400 x $0.35 =
$140; $105 + $140 = $245).
Note:
If Ms. Smith wants to continue her investment in Entrx, she can
consolidate or transfer her two record accounts prior to the Effective
Date into an account with at least 500 shares of common stock.
Alternatively, she can buy at least 200 more shares for the first account
and at least 100 more shares for the second account. She would have to act
far enough in advance of the Reverse/Forward Stock Split so that the
consolidation or the purchase is completed by the close of business
(eastern standard time) on the Effective Date.
|
|
|
|
Mr.
Johnson holds 500 shares of common stock as of the Effective
Date.
|
|
After
the Reverse/Forward Stock Split, Mr. Johnson will continue to hold all 500
shares of common stock.
|
|
|
|
Ms.
Jones holds 1,000 shares of common stock in a brokerage account as of the
Effective Date.
|
|
Entrx
intends for the Reverse/Forward Stock Split to treat shareholders holding
common stock in street name through a nominee (such as a bank or broker)
in the same manner as shareholders whose shares are registered in their
names. Nominees will be instructed to effect the Reverse/Forward Stock
Split for their beneficial holders. However, nominees may have different
procedures. Ms. Jones should contact her nominees to ascertain the
procedure being adopted by that
nominee.
|
Background
and Purpose of the Reverse/Forward Stock Split
Entrx has
a shareholder base of approximately 2,350 shareholders. This is a relatively
large number of shareholders for a company of our size. As of March
11, 2009, approximately 1,500 holders of our common stock owned fewer than 500
shares. At that time, these 1,500 shareholders represented approximately 64% of
the total number of holders of common stock, but held in the aggregate
approximately 170,000 shares, or only about 2% of the total number of
outstanding shares of common stock.
When
we first proposed the Reverse/Forward Stock Split for the Entrx shareholders
meeting held on January 28, 2008, and in our previous filings of this proxy
statement in preliminary form with the Securities and Exchange Commission, we
estimated that we had 4,700 shareholders of record, and projected that
approximately 360,000 shares would be cashed out for an aggregate of
$126,000. We have subsequently been informed by our stock transfer
agent that the common stock held by approximately 1,050 shareholders has been
escheated to various states within the past year. The laws of the
various states provide in some fashion that the property of others held by banks
and other entities that has gone unclaimed for some period of time must be
turned over (escheated) to the state. The escheating of shares to the
various states occurred presumably because of the inactivity or abandonment of
the accounts holding those shares. The escheated shares are generally
consolidated and sold in the open market and thus remain outstanding in the
hands of fewer shareholders, who are included in our shareholder
base.
In
addition, shareholders who hold shares in street name have the option to allow
disclosure of their identity to us or to withhold that
disclosure. The number of shares of Entrx held in the disclosing
group is approximately the same as those held in the non-disclosing
group. We had previously assumed that the number of shareholders and
their relative holdings in those groups would be roughly
proportional. We now know this proportionality does not
apply. The non-disclosing group apparently has significantly fewer
shareholders (an estimated 1,300 fewer) including those who own less than 500
shares.
Thus, we believed that our annual
savings in meeting and printing costs by the reduction of 3,700 shareholders
would be approximately $20,000. Since we are now proposing to cash
out 1,500 shareholders, that savings will be $12,000 less.
Although
the cost savings we previously estimated would result from the Reverse/Forward
Stock Split ($20,000 with respect to each shareholder meeting) will be less,
Entrx still expects to benefit from a cost saving as a result of the
Reverse/Forward Stock Split, and the Board of Directors, upon review, has
determined to proceed with the Reverse/Forward Stock Split. The cost of
administering each registered shareholder's account is the same regardless of
the number of shares held in that account. Therefore, Entrx's costs to maintain
such small accounts are disproportionately high when compared to the total
number of shares involved. In connection with an annual shareholder meeting,
each registered and street name shareholder would cost Entrx approximately
$5.00, or at least $8,000, for transfer agent and other administrative fees as
well as printing and postage costs to mail proxy materials and the annual
report. We expect that these costs will only increase over
time.
Moreover,
the Reverse/Forward Stock Split will provide shareholders with fewer than 500
shares of common stock with a cost-effective way to cash out their investments,
because Entrx will pay all transaction costs in connection with the
Reverse/Forward Stock Split. Otherwise, shareholders with small holdings would
likely incur brokerage fees which are disproportionately high relative to the
market value of their shares if they wanted to sell their stock. The
Reverse/Forward Stock Split will eliminate these problems for most shareholders
with small holdings.
In light
of these disproportionate costs, the Board believes that it is in the best
interests of Entrx and its shareholders to eliminate the administrative burden
and costs associated with such small accounts, and to provide our
less-than-500-share shareholders a way of disposing of their shares on an
economical basis.
The
estimated cost of effecting the Reverse/Forward Stock Split, including the cost
of soliciting proxies, legal fees and stock transfer fees, is $44,000 (not
counting the amount we will pay for fractional shares). We estimate
printing and mailing costs, including the amount charged to us by our stock
transfer agent, will be approximately $18,000, that our legal fees will be
approximately $15,000, that our solicitation costs (primarily our agreement with
The Altman Group discussed on page 1 of this Proxy) will be approximately
$10,000, and that the administrative costs related to the redemption of the
shares held by Cashed-Out Shareholders will be approximately
$1,000. The total estimated cost of the Reverse/Forward Stock Split,
therefore, including the amount we pay for fractional shares, which was
estimated to be $170,000, is now reduced to $104,000, approximately $20,000 of
which has already been expended. These costs will be paid out of
Entrx’s existing cash.
None of
our executive officers, directors or affiliates that own any shares of our
common stock own less than 500 shares, and none of them will accordingly be
cashed out.
If the
proposed Reverse/Forward Stock Split is not passed or implemented, Entrx may in
the future pursue alternative methods of reducing its shareholder base,
including odd-lot tender offers and programs to facilitate sales by shareholders
of odd-lot holdings. However, there can be no assurance that Entrx will decide
to pursue any such transaction.
Effect
of the Reverse/Forward Stock Split on Entrx Shareholders
Registered Shareholders with Fewer
Than 500 Shares of
Common Stock:
If we
complete the Reverse/Forward Stock Split and you are a Cashed-Out Shareholder
(i.e., a shareholder holding fewer than 500 shares of common stock in any
account immediately prior to the Reverse Stock Split):
|
o
|
You
will not receive fractional shares of stock as a result of the Reverse
Stock Split in respect of your shares being cashed
out.
|
|
o
|
Instead
of receiving fractional shares, you will receive a cash payment in respect
of your affected shares. See "Fairness of the Reverse/Forward Stock Split"
at page 15.
|
|
o
|
After
the Reverse Stock Split, you will have no further interest in Entrx with
respect to your cashed-out shares. These shares will no longer entitle you
to the right to vote as a shareholder or share in Entrx's assets,
earnings, or profits or in any dividends paid after the Reverse Stock
Split. In other words, you will no longer hold your cashed-out shares, you
will have only the right to receive cash for these shares. In addition,
you will not be entitled to receive interest with respect to the period of
time between the Effective Date and the date you receive your payment for
the cashed-out shares.
|
|
o
|
You
will not have to pay any service charges or brokerage commissions in
connection with the Reverse/Forward Stock
Split.
|
|
o
|
As
soon as practicable after the time we effect the Reverse/Forward Stock
Split, you will receive a payment for the cashed-out shares you held
immediately prior to the Reverse Stock Split in accordance with the
procedures described below.
|
If You
Hold Book-Entry Shares:
|
o
|
Most
of Entrx's registered shareholders hold their shares in book-entry form
under the Direct Registration System for securities. These shareholders do
not have stock certificates evidencing their ownership of common stock.
They are, however, provided with a statement reflecting the number of
shares registered in their
accounts.
|
|
o
|
If
you are a Cashed-Out Shareholder who holds registered shares in a
book-entry account, you do not need to take any action to receive your
cash payment. A check will be mailed to you at your registered address as
soon as practicable after the Effective Date. By signing and cashing this
check, you will warrant that you owned the shares for which you received a
cash payment.
|
If You
Hold Certificated Shares:
|
o
|
If
you are a Cashed-Out Shareholder with a stock certificate representing
your cashed-out shares, you will receive a transmittal letter as soon as
practicable after the Effective Date. The letter of transmittal will
contain instructions on how to surrender your certificate(s) to Entrx's
transfer agent, American Stock Transfer, for your cash payment. You will
not receive your cash payment until you surrender your outstanding
certificate(s) to American Stock Transfer, together with a completed and
executed copy of the letter of transmittal. Please do not send your
certificates until you receive your letter of transmittal. For further
information, see "Stock Certificates" on page
18.
|
|
o
|
All
amounts owed to you will be subject to applicable federal income tax and
state abandoned property laws.
|
|
o
|
You
will not receive any interest on cash payments owed to you as a result of
the Reverse/Forward Stock Split.
|
NOTE: If
you want to continue to hold common stock after the Reverse/Forward Stock Split,
you may do so by taking either of the following actions far enough in advance so
that it is completed by the Effective Date:
(1)
purchase a sufficient number of shares of common stock on the open market so
that you hold at least 500 shares of common stock in your account prior to the
Reverse Stock Split; or
(2) if
applicable, consolidate your accounts so that you hold at least 500 shares of
common stock in one account prior to the Reverse Stock Split.
Registered
Shareholders with 500 or More Shares of Common Stock:
If You
Hold Certificated Stock:
If you
are a registered shareholder with 500 or more shares of common stock as of 6:00
p.m. eastern daylight time on the Effective Date, we will first reclassify your
shares into one-five hundredth (1/500) of the number of shares you held
immediately prior to the Reverse Stock Split. One minute after the Reverse Stock
Split, at 6:01 p.m. eastern daylight time, we will reclassify your shares in the
Forward Stock Split into 500 times the number of shares you held after the
Reverse Stock Split, which will result in you holding the same number of shares
you held before the Reverse Stock Split. As a result, the Reverse/Forward Stock
Split will not affect the number of shares that you hold if you hold 500 or more
shares of common stock immediately prior to the Reverse Stock Split. To
illustrate, if we were to effect the 1-for-500 Reverse/500-for-1 Forward Stock
Split and you held 1,000 shares of common stock in your account immediately
prior to the Reverse Stock Split, your shares would be converted into two shares
in the Reverse Stock Split and then back to 1,000 shares in the Forward Stock
Split.
If You
Hold Shares in Street Name:
Entrx
intends for the Reverse/Forward Stock Split to treat shareholders holding common
stock in street name through a nominee (such as a bank or broker) in the same
manner as shareholders whose shares are registered in their names. Nominees will
be instructed to effect the Reverse/Forward Stock Split for their beneficial
holders. However, nominees may have different procedures and shareholders
holding common stock in street name should contact their nominees.
Option
and Warranty Holders:
If you
hold options or warrants to purchase Entrx stock, the Reverse/Forward Stock
Split will not affect the number of shares of common stock you may acquire under
those options or warrants.
Affiliates:
There
is no difference in the effect that the Reverse/Forward Stock Split will have on
affiliates of Entrx as compared to non-affiliates, since we are not aware of any
affiliates of Entrx owning less than 500 shares of our common stock in any
account, those affiliates will be affected in a manner identical to
non-affiliates who own more than 500 shares. In other words, we do
not believe that any affiliate of Entrx will be cashed out following the
Reverse/Forward Stock Split. If the Reverse/Forward Stock Split is
effected, the change in the interest of the affiliated shareholders of Entrx in
Entrx’s net book value and net earnings will be immaterial. For
example, if the Reverse/Forward Stock Split is effected, the estimated ownership
of outstanding shares of Peter L. Hauser, who owns the largest number of Entrx’s
shares, would have increased from 12.6% to 12.8%. The estimated
increase in his per share book value at December 31, 2008 would have increased
from $0.883 to $0.896, or from $686,744 to $696,163, in the
aggregate. Mr. Hauser’s estimated share of net income for the year
ended December 31, 2008 would have increased from $25,919 to
$26,508. No other affiliate owns over 2% of Entrx’s outstanding
common stock. None of our officers or directors own less than 500
shares; accordingly, none of them will receive any cash
pay-out.
Financial
Information
The
following summary financial information is derived from our audited consolidated
balance sheets at December 31, 2007 and December 31, 2008:
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
$ |
16,936,256 |
|
|
$ |
15,688,122 |
|
Noncurrent
Assets
|
|
|
38,416,601 |
|
|
|
30,010,494 |
|
Current
Liabilities
|
|
|
10,446,095 |
|
|
|
10,285,865 |
|
Noncurrent
Liabilities
|
|
|
38,140,602 |
|
|
|
29,132,470 |
|
The
total shareholders' equity as of December 31, 2008, was $6,766,160 and the book
value per share was $0.88.
The
following summary financial information is derived from our audited consolidated
income statements for the years ended December 31, 2007 and December 31,
2008:
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
|
Gross
Revenues
|
|
$ |
27,846,507 |
|
|
$ |
22,358,764 |
|
Contract
Costs and Expenses
|
|
|
22,847,031 |
|
|
|
18,352,750 |
|
Gross
Margin
|
|
|
4,999,476 |
|
|
|
4,006,014 |
|
Net
Income
|
|
|
255,370 |
|
|
|
622,116 |
|
|
|
|
|
|
|
|
|
|
Net
Income Per Share of Common Stock (basic and diluted)
|
|
$ |
0.03 |
|
|
$ |
0.08 |
|
The ratio of earnings to fixed
charges for the years ended December 31, 2007 and December 31, 2008, was 64.1
and 33.9, respectively. Fixed charges includes only
interest.
Reference is made to our Form 10K
annual report for 2008, filed with the Securities and Exchange Commission, for a
full presentation of our financial statements, starting on page 23 of that
document.
The impact of the Reverse/Forward Stock
Split on the income statement for the year ended December 31, 2007, assuming
that the Reverse/Forward Stock Split occurred on January 1, 2007, would be to
decrease by approximately 170,000 the weighted average number of common shares,
basic and diluted, to 7,551,065. There would be no other changes to
any income statement amounts.
The impact of the Reverse/Forward
Stock Split on the December 31, 2008 balance sheet, of the Company, assuming
that the Reverse/Forward Stock Split occurred on December 31, 2008, would be to
decrease by $60,000 (not including estimated expenses of $44,000) the balances
of cash and cash equivalents, total current assets and total assets, to
$2,018,666, $16,876,256 and $55,292,857,
respectively. Additional paid-in capital, total shareholders’
equity and total liabilities and shareholders’ equity would also be reduced by
$60,000, to $69,771,881, $6,706,160 and $55,292,857,
respectively. There would be no change to any other balance sheet
amounts.
The impact of the Reverse/Forward
Stock Split on the income statement for the year ended December 31, 2008,
assuming that the Reverse/Forward Stock Split occurred on January 1, 2008, would
be to decrease by 170,000 the weighted average number of common shares, basic
and diluted, to 7,483,196. There would be no other changes to any
income statement amounts.
Fairness
of the Reverse/Forward Stock Split
General
Our Board of Directors and
management believe that the Reverse/Forward Stock Split is fair to all of our
shareholders who are not considered affiliates of Entrx by reason of positions
of control, including those who are being cashed out and those who are not being
cashed out. This belief was not altered by discovering that we had
approximately 2,350 shareholders as opposed to 4,700 shareholders (see
“Background and Purpose of Reverse/Forward Stock Split”).
Cashed-Out
Shareholders
Based
upon the Cash-Out Price of $0.35, a shareholder owning 499 shares would receive
$174.65, without paying a commission. Most of the shareholders to be
cashed out own substantially less than 500 shares; many of them own only one
share. This is an opportunity for shareholders with small holdings to
obtain the value of the shares without payment of a commission, which would, in
many cases, equal or exceed the value of the shares. If a shareholder
does not want to be cashed out, for a relatively small amount of money (less
than $0.20 per share at the market price as of the date of this Proxy Statement)
he or she can acquire additional shares to bring their holdings to 500 shares or
greater.
We
have reported earnings of $622,000, or $0.08 per share, for 2007, and $255,370,
or $0.03 per share, for 2008.
Our
historical net income (loss) since 2003 are as follows:
Year
|
|
Net Income (Loss)
|
|
|
Per Share
|
|
2008
|
|
$ |
255,370 |
|
|
$ |
0.03 |
|
2007
|
|
|
622,000 |
|
|
|
0.08 |
|
2006
|
|
|
2,052,000 |
|
|
|
0.26 |
|
2005
|
|
|
(1,743,000 |
) |
|
|
(0.23 |
) |
2004
|
|
|
611,000 |
|
|
|
0.08 |
|
2003
|
|
|
(3,006,000 |
) |
|
|
(0.41 |
) |
Significant
swings in our profits and losses over the past approximately six years have
often been greatly influenced by events outside of normal day-to-day operations,
such as profit recorded upon the sale of our office and manufacturing facilities
in 2006. Nevertheless, our earnings history has been erratic, and may
be an unreliable criterion by which to measure the value of our common
stock.
The
Company has not paid any dividends during the past five years, and at this time
has no plan to do so. The Company’s ability to declare a dividend is
restricted only to the extent of its cash on hand and the board of directors’
determination of the best use of that cash.
Entrx Corporation common stock is
traded sporadically over the counter, and bid and asked quotations, as well as
transactions, are reported in the pink sheets. The market price has
apparently consistently recognized the foregoing limitation, as the high bid for
our common stock has not exceed $0.47 for at least the last few
years. The high and low closing bid quotations, as reported in the
pink sheets for each quarter since January 1, 2007, are as follows:
|
|
High Bid
|
|
|
Low Bid
|
|
2007
|
|
|
|
|
|
|
1st
Quarter
|
|
|
0.47 |
|
|
|
0.16 |
|
2nd
Quarter
|
|
|
0.34 |
|
|
|
0.17 |
|
3rd
Quarter
|
|
|
0.38 |
|
|
|
0.16 |
|
4th
Quarter
|
|
|
0.46 |
|
|
|
0.28 |
|
2008
|
|
|
|
|
|
|
|
|
1st
Quarter
|
|
|
0.42 |
|
|
|
0.25 |
|
2nd
Quarter
|
|
|
0.32 |
|
|
|
0.21 |
|
3rd
Quarter
|
|
|
0.30 |
|
|
|
0.21 |
|
4th
Quarter
|
|
|
0.28 |
|
|
|
0.115 |
|
In
establishing the Cash-Out Price of $0.35 per share, we have primarily taken into
consideration the historical market price of our common stock. When
Entrx presented a substantially identical proposal to the shareholders of Entrx
in January 2008, the price of its common stock had reached $0.35 per share on
only four days; two in August 2006 and two in September 2006, during the
previous two calendar years of 2006 and 2007. At that time the Board
of Directors felt that that the highest closing bid price of the previous two
years was more than fair to the cashed-out shareholders. In
resubmitting this proposed Reverse/Forward Stock Split to the shareholders,
Entrx’s management and the Board of Directors again reviewed the historical
market price of Entrx’s common stock, and observed for the past two years that
the closing per-share bid price ranged from $0.115 to $0.47. Since
January 1, 2007, the closing bid price was over $0.35 per share on about 50
trading days, and under $0.20 per share on over 150 trading days during the same
period. The closing bid price has not exceeded $0.35 since January
2008, when there was a short term rise in that bid price. At the
close of business on March 24, 2009, the closing bid price of our common stock
was $0.145 per share. The 52-week price range of our common stock,
ending on December 31, 2008, was $0.115 to $0.42.
Entrx’s
management and Board of Directors also considered Entrx’s per share book value
of approximately $0.82 on December 31, 2007, and approximately $.88 on December
31, 2008. If Entrx were liquidated, it is unlikely that this amount,
or even a substantial portion, would be available for distribution to
shareholders. It is highly likely that liquidation would involve a
bankruptcy proceeding because of Entrx’s large potential asbestos-related
liability, the involvement of our insurers, and the need to have those
asbestos-related cases litigated, administered and funded.
Entrx’s
management believes that the value of Entrx as a going concern, as well as the
market price for its shares, is significantly and adversely affected by its
asbestos-related liabilities. Our estimated liability for currently
active and potential future asbestos-related injury cases as of September 30,
2008, was $30,750,000. We revised our estimate of our liability at
December 31, 2008, to $45,250,000, as the result of adverse claim developments
during 2008. This estimate is continually subject to review as
asbestos-related cases are commenced and administered, and is subject to
uncertainty. While Entrx’s management continues to believe, even in
light of an increase in our estimated liability, that it has adequate insurance
to cover current and future asbestos-related liabilities, such coverage cannot
be assured, and a potential buyer would likely materially discount the price of
Entrx as a going concern.
Based
upon the foregoing, the Board of Directors established $0.35 per share as the
cash-out price, and continues to believe that price to be a fair value for the
Entrx shares in payment to the cashed-out shareholders.
We have
not structured the vote on the Reverse/Forward Stock Split requiring a vote of a
majority of the shares held by unaffiliated shareholders (in this case,
shareholders who are not officers or directors of Entrx). The
interests of the affiliated and non-affiliated shareholders who are not being
cashed out under the proposed Reverse/Forward Stock Split are substantially
identical and, since each proposal to amend Entrx’s Restated and Amended
Certificate of Incorporation requires the affirmative vote of shareholders
owning a majority of the outstanding shares, excluding the vote of affiliates
would make passage of the proposed Reverse/Forward Stock Split extremely
unlikely, particularly given the historical lack of interest demonstrated by
past shareholder voting patterns.
We
continually seek ways to increase shareholder value. If any of our
attempts to do so prove successful, a cashed-out shareholder will not be able to
participate in that success unless he or she subsequently acquires shares of
Entrx. On the other hand, there is no assurance that we will be
successful in such attempts.
The
proposed Reverse/Forward Stock Split was approved by all three of the members of
the Board of Directors who are not employees of Entrx.
Neither
the Company nor any of its directors has retained an unaffiliated representative
to act solely on behalf of unaffiliated shareholders for the purpose of
negotiating the terms of the proposed transaction or preparing a report as to
the fairness of the proposed transaction.
Shareholders
Who Are Not Cashed-Out
Unaffiliated
shareholders owning 500 shares or more of our common stock are not adversely
affected financially. The Cash-Out Price is anti-dilutive in terms of
Entrx’s book value. There is no materially adverse financial
consequence to Entrx which would affect the value of our continuing
shareholders’ shares. Trading volume in our stock is unlikely to be
affected, as we believe that trading in blocks of less than 500 shares
represents only a small fraction of our trading volume.
While we
do not intend to apply for deregistration under the Securities Exchange Act of
1934, if we were to do so, we would not be obligated to provide our continuing
shareholders with information as mandated under the Securities Exchange
Act. See “Effect of the Reverse/Forward Stock Split on Entrx”
below.
The
ability of management or other shareholders owning more than 5% of our
outstanding common stock to exercise control by an increased percentage
ownership interest in Entrx will not be meaningfully enhanced. The
percentage ownership of our outstanding common stock by our executive officers,
directors and director nominees as a group will increase only from 15.9% to
16.2%. See “Common Stock Ownership” below.
Effect
of the Reverse/Forward Stock Split on Entrx
It is
currently estimated that following the Reverse/Forward Stock Split, Entrx will
have between 800 and 900 common stock shareholders, approximately 53 of whom
will be of record. Section 12(g)(4) of the Securities Exchange Act of
1934 provides that the Company can terminate its registration under that Act
upon the filing of a certificate with the Securities and Exchange Commission
stating that it has less than 300 shareholders of record. Upon such
termination, our obligations under the Securities Exchange Act of 1934,
including our obligations to file publicly available periodic reports with the
Securities and Exchange Commission and to provide our shareholders with proxy
statements prior to shareholder meetings, would cease. We do not
intend to terminate our registration under the Securities Exchange Act in the
near future.
On March
11, 2009, there were 7,656,147 shares of common stock issued and
outstanding. The number of shares of authorized shares of common
stock will not change as a result of the Reverse/Forward Stock Split. On the
other hand, the total number of outstanding shares of common stock will be
reduced by the number of shares held by the Cashed-Out Shareholders immediately
prior to the Reverse Stock Split.
The total
number of shares that will be cashed-out and the total cash to be paid by Entrx
is unknown at this time; we estimate, however, that 170,000 shares may be cashed
out, and that the cash payments that will be paid to Cashed-Out Shareholders,
including both registered and street name holders, will be approximately
$60,000. The actual amounts will depend on the number of Cashed-Out
Shareholders on the Effective Date, which may vary from the number of such
shareholders on March 11, 2009. Payment for the shares of Cashed-Out
Shareholders will come out of our cash reserves. All shares acquired
will be held in treasury and eventually retired.
The par
value of the common stock will remain at $.10 per share after the
Reverse/Forward Stock Split.
Stock
Certificates
The
Reverse/Forward Stock Split will not affect any certificates representing shares
of common stock held by registered shareholders owning 500 or more shares of
common stock immediately prior to the Reverse Stock Split. Old certificates held
by any of these shareholders will continue to evidence ownership of the same
number of shares as is set forth on the face of the certificate.
Any
Cashed-Out Shareholder with share certificates will receive a letter of
transmittal after the Reverse/Forward Stock Split is completed. These
shareholders must complete and sign the letter of transmittal and return it with
their stock certificate(s) to Entrx's transfer agent, American Stock Transfer,
before they can receive cash payment for those shares.
Certain
Federal Income Tax Consequences
We have
summarized below certain federal income tax consequences to Entrx and
shareholders resulting from the Reverse/Forward Stock Split. This summary is
based on U.S. federal income tax law existing as of the date of this Proxy
Statement, and such tax laws may change, even retroactively. This summary does
not discuss all aspects of federal income taxation which may be important to you
in light of your individual circumstances. Many shareholders (such as financial
institutions, insurance companies, broker-dealers, tax-exempt organizations, and
foreign persons) may be subject to special tax rules. Other shareholders may
also be subject to special tax rules, including but not limited to: shareholders
who received common stock as compensation for services or pursuant to the
exercise of an employee stock option, or shareholders who have held, or will
hold, stock as part of a straddle, hedging, or conversion transaction for
federal income tax purposes. In addition, this summary does not discuss any
state, local, foreign, or other tax considerations. This summary assumes that
you are a U.S. citizen and have held, and will hold, your shares as capital
assets under the Code. You should consult your tax advisor as to the particular
federal, state, local, foreign, and other tax consequences, in light of your
specific circumstances.
We
believe that the Reverse/Forward Stock Split will be treated as a tax-free
"recapitalization" for federal income tax purposes. Accordingly, the
Reverse/Forward Stock Split will not result in any material federal income tax
consequences to Entrx.
Federal
Income Tax Consequences to Shareholders Who Are Not Cashed Out by the
Reverse/Forward Stock Split
If you
(1) continue to hold common stock immediately after the Reverse/Forward Stock
Split, and (2) receive no cash as a result of the Reverse/Forward Stock Split,
you will not recognize any gain or loss in the Reverse/Forward Stock Split and
you will have the same adjusted tax basis and holding period in your common
stock as you had in such stock immediately prior to the Reverse/Forward Stock
Split.
Federal
Income Tax Consequences to Cashed-Out Shareholders
If you
receive cash as a result of the Reverse/Forward Stock Split, your tax
consequences will depend on whether, in addition to receiving cash, you or a
person or entity related to you continues to hold common stock immediately after
the Reverse/Forward Stock Split, as explained below.
Shareholders
Who Exchange All of Their Common Stock for Cash as a Result of the
Reverse/Forward Stock Splits
If you
(1) receive cash in exchange for a fractional share as a result of the
Reverse/Forward Stock Split, (2) do not continue to hold any common stock
immediately after the Reverse/Forward Stock Split, and (3) are not related to
any person or entity which holds common stock immediately after the
Reverse/Forward Stock Split, you will recognize capital gain or loss. The amount
of capital gain or loss you recognize will equal the difference between the cash
you receive for your cashed-out stock and your aggregate adjusted tax basis in
such stock.
If you
are related to a person or entity who continues to hold common stock immediately
after the Reverse/Forward Stock Split, you will recognize gain in the same
manner as set forth in the previous paragraph, provided that your receipt of
cash either (1) is "not essentially equivalent to a dividend," or (2) is a
"substantially disproportionate redemption of stock," as described
below.
|
o
|
"Not
Essentially Equivalent to a Dividend." You will satisfy the "not
essentially equivalent to a dividend" test if the reduction in your
proportionate interest in Entrx resulting from the Reverse/Forward Stock
Split is considered a "meaningful reduction" given your particular facts
and circumstances. The Internal Revenue Service has ruled that a small
reduction by a minority shareholder whose relative stock interest is
minimal and who exercises no control over the affairs of the corporation
will meet this test. In consultation with your own tax advisor,
you should determine whether that Internal Revenue Service ruling would,
or would not, apply given your particular facts and
circumstances.
|
|
o
|
"Substantially
Disproportionate Redemption of Stock." The receipt of cash in the
Reverse/Forward Stock Split will be a "substantially disproportionate
redemption of stock" for you if the percentage of the outstanding shares
of common stock owned by you immediately after the Reverse/Forward Stock
Split is less than 80% of the percentage of shares of common stock owned
by you immediately before the Reverse/Forward Stock
Split.
|
In
applying these tests, you will be treated as owning shares actually or
constructively owned by certain individuals and entities related to you. If the
taxable amount is not treated as capital gain under any of the tests, it will be
treated first as ordinary dividend income to the extent of your ratable share of
Entrx's undistributed earnings and profits, then as a tax-free return of capital
to the extent of your aggregate adjusted tax basis in your shares, and any
remaining gain will be treated as capital gain.
Shareholders
Who Both Receive Cash and Continue to Hold Common Stock Immediately After the
Reverse/Forward Stock Splits
If you
both receive cash as a result of the Reverse/Forward Stock Split and continue to
hold common stock immediately after the Reverse/Forward Stock Split, you
generally will recognize gain, but not loss, in an amount equal to the lesser of
(1) the excess of the sum of aggregate fair market value of your shares of
common stock plus the cash received over your adjusted tax basis in the shares,
or (2) the amount of cash received in the Reverse/Forward Stock Split. In
determining whether you continue to hold common stock immediately after the
Reverse/Forward Stock Split, you will be treated as owning shares actually or
constructively owned by certain individuals and entities related to you. Your
aggregate adjusted tax basis in your shares of common stock held immediately
after the Reverse/Forward Stock Split will be equal to your aggregate adjusted
tax basis in your shares of common stock held immediately prior to the
Reverse/Forward Stock Split, increased by any gain recognized in the
Reverse/Forward Stock Split, and decreased by the amount of cash received in the
Reverse/Forward Stock Split.
Any gain
recognized in the Reverse/Forward Stock Split will be treated, for federal
income tax purposes, as capital gain, provided that your receipt of cash either
(1) is "not essentially equivalent to a dividend" with respect to you, or (2) is
a "substantially disproportionate redemption of stock" with respect to you.
(Each of the terms in quotation marks in the previous sentence is discussed
above under the heading "Shareholders who Exchange all of their common stock for
Cash as a Result of the Reverse/Forward Stock Split.") In applying these tests,
you may possibly take into account sales of shares of common stock that occur
substantially contemporaneously with the Reverse/Forward Stock Split. If your
gain is not treated as capital gain under any of these tests, the gain will be
treated as ordinary dividend income to you to the extent of your ratable share
of Entrx's undistributed earnings and profits, then as a tax-free return of
capital to the extent of your aggregate adjusted tax basis in your shares, and
any remaining gain will be treated as a capital gain.
The
preceding summary was not intended or written to be used, and cannot be used,
for the purpose of avoiding any tax penalties. It is intended to
provide general information in support of the Board of Directors’ recommendation
to effect the Reverse/Forward Stock Split. You should consult your
tax advisor as to the particular federal, state, local, foreign, and other tax
consequences of the Reverse/Forward Stock Split, in light of your specific
circumstances.
Appraisal
Rights
Shareholders
do not have appraisal rights under Delaware state law or under Entrx's Restated
and Amended Certificate of Incorporation or By-laws in connection with the
Reverse/Forward Stock Split.
Reservation
of Rights
We,
through Board action, reserve the right to abandon the Reverse/Forward Stock
Split without further action by our shareholders at any time before the filing
of the necessary amendments to Entrx's Restated and Amended Certificate of
Incorporation with the Delaware Secretary of State, even if the Reverse/Forward
Stock Split has been authorized by our shareholders at the Special Meeting, and
by voting in favor of the Reverse/Forward Stock Split you are expressly also
authorizing us to determine not to proceed with the Reverse/Forward Stock Split
if we should so decide. If the Board determines to abandon the
Reverse/Forward Stock Split, we will file a Form 8K with the United States
Securities and Exchange Commission on or prior to May 8, 2009 announcing such
abandonment.
Board
of Directors’ Recommendation
The
Board of Directors Recommends That You Vote for the Proposals to Amend the
Restated and Amended Certificate of Incorporation of Entrx Corporation to Effect
the Reverse/Forward Stock Split. Each executive officer and member of
the Board of Directors has expressed an intent to vote in favor the
Reverse/Forward Stock Split.
OFFICERS
AND DIRECTORS
Peter L.
Hauser. Peter L. Hauser is the Company’s Chief Executive
Officer, a director and the beneficial owner of 12.6% of the Company’s common
stock. Mr. Hauser’s business address is Entrx Corporation, 800
Nicollet Mall, Suite 2690, Minneapolis, Minnesota 55402, and his telephone
number is 612-333-0614. Mr. Hauser has been the president and chief
executive officer of Entrx Corporation since October 2004, and devotes
approximately one-third of his working time to such office. In July
2008, Mr. Hauser founded, and is the owner of, Standard Health, Inc., with
offices in St. Paul, Minnesota. Standard Health, Inc. engages in the
marketing of a proprietary software system called HealthAccountPro™, for health
care claim administration and accounting serving the consumer-driven health care
plans through third-party health care administrators, for unions and
self-directed corporate health care plans. Mr. Hauser was a founder,
and was the principal owner and chairman of the board of directors, of Health
Care Financial Solutions, Inc., from March 2003 until July
2008. Healthcare Financial Solutions, Inc., with its office located
in St. Paul, Minnesota, was engaged in the development and marketing of the
software system now being marketed by Standard Health, Inc. From 1967
until June 2003, Mr. Hauser was engaged in the securities brokerage
industry. During that period, from 1977 through April 2003, Mr.
Hauser was employed at Equity Securities Trading Co., Inc., a Minneapolis,
Minnesota-based securities brokerage firm (now known as The Oak Ridge Financial
Group, Inc.), where he acted as a vice president and a principal beginning in
1993. Mr. Hauser was an account executive at Feltl & Company, a
Minneapolis, Minnesota securities brokerage firm, from April 2003 until June
2003, at which time he retired from the securities industry. From
1993 until 2003, Mr. Hauser was a member of the board of directors of GelStat
Corp. (OTCBB: GSAC.OB), (formerly called “Developed Technology Resources,
Inc.”), which was previously engaged in various enterprises in the former Soviet
Union, including the distribution of airport security equipment and the
manufacture and distribution of dairy products and snack foods. By
2003, GelStat Corp. had disposed of all of its assets relating to its former
Soviet Union enterprises, and began engaging in the domestic production and
distribution of over-the-counter, non-prescription health care
products.
Brian D.
Niebur. Brian D. Niebur is the Company’s Chief Financial
Officer. Mr. Niebur’s business address is Entrx Corporation, 800
Nicollet Mall, Suite 2690, Minneapolis, Minnesota 55402, and his telephone
number is 612-333-0614. Mr. Niebur has been employed part time by
Entrx as its treasurer and chief financial officer since February
2002. Mr. Niebur has a Bachelor of Arts degree in accounting and is a
certified public accountant (inactive). Since July 2000, Mr. Niebur
has acted as a vice president and controller for Wyncrest Capital, Inc. located
at 800 Nicollet Mall Suite 2690 Minneapolis, Minnesota 55402, a privately held
venture capital firm. Mr. Niebur’s primary duties for Wyncrest
Capital, Inc. have been to act as chief financial officer and a director for
Spectre Gaming, Inc. (OTCBB: SGMG), in which Wyncrest Capital, Inc.
had made an equity investment, from January 2003 until November
2005. Spectre Gaming, Inc. was engaged in the business of developing
and marketing electronic gaming systems for the Native American gaming
market. Mr. Niebur’s duties for Wyncrest Capital, Inc. also included
acting from January 2005 until March 2007 as Chief Financial Officer and
Secretary of Ready Credit Corporation (Pink Sheets: RCTC), another corporation
in which Wyncrest Capital, Inc. has an investment, with offices in Minneapolis,
Minnesota, and from January 2005 until May 2008 as a member of the board of
directors of Ready Credit Corporation.
David R. Trueblood. David
R. Trueblood was elected as President of Entrx’s wholly owned subsidiary,
Metalclad Insulation Corporation, on February 1, 2007. Mr. Trueblood
has been employed by Metalclad Insulation Corporation since November 1993, in
various capacities. Immediately prior to his appointment as
President, Mr. Trueblood served as project manager, bidding upon, securing and
managing a number of Metalclad’s most important projects.
Joseph M.
Caldwell. Joseph M. Caldwell is a director of the
Company. Mr. Caldwell’s business address is US Internet, 12450
Wayzata Blvd., Suite 121, Minnetonka, Minnesota 55305, and his
952-253-3200. Mr. Caldwell founded US Internet Corporation in March
1995, and since that date has served on its board of
directors. From March 1995 to May 2000 Mr. Caldwell was the chief
executive officer of US Internet Corporation. In June 2005 he became the
Vice President of Marketing for US Internet Corporation, a position he currently
holds. US Internet Corporation is a privately held Internet service
provider, providing services in over 1,300 cities nationwide and over 110
cities internationally, with its principal office at 12450 Wayzata Blvd, #121,
Minnetonka, Minnesota, 55305. From April 2002 until June 2005, Mr.
Caldwell was the chief executive officer of Marix Technologies, Inc., and
beginning in May, 2000, a member of its board of directors. Marix
Technologies, Inc. was a privately held company based in Minneapolis, Minnesota
that developed and marketed software designs to facilitate and control offsite
access to software applications and information.
E. Thomas
Welch. E. Thomas Welch is a director of the
Company. Mr. Welch’s business address is BNC National Bank, 333 South
Seventh Street, Suite 150, Minneapolis, Minnesota 55402, and his telephone
number is 612-305-2201. Mr. Welch has been the president of BNC
National Bank at its Minneapolis, Minnesota office, since April
2005. BNC National Bank, with corporate offices in Phoenix, Arizona,
conducts banking business through 21 banks located in North Dakota, Minnesota
and Arizona. Mr. Welch was a Managing Director of the U. S. Trust
Company, located at 730 2nd Ave South, # 1400, Minneapolis, Minnesota
55402, from April 2001 until March 2005, where he was primarily responsible for
financial, risk management, compliance and fiduciary matters. U.S.
Trust Company was engaged nationally in the trust, asset management, investment
and banking business. From 1984 until April 2001, Mr. Welch was
employed by Resource Trust Company, in Minneapolis, Minnesota, where he acted as
the president from 1988 to April 2001, in charge of private banking, trust
investment and corporate matters. Resource Trust Company and its principal
affiliated companies were acquired by U.S. Trust Company in April
2001. Mr. Welch has a Bachelor’s degree in accounting and a J.D.
degree in law.
David E.
Cleveland. David E. Cleveland is a director of the
Company. Mr. Cleveland’s address is W3195 Soholt Road, Sarona, WI
54870 and his business telephone number is 612-333-0164. Mr.
Cleveland was chairman of the Board of Associated Bank of Minnesota, located at
1801 Riverside Avenue, Minneapolis, Minnesota 55454, from March 2001 until April
2004, and President of the Board of that bank from March 13, 2000 until January
2001. From March 1987 until March 2000, Mr. Cleveland was President
of the Riverside Bank, in Minneapolis, Minnesota. From April 1969
until March 1987, Mr. Cleveland served consecutively as President of State Bank
of Hudson, Hudson, Wisconsin, Riverside Community State Bank, Minneapolis, and
Resources Bank & Trust, Minneapolis. Mr. Cleveland has been
retired since April 2004.
None of
the above persons has been convicted in a criminal proceeding during the past
five years (excluding traffic violations or similar
misdemeanors). None of the above persons has been a party to any
judicial or administrative proceeding during the past five years that resulted
in a judgment, decree or final order enjoining any of them from future
violations of, or prohibiting activities subject to, federal or state securities
laws, or a finding of any violation of federal or state securities
laws. Each of the above persons is a citizen of the United
States. Each officer and director of the Company has indicated that
he intends to vote his shares, including the shares for which he may hold a
proxy, in favor of the Reverse/Forward Stock Split, believing it to be in the
best interests of all of the shareholders, including the shareholders being
cashed out.
COMMON
STOCK OWNERSHIP
Share
Ownership of Officers and Directors
The
following table sets forth certain information as of March 11, 2009, with
respect to the shares of common stock beneficially owned by: (i) each director;
(ii) each executive officer; and (iii) all current executive officers
(regardless of salary and bonus level) and directors as a group. The table also
reflects the percentage of outstanding shares beneficially owned in each case,
and the pro forma percentage which would be owned as if the Reverse/Forward
Stock Split was effected on March 11, 2009. The address for each
shareholder is 800 Nicollet Mall, Suite 2690, Minneapolis, MN 55402, except for
Mr. Trueblood, whose address is 1818 Rossyln Avenue, Fullerton, CA
92831. Unless otherwise indicated, the shareholders listed in the
table below have sole voting and investment powers with respect to the shares
indicated:
Name of Beneficial Owner
|
|
Position
|
|
Number of Common
Shares Beneficially
Owned
|
|
|
Percentage of
Outstanding
Shares(7)
|
|
|
Pro Forma Percentage
of Outstanding
Shares (7)(8)
|
|
Peter
L. Hauser
|
|
Chief
Executive Officer and Director
|
|
|
987,075 |
(1)
|
|
|
12.6 |
|
|
|
12.8 |
|
David
E. Cleveland
|
|
Director
|
|
|
10,000 |
|
|
|
* |
|
|
|
* |
|
Joseph
M. Caldwell
|
|
Director
|
|
|
130,000 |
(2)
|
|
|
1.7 |
|
|
|
1.7 |
|
E.
Thomas Welch
|
|
Director
|
|
|
65,000 |
(3)
|
|
|
* |
|
|
|
* |
|
Brian
D. Niebur
|
|
Chief
Financial Officer
|
|
|
80,000 |
(4)
|
|
|
1.0 |
|
|
|
1.1 |
|
David
R. Trueblood
|
|
President
of Metalclad Insulation Corporation, a wholly owned subsidiary of
Entrx
|
|
|
7,000 |
(5)
|
|
|
* |
|
|
|
* |
|
All
current executive officers and directors, as a group (6
persons)
|
|
|
|
|
1,279,075 |
(6)
|
|
|
15.9 |
|
|
|
16.2 |
|
(1)
|
Includes
210,000 shares that Mr. Hauser may acquire upon the exercise of
outstanding stock options and
warrants.
|
(2)
|
Includes
90,000 shares that Mr. Caldwell has the right to acquire upon the exercise
of outstanding stock options.
|
(3)
|
Includes
25,000 shares that Mr. Welch may acquire upon the exercise of outstanding
stock options.
|
(4)
|
Includes
70,000 shares which Mr. Niebur may acquire upon the exercise of
outstanding stock options.
|
(5)
|
Includes
7,000 shares which Mr. Trueblood may acquire upon the exercise of
outstanding stock options.
|
(6)
|
Assumes
that each shareholder listed exercised all options available to that
person which would vest prior to May 10,
2009.
|
(7)
|
The
percentage of outstanding shares of common stock as shown in the table
above is calculated on 7,656,147 shares outstanding, as of March 11, 2009,
plus it assumes in each case that the shareholder exercised all vested
options available to that person as of March 11,
2009.
|
(8)
|
Assumes
the Reverse/Forward Stock Split was effected as of March 11, 2009, and
that the number of shares redeemed is 170,000, leaving an estimated
7,486,147 shares outstanding.
|
Each of the above officers and
directors has expressed an intent to vote in favor of the proposed
Reverse/Forward Stock Split.
Share
Ownership of Certain Beneficial Owners
The
following table sets forth the name, address, number of shares of Entrx's common
stock beneficially owned, and the percentage of the outstanding shares of common
stock such shares represent (both before and after the proposed Reverse/Forward
Stock Split), of each person or group of persons, known by Entrx to beneficially
own more than 5% of Entrx's outstanding common stock as of March 11,
2009. Unless otherwise indicated, the shareholders listed in the
table below have sole voting and investment powers with respect to the shares
indicated:
Name and Address
of Beneficial Owner
|
|
Number of Common
Shares Beneficially
Owned
|
|
|
Before Reverse/Forward
Stock Split Percentage of
Outstanding Shares (6)
|
|
|
After Reverse/Forward
Stock Split Percentage of
Outstanding Shares (6)(7)
|
|
Peter
L. Hauser
16130
East Cholla Drive
Fountain
Hills, AZ 85268
|
|
|
987,075 |
(1)
|
|
|
12.6
|
|
|
|
12.8 |
|
|
|
|
|
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Wayne
W. Mills
5020
Blake Road
Edina,
MN 55436
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445,000 |
(2)
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5.8 |
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5.9 |
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Grant
S. Kesler
3739
Brighton Point Drive
Salt
Lake City, UT 84121
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764,335 |
(3)
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9.2 |
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9.4 |
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Anthony
C. Dabbene
26921
Magnolia Court
Laguna
Hills, CA 92653
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487,200 |
(4)
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6.0 |
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6.1 |
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George
W. Holbrook, Jr.
1157
S.W. 30th
Street
Suite
E
Box
1938
Palm
City, FL 34991
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451,615 |
(5)
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5.9 |
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6.0 |
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James
R. McGoogan
1157
S.W. 30th
Street
Suite
E
Box
1938
Palm
City, FL 34991
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387,740 |
(5)
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5.1 |
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5.2 |
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Bradley
Resources Company
1157
S.W. 30th
Street
Suite
E
Box
1938
Palm
City, FL 34991
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376,255 |
(5)
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4.9 |
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5.0 |
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(1)
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Includes
10,000 shares which Mr. Hauser may purchase under currently exercisable
options at $0.55 per share, and 200,000 shares which Mr. Hauser may
purchase under currently exercisable options at $0.50 per
share.
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(2)
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As
reported on a Form 13D/A on February 14, 2008, Mr. Mills owns 225,000
shares held in his Individual Retirement Account, and 50,000 shares which
Mr. Mills may purchase under a currently exercisable options at prices
ranging from $0.50 to $2.50 per
share.
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(3)
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Includes
620,000 shares which Mr. Kesler may purchase under currently exercisable
options at prices ranging from $2.00 to $3.00 per
share.
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(4)
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Includes
450,000 shares which Mr. Dabbene may purchase under currently exercisable
options at prices ranging from $2.00 to $3.00 per
share.
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(5)
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As
reported in a Form 13-G on January 7, 2005, Messrs.
Holbrook and McGoogan own 75,360 and 11,485 shares, respectively, of our
common stock and are both partners of Bradley Resources Company with
shared voting and dispositive power with respect to the 476,255 shares
owned by Bradley Resources Company. Included in the shares owned by Mr.
Holbrook is a warrant to purchase 50,000 shares. Bradley
Resources Company, Mr. Holbrook and Mr. McGoogan may be considered to be a
“group” as defined under Rule 13d-5 of the Securities Exchange Act of
1934, with the power to vote and dispose of an aggregate of 463,100 shares
of our common stock, or 6.0% of our common
stock.
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(6)
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The
percentage of outstanding shares of common stock shown in the table above
is calculated based upon 7,656,147 shares outstanding as of the close of
business March 11, 2009, plus it assumes in each case that the shareholder
exercised all options available to that person that would vest within 60
days thereafter.
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(7)
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Assumes
the Reverse/Forward Stock Split was effected as of March 11, 2009, and
that the number of shares redeemed is 170,000, leaving an estimated
7,486,147 shares outstanding.
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SHAREHOLDER
PROPOSALS
Proposals
that shareholders may wish to present at the annual meeting of Entrx's
shareholders in 2009 must be received by Entrx in writing at 800 Nicollet Mall,
Suite 2690, Minneapolis, Minnesota, 55402, prior to June 1, 2009, in order
to be included in the proxy statement and form of proxy relating to that
meeting.
Entrx's latest Annual Report on Form
10-K for the year ended December 31, 2008, without the exhibits listed in the
Form 10-K, which has been filed with the Securities and Exchange Commission, has
been furnished to each shareholder of record as of March 11, 2009, and has been furnished to nominees
of street-name shareholders in sufficient quantities to be provided to all
beneficial shareholders on approximately March 27, 2009. If, however,
you as a record or beneficial shareholder on the record date did not receive a
copy of the Annual Report on Form 10-K, you may request in writing that a copy
be mailed to you, making a representation (in the case of a street name
shareholder) that you were a beneficial owner of Entrx's shares on the record
date. Upon such request, the Form 10-K Annual Report will be mailed
to you without charge. If you would like a copy of any of the
exhibits listed in the Form 10-K Annual Report, we will mail you a copy upon
request and upon the payment of $5.00 per document, and $0.25 per
page. All requests should be made in writing and addressed to Brian
Niebur, Chief Financial Officer, Entrx Corporation, 800 Nicollet Mall,
Suite 2690, Minneapolis, Minnesota 55402.
In
addition, the Annual Report on Form 10-K for the year ended December 31, 2008,
this Proxy Statement and the accompanying Notice of Special Meeting dated March
25, 2009 and form of Proxy, are also available over the internet at
www.vfnotice.com/entrxcorporation.
A
form of Proxy is enclosed for your use. Please date, sign and return
the Proxy at your earliest convenience. Prompt return of your Proxy
will be appreciated.
PROXY
ENTRX
CORPORATION
This
Proxy is Solicited on Behalf of the Board of Directors and Management of Entrx
Corporation
The
undersigned, revoking all prior proxies, hereby appoints Peter L. Hauser and E.
Thomas Welch, and each or either of them, as proxies, with full power of
substitution, to vote all shares of common stock of Entrx Corporation (the
“Company”) which the undersigned is entitled to vote at the Special
Meeting of Shareholders of Entrx Corporation, to be held at the offices of the
Company, 800 Nicollet Mall, Suite 2690, Minneapolis, Minnesota, on May 4, 2009,
at 10:00 a.m. CDT or at any adjournment thereof, and hereby instructs said
proxies to vote said shares as specified below:
Reverse
Stock Split:
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FOR an amendment to the
Company’s Restated and Amended Certificate of Incorporation, which will
result in a 1-for-500 reverse common stock split and the cash out of
shareholders owning less than 500 shares in any account at a price of
$0.35 per share.
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AGAINST: Check
the box below only if you wish to vote Against the amendment to effect a
reverse stock split.
o
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Forward
Stock Split:
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FOR an amendment to the
Company’s Restated and Amended Certificate of Incorporation, which will be
effective one minute after the 1-for-500 reverse common stock split, that
will result in a 500-for-1 share forward common stock split, which will
restore the number of shares held in any account and which are not cashed
out, to the number held prior to the reverse common stock
split
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AGAINST: Check
the box below only if you wish to vote Against the amendment to effect a
forward stock split.
o
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To vote
by telephone, you must call 800-776-9437 on weekdays between the hours of 8:00
a.m. and 3:30 p.m. CDT, prior to May 1, 2009. You should have this
proxy available when you call so that you can be properly
identified.
If
either proposed amendment to effect a reverse stock split or to effect a forward
stock split fails to receive the affirmative vote of shareholders owning a
majority of Entrx’s common stock, then neither amendment will be deemed to have
been approved.
NOTE:
In their discretion, the proxies are authorized to vote upon matters which are
incidental to the conduct of the Special Meeting, and upon other business of
which the Board of Directors is presently unaware and which may properly come
before the meeting.
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND MANAGEMENT OF ENTRX CORPORATION
AND WILL BE VOTED IN FAVOR OF THE AMENDMENTS TO THE COMPANY’S RESTATED AND
AMENDED CERTIFICATE OF INCORPORATION EFFECTING A REVERSE FOLLOWED BY A FORWARD
STOCK SPLIT, UNLESS OTHER INSTRUCTIONS ARE GIVEN.
Signature(s)
____________________________________
Dated ____________________,
2009
Please
sign exactly as your name appears hereon; if stock is held jointly, each owner
must sign. When signing as executor, trustee, guardian, attorney, agent or
proxy, please indicate title. Please
sign, date and return this Proxy promptly.
APPENDIX
A
Page
1
CERTIFICATE
OF AMENDMENT
TO
RESTATED
CERTIFICATE OF INCORPORATION
OF
ENTRX
CORPORATION
The
undersigned, Peter L. Hauser, President of Entrx Corporation, a Delaware
corporation (the “Corporation”), being duly authorized, hereby certifies that,
as declared advisable by resolution of the Board of Directors of the
Corporation, and as adopted by the affirmative vote of shareholders of the
Corporation owning a majority of the outstanding shares of the Corporation
(there being only common stock outstanding), at a duly called and held meeting
thereof on May 4, 2009, all in accordance with Section 242 of the Delaware
General Corporation Law, a resolution was adopted amending Section 4.1 contained
in the Fourth Article of the Corporation’s Certificate of Incorporation to read
in its entirety as follows:
“FOURTH:
Section
4.1
Without regard to any other provisions
of this Certificate of Incorporation, each one share of Common Stock (as defined
below), either issued and outstanding or held by the Corporation as treasury
stock, immediately prior to the time this amendment becomes effective shall be
and is hereby automatically reclassified and changed (without any further act)
into one five-hundredth (1/500) of a fully paid and nonassessable share of
Common Stock, without increasing or decreasing the amount of stated capital or
paid-in surplus of the Corporation, provided that no fractional shares shall be
issued to any holder of fewer than 500 shares of Common Stock immediately prior
to the time this amendment becomes effective, and that instead of issuing such
factional shares, the Corporation shall cancel such fractional shares and pay
the holders thereof the fair value of such factional shares in cash, all as of
the time when this amendment becomes effective.
The total number of shares of stock
which the Corporation shall have authority to issue is 85,000,000, of which
80,000,000 shares shall be Common Stock having a par value of $0.10 per share,
and 5,000,000 shares shall be Preferred Stock having a par value of $1.00 per
share.”
The
foregoing amendment shall be effective as of 6:00 p.m. eastern daylight time on
May 15, 2009.
IN
WITNESS WHEREOF, Entrx Corporation has caused this Certificate of Amendment to
be signed on its behalf by the undersigned officer, duly authorized, this _____
day of __________, 2009.
ENTRX
CORPORATION
APPENDIX
A
Page
2
CERTIFICATE
OF AMENDMENT
TO
RESTATED
CERTIFICATE OF INCORPORATION
OF
ENTRX
CORPORATION
The
undersigned, Peter L. Hauser, President of Entrx Corporation, a Delaware
corporation (the “Corporation”), being duly authorized, hereby certifies that,
as declared advisable by resolution of the Board of Directors of the
Corporation, and as adopted by the affirmative vote of shareholders of the
Corporation owning a majority of the outstanding shares of the Corporation
(there being only common stock outstanding), at a duly called and held meeting
thereof on May 4, 2009, all in accordance with Section 242 of the Delaware
General Corporation Law, a resolution was adopted amending Section 4.1 contained
in the Fourth Article of the Corporation’s Certificate of Incorporation to read
in its entirety as follows:
“FOURTH:
Section
4.1
Without regard to any other provisions
of this Certificate of Incorporation, each one share of Common Stock (as defined
below), either issued and outstanding or held by the Corporation as treasury
stock (including each fractional share in excess of one share held by any
stockholder and each fractional share in excess of one share held by the
Corporation) immediately prior to the time this amendment becomes effective,
shall be and is hereby automatically reclassified and changed (without any
further act) into 500 hundred fully paid and nonassessable share of Common Stock
(or, with respect to such fractional shares, such lesser number and shares and
fractional shares as may be applicable based up such 500/1 ration), without
increasing or decreasing the amount of stated capital or paid-in surplus of the
Corporation, provided that no fractional shares shall be issued.
The total number of shares of stock
which the Corporation shall have authority to issue is 85,000,000, of which
80,000,000 shares shall be Common Stock having a par value of $0.10 per share,
and 5,000,000 shares shall be Preferred Stock having a par value of $1.00 per
share.”
The
foregoing amendment shall be effective as of 6:01 p.m. eastern daylight time on
May 15, 2009.
IN
WITNESS WHEREOF, Entrx Corporation has caused this Certificate of Amendment to
be signed on its behalf by the undersigned officer, duly authorized, this _____
day of __________, 2009.
ENTRX
CORPORATION