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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 2000
REGISTRATION NO. 333
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INFOCURE CORPORATION
(Exact name of Registrant as specified in its charter)
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DELAWARE 7372 58-2271614
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
1765 THE EXCHANGE
SUITE 500
ATLANTA, GEORGIA 30339
(770) 221-9990
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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JAMES A. COCHRAN
SENIOR VICE PRESIDENT -- FINANCE AND
CHIEF FINANCIAL OFFICER
1765 THE EXCHANGE
SUITE 500
ATLANTA, GEORGIA 30339
(770) 221-9990
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
JOHN J. KELLEY III RICHARD L. HAURY, JR. HERRICK K. LIDSTONE, JR.
KING & SPALDING MORRIS, MANNING & MARTIN, L.L.P. NORTON LIDSTONE, P.C.
191 PEACHTREE STREET 1600 ATLANTA FINANCIAL CENTRE THE QUADRANT, SUITE 850
ATLANTA, GEORGIA 30303 3343 PEACHTREE ROAD, N.E. 5445 DTC PARKWAY
(404) 572-4600 ATLANTA, GEORGIA 30326 ENGLEWOOD, COLORADO 80111
(404) 504-7713 (303) 221-5552
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
effective time of the merger of wholly owned subsidiary of the Registrant with
and into Medical Dynamics, Inc., which merger shall occur as soon as practicable
following the effectiveness of this Registration Statement.
If any securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE(2) FEE(2)
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Common Stock $.001 par value per share...... 751,371 N/A $8,902,001.10 $2,350.13
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(1) This amount is based upon the number of shares of Common Stock anticipated
to be issued upon consummation of the transactions contemplated in the
Agreement and Plan of Merger and Reorganization dated as of December 21,
1999, by and among Medical Dynamics, Inc., InfoCure Corporation and CADI
Acquisition Corporation, as amended by the First Amendment to Agreement and
Plan of Merger dated as of April 10, 2000.
(2) Estimated solely for the purpose of calculating the registration fee and
computed pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of
1933, as amended, based on the average of the high and low sale prices of
Medical Dynamics common stock on The Nasdaq SmallCap Market on April 13,
2000 ($.672).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PROXY STATEMENT-PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. INFOCURE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROXY STATEMENT-PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION -- DATED APRIL 14, 2000
MEDICAL DYNAMICS, INC.
99 INVERNESS DRIVE EAST
ENGLEWOOD, COLORADO 80112
Dear Stockholder:
The Medical Dynamics, Inc. board of directors has unanimously approved a
merger which will result in the acquisition of Medical Dynamics by InfoCure
Corporation, a publicly-traded company headquartered in Atlanta, Georgia.
In the merger, each share of Medical Dynamics common stock will be
exchanged for .05672 shares of InfoCure common stock. This exchange ratio may
change in certain circumstances, and we will determine the exact ratio
immediately prior to closing of the merger according to the formula specified in
the merger agreement and described in this proxy statement-prospectus. InfoCure
common stock is traded on The Nasdaq National Market under the symbol "INCX,"
and on April , 2000, InfoCure common stock closed at $ per
share.
The merger cannot be completed unless the holders of more than a majority
of Medical Dynamics' outstanding shares of common stock approve the merger
agreement. Only stockholders who hold shares of Medical Dynamics at the close of
business on April 27, 2000 will be entitled to vote at the special meeting. In
connection with the merger, certain stockholders of Medical Dynamics who hold
approximately 17% of the outstanding shares of Medical Dynamics common stock
have agreed to vote their shares in favor of the merger.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS UNANIMOUSLY DETERMINED
THAT THE MERGER IS CONSISTENT WITH AND IN FURTHERANCE OF THE LONG-TERM BUSINESS
STRATEGY OF MEDICAL DYNAMICS AND FAIR TO, AND IN THE BEST INTERESTS OF, MEDICAL
DYNAMICS AND ITS STOCKHOLDERS. MEDICAL DYNAMICS' BOARD OF DIRECTORS APPROVED AND
DECLARED ADVISABLE THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS ITS APPROVAL
BY YOU.
This proxy statement-prospectus provides you with detailed information
concerning InfoCure, Medical Dynamics and the merger. Please give all of the
information contained in the proxy statement-prospectus your careful attention.
IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE DISCUSSION IN THE SECTION
ENTITLED "RISK FACTORS" ON PAGE 17 OF THIS PROXY STATEMENT-PROSPECTUS.
The special meeting of Medical Dynamics stockholders will be held on May
30, 2000 at 10:00 a.m. at the offices of Medical Dynamics, 99 Inverness Drive
East, Englewood, Colorado 80112.
Please use this opportunity to take part in the affairs of Medical Dynamics
by voting on the approval of the merger agreement. Whether or not you plan to
attend the meeting, please complete, sign, date and return the accompanying
proxy in the enclosed self-addressed stamped envelope. Returning the proxy does
NOT deprive you of your right to attend the meeting and to vote your shares in
person. YOUR VOTE IS VERY IMPORTANT.
We appreciate your consideration of this matter.
Van A. Horsley
President, Medical Dynamics, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement-prospectus is dated , 2000 and is first
being mailed to stockholders on or about , 2000.
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REFERENCES TO ADDITIONAL INFORMATION
This proxy statement-prospectus incorporates important business and
financial information about Medical Dynamics and InfoCure from other documents
that are not included in or delivered with this proxy statement-prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain those documents incorporated by reference in this proxy
statement-prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses and telephone numbers:
Medical Dynamics, Inc. InfoCure Corporation
99 Inverness Drive East 1765 The Exchange, Suite 500
Englewood, Colorado 80112 Atlanta, Georgia 30339
Attention: Investor Relations Attention: Investor Relations
Department Department
Telephone: (303) 790-2990 Telephone: (770) 221-9990
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY MAY 25, 2000 IN
ORDER TO RECEIVE THEM BEFORE THE MEDICAL DYNAMICS SPECIAL MEETING.
See "Where You Can Find More Information" beginning on page 60.
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MEDICAL DYNAMICS, INC.
99 INVERNESS DRIVE EAST
ENGLEWOOD, COLORADO 80112
NOTICE OF SPECIAL MEETING OF MEDICAL DYNAMICS STOCKHOLDERS
MAY 30, 2000
AT 10:00 A.M.
To Medical Dynamics Stockholders:
Notice is hereby given that a special meeting of stockholders of Medical
Dynamics, Inc. will be held on May 30, 2000 at 10:00 a.m. local time at the
offices of Medical Dynamics, 99 Inverness Drive East, Englewood, Colorado 80112,
for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger and Reorganization, dated December 21, 1999, by and among
InfoCure Corporation, CADI Acquisition Corporation, a wholly owned
subsidiary of InfoCure, and Medical Dynamics, as amended by the First
Amendment to the Agreement and Plan of Merger dated as of April 10, 2000,
pursuant to which CADI will merge with and into Medical Dynamics and
Medical Dynamics will survive the merger and continue as a wholly owned
subsidiary of InfoCure. In the merger, each share of Medical Dynamics
common stock, par value $.001 per share, will be exchanged for .05672
shares of InfoCure common stock, par value $.001 per share. This exchange
ratio may be subject to change in certain circumstances, and the exact
ratio will be determined immediately prior to closing of the merger
according to the formula specified in the merger agreement and described in
this proxy statement-prospectus. Approval of the merger agreement will also
constitute approval of the merger and the other transactions contemplated
by the merger agreement.
2. To transact such other business as may properly come before the
special meeting or any adjournment thereof.
These items of business are described in the attached proxy
statement-prospectus. Only holders of record of Medical Dynamics shares at the
close of business on April 27, 2000, the record date, are entitled to vote on
the matters listed in this Notice of Special Meeting of Medical Dynamics
Stockholders. You may vote in person at the Medical Dynamics special meeting
even if you have returned a proxy.
By Order of the Board of Directors
of Medical Dynamics, Inc.
Van A. Horsley
President
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED STAMPED ENVELOPE.
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TABLE OF CONTENTS
PAGE
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Questions and Answers About the Merger...................... 1
Summary..................................................... 3
The Companies............................................. 3
The Merger................................................ 3
What You Will Receive in The Merger....................... 4
InfoCure Will Assume the Medical Dynamics Options and
Warrants............................................... 4
Reasons for the Merger.................................... 4
Accounting Treatment...................................... 5
Non-Solicitation of Third Party Proposals................. 5
Conditions to Completion of the Merger.................... 5
Termination of the Merger Agreement....................... 5
Fees and Expenses......................................... 5
Restrictions on Your Ability to Sell InfoCure Common
Stock.................................................. 6
Special Meeting of Stockholders........................... 6
Stockholder Vote Required to Approve the Merger........... 6
Voting Agreement.......................................... 6
Voting Rights at the Special Meeting...................... 6
Medical Dynamics' Recommendation to Stockholders.......... 7
Voting by Directors and Executive Officers................ 7
Interests of Certain Persons in the Merger That May be
Different from Yours................................... 7
Completion of the Merger and Regulatory Approvals......... 7
Differences in Stockholders' Rights....................... 7
Listing of InfoCure Common Stock.......................... 7
Market Price Information.................................. 7
Forward-Looking Statements May Prove Inaccurate........... 8
Who Can Help Answer Your Questions........................ 8
Selected Historical Financial Data........................ 9
Unaudited Pro Forma Condensed Combined Financial
Statements............................................. 12
Comparative Per Share Data................................ 15
Risk Factors................................................ 17
The Total Number of Shares of InfoCure Common Stock to be
Issued in the Merger May Change........................ 17
InfoCure May Not Achieve the Anticipated Benefits from the
Merger................................................. 17
The Medical Dynamics Board of Directors Did Not Obtain Any
Third Party Opinion as to the Fairness of the Merger... 18
Certain of Medical Dynamics' Officers and Directors Have
Conflicts of Interest That May Influence Them to
Support or Approve the Merger.......................... 18
The Issuance of InfoCure Common Stock and Medical
Dynamics' Operating Losses Will Increase InfoCure's
Losses Per Share....................................... 18
Your Rights as a Medical Dynamics Stockholder Differ from
the Rights You Will Have as an InfoCure Stockholder.... 19
Failure to Complete the Merger Could Negatively Impact
Medical Dynamics' Future Business and Operations....... 19
InfoCure's Subscription Pricing Model is Unproven and its
Success Depends on Acceptance of this Model and
InfoCure's Ability to Set Subscription Fees at
Appropriate Levels..................................... 19
InfoCure's ASP Product Strategy is Unproven and Customers
May Not Respond Favorably to its New Products.......... 20
(i)
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PAGE
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The Failure to Successfully Complete the Development of
InfoCure's Internet Solutions and Enter into Strategic
Relationships Could Harm InfoCure's Business and Limit
its Potential Growth................................... 20
InfoCure's ASP Product Strategy is Dependent Upon the
Continued Development of the Internet.................. 21
InfoCure's Systems May be Vulnerable to Security Breaches
and Viruses............................................ 21
InfoCure Plans to Expand Rapidly and it May be Difficult
to Manage InfoCure's Growth............................ 21
InfoCure's Growth Could be Limited if it is Unable to
Attract and Retain Qualified Personnel................. 22
If InfoCure is Unable to Protect Its Intellectual Property
Rights from Third Party Challenges, InfoCure's
Competitive Position May Be Significantly Impaired..... 22
Intellectual Property Infringement Claims Against InfoCure
Could be Costly to Defend and Could Divert Management's
Attention Away from InfoCure's Business................ 22
InfoCure May Undertake Acquisitions Which Can Pose Risks
to its Business........................................ 23
InfoCure May Face Difficulties Integrating Acquired
Businesses............................................. 23
Technology Solutions May Change Faster Than InfoCure is
Able to Update its Technology..........................
InfoCure is Subject to Government Regulation and Legal
Uncertainties.......................................... 23
Changes in State and Federal Laws Relating to
Confidentiality of Patient Medical Records Could Limit
InfoCure's Customers' Ability to Use its Services...... 24
Changes in the Regulatory and Economic Environment in the
Healthcare Industry Could Adversely Affect InfoCure's
Business............................................... 25
InfoCure's Quarterly Operating Results May Vary and in the
Past it has Experienced Losses......................... 25
Competition Could Reduce Revenue from InfoCure's Products
and Services........................................... 25
InfoCure's New Product Strategy and Subscription Pricing
Model will Require Additional Financing Which May Not
be Available........................................... 26
InfoCure's Stock Price has Historically Been Volatile,
Which May Make it More Difficult for You to Resell
Shares When You Want at Prices You Find Attractive..... 26
InfoCure's Certificate of Incorporation and Bylaws Have
Anti-takeover Provisions............................... 27
Privately-sold Shares Eligible for Public Resale Could
Have a Negative Effect on InfoCure's Stock Price....... 27
Forward-looking Statements May Prove Inaccurate........... 27
The Special Meeting......................................... 29
Purpose................................................... 29
Date, Place and Time...................................... 29
Record Date............................................... 29
Medical Dynamics Stockholders Entitled to Vote............ 29
Vote Required; Voting at the Meeting...................... 29
Voting of Proxies......................................... 29
Solicitation of Proxies................................... 30
Appraisal Rights.......................................... 30
Recommendation of the Medical Dynamics Board of
Directors.............................................. 31
Interests of Certain Medical Dynamics Directors, Officers
and Affiliates in the Merger........................... 31
Description of the Merger................................... 33
The Merger................................................ 33
What You Will Receive in the Merger....................... 33
Effect of the Merger on Medical Dynamics Options and
Warrants............................................... 33
Material Federal Income Tax Consequences of the Merger.... 34
Loan to Medical Dynamics.................................. 36
(ii)
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PAGE
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Background of and Reasons for the Merger.................. 36
Completion of the Merger.................................. 41
Distribution of InfoCure Stock Certificates............... 41
Regulatory Approval....................................... 42
Management and Operations After the Merger................ 42
Accounting Treatment...................................... 42
Resales of InfoCure Common Stock.......................... 42
Voting Agreement.......................................... 43
The Merger Agreement........................................ 44
Conditions to Completion of the Merger.................... 44
No Solicitation........................................... 45
Waiver, Amendment, and Termination........................ 46
Fees and Expenses......................................... 47
Termination Fee........................................... 47
Representations and Warranties............................ 48
Conduct of Business Pending the Merger.................... 49
The Stockholders Agreement.................................. 50
Comparative Stock Prices and Dividends...................... 51
Recent Closing Prices..................................... 51
Dividend Information...................................... 52
Number of Stockholders.................................... 52
Principal Stockholders...................................... 53
Effect of the Merger on Rights of Stockholders.............. 54
Classes of Common Stock of Medical Dynamics and
InfoCure............................................... 54
Board of Directors........................................ 54
Number of Directors....................................... 54
Filling Vacancies on the Board............................ 54
Quorum.................................................... 55
Stockholder Action by Written Consent..................... 55
Ability to Call Special Meeting........................... 55
Notice of Meeting......................................... 55
Advance Notice of Stockholder Proposals................... 55
Voting Requirements....................................... 57
Amending Certificate of Incorporation or Articles of
Incorporation.......................................... 57
Amending Bylaws........................................... 57
Interested Director Transactions.......................... 57
Stockholder Proposals....................................... 59
Other Matters............................................... 59
Experts..................................................... 59
Legal Matters............................................... 60
Where You Can Find More Information......................... 60
APPENDIX A -- Agreement and Plan of Merger, as amended...... A-1
(iii)
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY IS MEDICAL DYNAMICS BEING ACQUIRED BY INFOCURE?
A: The Medical Dynamics board believes that the merger is in the best interests
of the Company and will provide significant benefits to its stockholders,
customers and employees. The board believes that the merger will create a
company which will be better positioned to be a strong competitor in the
rapidly changing and consolidating healthcare information technology
services industry. To review the background and reasons for the merger in
greater detail, see pages 36 through 40.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Medical Dynamics stockholders will receive .05672 shares of InfoCure common
stock in exchange for each share of Medical Dynamics common stock they hold.
However, this exchange ratio will change if the average closing price of
InfoCure common stock prior to the closing of the merger is less than $13.22
per share or more than $22.04 per share. If the average closing price of
InfoCure common stock prior to the closing of the merger is below $13.22,
then the exchange ratio will be adjusted so that you will receive $0.75
worth of InfoCure common stock for each share of Medical Dynamics common
stock. If the average closing price of InfoCure common stock prior to the
closing of the merger is above $22.04, then the exchange ratio will be
adjusted so that you will receive $1.25 worth of InfoCure common stock for
each share of Medical Dynamics common stock. This is the "exchange ratio."
You should obtain current market prices for shares of InfoCure Common Stock
and shares of Medical Dynamics Common Stock.
For example:
- If you own 100,000 shares of Medical Dynamics common stock and the
average closing price of InfoCure common stock at the time of the merger
is between $13.22 and $22.04 per share, you will receive 5,672 shares of
InfoCure common stock upon completion of the merger.
- If you own 100,000 shares of Medical Dynamics common stock and the
average closing price of InfoCure common stock at the time of the merger
is $30.00 per share, you will receive approximately 4,167 shares of
InfoCure common stock upon completion of the merger.
- If you own 100,000 shares of Medical Dynamics common stock and the
average closing price of InfoCure common stock at the time of the merger
is $10.00 per share, you will receive approximately 7,500 shares of
InfoCure common stock upon completion of the merger.
Q: AM I ENTITLED TO APPRAISAL RIGHTS?
A: No. Because the shares of InfoCure common stock are listed on The Nasdaq
Stock Market and the shares of Medical Dynamics common stock are held by
more than 2,000 stockholders of record, you will not have appraisal rights
under Colorado law.
Q: WHAT RISKS SHOULD I CONSIDER?
A: You should review "Risk Factors" on pages 17 through 28.
You should also review the factors considered by the Medical Dynamics board
of directors. See "Description of the Merger -- Background of and Reasons
for the Merger."
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger during the second quarter of 2000.
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Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: We expect that the exchange of your Medical Dynamics shares generally will
be tax-free to you for U.S. federal income tax purposes. You will, however,
have to pay taxes on cash received for fractional shares. To review the tax
consequences to you in greater detail, see pages 34 through 36.
YOUR TAX CONSEQUENCES WILL DEPEND ON YOUR PERSONAL SITUATION. YOU SHOULD
CONSULT YOUR TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES
OF THE MERGER TO YOU.
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: You are being asked to approve the merger agreement which provides for the
acquisition of Medical Dynamics through a merger of an InfoCure subsidiary
into Medical Dynamics, following which Medical Dynamics will become a wholly
owned subsidiary of InfoCure. Approval of the proposal requires the
affirmative vote of a majority of the outstanding shares of Medical Dynamics
common stock.
THE MEDICAL DYNAMICS BOARD HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS VOTING FOR THE APPROVAL OF THE MERGER AGREEMENT.
Q: WHAT DO I NEED TO DO NOW?
A: After you review the proxy statement and resolve any questions you may have,
please indicate on your proxy card how you want to vote, and sign and mail
it in the enclosed envelope as soon as possible, so that your shares will be
represented at the special meeting of Medical Dynamics stockholders.
Specific instructions regarding procedures to be followed in voting are set
forth on your proxy card.
If you sign and send in your proxy and do not indicate how you want to vote,
your proxy will be voted in favor of the proposal to approve the merger
agreement. If you do not sign and send in your proxy or you abstain, it will
have the effect of a vote against the proposal to approve the merger
agreement.
The special meeting of Medical Dynamics stockholders will take place on May
30, 2000 at 10:00 a.m. at the offices of Medical Dynamics, 99 Inverness
Drive East, Englewood, Colorado 80112. You may attend the special meeting
and vote your shares in person, rather than voting by proxy. In addition,
you may withdraw your proxy up to and including the day of the special
meeting by following the directions on page 30 and either change your vote
or attend the special meeting and vote in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares of Medical Dynamics common stock only if
you provide instructions on how to vote. You should instruct your broker how
to vote your shares, following the directions your broker provides. If you
do not provide instructions to your broker, your shares will not be voted.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed we will send you written instructions for
exchanging your Medical Dynamics common stock certificates for InfoCure
common stock certificates.
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SUMMARY
This summary highlights selected information from this proxy
statement-prospectus and may not contain all of the information that is
important to you. You should carefully read this entire document and the other
documents we refer to for a more complete understanding of the merger. In
particular, you should read the documents attached to this proxy
statement-prospectus. In addition, we incorporate important business and
financial information about InfoCure and Medical Dynamics into this proxy
statement-prospectus by reference. You may obtain the information incorporated
into this proxy statement-prospectus by reference without charge by following
the instructions in the section entitled "Where You Can Find More Information"
on page 60 of this proxy statement-prospectus.
THE COMPANIES
INFOCURE CORPORATION
1765 THE EXCHANGE
SUITE 500
ATLANTA, GEORGIA 30339
(770) 221-9990
InfoCure is a leading national provider of healthcare practice management
software products and services. Its wide range of practice management software
automates the administrative, financial and clinical information management
functions for physicians, dentists and other healthcare practitioners in
targeted specialty markets. InfoCure also provides its customers with ongoing
maintenance and support, training, electronic data interchange, or "EDI,"
services and electronic commerce services. These products and services are
designed to increase the quality and reduce the cost of providing care by
enabling physicians to manage their practices more efficiently.
InfoCure is currently reorganizing its business to facilitate changes in
its pricing of practice management software products, its delivery of these
products and the scope of its product offerings. For a complete description of
the risks associated with this reorganization, please see "Risk Factors -- Risks
Related to InfoCure and Medical Dynamics as a Combined Company" on page 17.
For the year ended December 31, 1999, InfoCure generated revenues of $203.6
million and a net loss, after extraordinary items, of $3.8 million. On December
31, 1999, InfoCure had consolidated assets of approximately $220.5 million and
consolidated stockholders' equity of $135.3 million.
MEDICAL DYNAMICS, INC.
99 INVERNESS DRIVE EAST
ENGLEWOOD, COLORADO 80112
(303) 790-2990
Medical Dynamics is engaged in the development and marketing of practice
management software and related products for the dental profession. Medical
Dynamics' principal products are practice management software, patient education
systems, digital x-ray systems and a wide variety of ancillary products utilized
in the dental profession.
For the year ended September 30, 1999, Medical Dynamics generated revenue
of $11.0 million and a net loss of $5.4 million. On September 30, 1999, Medical
Dynamics had consolidated assets of $5.6 million and consolidated stockholders'
equity of approximately $2.6 million.
THE MERGER
InfoCure will acquire Medical Dynamics by means of the merger of CADI
Acquisition Corporation, a wholly owned subsidiary of InfoCure, with and into
Medical Dynamics. After the merger, Medical Dynamics will be the surviving
corporation. The merger agreement is attached as Appendix A to this proxy
statement-prospectus. We encourage you to read the merger agreement carefully.
The merger agreement is more fully discussed on pages 44 through 49 of this
proxy statement-prospectus.
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WHAT YOU WILL RECEIVE IN THE MERGER
Each share of Medical Dynamics common stock will be exchanged for .05672
shares of InfoCure common stock. However, this exchange ratio will change if the
average closing price of InfoCure common stock prior to the closing of the
merger is less than $13.22 per share or more than $22.04 per share. If the
average closing price of InfoCure common stock prior to the closing of the
merger is below $13.22, then the exchange ratio will be adjusted so that you
will receive $0.75 worth of InfoCure common stock for each share of Medical
Dynamics common stock. If the average closing price of InfoCure common stock
prior to the closing of the merger is above $22.04, then the exchange ratio will
be adjusted so that you will receive $1.25 worth of InfoCure common stock for
each share of Medical Dynamics common stock.
In addition, InfoCure will not issue fractional shares in the merger. As a
result, the total number of shares of InfoCure common stock that Medical
Dynamics stockholders will receive in the merger will be rounded down to the
nearest whole number. You will receive a cash payment, without interest, for the
value of the remaining fraction of a share of InfoCure common stock that you
would otherwise be entitled to receive based upon the average closing price of a
share of InfoCure common stock at the time of the merger.
INFOCURE WILL ASSUME THE MEDICAL DYNAMICS OPTIONS AND WARRANTS
Medical Dynamics has issued options and warrants exercisable for shares of
Medical Dynamics common stock. When the merger is effective, all outstanding
options and warrants to purchase Medical Dynamics common stock will convert into
options and warrants to purchase InfoCure common stock. The number of shares of
InfoCure common stock issuable upon exercise or conversion and the exercise
price and conversion price will each be adjusted to reflect the exchange ratio.
All other terms of the Medical Dynamics warrants and options will remain the
same.
REASONS FOR THE MERGER
Medical Dynamics and InfoCure have identified several potential advantages
of the merger that they believe will benefit you, Medical Dynamics and InfoCure.
We anticipate that the merger will benefit you by:
- reducing your exposure to risks inherent in Medical Dynamics' reliance on
a limited number of products and competition with larger companies with
more diversified product lines and greater financial resources; and
- allowing you to participate in the potential for growth of the combined
company after the merger.
Medical Dynamics anticipates that the merger will benefit it by:
- enabling Medical Dynamics to gain access to additional capital resources;
- providing increased opportunity for the development of Medical Dynamics'
product offerings, thereby augmenting Medical Dynamics' competitive
position and maximizing value for stockholders of the combined entity;
and
- providing Medical Dynamics with the opportunity to capitalize on
InfoCure's relationships with its customers and vendors.
InfoCure anticipates that the merger will benefit it by:
- enhancing InfoCure's product portfolio with the addition of Medical
Dynamics' products; and
- allowing InfoCure to secure ownership of Medical Dynamics' technology.
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12
ACCOUNTING TREATMENT
We intend to account for the merger as a purchase business combination.
Under this method of accounting, after the closing of the merger, our assets and
liabilities will be recorded at fair value and any excess of the total value of
shares exchanged for our assets over our net assets will be recorded as
goodwill.
NON-SOLICITATION OF THIRD PARTY PROPOSALS
Until consummation or abandonment of the merger, Medical Dynamics and its
affiliates have agreed not to initiate or facilitate any proposal from a third
party with respect to a merger, consolidation, sale or similar transaction
involving Medical Dynamics or its subsidiaries (an "acquisition proposal").
However, during the period from the mailing of this proxy statement-prospectus
until the Medical Dynamics stockholders have approved the merger, the Medical
Dynamics board may engage in discussions regarding an acquisition proposal if
certain conditions are met. Those conditions are more fully described on page 45
of this proxy statement-prospectus.
CONDITIONS TO COMPLETION OF THE MERGER
The merger will be completed only if certain conditions, including, but not
limited to the following, are met or waived, if waivable:
- Medical Dynamics stockholders approve the merger;
- InfoCure and Medical Dynamics receive legal opinions from their
respective counsel concerning the tax-free treatment of the merger; and
- neither Medical Dynamics nor InfoCure has breached any of its
representations or obligations under the merger agreement in any material
respect.
In addition to these conditions, the merger agreement, attached to this
proxy statement-prospectus as Appendix A, describes other conditions that must
be met before the merger may be completed.
TERMINATION OF THE MERGER AGREEMENT
Either InfoCure or Medical Dynamics may terminate the merger agreement
under certain circumstances, including if:
- both parties consent in writing;
- the merger is not completed before July 31, 2000;
- legal restraints prevent the consummation of the merger;
- the Medical Dynamics stockholders do not approve the merger agreement; or
- the other party breaches in a material manner any of its representations,
warranties or covenants under the merger agreement and such breach is not
cured within 30 days of notice.
In addition, InfoCure may terminate the merger agreement, among other
things, if Medical Dynamics accepts or recommends acceptance of an acquisition
proposal with another party or withdraws, or adversely modifies, its
recommendation of the merger.
FEES AND EXPENSES
InfoCure and Medical Dynamics will generally pay their own fees, costs and
expenses incurred in connection with the merger agreement. However, Medical
Dynamics will pay InfoCure a "break up" fee of $1.3 million, under certain
circumstances, if:
- Medical Dynamics approves, enters into, or consummates a transaction
contemplated by an acquisition proposal;
- the Medical Dynamics board withdraws, modifies or changes its
recommendation as to the merger; or
- certain principal stockholders of Medical Dynamics who own 17% of the
outstanding shares of Medical Dynamics
5
13
stock fail to comply with their obligations under a stockholders
agreement to vote in favor of the merger.
In addition, InfoCure will pay Medical Dynamics a fee of $150,000 if
Medical Dynamics terminates the merger agreement because InfoCure breaches its
representations, warranties or obligations under the merger agreement in any
material respect.
RESTRICTIONS ON YOUR ABILITY TO SELL INFOCURE COMMON STOCK
All shares of InfoCure common stock received by you in connection with the
merger will be freely transferable, unless you are an "affiliate" of Medical
Dynamics or InfoCure under the securities laws. If you are considered an
affiliate of Medical Dynamics or InfoCure, your shares of common stock received
in the merger may only be sold pursuant to an exemption under the securities
laws or pursuant to an effective registration statement covering the resale of
such shares.
SPECIAL MEETING OF STOCKHOLDERS
The special meeting of Medical Dynamics Stockholders will be held at the
offices of Medical Dynamics, 99 Inverness Drive East, Englewood, Colorado 80112,
at 10:00 a.m., on May 30, 2000. At the special meeting, we will ask you to
approve the merger agreement. In order for the special meeting to be held, a
quorum must be present. A quorum is present if a majority of the outstanding
shares of Medical Dynamics common stock are represented at the special meeting
either in person or by proxy.
STOCKHOLDER VOTE REQUIRED TO APPROVE THE MERGER
The affirmative vote of the holders of a majority of the outstanding shares
of Medical Dynamics common stock is required to approve the merger agreement. In
connection with the merger, certain stockholders of Medical Dynamics who hold
approximately 17% of the outstanding shares of Medical Dynamics common stock
have agreed to vote their shares in favor of the merger.
VOTING AGREEMENT
The holders of approximately 17% of the outstanding Medical Dynamics common
stock have agreed to vote in favor of the merger agreement.
VOTING RIGHTS AT THE SPECIAL MEETING
You are entitled to vote at the special meeting if you owned shares as of
the close of business on April 27, 2000, the record date. As of the record date,
there were shares of Medical Dynamics common stock outstanding
and such shares of Medical Dynamics common stock were held by
holders of record. You will be entitled to one vote for each share of Medical
Dynamics common stock that you owned on the record date. You may vote either by
attending the special meeting and voting your shares or by completing the
enclosed proxy card and mailing it in the enclosed envelope.
Medical Dynamics is seeking your proxy to use at the special meeting.
Medical Dynamics and InfoCure have prepared this proxy statement-prospectus to
assist you in deciding how to vote. Whether or not you plan to attend the
meeting, please indicate on your proxy card how you want to vote. Please sign,
date and mail it as soon as possible so that your shares will be represented at
the special meeting. If you sign, date and mail your proxy card without
indicating how you wish to vote, your proxy will be counted as a vote FOR
approval of the merger agreement. If you fail to return your proxy card and fail
to vote at the meeting, the effect will be a vote AGAINST approval of the merger
agreement. If you sign a proxy, you may revoke it at any time before the special
meeting or by attending and voting at the special meeting.
6
14
MEDICAL DYNAMICS' RECOMMENDATION TO STOCKHOLDERS
Medical Dynamics' board of directors unanimously approved the merger
agreement. The board believes that the proposed merger is consistent with and in
furtherance of the long-term business strategy of Medical Dynamics and fair to,
and in the best interests of, Medical Dynamics and its stockholders and
recommends that you vote to approve the merger agreement.
VOTING BY DIRECTORS AND EXECUTIVE OFFICERS
On the record date, Medical Dynamics' directors and executive officers
owned 2,259,716 shares, or approximately 17% of the outstanding shares of
Medical Dynamics common stock. This number does not include stock that the
Medical Dynamics directors and executive officers may acquire through the
exercise of stock options or warrants. On the record date and as of the date of
this proxy statement-prospectus, InfoCure's directors and executive officers
owned no shares of Medical Dynamics common stock.
INTERESTS OF CERTAIN PERSONS IN THE MERGER THAT MAY BE DIFFERENT FROM YOURS
When considering the recommendation of Medical Dynamics' board of
directors, you should be aware that certain Medical Dynamics directors and
officers have interests in the merger that are different from, or are in
addition to, yours. Your board of directors was aware of these interests and
considered them in approving and recommending the merger.
COMPLETION OF THE MERGER AND REGULATORY APPROVALS
The merger will become effective upon the filing of articles of merger with
the Colorado Secretary of State. If the Medical Dynamics stockholders approve
the merger at the special meeting and all required regulatory approvals are
obtained, we currently anticipate that the merger will be completed on or about
, 2000.
InfoCure and Medical Dynamics are required to make filings with or obtain
approvals from certain regulatory authorities in connection with the merger.
InfoCure and Medical Dynamics cannot assure you that they can obtain the
necessary regulatory approvals or that the other conditions to consummation of
the merger can or will be satisfied.
DIFFERENCES IN STOCKHOLDERS' RIGHTS
When the merger is completed, you will automatically become an InfoCure
stockholder whether or not you surrender your Medical Dynamics stock
certificates. Your rights as a Medical Dynamics stockholder are governed by the
Medical Dynamics articles of incorporation and bylaws and by Colorado law. The
rights of InfoCure stockholders differ from the rights of Medical Dynamics
stockholders in several important ways. Many of these have to do with provisions
in InfoCure's certificate of incorporation and bylaws and with Delaware law.
LISTING OF INFOCURE COMMON STOCK
InfoCure has agreed to list the shares of InfoCure common stock to be
issued in connection with the merger on The Nasdaq National Market.
MARKET PRICE INFORMATION
Shares of InfoCure common stock are traded on The Nasdaq National Market
under the trading symbol "INCX." Shares of Medical Dynamics common stock are
traded on The Nasdaq SmallCap Market under the trading symbol "MEDY." The
following table presents:
- the last reported sale price of one share of InfoCure common stock;
- the last reported sale price of one share of Medical Dynamics common
stock; and
7
15
- the market value of one share of Medical Dynamics common stock on an
equivalent per share basis,
in each case as if the merger had been completed on December 20, 1999, the last
full trading day before the public announcement of the merger agreement, and on
April 4, 2000, the last practicable day before the date of this proxy
statement-prospectus. The equivalent price per share data for Medical Dynamics
common stock has been determined by multiplying the applicable last reported
sale price of one share of InfoCure common stock on each of these dates by the
assumed exchange ratio of .05672, as adjusted to reflect the per share collar.
INFOCURE:
PRICE PER SHARE
DATE COMMON STOCK
- ---- ---------------
December 20, 1999........... $ 27.00
April , 2000..............
MEDICAL DYNAMICS:
EQUIVALENT
PRICE PER SHARE PRICE PER SHARE
DATE COMMON STOCK COMMON STOCK
- ---- --------------- ---------------
December 20, 1999.... $ 0.9375 $ 1.25*
April 4, 2000........
- ------------------------
* reflects the $1.25 per share collar.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
InfoCure and Medical Dynamics have made forward-looking statements in this
document and in documents to which we have referred you. These statements are
subject to risks and uncertainties, and we cannot assure you that these
statements will prove to be correct. Forward-looking statements include
assumptions as to how InfoCure and Medical Dynamics may perform in the future.
When we use words like "believes," "expects," "anticipates" or similar
expressions, we are making forward-looking statements. For those statements,
InfoCure and Medical Dynamics claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. You should understand that the important factors discussed in this
document and in the documents that we incorporate by reference could affect the
future results of InfoCure and Medical Dynamics and could cause those results to
differ materially from those expressed in our forward-looking statements. See
"Risk Factors" beginning on page 17.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have any questions about the merger, please call Van A. Horsley,
Medical Dynamics' President, at (303) 790-2990, Extension 13.
8
16
SELECTED HISTORICAL FINANCIAL DATA
INFOCURE SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data set forth below as of
January 31, 1996 and 1997 and December 31, 1997 and for the two years ended
January 31, 1997 have been derived from the audited consolidated financial
statements of American Medcare Corporation, the predecessor of InfoCure, not
included or incorporated by reference into this proxy statement-prospectus. The
selected historical consolidated financial data set forth below as of December
31, 1999 and 1998 and for the years ended December 31, 1999 and 1998, and the
eleven months ended December 31, 1997 have been derived from InfoCure's
consolidated financial statements which are incorporated by reference in this
proxy statement-prospectus. These consolidated financial statements have been
audited by BDO Seidman, LLP, whose report on these consolidated financial
statements is also incorporated by reference in this proxy statement-prospectus.
The information presented gives retroactive effect to pooling-of-interests
treatment for acquisitions completed on or before December 31, 1999 and a
2-for-1 stock split in August 1999. The following financial information should
be read in conjunction with InfoCure's consolidated financial statements and
related notes thereto provided in InfoCure's Annual Report on Form 10-K for the
year ended December 31, 1999 incorporated by reference in this proxy
statement-prospectus.
ELEVEN
YEAR ENDED MONTHS YEAR ENDED
DECEMBER 31, ENDED JANUARY 31,
CONSOLIDATED STATEMENT ------------------- DECEMBER 31, -----------------
OF OPERATIONS DATA: 1999 1998(1) 1997 1997 1996
- ---------------------- -------- -------- ------------ ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Total revenue.......................... $203,634 $129,845 $ 75,229 $53,644 $53,756
Compensatory stock awards.............. 1,431 6,447 78 -- --
Purchased research and development..... -- 9,000 -- -- --
Restructuring and other charges........ 10,681 1,874 13,052 -- --
Merger costs........................... 3,764 123 -- -- --
Operating income (loss)................ 3,230 (4,007) (25,340) (7,576) (4,287)
Net loss available to common
stockholders before extraordinary
item................................. (859) (7,599) (18,709) (5,946) (4,686)
Net loss per share before extraordinary
item (2):
Basic and diluted...................... $ (0.03) $ (0.39) $ (1.21)
Shares used in computing net loss per
share: Basic and diluted............. 27,994 19,312 15,523
9
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AS OF DECEMBER 31, AS OF JANUARY 31,
----------------------------- -----------------
CONSOLIDATED BALANCE SHEET DATA: 1999 1998 1997 1997 1996
- -------------------------------- -------- -------- ------- ------- -------
(IN THOUSANDS)
Cash and cash equivalents.................. $ 16,836 $ 10,302 $ 6,795 $ 3,822 $ 1,280
Working capital............................ 26,601 (3,598) (6,736) (5,233) (5,000)
Total assets............................... 220,504 160,132 65,794 33,013 24,434
Long-term debt, less current portion....... 41,178 72,896 12,394 5,962 5,883
Convertible, redeemable preferred stock.... -- 8,501 -- -- --
Stockholders' equity (capital deficit)..... 135,339 22,772 11,615 5,501 (1,138)
(1) During 1998, InfoCure acquired the net assets of the Healthcare Systems
Division of The Reynolds and Reynolds Company in a transaction accounted for
as a purchase.
(2) Loss per share for the years ended January 31, 1997 and 1996 has not been
presented as it is not considered meaningful due to the acquisition of the
Founding Companies and the Company's initial public offering in conjunction
with the formation of the Company in the period ended December 31, 1997.
MEDICAL DYNAMICS SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The selected historical financial data set forth below as of September 30,
1995, 1996 and 1997, and for each of the years in the two years ended September
30, 1996 have been derived from Medical Dynamics' audited consolidated financial
statements not included or incorporated by reference into this proxy
statement-prospectus. The selected historical financial data set forth below as
of September 30, 1998 and 1999, and for each of the years in the three
year-period ended September 30, 1999 have been derived from Medical Dynamics'
consolidated financial statements which are incorporated by reference into this
proxy statement-prospectus. These consolidated financial statements have been
audited by Hein + Associates LLP, whose report on these consolidated financial
statements is also incorporated by reference in this proxy statement-prospectus.
The following financial information should be read in conjunction with Medical
Dynamics' consolidated financial statements and consolidated condensed financial
statements incorporated by reference into this proxy statement-prospectus.
THREE MONTHS
ENDED
DECEMBER 31, YEARS ENDED SEPTEMBER 30,
STATEMENT OF ---------------- -----------------------------------------------
OPERATIONS DATA: 1999 1998 1999 1998 1997 1996 1995
- ---------------- ------ ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues..................... $1,349 $ 3,082 $10,959 $ 7,847 $ 983 $ 668 $ 1,195
Cost of revenues............. 608 1,419 6,108 4,059 1,296 652 1,012
Gross profit................. 741 1,663 4,851 3,788 (313) 16 183
Operating loss............... (361) (905) (4,520) (2,304) (1,684) (1,787) (1,618)
Net loss..................... (448) (1,000) (5,398) (2,522) (1,548) (1,742) (1,484)
Net loss per share........... (0.04) (0.10) (0.52) (0.27) (0.21) (0.25) (0.22)
10
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SEPTEMBER 30,
DECEMBER 31, -------------------------------------------
BALANCE SHEET DATA: 1999 1999 1998 1997 1996 1995
- ------------------- ------------ ------- ------ ------ ------ ------
(IN THOUSANDS)
Current assets....................... $ 563 $ 645 $ 553 $1,713 $1,459 $2,557
Total assets......................... 5,270 5,603 9,170 1,917 2,237 2,886
Total liabilities.................... 2,789 3,010 3,707 370 310 354
Stockholders' equity................. 2,481 2,593 5,464 1,547 1,926 2,531
Working capital...................... (1,841) (1,787) 449 1,343 1,148 2,203
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma combined financial information
has been derived from the historical financial statements of InfoCure and
Medical Dynamics. The unaudited pro forma combined balance sheet as of December
31, 1999 has been presented as if the pending acquisition of Medical Dynamics
had been consummated on that date. The unaudited pro forma combined statements
of operations for the year ended December 31, 1999 have been presented as if the
pending acquisition of Medical Dynamics had been consummated on January 1, 1999.
The selected unaudited pro forma combined financial information gives
effect to the acquisition of Medical Dynamics under the purchase method of
accounting for business combinations and is based upon the assumptions and
adjustments described in the accompanying notes to the unaudited pro forma
condensed combined financial statements.
YEAR ENDED
DECEMBER 31, 1999
----------------------
(IN THOUSANDS
EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Total revenue............................................... $214,593
Compensatory stock awards................................... 1,481
Restructuring and other charges............................. 11,336
Merger costs................................................ 3,764
Operating loss.............................................. (1,888)
Net loss.................................................... (4,804)
Loss per share before extraordinary item, basic and
diluted................................................... (0.17)
DECEMBER 31, 1999
-----------------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 16,622
Working capital............................................. 24,755
Total assets................................................ 236,241
Long-term debt, less current portion........................ 41,563
Stockholders' equity........................................ 149,365
11
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UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The unaudited pro forma condensed combined financial statements have been
prepared to give effect to InfoCure's proposed acquisition of all the
outstanding equity interest of Medical Dynamics in exchange for approximately
748,000 shares of InfoCure common stock. The exchange is calculated using an
exchange ratio of .05672 and assuming 13.2 million shares of Medical Dynamics
common stock outstanding on a fully diluted basis as of the date of the
acquisition. The pro forma condensed combined financial statements included
herein reflect the purchase method of accounting for the acquisition. Such
financial statements have been prepared from, and should be read in conjunction
with, the consolidated financial statements and notes thereto of InfoCure
included in InfoCure's annual report on Form 10-K for the year ended December
31, 1999, incorporated herein by reference and the Medical Dynamics historical
consolidated financial statements and notes thereto included in Medical
Dynamics' annual report on Form 10-KSB for the year ended September 30, 1999 and
its quarterly report on Form 10-QSB for the quarter ended December 31, 1999,
incorporated herein by reference.
The pro forma condensed combined balance sheet gives effect to the
acquisition as if it had occurred on December 31, 1999 combining the balance
sheets of InfoCure and Medical Dynamics as of that date. The pro forma condensed
combined statement of operations give effect to the acquisition as if it had
occurred on January 1, 1999, combining the results of InfoCure for the year
ended December 31, 1999 with those of Medical Dynamics for the year ended
September 30, 1999 which, for pro forma purposes, are considered comparable to
the results of a calendar twelve-month period.
The pro forma combined statements of operations for the year ended December
31, 1999 include appropriate adjustments for amortization and other items
related to the transaction, but exclude any potential cost savings. InfoCure
believes that it may be able to reduce salaries and related costs and general
and administrative expenses as it eliminates duplication of overhead and,
together with Medical Dynamics, has formulated a plan of restructuring to
implement such savings. There can be no assurance that the restructuring plan
will be successful in effecting such cost savings.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that management deems appropriate. The pro
forma combined financial information is unaudited and does not purport to
represent the consolidated results that would have been obtained had the
transaction occurred at the dates indicated, as assumed, nor does it purport to
present the results which may be obtained in the future.
12
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INFOCURE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1999
(IN THOUSANDS)
PRO FORMA PRO FORMA
INFOCURE MEDICAL DYNAMICS ADJUSTMENTS COMBINED
--------- ---------------- ----------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ $ 16,836 $ 261 $ (475)(C) $ 16,622
Accounts and notes receivable, net... 40,150 195 40,345
Inventory............................ 4,428 98 4,526
Refundable income taxes.............. 3,256 -- -- 3,256
Deferred tax assets.................. 2,843 -- 2,843
Prepaid expense and other current
assets............................. 1,376 9 1,385
--------- ------- -------- ---------
Total current assets............... 68,889 563 (475) 68,977
Property and equipment, net.......... 24,064 392 24,456
Goodwill, net........................ 102,678 1,115 14,618(B) 118,411
Other intangible assets, net......... 9,182 3,176 (3,176)(B) 9,182
Deferred tax asset................... 12,963 -- 12,963
Other assets......................... 2,728 24 (500)(A) 2,252
--------- ------- -------- ---------
Total assets....................... $ 220,504 $ 5,270 $ 10,467 $ 236,241
========= ======= ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable......................... $ 1,222 $ -- $ -- $ 1,222
Accounts payable..................... 10,161 301 10,462
Accrued expense...................... 15,306 545 (148)(C) 15,803
100(B)
Accrued restructuring costs.......... 2,534 -- 2,534
Deferred revenue and customer
deposits........................... 12,979 391 13,370
Current portion of long-term debt.... 694 1,167 (500)(A) 831
(203)(B)
(327)(C)
--------- ------- -------- ---------
Total current liabilities.......... 42,896 2,404 (1,078)(C) 44,222
Long-term debt, less current
portion............................ 41,178 385 41,563
Other liabilities.................... 1,091 -- 1,091
--------- ------- -------- ---------
Total liabilities.................. 85,165 2,789 (1,078) 86,876
--------- ------- -------- ---------
Stockholders' equity:
Common stock......................... 32 13 (12)(B) 33
Additional paid-in capital........... 189,837 28,108 (14,083)(B) 203,862
Accumulated deficit.................. (54,530) (25,640) 25,640(B) (54,530)
--------- ------- -------- ---------
Total stockholders' equity......... 135,339 2,481 11,545 149,365
--------- ------- -------- ---------
Total liabilities and stockholders'
equity.......................... $ 220,504 $ 5,270 $ 10,467 $ 236,241
========= ======= ======== =========
See accompanying notes to pro forma financial statements
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INFOCURE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
DECEMBER 31, 1999
(IN THOUSANDS)
PRO FORMA PRO FORMA
INFOCURE MEDICAL DYNAMICS ADJUSTMENTS COMBINED
--------- ---------------- ----------- ---------
Total revenue......................... $ 203,634 $ 10,959 $ -- $ 214,593
--------- -------- ------- ---------
Operating expense:
Hardware and other items purchased
for resale....................... 49,613 4,050 -- 53,663
Selling, general and
administrative................... 104,770 9,592 -- 114,362
Research and development............ 15,655 3 -- 15,658
Depreciation and amortization....... 14,490 1,129 598(D) 16,217
Compensatory stock awards........... 1,431 50 -- 1,481
Restructuring and other charges..... 10,681 655 -- 11,336
Merger costs........................ 3,764 -- -- 3,764
--------- -------- ------- ---------
Total operating expense.......... 200,404 15,479 598 216,481
--------- -------- ------- ---------
Operating income (loss)............... 3,230 (4,520) (598) (1,888)
Interest and other expense, net....... 3,513 878 -- 4,391
--------- -------- ------- ---------
Loss before income taxes and
extraordinary item.................. (283) (5,398) (598) (6,279)
Provision (benefit) for income
taxes............................... 576 -- (2,051)(E) (1,475)
--------- -------- ------- ---------
Loss before extraordinary item........ $ (859) $ (5,398) $ 1,453 $ (4,804)
========= ======== ======= =========
(loss) per share before
extraordinary item:
Basic and diluted.............. $ (0.03) $ (0.17)
========= =========
Weighted average shares
outstanding:..................... 27,994 28,742
========= =========
See accompanying notes to pro forma financial statements
14
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INFOCURE CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS
(A) Records elimination of InfoCure loan to Medical Dynamics
(B) Records issuance of 748,000 shares of InfoCure common stock in exchange for
13.2 million shares of Medical Dynamics common stock. Medical Dynamics
common stock outstanding includes approximately 318,000 shares issued in
January 2000 to reduce indebtedness. The merger agreement provides that the
InfoCure shares to be exchanged are valued based on the average of the
closing price of InfoCure common stock for the 20 days preceding closing,
including the estimated fair value of InfoCure options exchanged for Medical
Dynamics options and estimated merger costs of the transaction. However, the
exchange ratio of .05672 shares will change if the average closing price of
InfoCure common stock prior to the closing of the merger is less than $13.22
per share or more than $22.04 per share. If the average closing price prior
to the closing of the merger is below $13.22, each share of Medical Dynamics
common stock will be exchanged for $0.75 worth of InfoCure common stock. If
the average closing price prior to the closing of the merger is above
$22.04, each share of Medical Dynamics common stock will be exchanged for
$1.25 worth of InfoCure common stock. For pro forma purposes the total
consideration is estimated at $14.1 million, representing 748,000 shares of
InfoCure common stock valued at $18.05 per share plus approximately $500,000
for the estimated fair value of InfoCure options exchanged for Medical
Dynamics options and estimated transactions costs of $100,000.
(C) Records payments of accrued salary and vacation and certain promissory notes
upon closing. This acquisition is accounted for as a purchase with the total
consideration allocated to the assets acquired as follows:
DESCRIPTION AMOUNT
- ----------- ----------
(IN
THOUSANDS)
Current assets.............................................. $ 563
Property and equipment...................................... 392
Other assets................................................ 24
Current liabilities......................................... (2,201)
Long-term debt, net of current portion...................... (385)
-------
Net assets................................................ (1,607)
Goodwill.................................................... 15,733
-------
$14,126
=======
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
(D) Records adjustment to amortization expense to reflect increase for new basis
of goodwill and eliminate amortization for other intangibles to which no
value was assigned. Goodwill is amortized using the straight line method
over a 15 year life from January 1 to November 15, and over a 3 year life
effective in the fourth quarter consistent with InfoCure's adoption of a
change in accounting estimated effected in 1999.
15
23
INFOCURE CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
(E) Provides the effect of income taxes as though the companies filed
consolidated tax returns. Goodwill arising from the transaction is not
deductible for income tax purposes and therefore does not provide a pro
forma income tax benefit.
COMPARATIVE PER SHARE DATA
We are providing the following comparative per share information to aid you
in your analysis of the financial aspects of the merger. You should read this
information in conjunction with the historical consolidated financial statements
of InfoCure and Medical Dynamics contained in reports that have been previously
filed with the SEC and that are incorporated by reference in this proxy
statement-prospectus. See "Unaudited Pro Forma Condensed Combined Financial
Statements" beginning on page 12. The pro forma loss per share amounts presented
below reflect the pending acquisition of Medical Dynamics as if it had occurred
on January 1, 1999. The pro forma book value per share amounts presented below
reflect the pending acquisition of Medical Dynamics as though it had occurred on
December 31, 1999. The Medical Dynamics pro forma equivalent per share data were
calculated by multiplying the InfoCure pro forma per share data by .05672, the
applicable exchange ratio (subject to certain adjustments), so that the InfoCure
pro forma per share amounts are equated to the respective values for one share
of Medical Dynamics, assuming an all stock conversion. The pro forma per share
data are not necessarily indicative of the results that would have occurred,
your financial interest in such results, or the future results that will occur
after the merger. Neither InfoCure nor Medical Dynamics has paid cash dividends
on its common stock.
LOSS PER COMMON SHARE BEFORE EXTRAORDINARY ITEM:
YEAR ENDED
DECEMBER 31, 1999
-----------------
BASIC AND DILUTED:
InfoCure historical....................................... $(0.03)
Medical Dynamics historical(1)............................ (0.52)
Pro forma combined........................................ (0.17)
Medical Dynamics pro forma equivalent..................... (0.01)
DECEMBER 31, 1999
-----------------
BOOK VALUE PER COMMON SHARE:
InfoCure historical....................................... $4.18
Medical Dynamics historical............................... .19
Pro forma combined........................................ 4.52
Medical Dynamics pro forma equivalent..................... .26
- -------------------------
(1) Medical Dynamics historical data is derived from its consolidated financial
statements for the year ended for the year ended September 30, 1999.
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RISK FACTORS
If the merger is consummated, you will receive shares of InfoCure common
stock in exchange for your shares of Medical Dynamics common stock. You should
be aware of particular risks and uncertainties that are applicable to an
investment in InfoCure common stock. In addition to the other information
included and incorporated by reference in this proxy statement-prospectus, you
should consider carefully the matters described below in determining whether to
approve the merger agreement.
RISKS RELATED TO THE MERGER
THE TOTAL NUMBER OF SHARES OF INFOCURE COMMON STOCK TO BE ISSUED IN THE MERGER
MAY CHANGE.
The number of shares of InfoCure common stock to be issued for each share
of Medical Dynamics common stock will be adjusted in the event of certain
fluctuations in the market price of the InfoCure common stock prior to the
merger. The exchange ratio is .05672 shares of InfoCure common stock for each
share of Medical Dynamics common stock provided the average closing price of
InfoCure common stock for the 20 trading days prior to the closing of the merger
is between $13.22 and $22.04 per share. If the average closing price of InfoCure
common stock is below $13.22 per share, then the exchange ratio will be adjusted
so that you will receive $0.75 worth of InfoCure common stock for each share of
Medical Dynamics common stock. If the average closing price of InfoCure common
stock is above $22.04 per share, then the exchange ratio will be adjusted so
that you will receive $1.25 worth of InfoCure common stock for each share of
Medical Dynamics common stock. Thus, the specific dollar value of InfoCure
common stock you will receive upon closing of the merger will depend on the
market value of the InfoCure common stock at the time of closing of the merger.
Accordingly, the value of the consideration that you will receive if the merger
occurs may decrease from the date you vote your shares. The closing sale price
of InfoCure common stock on The Nasdaq National Market on December 20, 1999, the
last trading day prior to the public announcement of the proposed merger, was
$27.00, and on April , 2000, the most recent practicable date prior to the
printing of this proxy statement-prospectus, was $ . However, neither
Medical Dynamics nor InfoCure can assure you as to the market price of InfoCure
common stock at any time before or after the merger.
Neither InfoCure nor Medical Dynamics will have the right to terminate the
merger agreement as a result of changes in InfoCure's common stock price. You
should obtain current market quotations for the InfoCure common stock.
INFOCURE MAY NOT ACHIEVE THE ANTICIPATED BENEFITS FROM THE MERGER.
InfoCure cannot guarantee that it will realize the benefits that it
anticipates from integrating Medical Dynamics' operations and InfoCure's
operations as fully or as quickly as it expects. InfoCure may encounter
difficulties integrating Medical Dynamics' operations, including, without
limitation:
- difficulty integrating the financial, operational and administrative
functions of Medical Dynamics;
- difficulty integrating Medical Dynamics' products and services;
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- delays in realizing the benefits of InfoCure's strategies for Medical
Dynamics' business;
- diversion of management's attention from existing operations;
- difficulty operating in markets in which InfoCure has little prior
experience;
- inability to retain key employees necessary to continue the operations of
Medical Dynamics; or
- Medical Dynamics' unknown or contingent liabilities.
The challenges and risks of integrating the operations of Medical Dynamics
will be made greater because InfoCure is still integrating several recent
acquisitions. Moreover, InfoCure anticipates that it will make additional future
acquisitions. The integration of multiple acquisitions at the same time will
place an even greater strain on InfoCure's management's resources and attention.
THE MEDICAL DYNAMICS BOARD OF DIRECTORS DID NOT OBTAIN ANY THIRD PARTY OPINION
AS TO THE FAIRNESS OF THE MERGER.
The Medical Dynamics board of directors did not seek or obtain any third
party fairness opinion or any valuation or appraisal of either Medical Dynamics
or InfoCure. Therefore, in voting to approve the merger, the Medical Dynamics
stockholders will not have the benefit of a third party opinion that the number
of shares of InfoCure common stock to be received by them in the merger is fair
from a financial point of view. The number of shares of InfoCure common stock to
be received in the merger was negotiated directly between representatives of
InfoCure and Medical Dynamics.
CERTAIN OF MEDICAL DYNAMICS' OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST
THAT MAY INFLUENCE THEM TO SUPPORT OR APPROVE THE MERGER.
The directors and officers of Medical Dynamics participate in arrangements
and have continuing indemnification against liabilities that provide them with
interests in the merger that are different from, or are in addition to, your
interests. As a result, these directors and officers could be more likely to
approve the merger agreement than if they did not hold these interests. You
should consider whether these interests may have influenced these directors or
officers to support or recommend the merger.
THE ISSUANCE OF INFOCURE COMMON STOCK AND MEDICAL DYNAMICS' OPERATING LOSSES
WILL INCREASE INFOCURE'S LOSSES PER SHARE.
Approximately 718,000 shares of InfoCure common stock will be issued
pursuant to the terms of the merger agreement, representing approximately 2% of
the total number of shares of InfoCure common stock that are outstanding as of
April 4 , 2000. In addition, Medical Dynamics continues to experience operating
losses. As a result, InfoCure's losses per share will be increased which may
negatively affect the market price of InfoCure common stock.
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YOUR RIGHTS AS A MEDICAL DYNAMICS STOCKHOLDER DIFFER FROM THE RIGHTS YOU WILL
HAVE AS AN INFOCURE STOCKHOLDER.
Following the merger, you will become a holder of InfoCure common stock.
Certain material differences exist between the rights of stockholders of Medical
Dynamics under Medical Dynamics' articles of incorporation and bylaws and
Colorado law, and the rights of stockholders of InfoCure under InfoCure's
certificate of incorporation and bylaws and Delaware law.
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT MEDICAL DYNAMICS' FUTURE
BUSINESS AND OPERATIONS.
If the merger is not completed for any reason, Medical Dynamics may be
subject to a number of material risks, including the following:
- Medical Dynamics has a substantial working capital deficit and may have
difficulty paying its debts;
- Medical Dynamics may incur substantial operating losses and may need to
immediately and successfully establish new sources of financing, the
availability of which is uncertain;
- potential customers may defer purchases of Medical Dynamics products;
- potential partners may refrain from entering into agreements with Medical
Dynamics;
- employee turnover may increase; and
- Medical Dynamics may be delisted from The Nasdaq SmallCap Market.
The occurrence of any of these factors would likely result in serious harm
to Medical Dynamics' business, results of operations and financial condition.
RISKS RELATED TO INFOCURE AND MEDICAL DYNAMICS AS A COMBINED COMPANY
INFOCURE'S SUBSCRIPTION PRICING MODEL IS UNPROVEN AND ITS SUCCESS DEPENDS ON
ACCEPTANCE OF THIS MODEL AND INFOCURE'S ABILITY TO SET SUBSCRIPTION FEES AT
APPROPRIATE LEVELS.
InfoCure is currently reorganizing its business to facilitate changes in
its pricing of practice management software products, its delivery of these
products to customers and the scope of its product offerings. As part of the
reorganization, InfoCure plans to convert to subscription-based pricing for
substantially all of its products and services. Under this subscription pricing
model, customers will pay a fixed, monthly fee for use of InfoCure's products
and services and the computer hardware necessary to utilize those products and
services. This represents a change in InfoCure's historical pricing model in
which customers were charged an initial licensing fee for use of practice
management products and continuing maintenance, support and electronic data
interchange, or EDI, transaction fees. Potential customers may not accept
InfoCure's subscription pricing model. The success of this subscription pricing
model depends on InfoCure's ability to set subscription fees at rates that will
allow InfoCure to achieve profitability.
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The markets for practice management applications delivered through
subscription pricing are relatively new and evolving. There are relatively few
similar products whose subscription fees InfoCure can evaluate in setting fees
and the providers of those products have also had to set their fees in the
context of an undeveloped market. As a result, InfoCure has limited information
from which to evaluate the appropriate level for its subscription fees and
InfoCure may fail to set subscription fees at levels that enable it to become
profitable. In addition, InfoCure will enter into multi-year agreements with
subscribers pursuant to which subscription fees or increases in fees will be
locked-in typically for five years, limiting InfoCure's ability to increase
subscription fees for those subscribers. If InfoCure fails to appropriately
price its subscription fees, achieving profitability could take longer than
expected or InfoCure may never achieve profitability.
INFOCURE'S ASP PRODUCT STRATEGY IS UNPROVEN AND CUSTOMERS MAY NOT RESPOND
FAVORABLY TO ITS NEW PRODUCTS.
As part of the reorganization which InfoCure is undertaking, InfoCure
intends to develop and offer new practice management software applications that
can be delivered through the application services provider, or "ASP," delivery
model. In the ASP delivery model, InfoCure would remotely host applications from
an offsite central server which customers would access over dedicated lines,
virtual private networks or the Internet. Providing software applications to
physicians through the ASP delivery model is a business that has only recently
begun to develop, and this concept may not achieve acceptance in the market. In
order to successfully sell InfoCure's ASP-delivered products, InfoCure will need
to convince new and existing customers that the features of these products
justify their cost, as well as the time and administrative expense required to
convert to these products. If InfoCure is unsuccessful or if the market for its
ASP-delivered products does not grow or grows slowly, achieving profitability
could take longer than expected or InfoCure may never achieve profitability.
Achieving market acceptance for these products will require substantial sales
and marketing efforts and expenditure of significant funds to increase awareness
and demand by InfoCure's target customers. In addition, InfoCure's potential
customers may have made extensive investment in hardware, software and training
for existing systems. As a result, they may be unwilling to adopt new systems.
Further, InfoCure's potential customers could perceive that InfoCure's
ASP-delivered products will not adequately or cost-effectively address their
requirements.
THE FAILURE TO SUCCESSFULLY COMPLETE THE DEVELOPMENT OF INFOCURE'S INTERNET
SOLUTIONS AND ENTER INTO STRATEGIC RELATIONSHIPS COULD HARM INFOCURE'S BUSINESS
AND LIMIT ITS POTENTIAL GROWTH.
As part of InfoCure's reorganization, it intends to offer Internet
solutions that will allow its customers to utilize the Internet to enhance
office workflow and conduct business-to-business e-commerce. InfoCure is
continuing to develop its Internet solutions and to establish strategic
relationships to facilitate these product offerings. InfoCure's ability to
attract new customers may be dependent upon its ability to complete the
development of its Internet solutions. In addition, InfoCure's ability to offer
some Internet solutions is contingent upon it entering into strategic
relationships. If InfoCure is unsuccessful in completing the development of
InfoCure's Internet solutions or fails to enter into strategic relationships,
the offering of these products may be delayed or these products may never become
available.
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INFOCURE'S ASP PRODUCT STRATEGY IS DEPENDENT UPON THE CONTINUED DEVELOPMENT OF
THE INTERNET.
InfoCure's ability to offer ASP-delivered products that can be accessed
over the Internet and its Internet solutions on a widespread basis depends on
InfoCure's potential customers having access to Internet connections with the
necessary speed, bandwidth and data capacity. The availability of this Internet
access will depend on others for the ongoing development of the Internet
infrastructure, including the necessary speed, bandwidth, data capacity and
security, as well as timely development of complementary products for providing
reliable Internet access and service. InfoCure cannot predict whether the
Internet will evolve to the point where its customers will be able to take full
advantage of the services that InfoCure offers. If the Internet fails to develop
into an efficient medium for these transactions, InfoCure's ASP product strategy
will be unsuccessful.
INFOCURE'S SYSTEMS MAY BE VULNERABLE TO SECURITY BREACHES AND VIRUSES.
The success of InfoCure's strategy to offer ASP-delivered products and
Internet solutions depends on the confidence of its customers in InfoCure's
ability to securely transmit confidential information. Any failure to provide
secure electronic communication services could harm InfoCure's business and
reputation. InfoCure's ASP-delivered products and Internet solutions will rely
on encryption, authentication and other security technology licensed from third
parties to achieve secure transmission of confidential information. InfoCure may
not be able to stop unauthorized attempts to gain access to or disrupt the
transmission of communications by InfoCure's customers. Anyone who is able to
circumvent InfoCure's security measures could misappropriate confidential user
information or interrupt InfoCure's, or InfoCure's customers', operations. In
addition, InfoCure's ASP-delivered products may be vulnerable to viruses,
physical or electronic break-ins, and similar disruptions.
INFOCURE PLANS TO EXPAND RAPIDLY AND IT MAY BE DIFFICULT TO MANAGE INFOCURE'S
GROWTH.
InfoCure intends to rapidly grow its business. However, InfoCure cannot be
sure that it will successfully manage its growth. In order to successfully
manage its growth, InfoCure must:
- expand and enhance its administrative infrastructure;
- improve its management, financial and information systems and controls;
and
- expand, train and manage its employees effectively
Continued growth could place a further strain on InfoCure's management,
operations and financial resources. There will also be additional demands on
InfoCure's sales, marketing and administrative resources as InfoCure increases
its product offerings and expands its target markets and customers. InfoCure
cannot assure you that its operating and financial control systems,
administrative infrastructure, facilities and personnel will be adequate to
support its future operations or to effectively adapt to future growth. If
InfoCure cannot manage its growth effectively, InfoCure's business may be
harmed.
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INFOCURE'S GROWTH COULD BE LIMITED IF IT IS UNABLE TO ATTRACT AND RETAIN
QUALIFIED PERSONNEL.
InfoCure believes its success depends largely on its ability to attract and
retain highly skilled technical, managerial and marketing personnel to develop
its products and services. Individuals with the information technology skills
InfoCure needs to further develop its products and services are in short supply
and competition for qualified personnel is particularly intense. InfoCure may
not be able to hire the necessary personnel to implement its business strategy,
or InfoCure may need to pay higher compensation for employees than it currently
expects. There can be no assurance InfoCure will succeed in attracting and
retaining the personnel it needs to continue to grow and to implement its
business strategy. In addition, InfoCure depends on the performance of its
executive officers and other key employees. The loss of any member of InfoCure's
senior management team could negatively impact its ability to execute its new
product strategy and subscription pricing model.
IF INFOCURE IS UNABLE TO PROTECT ITS INTELLECTUAL PROPERTY RIGHTS FROM THIRD
PARTY CHALLENGES, INFOCURE'S COMPETITIVE POSITION MAY BE SIGNIFICANTLY IMPAIRED.
InfoCure relies on a combination of copyright, trademark and trade secret
laws and restrictions on disclosure to protect the intellectual property rights
related to InfoCure's software applications. InfoCure's software technology is
not patented and existing copyright laws offer only limited practical
protection. In addition, InfoCure has not generally entered into confidentiality
agreements with its employees. InfoCure cannot guarantee that the legal
protections that it relies on will be adequate to prevent misappropriation of
its technology.
Further, these protections do not prevent independent third-party
development of competitive products or services. Unauthorized parties may
attempt to copy or otherwise obtain and use InfoCure's products or technology.
Monitoring use of InfoCure's products is difficult, and InfoCure cannot assure
you that the steps it has taken will prevent unauthorized use of InfoCure's
technology, particularly in foreign countries where the laws may not protect
InfoCure's proprietary rights as fully as in the United States.
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST INFOCURE COULD BE COSTLY TO
DEFEND AND COULD DIVERT MANAGEMENT'S ATTENTION AWAY FROM INFOCURE'S BUSINESS.
As the number of software products in InfoCure's target markets increases
and as the functionality of these products overlaps, InfoCure may become
increasingly subject to the threat of infringement claims. InfoCure cannot
guarantee that third parties will not assert infringement claims against it in
the future. Any infringement claims alleged against InfoCure, even if without
merit, can be time-consuming and expensive to defend. Any infringement claims
may divert management's attention and resources and could also cause delays in
the delivery of InfoCure's applications to its customers. Settlement of any
infringement claims could require InfoCure to enter into costly royalty or
licensing agreements. If a claim of product infringement against InfoCure was
successful and InfoCure was unable to license the infringing or similar
technology, InfoCure's business, financial condition and results of operations
could be harmed.
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INFOCURE MAY UNDERTAKE ACQUISITIONS WHICH CAN POSE RISKS TO ITS BUSINESS.
InfoCure may undertake acquisitions if it identifies companies with
complementary applications, services, businesses or technologies. InfoCure may
be unable to retain the acquired companies' personnel or integrate them into its
company. InfoCure's profitability may suffer because of acquisition-related
costs or amortization of acquired goodwill and other intangible assets.
Similarly, the time and expense associated with finding suitable and compatible
companies to enhance InfoCure's product offering could disrupt InfoCure's
ongoing business and divert its management's focus.
INFOCURE MAY FACE DIFFICULTIES INTEGRATING ACQUIRED BUSINESSES.
InfoCure's successful integration of the businesses it has acquired is
critical to its future success. Integrating the management and operations of
acquired businesses is time consuming, and InfoCure cannot guarantee that it
will achieve any of the anticipated synergies and other benefits expected to be
realized from these acquisitions.
TECHNOLOGY SOLUTIONS MAY CHANGE FASTER THAN INFOCURE IS ABLE TO UPDATE ITS
TECHNOLOGY.
The healthcare software application market in which InfoCure competes is
characterized by rapidly changing technology, evolving industry standards,
emerging competition and the frequent introduction of new services, software and
other products. InfoCure's success depends partly on its ability to:
- develop new or enhance existing applications, software and services to
meet its customers' changing needs in a timely and cost-effective way;
- respond effectively to technological changes and new product offerings of
its competitors; and
- develop relationships with strategic partners necessary to offer its
Internet solutions and ASP-delivered products.
InfoCure cannot assure you that it will be able to accomplish any or all of
these goals. Many of InfoCure's competitors may develop products or technologies
that are better or more attractive than InfoCure's or that may render InfoCure's
technology or applications obsolete. If InfoCure does not succeed in adapting
its technology, its business could be harmed.
INFOCURE IS SUBJECT TO GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES.
Legislation currently being considered at the federal level could impact
the manner in which InfoCure conduct its business. The Health Insurance
Portability and Accountability Act of 1996 ("HIPAA") mandates the adoption of
national standards for the transmission of certain types of medical information
and the data elements used in such transmissions to insure the integrity and
confidentiality of such information. On November 3, 1999, the Secretary of
Health and Human Services promulgated regulations to protect the privacy of
electronically transmitted or maintained, individually identifiable health
information. InfoCure believes that its products will enable compliance with the
proposed regulations but cannot assure you that it will be able to comply with
those proposed regulations in a timely manner or at all. Moreover, until the
proposed regulations become final, they could
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change, which could require InfoCure to expend additional resources to comply
with the revised standards and InfoCure may not be able to comply with the
revised standards in a timely manner or at all. If any of InfoCure's products or
services are subject to those regulations, it may be required to incur
additional expenses in order to comply with these requirements, and InfoCure may
not be able to comply with them in a timely manner or at all. In addition, the
success of InfoCure's compliance efforts may also be dependent on the success of
healthcare participants in dealing with the standards. If InfoCure is unable to
comply with regulations implementing HIPAA in a timely manner or at all, the
sale of InfoCure's products and InfoCure's business could be harmed.
The United States Food and Drug Administration is responsible for assuring
the safety and effectiveness of medical devices under the Federal Food, Drug and
Cosmetic Act. Computer applications and software are considered medical devices
and are subject to regulation by the FDA when they are indicated, labeled or
intended to be used in the diagnosis of disease or other conditions, or in the
cure, mitigation, treatment or prevention of disease, or are intended to affect
the structure or function of the body. InfoCure does not believe any of its
current products or services are subject to FDA regulation as medical devices;
however, InfoCure plans to expand its product and service offerings into areas
that may be subject to FDA regulation. InfoCure has no experience in complying
with FDA regulations. InfoCure's compliance with such FDA regulations could
prove to be time consuming, burdensome and expensive, which could adversely
affect its ability to introduce new applications or services in a timely manner.
In addition, InfoCure may become subject to additional government
regulations in connection with its changing product strategy. Laws and
regulations directly applicable to communications or commerce over the Internet
are becoming more prevalent. Laws and regulations may be adopted with respect to
the Internet or other online services covering issues such as user privacy,
pricing, content, copyrights, distribution and characteristics, and quality of
products and services. Because of the increasing use of the Internet as a
communication and commercial medium, the government has adopted and may adopt
additional laws and regulations with respect to the Internet covering such areas
as user privacy, pricing, content, taxation, copyright protection, distribution
and characteristics and quality of production and services.
CHANGES IN STATE AND FEDERAL LAWS RELATING TO CONFIDENTIALITY OF PATIENT MEDICAL
RECORDS COULD LIMIT INFOCURE'S CUSTOMERS' ABILITY TO USE ITS SERVICES.
InfoCure cannot assure you that changes to state or federal laws will not
materially restrict the ability of healthcare providers to submit information
from patient records using InfoCure's applications. Such restrictions would
decrease the value of InfoCure's applications to its customers, which could
materially harm InfoCure's business. The confidentiality of patient records and
the circumstances under which records may be released for inclusion in
InfoCure's databases are subject to substantial regulation by state governments.
These state laws and regulations govern both the disclosure and the use of
confidential patient medical record information. Although compliance with these
laws and regulations is at present principally the responsibility of the
healthcare provider, regulations governing patient confidentiality rights are
evolving rapidly. Additional legislation governing the dissemination of medical
record information has been proposed at both the state and federal level. This
legislation may require holders of this information to implement security
measures. Such legislation might require InfoCure to make substantial
expenditures to implement such measures.
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CHANGES IN THE REGULATORY AND ECONOMIC ENVIRONMENT IN THE HEALTHCARE INDUSTRY
COULD ADVERSELY AFFECT INFOCURE'S BUSINESS.
The healthcare industry is highly regulated and is subject to changing
political, economic and regulatory influences. These factors affect the
purchasing practices and operation of healthcare organizations. Changes in
current healthcare financing and reimbursement systems could require InfoCure to
make unplanned enhancements of applications or services, or result in delays or
cancellations of orders or in the revocation of endorsement of InfoCure's
services by its strategic partners and others. Federal and state legislatures
have periodically considered programs to reform or amend the U.S. healthcare
system at both the federal and state level. These programs may contain proposals
to increase governmental involvement in healthcare, lower reimbursement rates or
otherwise change the environment in which healthcare industry participants
operate. Healthcare industry participants may respond by reducing their
investments or postponing investment decisions, including investments in
InfoCure's applications and services.
INFOCURE'S QUARTERLY OPERATING RESULTS MAY VARY AND IN THE PAST IT HAS
EXPERIENCED LOSSES.
InfoCure's operating results may vary significantly from quarter to
quarter. In addition, InfoCure has experienced historical losses. InfoCure's
operating results will be influenced by such factors as:
- its success in appropriately pricing and transitioning to the
subscription pricing model;
- the rate at which its existing customers convert and new customers
subscribe to its subscription pricing model;
- its release of the ASP-delivered product and Internet solutions and the
rate of adoption of these products and services by new and existing
customers;
- the timing of and charges associated with completed acquisitions or other
events;
- changes in customer purchasing patterns;
- competition;
- the timing of and cost related to development its new products;
- the length of sales cycles; and
- the levels of advertising and promotional expenditures.
COMPETITION COULD REDUCE REVENUE FROM INFOCURE'S PRODUCTS AND SERVICES.
InfoCure's principal competitors include both national and regional
practice management systems vendors. Currently, the practice management systems
industry in the United States is characterized by a large number of relatively
small, regionally-focused companies, comprising a highly fragmented industry
with only a few national vendors. Smaller, regionally-focused companies
typically market their products to a single practice specialty. Until recently,
larger, national vendors have targeted primarily large healthcare providers.
InfoCure believes that the larger, national vendors may broaden their markets to
include both small and large healthcare providers. The healthcare information
technology industry
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is consolidating, which has resulted in large, well-capitalized companies that
have not historically been providers of practice management systems entering
into the practice management systems market. In addition, InfoCure competes with
national and regional providers of computerized billing, insurance processing
and record management services to healthcare practices. As the market for
InfoCure's products and services expands, additional competitors are likely to
enter this market. InfoCure believes that the primary competitive factors in its
markets are:
- product features and functionality;
- customer service, support and satisfaction;
- price;
- ongoing product enhancements; and
- the reputation and stability of the vendor.
Some competitors have greater financial, development, technical, marketing
and sales resources than InfoCure. If competition in the practice management
systems industry intensifies, InfoCure's results of operations may suffer and it
may be required to lower the prices of its products and services.
INFOCURE'S NEW PRODUCT STRATEGY AND SUBSCRIPTION PRICING MODEL WILL REQUIRE
ADDITIONAL FINANCING WHICH MAY NOT BE AVAILABLE.
InfoCure's transition to the subscription pricing model will initially
adversely impact InfoCure's cash flow until subscription fees replace the
decline in one-time revenue from license fees and hardware sales. In addition,
InfoCure expects to incur increased marketing and sales expense in connection
with the rollout of InfoCure's ASP-delivered products and Internet solutions.
Adequate financing for these needs may not be available to InfoCure.
INVESTMENT RISKS
INFOCURE'S STOCK PRICE HAS HISTORICALLY BEEN VOLATILE, WHICH MAY MAKE IT MORE
DIFFICULT FOR YOU TO RESELL SHARES WHEN YOU WANT AT PRICES YOU FIND ATTRACTIVE.
The market price of InfoCure common stock has been volatile in the past and
may be volatile in the future. The market price of InfoCure's common stock may
be significantly affected by the following factors:
- public announcements by companies in InfoCure's industry, including
announcements of acquisitions, strategic relationships, new technologies
and new products or product enhancements;
- general market conditions or market conditions specific to particular
industries;
- the combined company's technological innovations or those of its
competitors; and
- quarterly variations in InfoCure's results of operations.
In particular, the stock prices of many companies in the technology and
emerging growth sectors have fluctuated widely due to events unrelated to their
operating performance. These fluctuations may cause the market price of
InfoCure's common stock to decline below current levels.
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INFOCURE'S CERTIFICATE OF INCORPORATION AND BYLAWS HAVE ANTI-TAKEOVER
PROVISIONS.
Provisions of InfoCure's certificate of incorporation and bylaws, as well
as the Delaware General Corporation Law, could make it more difficult for a
third party to acquire InfoCure even if doing so would be beneficial to its
stockholders. InfoCure is subject to the provisions of Section 203 of the
Delaware General Corporation Law which restricts certain business combinations
with interested stockholders. The combination of these provisions may have the
effect of inhibiting a non-negotiated merger or other business combination.
In addition, the InfoCure board of directors has the authority to issue up
to two million shares of preferred stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares, without stockholder action. The rights of the holders of common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The issuance of
preferred stock could discourage or make difficult the acquisition of a majority
of its outstanding voting stock by a third party.
Moreover, certain provisions of InfoCure's certificate of incorporation and
bylaws and Delaware law could delay or make more difficult a merger, tender
offer or proxy contest involving InfoCure. These provisions may have the effect
of delaying or preventing a change of control.
PRIVATELY-SOLD SHARES ELIGIBLE FOR PUBLIC RESALE COULD HAVE A NEGATIVE EFFECT ON
INFOCURE'S STOCK PRICE.
As of March 28, 2000, InfoCure had 32.6 million shares of common stock
outstanding, and there were outstanding options to purchase approximately 8.2
million shares of InfoCure common stock under stock option plans. InfoCure has
issued shares in connection with acquisitions and investments and such shares
are available for resale pursuant to currently effective registration statements
previously filed by InfoCure with the SEC. Sales of substantial amounts of these
shares in the public market or the prospect of these sales could adversely
affect the market price of InfoCure common stock.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE.
This proxy statement-prospectus contains "forward-looking statements" that
involve risks and uncertainties, such as statements concerning: growth and
future operating results of Medical Dynamics and InfoCure; the benefits of the
merger to Medical Dynamics, InfoCure and Medical Dynamics stockholders; the
anticipated closing date of the merger; anticipated difficulties in integrating
Medical Dynamics' operations with that of InfoCure's; additional charges and
estimated transaction costs that the combined company may encounter; the parties
intent to account for the merger as a purchase business combination; the
potential fluctuation in market price of InfoCure common stock; the exchange
ratio of the merger; the number of shares of Medical Dynamics common stock
outstanding on the closing date of the merger; InfoCure's ability to reduce
expenses; Medical Dynamics' belief that its size and limited access to capital
resources may inhibit future growth; future customer benefits attributable to
Medical Dynamics' or InfoCure's products; developments in Medical Dynamics' or
InfoCure's markets and strategic focus; InfoCure's transition to subscription
pricing, InfoCure's development of ASP-delivered products, Internet solutions
and other new products and product enhancements; potential acquisitions and the
integration of acquired businesses, products and technologies; strategic
relationships; future
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economic, business and regulatory conditions; future levels of Medical Dynamics'
costs of goods sold, sales and marketing expenses, research and development
expenses, general and administrative expenses, depreciation and amortization
expenses and net loss; and Medical Dynamics' liquidity.
Such forward-looking statements are generally accompanied by words such as
"project," "believe," "anticipate," "plan," "expect," "estimate," "intend,"
"should," "would," "could," "may," or other words that convey uncertainty of
future events or outcomes. Although each of Medical Dynamics and InfoCure
believes that such forward-looking statements are reasonable, neither can assure
you that such expectations will prove to be correct. Factors that could cause
actual results to differ materially from these forward-looking statements are
disclosed herein. These factors and other cautionary statements made in this
document should be read as being applicable to all related forward-looking
statements whenever they appear in this document. Neither Medical Dynamics nor
InfoCure undertakes any obligation to update any forward-looking statements.
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THE SPECIAL MEETING
PURPOSE
InfoCure and Medical Dynamics are furnishing this proxy
statement-prospectus to Medical Dynamics stockholders in connection with the
solicitation of proxies by the Medical Dynamics board of directors. The Medical
Dynamics board of directors will use the proxies at the special meeting of
stockholders of Medical Dynamics to be held on May 30, 2000 and at any
adjournment or postponement thereof.
At the special meeting, you will be asked to vote upon the proposal to
approve the merger agreement attached to this proxy statement-prospectus as
Appendix A and to authorize the merger of a wholly owned subsidiary of InfoCure
into Medical Dynamics, with Medical Dynamics being the surviving corporation and
a wholly owned subsidiary of InfoCure.
DATE, PLACE AND TIME
The special meeting of Medical Dynamics' stockholders will be held on May
30, 2000, at the offices of Medical Dynamics, 99 Inverness Drive East,
Englewood, Colorado 80112 commencing at 10:00 a.m., local time.
RECORD DATE
The Medical Dynamics board of directors fixed the close of business on
April 27, 2000 as the record date for the special meeting. Accordingly, only
holders of Medical Dynamics common stock of record at the close of business on
April 27, 2000 will be entitled to notice of, and to vote at, the special
meeting.
MEDICAL DYNAMICS STOCKHOLDERS ENTITLED TO VOTE
As of April 27, 2000, there were outstanding shares of
Medical Dynamics common stock and such shares of common stock were held by
holders of record. Each share of Medical Dynamics common stock
entitles the holder thereof to one vote.
As of the date of this proxy statement -- prospectus, directors and
executive officers of Medical Dynamics may be deemed to be beneficial owners of
2,259,716 of the outstanding shares of Medical Dynamics common stock. This
number does not include stock that the Medical Dynamics directors and executive
officers may acquire through the exercise of stock options or warrants.
On the record date and as of the date of this proxy statement-prospectus,
InfoCure's directors and executive officers owned no shares of Medical Dynamics
common stock.
VOTE REQUIRED; VOTING AT THE MEETING
The holders of a majority of the outstanding shares of Medical Dynamics
common stock must be present in person or by proxy for a quorum to exist at the
special meeting. Approval of the merger agreement and authorization of the
merger requires the affirmative vote of the holders of a majority of the
outstanding shares of Medical Dynamics common stock.
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The holders of 17% of the outstanding shares of Medical Dynamics common
stock have agreed to vote in favor of the merger agreement pursuant to a voting
agreement with InfoCure.
VOTING OF PROXIES
All properly executed proxies received before the vote at the special
meeting, and not revoked, will be voted in accordance with the instructions
indicated on the proxies. If no instructions are indicated, such proxies will be
voted FOR the proposal to approve the merger agreement, and the proxy holder may
vote the proxy in its discretion as to any other matter which may properly come
before the meeting.
Any abstention will have the same effect as a vote AGAINST the approval of
the merger agreement.
A Medical Dynamics stockholder who has given a proxy solicited by Medical
Dynamics' board of directors may revoke it by:
- giving written notice of revocation to the Secretary of Medical Dynamics;
- delivering a later dated proxy to the Secretary of Medical Dynamics; or
- attending the special meeting and voting in person.
Any written notice of revocation or subsequent proxy must be sent so as to
be delivered at or before the taking of the vote at the special meeting to
Medical Dynamics, Inc., 99 Inverness Drive East, Englewood, Colorado 80112,
Attention: Secretary.
SOLICITATION OF PROXIES
The expenses of the solicitation of proxies for the special meeting will be
borne equally by InfoCure and Medical Dynamics, including the expenses incurred
in connection with filing, printing and mailing this proxy statement-prospectus
and the forms of proxy to the Medical Dynamics stockholders.
In addition to solicitation by mail, directors, officers and key employees
of Medical Dynamics may solicit proxies in person or by telephone, telegram or
other means of communication. These persons will receive no additional
compensation for solicitation of proxies, but may be reimbursed for reasonable
out-of-pocket expenses.
You should not send in any stock certificates with your proxies. A
transmittal form with instructions for the surrender of stock certificates for
shares of Medical Dynamics will be mailed to you as soon as practicable after
completion of the merger.
APPRAISAL RIGHTS
The Colorado Business Corporation Act generally provides that stockholders
of a corporation in a merger are not entitled to appraisal rights if the shares
of stock they own are, as of the record date, either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc., or held of record by at least 2,000 stockholders. Because the shares of
InfoCure common stock are listed on The Nasdaq National Market and because the
shares of Medical Dynamics common stock are held by more than 2,000
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stockholders of record, no Medical Dynamics stockholder is entitled to dissent
from the merger and demand payment of the "fair value" of such holder's shares
of Medical Dynamics common stock.
RECOMMENDATION OF THE MEDICAL DYNAMICS BOARD OF DIRECTORS
The Medical Dynamics board of directors has unanimously determined that the
terms of the merger agreement are consistent with and in furtherance of the
long-term business strategy of Medical Dynamics and fair to, and in the best
interests of, Medical Dynamics and its stockholders. Accordingly, the Medical
Dynamics board of directors recommends that Medical Dynamics stockholders vote
FOR the proposal to approve the merger agreement.
INTERESTS OF CERTAIN MEDICAL DYNAMICS DIRECTORS, OFFICERS AND AFFILIATES IN THE
MERGER
When considering the recommendation of the Medical Dynamics board of
directors, you should be aware that certain Medical Dynamics directors, officers
and affiliates have interests in the merger that are different from, or are in
addition to, yours. Your board of directors was aware of these interests and
considered them in approving and recommending the merger.
ASSUMPTION OF STOCK OPTIONS AND WARRANTS. At the closing of the merger,
all outstanding stock options and warrants held by officers, directors and
affiliates of Medical Dynamics will be assumed by InfoCure. Such assumption
provisions are pursuant to the terms of the options and warrants.
ACCELERATION OF OPTIONS AND PAYMENT OF CASH SEVERANCE. Upon closing of the
merger, certain options of Van A. Horsley, President of Medical Dynamics, to
purchase 400,000 shares of Medical Dynamics common stock will vest and become
immediately exercisable. In addition, Mr. Horsley will receive a cash payment of
$148,000 related to salary and accrued vacation.
EXECUTION OF NEW EMPLOYMENT AGREEMENTS. Each of Daniel L. Richmond and
Chae U. Kim, directors and officers with one of Medical Dynamics' subsidiaries,
currently have employment agreements with Medical Dynamics. The terms of the
agreements are five years and provide for annual compensation of $105,000 each
and other customary benefits. In connection with the merger, these employment
agreements will be cancelled and replaced with new employment agreements with
InfoCure.
The new employment agreement with Daniel L. Richmond provides for Mr.
Richmond to serve as manager of national accounts for Medical Dynamics's Dental
Division for a term of two years. Mr. Richmond will receive an annual salary of
$110,000, a $500 monthly business allowance, a $1,000 monthly automobile
allowance, and will be eligible for an annual cash incentive bonus not to exceed
his base salary.
The new employment agreement with Chae U. Kim provides for Mr. Kim to
manage all development of the Medical Dynamics Dental Division's "Classic" line
of products for a term of two years. Mr. Kim will receive an annual salary of
$110,000, a $500 monthly business allowance, a $1,000 monthly automobile
allowance, and will be eligible for an annual cash incentive bonus not to exceed
his base salary.
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PAYMENT OF PROMISSORY NOTES. Medical Dynamics currently owes Messrs.
Richmond and Kim certain consideration from Medical Dynamics' original
acquisition of Computer Age Dentist, Inc. Approximately $127,000 is owed under
these notes, and these notes are payable in full on August 1, 2000, or, if
earlier, upon the sale of Medical Dynamics. These notes bear interest at 12% per
annum, with interest being payable when the principal is due. These notes will
be paid in full by InfoCure upon closing of the merger.
On July 30, 1999, Medical Dynamics issued a promissory note in the amount
of $400,000 to Edwin L. Adair, M.D. and Mrs. Pat Horsley Adair, each an officer
and a director of Medical Dynamics. Dr. and Mrs. Adair advanced the entire
amount to Medical Dynamics on July 30, 1999. The note bears interest at 12% per
annum, with interest payable monthly in arrears. All unpaid interest and
principal is due on July 30, 2000, or, if earlier, upon the sale of Medical
Dynamics. The current outstanding principal balance of the note is $200,000. The
note will be paid in full by InfoCure upon closing of the merger.
ASSUMPTION OF ROYALTY AGREEMENTS. Dr. Adair, and I. Dean Bayne, M.D., each
an officer and a director of Medical Dynamics, are entitled to receive royalties
equal to two percent of the net sales of certain products assigned to Medical
Dynamics. These royalty agreements will be assumed by InfoCure in the merger.
ASSUMPTION OF LICENSE AGREEMENT. Dr. Adair and Medical Dynamics entered
into an exclusive revocable license agreement relating to use of certain
technology invented and developed by Dr. Adair. The license agreement will be
assumed by InfoCure in the merger.
ASSUMPTION OF DISTRIBUTION AGREEMENT. Medical Dynamics entered into a
distribution agreement with Micro-Medical Devices, Inc. ("MMD"), a corporation
wholly owned by Dr. Adair. The distribution agreement includes all products
developed by Dr. Adair related to his Universal Sterile Endoscopy System. No
revenues have been received as a result of the distribution agreement with MMD
nor are any revenues currently expected. The distribution agreement will be
assumed by InfoCure in the merger.
INDEMNIFICATION AND INSURANCE. The merger agreement provides that after
the effective time of the merger, the surviving corporation will honor the
obligations of Medical Dynamics that existed prior to such effective time to
indemnify Medical Dynamics' present and former directors and officers and their
heirs, executors and assigns. In addition, InfoCure will assume indemnification
agreements with certain of Medical Dynamics' directors and officers providing
for indemnification of each such director by Medical Dynamics to the full extent
permitted by the Colorado Business Corporation Act. The agreements provide that
in all circumstances in which a director or officer may receive indemnification
by statute, such indemnity shall be provided.
For four years after the effective time of the merger, the surviving
corporation has agreed to indemnify and hold harmless, to the fullest extent
permitted under applicable law, each present or former director or officer of
Medical Dynamics or any of its subsidiaries (including his or her heirs,
executors and assigns) against any costs, expenses and amounts paid in
settlement of any claim, action, suit, proceeding or investigation arising out
of any act or omission in his or her capacity as a director, or officer which
occurred before the effective time of the merger.
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DESCRIPTION OF THE MERGER
The following information describes material aspects of the merger. This
description is only a summary of the terms and conditions of the merger
agreement. It is qualified in its entirety by the Appendix A hereto, which is
attached to this proxy statement-prospectus. You are urged to read Appendix A in
its entirety.
THE MERGER
The merger agreement provides for the acquisition of Medical Dynamics by
InfoCure pursuant to the merger of a wholly owned subsidiary of InfoCure into
Medical Dynamics. Medical Dynamics will be the surviving corporation following
the merger and will be wholly owned by InfoCure.
WHAT YOU WILL RECEIVE IN THE MERGER
Each share of Medical Dynamics common stock will be exchanged for .05672
shares of InfoCure common stock provided the average closing price of InfoCure
common stock for the 20 trading days prior to the closing of the merger is
between $13.22 and $22.04 per share. If the average closing price of InfoCure
common stock is below $13.22, then the exchange ratio will be adjusted so that
you will receive $0.75 worth of InfoCure common stock for each share of Medical
Dynamics common stock. If the average closing price of InfoCure common stock is
above $22.04, then the exchange ratio will be adjusted so that you will receive
$1.25 worth of InfoCure common stock for each share of Medical Dynamics common
stock. Thus, the specific dollar value of InfoCure common stock to be received
by you upon closing of the merger will depend on the market value of the
InfoCure common stock at the time of closing of the merger. Accordingly, the
value of the consideration that you will receive if the merger occurs may
decrease from the date you vote your shares. The closing sale price of InfoCure
common stock on The Nasdaq National Market on December 20, 1999, the last
trading day prior to the public announcement of the proposed merger, was $27.00,
and on April , 2000, the most recent practicable date prior to the printing of
this proxy statement-prospectus, was $ . However, neither Medical
Dynamics nor InfoCure can assure you as to the market price of InfoCure common
stock at any time before or after the merger. InfoCure will not issue any
fractional shares of common stock. Rather, InfoCure will pay cash for any
fractional share. The cash payment will be in an amount equal to the fraction
multiplied by the average closing price per share of InfoCure common stock for
the 20 trading days prior to the closing of the merger.
EFFECT OF THE MERGER ON MEDICAL DYNAMICS OPTIONS AND WARRANTS
OPTIONS
When the merger is effective, each option granted under Medical Dynamics'
stock option plans that is outstanding, whether or not exercisable, will convert
into an option to purchase InfoCure common stock. InfoCure will assume each
option in accordance with the terms of Medical Dynamics' stock option plans and
the stock option agreement that evidences the option and will deliver InfoCure
common stock upon the exercise of each option. After the merger becomes
effective:
- InfoCure and its compensation committee will be substituted for Medical
Dynamics and its committee which administers Medical Dynamics' plan,
respectively;
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- each option assumed by InfoCure may be exercised only for shares of
InfoCure common stock;
- the number of shares of InfoCure common stock subject to the option will
be equal to the number of shares of Medical Dynamics common stock subject
to the option immediately before the merger is completed multiplied by
the exchange ratio used for outstanding shares of Medical Dynamics common
and rounding up to the nearest whole share; and
- the per share exercise price of each option will be adjusted by dividing
it by the exchange ratio used for outstanding shares of Medical Dynamics
common stock and rounding up to the nearest cent.
Notwithstanding the foregoing, each Medical Dynamics option which is an
"incentive stock option" shall be adjusted as required by Section 424 of the
Internal Revenue Code so as not to constitute a modification, extension or
renewal of the option, within the meaning of Section 424 of the Internal Revenue
Code.
WARRANTS
When the merger is effective, each warrant to purchase Medical Dynamics
common stock will convert into a warrant to purchase InfoCure common stock.
InfoCure will assume each warrant in accordance with the terms of the warrant
and will deliver InfoCure common stock upon the exercise of the warrant. After
the merger becomes effective:
- each warrant assumed by InfoCure may be exercised only for shares of
InfoCure common stock;
- the number of shares of InfoCure common stock subject to the warrant will
be equal to the number of shares of Medical Dynamics common stock subject
to the warrant immediately before the merger is completed multiplied by
the exchange ratio used for outstanding shares of Medical Dynamics common
and rounding up to the nearest whole share; and
- the per share exercise price of each warrant will be adjusted by dividing
it by the exchange ratio used for outstanding shares of Medical Dynamics
common stock and rounding up to the nearest cent.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material U.S. federal income tax
consequences of the merger to the stockholders of Medical Dynamics. Because this
is a summary that is intended to address only federal income tax consequences of
the merger that generally will apply to all stockholders of Medical Dynamics, it
may not contain all of the information that may be important to you. As you
review this discussion, you should keep in mind that the tax consequences to you
may vary depending on your particular tax situation. For example, this
discussion does not address, among other matters:
- state, local, or foreign tax consequences of the merger;
- federal income tax consequences to Medical Dynamics stockholders who are
subject to special rules under the Internal Revenue Code, such as foreign
persons, tax-exempt organizations, insurance companies, financial
institutions, dealers in stocks
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and securities, persons who hold such stock as part of a "straddle" or
"conversion transaction" for federal income tax purposes, and persons who
do not own such stock as a capital asset;
- federal income tax consequences affecting shares of Medical Dynamics
common stock acquired upon the exercise of stock options, stock purchase
plan rights, or otherwise as compensation;
- the tax consequences to holders of warrants, options, or other rights to
acquire shares of such stock; and
- the tax consequences to Medical Dynamics stockholders who are not "United
States persons" for federal income tax purposes, including stockholders
who are not citizens or residents of the United States.
YOU ARE URGED BOTH TO REVIEW THE FOLLOWING DISCUSSION AND CONSULT WITH YOUR OWN
TAX ADVISOR TO DETERMINE THE EFFECT OF THE MERGER ON YOUR INDIVIDUAL TAX
SITUATION, INCLUDING ANY STATE, LOCAL OR NON-U.S. TAX CONSEQUENCES.
The information in this section is based on the current Internal Revenue
Code, current, temporary and proposed regulations, the legislative history of
the Internal Revenue Code, current administrative interpretations and practices
of the Internal Revenue Service, and existing court decisions. Future
legislation, regulations, administrative interpretations and court decisions
could change current law or adversely affect existing interpretations of current
law, possibly on a retroactive basis. Neither InfoCure nor Medical Dynamics
intends to request any rulings from the Internal Revenue Service concerning the
tax treatment of the merger. It is possible that the Internal Revenue Service
would challenge the statements in this discussion, which do not bind the
Internal Revenue Service or the courts, and that a court would agree with the
Internal Revenue Service.
The merger is intended to qualify as a "reorganization" under section
368(a) of the Internal Revenue Code. The federal income tax consequences
summarized below are based on the assumption that the merger will qualify as a
reorganization. The obligation of InfoCure and Medical Dynamics to consummate
the merger is conditioned upon the receipt of legal opinions from their
respective counsel that the merger will qualify as a reorganization under
section 368(a) of the Internal Revenue Code, although the merger agreement
provides that if counsel to either party does not render a tax opinion, the
merger will be consummated if counsel to the other party delivers a tax opinion
to both parties. The opinions of counsel will rely on customary factual
assumptions and customary representations made by InfoCure and Medical Dynamics.
If any of the factual assumptions or representations relied upon by counsel are
inaccurate, the opinions may not accurately describe the federal income tax
treatment of the merger, and this discussion may not accurately describe the tax
consequences of the merger.
If the merger constitutes a reorganization within the meaning of section
368(a) of the Internal Revenue Code, the merger will have the following material
federal income tax consequences to the stockholders of Medical Dynamics:
- no gain or loss will be recognized by the stockholders of Medical
Dynamics as a result of the receipt of InfoCure common stock in exchange
for Medical Dynamics common stock;
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- the aggregate tax basis of InfoCure common stock to be received by the
stockholders of Medical Dynamics will be the same as the aggregate tax
basis of the Medical Dynamics common stock surrendered in exchange
therefor;
- the holding period of the InfoCure common stock to be received by
stockholders of Medical Dynamics will include the holding period of the
Medical Dynamics common stock surrendered in exchange therefor, provided
the Medical Dynamics shares were held as a capital asset by the
stockholders of Medical Dynamics on the date of the exchange; and
- the payment of cash to stockholders of Medical Dynamics in lieu of
fractional share interests of InfoCure common stock will be treated for
federal income tax purposes as if the fractional shares were issued in
the merger and then were redeemed by InfoCure. A Medical Dynamics
stockholder generally will recognize capital gain or loss equal to the
difference between the amount of cash received for the fractional share
and the stockholder's tax basis in the fractional share, assuming that
the Medical Dynamics shares were held as a capital asset.
A successful Internal Revenue Service challenge to the reorganization
status of the merger generally would result in Medical Dynamics stockholders
recognizing gain or loss equal to the difference between the fair market value
of the InfoCure common stock received in the merger and such Medical Dynamics
stockholders' tax basis in their Medical Dynamics common stock surrendered in
the merger.
LOAN TO MEDICAL DYNAMICS
InfoCure entered into a loan with Medical Dynamics on October 28, 1999,
pursuant to which InfoCure advanced $500,000 to Medical Dynamics to repay
certain existing obligations and for general working capital purposes. Pursuant
to the merger agreement, InfoCure agreed to amend and/or restate the loan, and
on January 18, 2000, InfoCure advanced an additional $500,000 to Medical
Dynamics. This additional advance was for general working capital purposes. The
maturity date on all advances and interest under the loan is September 30, 2000,
unless the merger agreement is terminated by Medical Dynamics because InfoCure
has breached a representation, warranty or covenant set forth in the merger
agreement and has failed to cure the breach within 30 days of notice. If Medical
Dynamics terminates the merger agreement on such grounds, the maturity date for
all loan advances will be 120 days after the termination. All security for the
original loan will remain in place and each principal stockholder will sign a
subordination agreement to ensure that InfoCure is repaid in full by Medical
Dynamics before any principal stockholders receive payments from Medical
Dynamics.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND TO THE MERGER
The healthcare practice management systems industry is undergoing a period
of rapid consolidation favoring large-scale providers that can quickly develop
new and diverse software applications and provide enhanced services to
healthcare practitioners. Medical Dynamics believes that its smaller size
relative to that of many of its competitors and its limited access to capital
resources may inhibit its future growth in revenues and profitability.
Accordingly, the Medical Dynamics board of directors had considered various
alternative means of increasing Medical Dynamics' capital resources through a
possible
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combination, whether through sale, merger or joint venture, with a strong
partner in the healthcare systems industry which could provide Medical Dynamics
with additional capital resources as well as a competitive advantage.
On June 2, 1999, the management and board of Directors of Medical Dynamics
met to explore a variety of strategic alternatives.
On June 7, 1999, the board of directors of Medical Dynamics approved the
engagement of Neidiger, Tucker, Bruner, Inc., to act as Medical Dynamics'
financial advisor and consultant.
On June 16, 1999, Richard E. Perlman, InfoCure's Chairman, James K. Price,
InfoCure's Executive Vice President and Marc Kloner, an InfoCure employee, met
with Van A. Horsley, President and CEO of Medical Dynamics, Chae U. Kim,
President of Computer Age Dentist, Inc., a wholly owned subsidiary of Medical
Dynamics ("CADI"), and Dan L. Richmond, CEO of CADI at CADI's offices in Los
Angeles, California. At the meeting, the representatives described their
respective business operations, product technology and recent historical
financial results. The parties agreed to engage in further discussion regarding
a possible business combination of the companies.
On June 23, 1999, Medical Dynamics executed an agreement engaging Neidiger,
Tucker, Bruner, Inc. to act as Medical Dynamics' financial advisor and
consultant.
In early July 1999, Mr. Perlman called Mr. Horsley to inform him that
InfoCure had decided not to proceed at that time with discussions regarding a
proposed business combination. No further talks between the parties occurred
until October.
During the week of October 4, 1999, Messrs. Perlman, Price and Horsley
engaged in several discussions regarding a possible acquisition by InfoCure of a
60% equity interest in Medical Dynamics in exchange for $2 million cash, the
transfer of InfoCure's KComp Dental Division, the assignment of InfoCure's
contract to acquire the PracticeWorks Division of Zila, Inc. and the procurement
of a $10 million facility for future acquisitions. The Medical Dynamics board
reviewed the proposed transaction with Mr. Horsley and provided him with
authority to negotiate a letter of intent.
On October 25, 1999, Medical Dynamics informed Neidiger, Tucker, Bruner,
Inc. that Medical Dynamics had terminated its engagement with Neidiger since
Neidiger was not involved in any discussions related to the proposed InfoCure
transaction.
During the last two weeks of October 1999, the parties negotiated the terms
of InfoCure's proposed acquisition of a 60% interest in Medical Dynamics. Also
during this period, the parties exchanged due diligence request lists and
representatives of both companies and their advisors participated in several
telephone calls to conduct reciprocal legal, business, accounting and financial
due diligence. On October 27, 1999, the Medical Dynamics board approved the
terms of a final letter of intent, which was signed by the parties on October
28, 1999.
Pursuant to the terms of the final letter of intent, InfoCure and Medical
Dynamics executed loan documents pursuant to which InfoCure advanced $500,000 to
Medical Dynamics so that it could repay certain existing obligations and for
general working capital purposes.
On November 2, 1999, both companies issued a press release prior to the
opening of trading on The Nasdaq Stock Market regarding their arrangements.
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During November 1999, senior management of InfoCure re-evaluated the
proposed transaction and considered the possibility and merits of a possible
business combination of the companies. After extensive review by InfoCure senior
management, Mr. Perlman contacted Mr. Horsley on November 19, 1999 to propose a
business combination pursuant to which InfoCure would acquire all of the
outstanding shares of Medical Dynamics common stock in a stock-for-stock merger
transaction.
In late November 1999, and continuing into mid-December 1999, Messrs.
Perlman, Price and Horsley engaged in extensive telephone conversations
regarding the proposed merger transaction, including repayment of Medical
Dynamics' debt, treatment of options, employment contracts and the stock
exchange ratio. During this period, InfoCure's counsel delivered a first draft
of the merger agreement to Medical Dynamics and its counsel and subsequent
thereto, the parties engaged in several telephone conversations to negotiate the
provisions of the merger agreement. Also during this period, representatives of
InfoCure conducted on-site financial, operational and accounting due diligence
at Medical Dynamics' offices in Denver, Colorado and Los Angeles, California.
On December 15, 1999, the InfoCure board was briefed on the status of
discussions between InfoCure and Medical Dynamics and reviewed the relevant
financial, accounting and legal considerations of the proposed transaction.
After due consideration, the InfoCure board unanimously approved the merger
agreement and the merger.
On December 20, 1999, the Medical Dynamics board of directors held a
special telephone meeting at which Medical Dynamics board of directors reviewed
the terms of the merger agreement and related transactions. After due
consideration, the Medical Dynamics board unanimously approved the merger
agreement and the merger, subject to approval of the Medical Dynamics
stockholders.
Following the approval of the merger by the InfoCure board and the Medical
Dynamics board, on December 21, 1999, InfoCure and Medical Dynamics executed the
merger agreement and issued a press release prior to the opening of trading on
The Nasdaq Stock Market.
On April 10, 2000, InfoCure and Medical Dynamics entered into an amendment
to the merger agreement to extend the termination date of the merger from May
31, 2000 until July 31, 2000, and to reflect the change in accounting for the
merger from a pooling-of-interests to purchase transaction.
MEDICAL DYNAMICS' REASONS FOR THE MERGER
The Medical Dynamics board of directors has determined that the merger is
in the best interests of Medical Dynamics and its stockholders and has
unanimously approved the merger agreement. In reaching its determination, the
Medical Dynamics board of directors considered a number of factors, without
assigning any relative weights to such factors, including, but not limited to,
the following:
- Medical Dynamics' need to gain access to additional resources. Although
Medical Dynamics believed it has the ability to operate profitably in the
future and generate sufficient cash flow to service its short-term
obligations, Medical Dynamics believed its limited access to capital
resources may inhibit its growth in revenues and profitability.
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- The effect on the Medical Dynamics stockholders of Medical Dynamics
continuing as an independent entity compared to the effect of a
combination with InfoCure. The Medical Dynamics board determined that an
integration of Medical Dynamics with InfoCure, given InfoCure's greater
marketing, sales and financial resources, may provide a better
opportunity for the long-term success of Medical Dynamics' product
offerings and thereby maximize value for the Medical Dynamics
stockholders.
- The synergies that existed between InfoCure's business and operations and
Medical Dynamics' business and operations. InfoCure and Medical Dynamics
share similar types of customers and technologies. They also share a
similar vision, strategy and business philosophy in the physician office
marketplace. As a result, the combination provides the combined entity
with the opportunity to capitalize on the parties' respective existing
relationships with customers and vendors in order to cross-market their
respective products and services.
- The financial performance and condition, businesses and prospects of
Medical Dynamics and InfoCure, including, but not limited to, information
with respect to the historical stock prices of InfoCure and the
respective operating performances of Medical Dynamics and InfoCure.
- The terms of the merger agreement, including the form and amount of the
consideration to be received by the Medical Dynamics stockholders and the
terms and structure of the merger. The Medical Dynamics board of
directors deemed it significant that the merger would provide the
stockholders of Medical Dynamics with InfoCure common stock for which
there is an active and liquid trading market.
- The merger is expected to be a tax-free transaction to the Medical
Dynamics stockholders and is expected to be treated as a purchase
transaction for accounting and financial reporting purposes.
- The merger affords the Medical Dynamics stockholders the opportunity to
reduce the exposure inherent in Medical Dynamics' reliance on a few
products and services in a relatively discrete market, and the
difficulties Medical Dynamics faces in competing against larger companies
with more diversified product lines and greater financial resources.
In reaching its conclusion, the Medical Dynamics board of directors also
considered the following factors, which it believed did not favor entering into
the merger agreement:
- A combination with InfoCure could prevent it from seeking other avenues
of maximizing the value of the Medical Dynamics common stock, including
seeking a business combination with a third party that offered greater
value to the Medical Dynamics stockholders.
- The merger could prevent Medical Dynamics from maximizing the value of
the Medical Dynamics common stock by pursuing its existing strategic plan
as an independent entity and that, after the merger, the holders of
Medical Dynamics common stock who receive shares of InfoCure common stock
in the merger will have to rely on the operating success of InfoCure to
maximize the value of their investment.
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- All of the consideration that would be received by the Medical Dynamics
stockholders in the merger would consist of InfoCure common stock, rather
than cash.
- The merger could adversely affect Medical Dynamics' existing
relationships with customers and partners.
In reaching its conclusions set forth above, the Medical Dynamics board
acknowledged that certain officers and directors (specifically Messrs. Horsley,
Richmond and Kim with respect to certain employment matters, and Dr. and Mrs.
Adair and Messrs. Richmond and Kim with respect to the repayment of certain
indebtedness) would receive benefits in the merger, including those described
below under the caption "The Special Meeting -- Interests of Certain Medical
Dynamics Directors, Officers and Affiliates in the Merger." After further
consideration and discussion among the directors, the Medical Dynamics board (1)
concluded that those benefits (a) were not materially different from those to be
realized by other Medical Dynamics stockholders in the merger and (b) in the
case of Messrs. Horsley, Richmond and Kim, were appropriate compensation for the
employment relationship between those individuals and Medical Dynamics and its
subsidiary, Computer Age Dentist, Inc., and (2) considered the fact that Dr. and
Mrs. Adair and Messrs. Richard and Kim were otherwise in compliance with
relevant contractual requirements for the repayment of loans made.
Other than those considerations described above which the Medical Dynamics
board of directors believed did not favor entering into the merger agreement,
the Medical Dynamics board of directors did not identify any particular risks or
adverse effects on non-affiliated Medical Dynamics stockholders.
The foregoing discussion of certain information and factors deemed material
by the Medical Dynamics board in considering the merger agreement is not
intended to be exhaustive but is believed to include all material factors
considered by the Medical Dynamics board of directors.
The Medical Dynamics board of directors has unanimously approved the merger
agreement and unanimously recommends to the stockholders of Medical Dynamics
that you approve the merger agreement.
INFOCURE'S REASONS FOR THE MERGER
In approving the merger agreement, InfoCure's board of directors considered
a number of factors concerning the benefits of the merger. Without assigning any
relative or specific weights to the factors, InfoCure's board of directors
considered the following material factors, among others:
- Medical Dynamics' strong positions in the dental practice management
specialty.
- Medical Dynamics' existing customer base.
- Medical Dynamics' proprietary practice management and clinical software.
InfoCure's board of directors determined that the merger was in the best
interests of InfoCure and its stockholders, and unanimously approved the
proposed merger on December 15, 1999.
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COMPLETION OF THE MERGER
Subject to the conditions and the obligations of the parties to effect the
merger, the merger will be completed on the date and at the time specified in
the articles of merger to be filed with the Colorado Secretary of State.
InfoCure and Medical Dynamics agree to exercise their respective best
efforts to cause the closing to take place on or before July 31, 2000. However,
unexpected delays can occur. InfoCure and Medical Dynamics cannot assure you
that Medical Dynamics will be able to obtain necessary stockholder approval,
that they will be able to obtain any regulatory approvals required for the
merger or that they will be able to satisfy other conditions to completion of
the merger. Either Medical Dynamics' or InfoCure's board of directors may
terminate the merger agreement if the merger is not completed by July 31, 2000,
unless it is not completed because of the breach of the merger agreement by the
party seeking termination. See "The Merger Agreement -- Conditions to Completion
of the Merger" and "-- Waiver, Amendment, and Termination."
DISTRIBUTION OF INFOCURE STOCK CERTIFICATES
Promptly after the merger is completed, you will be mailed a letter of
transmittal and instructions for the exchange of the certificates representing
shares of Medical Dynamics common stock for certificates representing shares of
InfoCure common stock.
You should not send in your certificates until you receive a letter of
transmittal and instructions.
After you surrender to the exchange agent certificates for Medical Dynamics
common stock with a properly completed letter of transmittal, the exchange agent
will mail you a certificate or certificates representing the number of shares of
InfoCure common stock to which you are entitled and a check for the amount to be
paid in lieu of any fractional share, without interest, if any, together with
all undelivered dividends or distributions in respect of the shares of InfoCure
common stock, without interest thereon, if any. InfoCure will not be obligated
to deliver the consideration to you, as a former Medical Dynamics stockholder,
until you have surrendered your Medical Dynamics common stock certificates.
Whenever a dividend or other distribution is declared by InfoCure on
InfoCure common stock with a record date after the date on which the merger was
completed, the declaration will include dividends or other distributions on all
shares of InfoCure common stock that may be issued in the merger. However,
InfoCure will not pay any dividend or other distribution that is payable after
the completion of the merger to you until you surrender the certificate. If your
Medical Dynamics stock certificate has been lost, stolen, or destroyed, the
exchange agent will issue the shares of InfoCure common stock and any cash in
lieu of fractional shares upon your submission of an affidavit claiming the
certificate to be lost, stolen, or destroyed, the posting of a bond in such
amount as InfoCure may reasonably direct as indemnity against any claim that may
be made against InfoCure with respect to the certificate, and submission of any
other documents necessary to effect the exchange of the shares represented by
the certificate.
At the time the merger is completed, the stock transfer books of Medical
Dynamics will be closed to Medical Dynamics' stockholders and no transfer of
shares of Medical Dynamics common stock by any stockholder will thereafter be
made or recognized. If certificates for shares of Medical Dynamics common stock
are presented for transfer after the merger is completed, they will be canceled
and exchanged for shares of InfoCure
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common stock, a check for the amount due in lieu of fractional shares, if any,
and any undelivered dividends on the InfoCure common stock.
REGULATORY APPROVAL
InfoCure and Medical Dynamics are required to make filings with or obtain
approvals from certain regulatory authorities in connection with the merger.
InfoCure and Medical Dynamics cannot assure you that they can obtain the
necessary regulatory approvals or that the other conditions to consummation of
the merger can or will be satisfied.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
The merger will not change the present management team or board of
directors of InfoCure. Information concerning the management of InfoCure is
included in the documents incorporated by reference in this proxy
statement-prospectus. See "Where You Can Find More Information" on page 60 of
this proxy statement-prospectus.
Medical Dynamics will be the surviving corporation resulting from the
merger and will be a wholly owned subsidiary of InfoCure. Medical Dynamics will
continue to be governed by the laws of the State of Colorado. Medical Dynamics'
officers and directors will, however, resign upon consummation of the merger and
be replaced by persons designated by InfoCure.
ACCOUNTING TREATMENT
It is anticipated that the merger will be accounted for as a purchase
business combination. Under this method of accounting, after the closing of the
merger, our assets and liabilities will be recorded at fair value and any excess
of the total value of shares exchanged for our assets over our net assets will
be recorded as goodwill.
RESALES OF INFOCURE COMMON STOCK
InfoCure common stock to be issued to you in the merger will be registered
under the Securities Act of 1933, as amended (the "Securities Act"). All shares
of InfoCure common stock received by you in the merger will be freely
transferable after the merger provided you are not considered to be an
"affiliate" of Medical Dynamics or InfoCure. "Affiliates" generally are defined
as persons or entities who control, are controlled by, or are under common
control with Medical Dynamics or InfoCure at the time of the special meeting
(generally, executive officers, directors, and 10% or greater stockholders).
Rule 145 under the Securities Act restricts the sale of InfoCure common
stock received in the merger by affiliates of Medical Dynamics and certain of
their family members and related entities. Under the rule, during the first
12-month period after the merger is completed, affiliates of Medical Dynamics or
InfoCure may resell publicly the InfoCure common stock they receive in the
merger but only within certain limitations as to the amount of InfoCure common
stock they can sell in any three-month period and as to the manner of sale.
After the one-year period, affiliates of Medical Dynamics who are not affiliates
of InfoCure may resell their shares without restriction provided that InfoCure
must continue to satisfy its reporting requirements under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). After two years following
the closing of the merger, affiliates of Medical Dynamics who are not affiliates
of InfoCure and who have not
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been affiliates for at least three months may resell their shares without
restriction. Affiliates also would be permitted to resell InfoCure common stock
received in the merger pursuant to an effective registration statement under the
Securities Act or an available exemption from the registration requirements of
the Securities Act. This proxy statement-prospectus does not cover any resales
of InfoCure common stock received by persons who may be deemed to be affiliates
of Medical Dynamics or InfoCure.
Each person who may be deemed to be an affiliate of Medical Dynamics has
executed and delivered to InfoCure an agreement intended to ensure compliance
with the Securities Act. Each Medical Dynamics affiliate has agreed not to sell,
pledge, transfer, or otherwise dispose of any Medical Dynamics common stock held
by the affiliate except as contemplated by the merger agreement or the affiliate
agreement. In addition, each Medical Dynamics affiliate must agree not to sell,
pledge, transfer or otherwise dispose of any InfoCure common stock received in
the merger except in compliance with the Securities Act, and the applicable
rules. The stock certificates representing InfoCure common stock issued to
affiliates in the merger will bear a legend summarizing these restrictions on
transfer.
VOTING AGREEMENT
The holders of 17% of the outstanding shares of Medical Dynamics' common
stock have agreed to vote in favor of the merger agreement. The voting agreement
terminates upon the earlier of the termination of the merger agreement in
accordance with its terms or the effective time of the merger.
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THE MERGER AGREEMENT
The following description summarizes the material provisions of the merger
agreement. Your are urged to read carefully the merger agreement, a copy of
which is attached as Appendix A to this proxy statement-prospectus.
CONDITIONS TO COMPLETION OF THE MERGER
In addition to any required regulatory approvals, the merger will be
completed only if certain conditions, including, but not limited to the
following, are met or waived, if waivable:
- Medical Dynamics stockholders approve the merger at the special meeting;
- InfoCure and Medical Dynamics receive legal opinions from their
respective counsel concerning the tax-free treatment of the merger;
- InfoCure has not breached any of its representatives or obligations under
the merger agreement in any material respect;
- Medical Dynamics has not breached any of its representations or
obligations under the merger agreement in any material respect;
- the shares of InfoCure common stock to be issued in the merger are
approved for listing on The Nasdaq Stock Market;
- Medical Dynamics and InfoCure receive opinions of counsel in forms
reasonably satisfactory to each;
- no law order or other action taken by any court or governmental authority
prohibits or restricts the merger or makes it illegal; and
- in addition to these conditions, the merger agreement, attached as
Appendix A to this proxy statement-prospectus, describes other conditions
that must be met before the merger may be completed.
InfoCure and Medical Dynamics cannot assure you as to when or if all of the
conditions to the merger can or will be satisfied or waived by the party
permitted to do so. If the merger is not effected on or before July 31, 2000,
except as described otherwise in this proxy statement-prospectus or the merger
agreement, the board of directors of either Medical Dynamics or InfoCure may
terminate the merger agreement and abandon the merger.
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NO SOLICITATION
In the merger agreement, Medical Dynamics has agreed that until the
effective time of the merger or the termination of the merger agreement, neither
Medical Dynamics nor any of its officers, directors, affiliates, employees,
investment bankers, attorneys or other representatives will, directly or
indirectly:
- solicit, initiate, encourage or induce the making of any "acquisition
proposal" (as defined below);
- participate in any discussions or negotiations regarding, or take any
other action to facilitate any acquisition proposal;
- engage in discussions with any person with respect to any acquisition
proposal;
- approve, endorse or recommend any acquisition proposal; or
- enter into any letter of intent or similar contract relating to any
"acquisition transaction" (as defined below);
provided, however, that the Medical Dynamics board of directors may (1) comply
with certain SEC rules related to a tender or exchange offers not made in
violation of Medical Dynamics' non-solicitation covenants or (2) during the
period between mailing of this proxy statement-prospectus and the date the vote
required to be obtained from the Medical Dynamics stockholders in connection
with the merger has been obtained, in response to an unsolicited, bona fide
written acquisition proposal that the Medical Dynamics board of directors
reasonably concludes, based upon the advice of its independent financial
advisors, constitutes a "superior proposal" (as defined below), engage in
discussions with and furnish information to the party making such acquisition
proposal to the extent the Medical Dynamics board determines in good faith based
on the advice of its outside legal counsel that its fiduciary obligations under
applicable law require it to do so. In addition, at least five days prior to
furnishing any such nonpublic information to, or entering into discussions with,
such party, Medical Dynamics must (1) give InfoCure written notice of its
intention to furnish such information or enter into such discussions, (2)
receive from the third party an executed confidentiality agreement, and (3)
contemporaneously with furnishing any such nonpublic information, furnish such
nonpublic information to InfoCure.
The merger agreement provides that:
- the term "acquisition transaction" shall mean any transaction or series
of related transactions involving: (1) any acquisition or purchase from
Medical Dynamics by any person of more than 5% of the total outstanding
voting securities of Medical Dynamics or any of its subsidiaries or any
tender offer or exchange offer that if consummated would result in any
person beneficially owning 5% or more of the total outstanding voting
securities of Medical Dynamics or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving
Medical Dynamics pursuant to which the stockholders of Medical Dynamics
immediately preceding such transaction hold less than 95% of the equity
interests in the surviving or resulting entity of such transaction; (2)
any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than 5% of the assets of
Medical Dynamics; or (3) any liquidation, dissolution, recapitalization
or other significant corporate reorganization of Medical Dynamics;
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- the term "acquisition proposal" shall mean any offer or proposal relating
to any acquisition transaction; and
- the term "superior proposal" shall mean an acquisition proposal with
respect to which: (1) the Medical Dynamics board of directors has
concluded in good faith, after considering applicable state law, on the
basis of the written opinion of independent outside counsel, that such
action is necessary to prevent the board from violating its fiduciary
duties to the Medical Dynamics stockholders; (2) if any cash
consideration is involved, it is not subject to any financing
contingency, and with respect to which the board has determined (based
upon the written opinion of its independent financial advisors) in the
exercise of its fiduciary duties to the Medical Dynamics stockholders
that the acquiring party is capable of consummating the proposed
transaction on the terms proposed; and (3) the board has determined in
the exercise of its fiduciary duties to the Medical Dynamics stockholders
that the proposed transaction provides greater value to such stockholders
than the merger with InfoCure (based upon the written opinion of
independent financial advisors that such transaction is superior from a
financial point of view).
WAIVER, AMENDMENT, AND TERMINATION
To the extent permitted by law, the boards of directors of InfoCure and
Medical Dynamics may agree in writing to amend the merger agreement, whether
before or after Medical Dynamics' stockholders have approved it. In addition, at
any time before the merger becomes effective, either Medical Dynamics or
InfoCure, or both, may waive any default in the performance of any term of the
merger agreement by the other party or may waive or extend the time for the
compliance or fulfillment by the other party of any and all of its obligations
under the merger agreement. In addition, either InfoCure or Medical Dynamics may
waive any of the conditions precedent to its obligations under the merger
agreement, unless a violation of any law or regulation would result. To be
effective, a waiver must be in writing and signed by an authorized officer of
Medical Dynamics or InfoCure, as the case may be.
At any time before the merger becomes effective, the boards of directors of
InfoCure and Medical Dynamics may agree to terminate the merger agreement. In
addition, the merger agreement may be terminated at any time prior to the
effective time of the merger, whether before or after Medical Dynamics obtains
your approval, by:
1. Medical Dynamics or InfoCure, if the transaction is not completed
by July 31, 2000, or such later date as may be agreed to by Medical
Dynamics and InfoCure; however, neither Medical Dynamics nor InfoCure may
terminate the merger agreement if its breach is the reason the merger has
not been completed;
2. Medical Dynamics, if InfoCure breaches its representations,
warranties or obligations under the merger agreement in any material
respect;
3. InfoCure, if Medical Dynamics breaches its representations,
warranties or obligations under the merger agreement in any material
respect;
4. By Medical Dynamics or InfoCure, if a governmental authority has
issued an order or ruling or taken any other action having the effect of
permanently restraining or otherwise prohibiting the merger, and such
action is final and nonappealable;
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5. Medical Dynamics or InfoCure, if the Medical Dynamics stockholders
fail to approve the merger; or
6. InfoCure, if (A) the Medical Dynamics board withdraws, modifies or
changes its recommendation as to the merger in a manner adverse to
InfoCure, (B) the Medical Dynamics board recommends to its stockholders a
competing transaction, (C) Medical Dynamics breaches its non-solicitation
covenant under the merger agreement, (D) a competing transaction for
Medical Dynamics is announced and the Medical Dynamics board fails to
recommend against acceptance of such proposal, or (E) certain principal
stockholders of Medical Dynamics who own 17% of the outstanding shares of
Medical Dynamics stock fail to comply with their contractual obligations to
vote in favor of the merger,
If the merger is terminated, the merger agreement will become void and have
no effect.
FEES AND EXPENSES
All fees and expenses incurred in connection with the merger will be paid
by the party incurring such expenses whether or not the merger is consummated;
provided, however, that InfoCure and Medical Dynamics will share equally all
fees and expenses, other than attorneys' and accountants fees and expenses,
incurred in connection with the printing and filing of this proxy
statement-prospectus.
TERMINATION FEE
Medical Dynamics must pay InfoCure a $1.3 million cash termination fee if:
1. InfoCure terminates the merger agreement for the reasons described
in paragraph 6 above under "-- Waiver, Amendment, and Termination"; or
2. InfoCure terminates the merger agreement for the reasons described
in paragraph 1 or paragraph 5 above under "-- Waiver, Amendment. and
Termination" and (A) at or prior to such termination, there shall exist or
have been proposed an acquisition proposal and (B) within nine months after
such termination, Medical Dynamics enters into a definitive agreement with
respect to any "company acquisition" (as defined below) or any company
acquisition shall be consummated.
The merger agreement provides that the term "company acquisition" shall
mean: (1) a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Medical Dynamics
pursuant to which the stockholders of Medical Dynamics immediately preceding
such transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction; (2) a sale or other
disposition by Medical Dynamics of assets representing in excess of 50% of the
aggregate fair market value of Medical Dynamics' business immediately prior to
such sale; or (3) an acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by Medical Dynamics), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing in excess of 50% of the voting power of the then
outstanding shares of common stock of Medical Dynamics.
In addition, in the event that InfoCure terminates the merger agreement for
the reason described in paragraph 3 above under "-- Waiver, Amendment, and
Termination", then Medical Dynamics shall promptly reimburse InfoCure for its
costs and expenses in
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connection with the merger agreement, and if, within 9 months of such
termination, Medical Dynamics shall enter into a definitive agreement with
respect to any company acquisition or any company acquisition is consummated,
then concurrently with the execution of a definitive agreement with respect to,
or the consummation of, as applicable, such company acquisition, Medical
Dynamics must pay to InfoCure an amount in cash equal to the amount by which
$1.3 million exceeds the amount of InfoCure's expenses previously reimbursed by
Medical Dynamics.
Finally, if Medical Dynamics terminates the merger agreement for the reason
described in paragraph 2 above under "-- Waiver, Amendment, and Termination",
InfoCure shall pay to Medical Dynamics $150,000 in cash.
REPRESENTATIONS AND WARRANTIES
Both parties made a number of representations and warranties in the merger
agreement regarding aspects of our respective businesses, financial condition,
structure and other facts pertinent to the merger.
Medical Dynamics' representations and warranties include representations as
to:
- corporate organization, good standing and corporate power
- corporate power and authority to enter into the merger agreement
- capitalization
- SEC filings and financial statements
- books and records
- real property interests
- condition and sufficiency of assets
- accounts receivable
- inventory
- liabilities
- taxes
- material adverse changes since June 30, 1999
- employee benefit matters
- compliance with legal requirements and governmental authorizations
- legal proceedings or orders
- absence of certain changes and events since June 30, 1999
- material contracts
- insurance
- environmental matters
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- employees
- government contracts
- intellectual property rights
- year 2000 compliance
- certain payments
- relationships with related persons
- brokers or finders
- labor relations matters
- disclosure
- stockholder approval
InfoCure's representations and warranties include representations as to:
- corporate organization, good standing and corporate power
- corporate power and authority to enter into the merger agreement
- absence of restrictions and conflicts
- capitalization
- SEC filings and financial statements
- litigation
- disclosure
- absence of certain proceedings
- brokers or finders
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement obligates Medical Dynamics to use its reasonable
efforts to maintain and preserve its business organization and to retain the
services of its officers and key employees and maintain relationships with
customers, suppliers and other third parties to the end that their goodwill and
ongoing business shall not be impaired in any material respect, and imposes
certain limitations on the operations of Medical Dynamics and its subsidiaries.
These items are set forth in the merger agreement which is attached to this
proxy statement-prospectus as Appendix A.
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THE STOCKHOLDERS AGREEMENT
Certain stockholders of Medical Dynamics who own 17% of the outstanding
shares of common stock of Medical Dynamics have entered into a stockholders
agreement with InfoCure.
The stockholders agreement provides, among other things, that the
stockholders subject to the agreement:
- will not transfer any of the shares subject to the agreement, unless the
transferee has agreed in writing to hold the shares subject to the
agreement and executes an irrevocable proxy prior to the transfer;
- will not deposit any shares in a voting trust or grant a proxy or enter
into any voting agreement in contravention of the stockholder agreement;
- will vote the shares subject to the agreement in favor of (1) the merger
agreement and the merger, (2) any matter to facilitate the merger, and
(3) any shareholder proposal related to the merger if directed to do so
by InfoCure;
- will not directly or through a representative solicit, initiate or
encourage a third party to make an acquisition proposal to Medical
Dynamics, or take any action to facilitate any third party acquisition
proposal; and
- will deliver to InfoCure a proxy that (1) irrevocably appoints the
InfoCure board as sole and exclusive attorneys and proxies for the
stockholder, (2) authorizes and empowers the InfoCure board to vote and
exercise all voting rights of the shares subject to the agreement in
favor of the merger agreement and merger, and (3) revokes any and all
prior proxies given by the stockholder. The proxy and power of attorney
is coupled with an interest throughout the term of the stockholder
agreement and granted in consideration of InfoCure entering into the
merger agreement.
The stockholder agreement terminates on the earlier of the termination of
the merger agreement or the effective time of the merger.
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COMPARATIVE STOCK PRICES AND DIVIDENDS
InfoCure common stock is quoted on The Nasdaq National Market under the
trading symbol "INCX". Medical Dynamics common stock is quoted on The Nasdaq
SmallCap Market under the trading symbol "MEDY".
The following table sets forth, for the periods indicated, the high and low
sale prices per share of InfoCure common stock on The Nasdaq National Market and
Medical Dynamics common stock on The Nasdaq SmallCap Market. The table also
gives retroactive effect, where applicable, to the 2-for-1 stock split of
InfoCure which was effective August 19, 1999.
For current price information, you should consult publicly available
sources. InfoCure has never paid dividends on its common stock. Medical Dynamics
has never paid dividends on its common stock. InfoCure does not intend to pay
dividends on its common stock after consummation of the merger.
MEDICAL
INFOCURE DYNAMICS
COMMON STOCK COMMON STOCK
---------------- ---------------
HIGH LOW HIGH LOW
------- ------ ------ ------
Year Ending December 31, 2000
Second Quarter*.............................. $16.375 $15.50 $0.875 $0.781
First Quarter................................ 37.375 14.75 2.00 0.875
Year Ending December 31, 1999:
Fourth Quarter............................... $ 18.87 $17.94 $ 1.69 $ 0.66
Third Quarter................................ 28.75 16.94 0.94 0.63
Second Quarter............................... 26.47 12.25 2.19 0.84
First Quarter................................ 18.00 10.56 2.72 2.56
Year Ending December 31, 1998:
Fourth Quarter............................... $ 16.37 $ 5.81 $ 2.56 $ 2.31
Third Quarter................................ 8.47 6.37 3.00 2.00
Second Quarter............................... 8.09 5.47 3.00 2.13
First Quarter................................ 8.53 4.12 3.50 3.06
- -------------------------
* through April , 2000
RECENT CLOSING PRICES
The closing sales price per share of InfoCure common stock on The Nasdaq
National Market was (1) $27.00 on December 20, 1999, the last trading day before
we approved the merger agreement and (2) $ on April , 2000, the
latest practicable day before the mailing of this proxy-statement prospectus.
Because the market price of InfoCure common stock is subject to
fluctuation, the market value of the shares of InfoCure common stock that you
will receive in the merger may increase or decrease prior to and following the
merger. YOU ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR INFOCURE COMMON
STOCK. NEITHER MEDICAL DYNAMICS NOR INFOCURE CAN ASSURE YOU AS TO THE FUTURE
PRICES FOR INFOCURE COMMON STOCK.
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DIVIDEND INFORMATION
Neither InfoCure nor Medical Dynamics has ever paid cash dividends on its
stock, and each of InfoCure and Medical Dynamics anticipates that it will
continue to retain any earnings for the foreseeable future for use in the
operation of its business.
NUMBER OF STOCKHOLDERS
As of April 27, 2000, there were stockholders of record who held
shares of InfoCure common stock and as of April 27, 2000, there were
stockholders of record who held shares of Medical Dynamics common stock.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known by Medical
Dynamics regarding the beneficial ownership of common stock as of September 30,
1999 by:
- each person known by Medical Dynamics to be the beneficial owner of more
than 5% of its outstanding shares of common stock;
- each director of Medical Dynamics;
- each executive officer of Medical Dynamics; and
- all directors and executive officers of Medical Dynamics as a group.
Unless otherwise indicated, the persons or entities listed below have sole
voting and investment power with respect to all shares of common stock owned by
them.
NAME OF BENEFICIAL OWNER SHARES OWNED BENEFICIALLY(1) PERCENT OF CLASS*
- ------------------------ ---------------------------- -----------------
Edwin L. Adair, M.D.................... 1,174,290(2) 8.9%
Pat Horsley Adair...................... 1,174,290(2) 8.9
Daniel L. Richmond..................... 1,097,760(3) 8.2
Chae U. Kim............................ 1,097,760(3) 8.2
I. Dean Bayne, M.D..................... 40,000(4) .3
Van A. Horsley......................... 555,586(5) 4.2
Leroy Bilanich, Ed.D................... 40,000(4) .3
All officers and directors as a group
(7 persons).......................... 4,005,396(6) 27.4
- -------------------------
* Percent of class based upon shares outstanding on December 23, 1999 of
12,866,269.
(1) The term beneficial ownership with respect to a security is defined by Rule
13d-3 under the Securities Exchange Act of 1934 as consisting of sole or
shared voting power (including the power to vote or direct the vote) and/or
sole or shared investment power (including the power to dispose or direct
the disposition) with respect to the security through any contract,
arrangement, understanding, relationship or otherwise. Unless otherwise
indicated, beneficial ownership is of record and consists of sole voting and
investment power.
(2) Includes 295,000 stock options held by Dr. Adair of which all are presently
exercisable.
(3) Includes 450,000 shares under presently exercisable stock options. Does not
include option to acquire 150,000 shares which vest upon defined performance
goals.
(4) Includes 40,000 shares under presently exercisable stock options.
(5) Includes 470,680 shares under presently exercisable stock options. Does not
include options to acquire 400,000 shares which vest based upon definition
performance goals.
(6) Includes shares referenced in notes (2) through (5).
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EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
The following discussion describes certain material differences between the
rights of InfoCure stockholders and the rights of Medical Dynamics stockholders.
While we believe that the description covers the material differences between
the two, this summary may not contain all of the information that is important
to you. You should carefully read this entire proxy statement-prospectus and the
other documents we refer to for a more complete understanding of the differences
between being a stockholder of Medical Dynamics and being a stockholder of
InfoCure.
As a stockholder of Medical Dynamics, your rights are governed by Medical
Dynamics' amended and restated articles of incorporation and amended bylaws, as
currently in effect. After completion of the merger, you will become a common
stockholder of InfoCure. As an InfoCure stockholder, your rights will be
governed by InfoCure's amended certificate of incorporation and amended and
restated bylaws. InfoCure is incorporated under the laws of the state of
Delaware and Medical Dynamics is incorporated under the laws of the state of
Colorado, and therefore, your rights as a stockholder of InfoCure will be
governed by the Delaware General Corporation Law ("DGCL"), rather than the
Colorado Business Corporation Act ("CBCA"), after completion of the merger.
CLASSES OF COMMON STOCK OF MEDICAL DYNAMICS AND INFOCURE
We each have one class of common stock issued and outstanding. Holders of
InfoCure common stock and holders of Medical Dynamics common stock are each
entitled to one vote for each share held.
BOARD OF DIRECTORS
Neither InfoCure's nor Medical Dynamics' board of directors is divided into
classes and all directors are elected annually.
NUMBER OF DIRECTORS
InfoCure's board of directors may contain as few as three directors and as
many as twelve. Currently, there are six members. The exact number of authorized
directors within such range may be fixed from time to time by a resolution
adopted by InfoCure's board of directors. There are currently seven directors on
Medical Dynamics' board of directors.
FILLING VACANCIES ON THE BOARD
Any vacancy occurring on the InfoCure board of directors may be filled by a
vote of the majority of the remaining directors, though less than a quorum, or
by the sole remaining director, or if no director remains or if the vacancy is
not so filled, by the stockholders. A director elected to fill a vacancy will
serve until the next election of directors by the stockholders and the election
and qualification of the successor.
Medical Dynamics' bylaws provide that vacancies and newly-created
directorships resulting from any increase in the authorized number of directors
may be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum. The CBCA provides that stockholders may also fill a
vacancy on the board of directors. The term of a director elected to fill a
vacancy by the directors expires at the next annual
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stockholders' meeting at which directors are elected. The term of a director
elected to fill a vacancy by the stockholders is the unexpired term of the
predecessor director. Directors elected to fill vacancies or newly-created
directorships will continue to serve until a successor is elected and qualifies.
QUORUM
InfoCure's bylaws provide that one-third of the number of shares of stock
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of stockholders. Medical
Dynamics' articles of incorporation provide that one-third of all shares
entitled to vote shall constitute a quorum.
STOCKHOLDER ACTION BY WRITTEN CONSENT
InfoCure's bylaws provide that any action required or permitted to be taken
at any annual or special meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a written consent is signed by the
holders having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. InfoCure stockholders may act by a written
consent (that is less than unanimous) to elect directors in lieu of holding an
annual meeting only if all directorships to which directors could be elected at
an annual meeting are vacant and are filled by such action.
Medical Dynamics' bylaws provide that any action required to be taken, or
which may be taken at a meeting of the stockholders may be taken without a
meeting, if a written consent setting forth the action to be taken is signed by
all of the stockholders entitled to vote on that subject matter.
ABILITY TO CALL SPECIAL MEETING
Special Meetings of InfoCure stockholders may be called by the board of
directors or by the chairman of the board of directors. Special meetings of
stockholders of Medical Dynamics may be called by the president, the chief
executive officer, the board of directors or by the president at the request of
the holders of not less than one-tenth of all shares of Medical Dynamics
entitled to vote at the meeting.
NOTICE OF MEETING
InfoCure and Medical Dynamics stockholders are entitled to notice of all
stockholder meetings not less than ten nor more than sixty days prior to the
date of the meeting.
ADVANCE NOTICE OF STOCKHOLDER PROPOSALS
The Medical Dynamics bylaws do not contain any provisions related to
advance notice of stockholder proposals.
Business at an annual meeting may be brought by an InfoCure stockholder
only upon the stockholder's timely notice thereof in writing to the secretary of
InfoCure. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of InfoCure not less than sixty
days nor more than ninety (90) days prior to the meeting as originally
scheduled; provided, however, that in the event that less than
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sixty days notice or prior public disclosure of the date of the meeting is given
or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the tenth day following the
earlier of the day on which such notice of the date of the meeting was mailed or
the date on which such public disclosure was made.
The InfoCure stockholder's notice to the Secretary shall set forth:
- a brief description of the proposal desired to be brought before the
meeting and the reasons for conducting such business at the meeting;
- the name and address of the stockholder proposing such business and any
other stockholders known by such stockholder to be supporting such
proposal;
- the class and number of shares of InfoCure stock that are beneficially
owned by the stockholder on the date such stockholder gives notice to the
secretary, and the number of shares in InfoCure common stock that are
beneficially owned on such date by any other stockholders known to be
supporting such proposal; and
- any financial interest of the stockholder in such proposal.
With respect to InfoCure stockholders nominating persons to election to
InfoCure's board of directors, such nominations shall be made only at an annual
or special meeting of the stockholders called for that purpose and only by
complying with the notice procedures set forth in InfoCure's bylaws.
Specifically, the InfoCure stockholder must provide a timely notice in writing
to the secretary of InfoCure, such notice must be delivered to or mailed and
received at the principal executive offices of InfoCure not less than sixty days
nor more than ninety days prior to the meeting; provided, however, that in the
event that less than sixty days notice or public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the tenth day
following the earlier of the day on which such notice of the date of the meeting
was mailed or the date on which such public disclosure was made.
The stockholder's notice must set forth:
(1) as to each person that the stockholder proposes to nominate for
election or reelection as a director:
- the name, age, business address and residence address of such proposed
nominee;
- the principal occupation or employment of such proposed nominee;
- the class and number of shares of common stock of InfoCure which are
beneficially owned by such proposed nominee; and
- any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant
to Schedule 14A under the Securities Exchange Act; and
(2) as to the stockholder giving such notice:
- the name and address of such stockholder; and
- the class and number of shares of InfoCure's stock that are beneficially
owned by the stockholder on the date of such notice.
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VOTING REQUIREMENTS
InfoCure's bylaws provide that when a quorum is present at any stockholder
meeting, a majority of the number of shares of stock entitled to vote shall
decide any proposal brought before the meeting, unless the certificate of
incorporation, the bylaws or the DGCL provides a different threshold.
Medical Dynamics' articles of incorporation provide that when a quorum is
present at any stockholder meeting, the affirmative vote of the holders of a
majority of the shares entitled to vote shall decide any proposal brought before
the meeting, unless the articles of incorporation or the CBCA provide a
different threshold.
AMENDING CERTIFICATE OF INCORPORATION OR ARTICLES OF INCORPORATION
InfoCure's certificate of incorporation and Medical Dynamics' articles of
incorporation may be amended by the affirmative vote of a majority of the
outstanding common stock voting together as a single class and the affirmative
vote of a majority of the outstanding stock of each class entitled to vote
thereon.
AMENDING BYLAWS
InfoCure's bylaws may be amended as follows:
- at any meeting of stockholders at which a quorum is present, by vote of a
majority of the number of shares entitled to vote present in person or by
proxy, provided that the notice of the meeting contained a statement of
the substance of the amendment; or
- by a majority vote of the board of directors.
In addition, any stockholder who intends to propose an amendment to the
InfoCure bylaws shall notify the secretary of InfoCure in writing of the
amendment not later than one hundred eighty days prior to a request by such
stockholder to call a special meeting for such purpose or, if such proposal is
intended to be made at an annual meeting of stockholders, not later than the
latest date permitted for submission of stockholder proposals by Rule 14a-8
under the Exchange Act. Such notice to the secretary shall include the text of
the proposed amendment and a brief statement of the reason why such stockholder
intends to make such proposal.
Medical Dynamics' bylaws may be altered, amended, repealed, suspended or
replaced by the board of directors at any regular or special meeting. The CBCA
also permits stockholders to amend the bylaws.
INTERESTED DIRECTOR TRANSACTIONS
No contract or transaction between InfoCure and one or more of its
directors or officers, or between InfoCure and any other company, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the board of directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if:
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- the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the board of
directors or the committee, and the board of directors or committee in
good faith authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or
- the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
- the contract or transaction is fair as to InfoCure as of the time it is
authorized, approved or ratified, by the board of directors, a committee
thereof, or the stockholders.
The CBCA contains provisions which are substantially the same as the
Interested Director provisions of the InfoCure bylaws.
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STOCKHOLDER PROPOSALS
Medical Dynamics anticipates that it will hold its 2000 Annual Meeting of
Stockholders on or before September 30, 2000, only if the merger is not
consummated before the time of the meeting and only if required to maintain its
listing on The Nasdaq SmallCap Market. In the event that this meeting is held,
any proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Secretary of Medical Dynamics no
later than July 1, 2000 to be considered for inclusion in the Medical Dynamics
proxy materials relating to that meeting. Any submission of a stockholder
proposal outside of the proxy materials must be received by the Secretary of
Medical Dynamics no later than July 1, 2000 to be timely.
OTHER MATTERS
As of the date of this proxy statement-prospectus, Medical Dynamics' board
of directors knows of no matters that will be presented for consideration at the
special meeting other than as described in this proxy statement-prospectus.
However, if any other matters properly come before the special meeting or any
adjournment or postponement of the special meeting and are voted upon, the
enclosed proxy will be deemed to confer discretionary authority to the
individuals named as proxies to vote the shares represented by such proxy as to
any such matters.
EXPERTS
The consolidated financial statements and schedule of InfoCure Corporation
and its subsidiaries incorporated by reference in this proxy
statement-prospectus have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their reports incorporated herein by reference, and are incorporated herein in
reliance upon such reports given upon the authority of said firm as experts in
accounting and auditing.
The financial statements of The Healthcare Systems Division of The Reynolds
and Reynolds Company as of September 30, 1998 and 1997 and for the years ended
September 30, 1998, 1997 and 1996 incorporated by reference in this proxy
statement -- prospectus from InfoCure Corporation's Registration Statement on
Form S-3 (with respect to a public offering of 3,759,000 common shares),
effective April 21, 1999, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Datamedic Holding Corp. and
subsidiaries as of March 31, 1999 and 1998, and for each of the years in the
three-year period ended March 31, 1999, have been incorporated by reference
herein in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of Medical Dynamics, Inc. and its
subsidiaries incorporated by reference in this proxy statement-prospectus have
been audited by Hein + Associates LLP, independent certified public accountants,
to the extent and for the periods set forth in their reports incorporated herein
by reference, and are incorporated herein in
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reliance upon such reports given upon the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
Certain legal matters with respect to validity of the shares of InfoCure
common stock offered hereby in connection with the merger will be passed upon
for InfoCure by Morris, Manning & Martin, L.L.P., Atlanta, Georgia. Employees of
Morris, Manning & Martin, L.L.P. own an aggregate of shares of
InfoCure's common stock and an aggregate of shares of Medical
Dynamics' common stock.
WHERE YOU CAN FIND MORE INFORMATION
InfoCure and Medical Dynamics file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission or SEC. You may read and copy any reports, statements or other
information that InfoCure and Medical Dynamics file with the SEC at the SEC's
public reference rooms at the following locations:
Public Reference Room New York Regional Office Chicago Regional
450 Fifth Street, N.W. 7 World Trade Center Office
Room 1024 Suite 1300 Citicorp Center
Washington, D.C. 20549 New York, NY 10048 500 West Madison
Street
Suite 1400
Chicago, IL 60661-2511
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. These SEC filings are also available to the public from
commercial document retrieval services and at the Internet worldwide web site
maintained by the SEC at "http://www.sec.gov". Reports, proxy statements and
other information concerning InfoCure and Medical Dynamics may also be inspected
at the offices of The Nasdaq Stock Market, which is located at 1735 K. Street,
N.W., Washington, D.C. 20006.
InfoCure filed a registration statement on Form S-4 on April 13, 2000, to
register with the SEC the InfoCure common stock to be issued to Medical Dynamics
stockholders in the merger. This proxy statement-prospectus is a part of that
registration statement and constitutes a prospectus of InfoCure in addition to
being a proxy statement of InfoCure and Medical Dynamics. As allowed by SEC
rules, this proxy statement-prospectus does not contain all the information you
can find in InfoCure's registration statement or the exhibits to the
registration statement.
The SEC allows InfoCure and Medical Dynamics to "incorporate by reference"
information into this proxy statement-prospectus, which means that the companies
can disclose important information to you by referring you to other documents
filed separately with the SEC. The information incorporated by reference is
considered part of this proxy statement-prospectus, except for any information
superseded by information contained directly in this proxy statement-prospectus
or in later filed documents incorporated by reference in this proxy
statement-prospectus.
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This proxy statement-prospectus incorporates by reference the documents set
forth below that InfoCure and Medical Dynamics have previously filed with the
Securities and Exchange Commission. These documents contain important business
and financial information about InfoCure and Medical Dynamics that is not
included in or delivered with this proxy statement-prospectus.
INFOCURE FILINGS (FILE NO. 001-12799)
- -------------------------------------
Annual Report on Form 10-K............ Fiscal year ended December 31, 1999
Proxy Statement....................... For meeting to be held June 7, 2000
(which Proxy Statement will be filed
on or before April 30, 2000)
The financial statements of the
Healthcare Systems Division of The
Reynolds and Reynolds Company
included in InfoCure's Prospectus
filed pursuant to Rule 424(b)(4) on
April 22, 1999, which constitutes
part of the Registration Statement
on Form S-3 (No. 333-71109)......... Financial Statements of the Healthcare
Systems Division of The Reynolds and
Reynolds Company as of September 30,
1998 and 1997 and for the years ended
September 30, 1998, 1997 and 1996.
The description of Common Stock in
InfoCure's Registration Statement on
Form 8-A............................ Filed January 28, 1999
MEDICAL DYNAMICS FILINGS (FILE NO. 0-8632)
- ------------------------------------------
Annual Report on Form 10-KSB............ Fiscal Year ended September 30, 1999
Quarterly Reports on Form 10-QSB........ Quarter ended December 31, 1999
Current Reports on Form 8-K............. Dated November 2, 1999 (filed November
5, 1999) and December 21, 1999 (filed
December 23, 1999)
Proxy Statement......................... For meeting held September 30, 1999
InfoCure and Medical Dynamics also incorporate by reference additional
documents that may be filed with the SEC under section 13(a), 13(c), 14 or 15(d)
of the Exchange Act between the date of this proxy statement-prospectus and the
date of the Medical Dynamics special meeting on May 30, 2000. These include
periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, as well as proxy statements.
Medical Dynamics' Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1999, excluding exhibits, accompanies this proxy
statement-prospectus.
InfoCure has supplied all information contained or incorporated by
reference in this proxy statement-prospectus relating to InfoCure, and Medical
Dynamics has supplied all such information relating to Medical Dynamics.
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Medical Dynamics stockholders should not send in their Medical Dynamics
stock certificates until they receive the transmittal materials from the
exchange agent. Medical Dynamics stockholders of record who have further
questions about their stock certificates or the exchange of their Medical
Dynamics common stock for InfoCure common stock should call the exchange agent.
If you are a Medical Dynamics stockholder, we may have sent you some of the
documents incorporated by reference, but you can also obtain any of them through
the company, the SEC or the SEC's Internet web site as described above.
Documents incorporated by reference are available from Medical Dynamics without
charge, excluding all exhibits, except that if the company has specifically
incorporated by reference an exhibit in this proxy statement-prospectus, the
exhibit will also be provided without charge. You may obtain documents
incorporated by reference in this proxy statement-prospectus by requesting them
in writing or by telephone from the company at the following address and
telephone number:
Medical Dynamics, Inc.
99 Inverness Drive East
Englewood, Colorado 80112
Attention: Investor Relations Department
Telephone: (303) 790-2990
If you would like to request documents, please do so by May 25, 2000 in
order to receive them before your special meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT-PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT-PROSPECTUS. THIS PROXY STATEMENT-PROSPECTUS IS DATED
, 2000. YOU SHOULD NOT ASSUME THAT THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER
THAN THAT DATE. NEITHER THE MAILING OF THIS PROXY STATEMENT-PROSPECTUS TO
MEDICAL DYNAMICS STOCKHOLDERS NOR THE ISSUANCE OF INFOCURE COMMON STOCK IN THE
MERGER CREATES ANY IMPLICATION TO THE CONTRARY.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
MEDICAL DYNAMICS, INC., A COLORADO CORPORATION,
INFOCURE CORPORATION, A DELAWARE CORPORATION
AND
CADI ACQUISITION CORPORATION, A COLORADO CORPORATION
DATED: DECEMBER 21, 1999
TABLE OF CONTENTS
PAGE
----
A-6
1. Definitions........................................................
1.1. "Affiliate"................................................. A-6
1.2. "Best Efforts".............................................. A-6
1.3. "Breach".................................................... A-6
1.4. "Closing"................................................... A-6
1.5. "Closing Date".............................................. A-6
1.6. "Code"...................................................... A-6
1.7. "Company Disclosure Schedule"............................... A-6
1.8. "Company Material Adverse Effect"........................... A-6
1.9. "Consent"................................................... A-6
1.10. "Contemplated Transactions"................................. A-6
1.11. "Contract".................................................. A-7
1.12. "Damages"................................................... A-7
1.13. "Effective Time"............................................ A-7
1.14. "Encumbrance"............................................... A-7
1.15. "Environmental Requirements"................................ A-7
1.16. "ERISA"..................................................... A-7
1.17. "ERISA Affiliate"........................................... A-7
1.18. "Exchange Act".............................................. A-7
1.19. "Facilities"................................................ A-7
1.20. "GAAP"...................................................... A-7
1.21. "Governmental Authorization"................................ A-7
1.22. "Governmental Body"......................................... A-7
1.23. "HSR Act"................................................... A-7
1.24. "IRS"....................................................... A-8
1.25. "Knowledge"................................................. A-8
1.26. "Legal Requirement"......................................... A-8
1.27. "Order"..................................................... A-8
1.28. "Ordinary Course of Business"............................... A-8
1.29. "Organizational Documents".................................. A-8
1.30. "Parent Disclosure Schedule"................................ A-8
1.31. "Parent Material Adverse Effect"............................ A-8
1.32. "Person".................................................... A-8
A-1
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1.33. "Plan"...................................................... A-8
1.34. "Proceeding"................................................ A-8
1.35. "Related Person"............................................ A-8
1.36. "Representative"............................................ A-9
1.37. "Securities Act"............................................ A-9
1.38. "Subsidiary"................................................ A-9
1.39. "Tax Returns"............................................... A-9
1.40. "Taxes"..................................................... A-9
1.41. "Threatened"................................................ A-9
A-10
2. Merger.............................................................
2.1. The Merger.................................................. A-10
2.2. Effective Time; Closing..................................... A-10
2.3. Effect of the Merger........................................ A-10
2.4. Articles of Incorporation; Bylaws; Directors and Officers... A-10
2.5. Effect on Capital Stock..................................... A-11
2.6. Exchange of Certificates.................................... A-12
2.7. Lost, Stolen or Destroyed Certificates...................... A-14
2.8. No Further Ownership Rights in Company Common Stock......... A-14
2.9. Additional Actions.......................................... A-14
2.10. Tax and Accounting Consequences............................. A-15
A-15
3. Representations and Warranties of the Company......................
3.1. Organization, Good Standing, Corporate Power and
Subsidiaries.............................................. A-15
3.2. Authority; No Conflict...................................... A-15
3.3. Capitalization.............................................. A-17
3.4. SEC Filings; Financial Statements........................... A-18
3.5. Books and Records........................................... A-19
3.6. Real Property Interests..................................... A-19
3.7. Condition and Sufficiency of Assets......................... A-19
3.8. Accounts Receivable......................................... A-19
3.9. Inventory................................................... A-19
3.10. No Undisclosed Liabilities.................................. A-20
3.11. Taxes....................................................... A-20
3.12. No Company Material Adverse Effect.......................... A-21
3.13. Employee Benefits Matters................................... A-21
3.14. Compliance With Legal Requirements; Governmental
Authorizations............................................ A-24
3.15. Legal Proceedings; Orders................................... A-25
3.16. Absence of Certain Changes and Events....................... A-26
3.17. Contracts; No Defaults...................................... A-27
3.18. Insurance................................................... A-29
3.19. Environmental Matters....................................... A-29
3.20. Employees................................................... A-30
3.21. Government Contracts........................................ A-31
3.22. Intellectual Property Rights of the Company................. A-31
3.23. Certain Payments............................................ A-37
3.24. Relationships With Related Persons.......................... A-37
3.25. Brokers or Finders.......................................... A-38
A-2
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3.26. Labor Relations; Compliance................................. A-38
3.27. Disclosure Documents........................................ A-38
3.28. Disclosure.................................................. A-38
3.29. Vote Required............................................... A-39
3.30. Pooling-of-Interests........................................ A-39
A-39
4. Representations, Warranties and Disclaimers of Merger Sub and
Parent.............................................................
4.1. Organization................................................ A-39
4.2. Authorization............................................... A-39
4.3. Absence of Restrictions and Conflicts....................... A-40
4.4. Capitalization of Parent and Merger Sub..................... A-40
4.5. SEC Filings; Financial Statements........................... A-40
4.6. Litigation.................................................. A-41
4.7. Registration Statement; Proxy Statement..................... A-41
4.8. Certain Proceedings......................................... A-41
4.9. Brokers or Finders.......................................... A-42
A-42
5. Certain Agreements of the Parties..................................
5.1. No Solicitation............................................. A-42
5.2. Public Disclosure........................................... A-44]
5.3. Reasonable Efforts; Notification............................ A-44
5.4. Third Party Consents........................................ A-45
5.5. Indemnification............................................. A-45
5.6. Nasdaq Listing.............................................. A-45
5.7. Affiliates.................................................. A-45
5.8. Provision of Loan By Parent to Company...................... A-46
A-46
6. Additional Covenants of the Parties................................
6.1. Mutual Covenants............................................ A-46
6.2. Covenants of the Company.................................... A-49
6.3. Form S-8.................................................... A-51
6.4. Stock Options and Warrants.................................. A-51
A-52
7. Conditions.........................................................
7.1. Mutual Conditions........................................... A-52
7.2. Conditions to Obligations of Merger Sub and Parent.......... A-53
7.3. Conditions to Obligations of the Company.................... A-54
A-55
8. Termination........................................................
8.1. Termination................................................. A-55
8.2. Notice of Termination; Effect of Termination................ A-56
8.3. Fees and Expenses........................................... A-56
8.4. Amendment................................................... A-57
8.5. Extension; Waiver........................................... A-57
8.6. Special Parent Payment...................................... A-58
A-58
9. Miscellaneous......................................................
9.1. Survival of Representations and Warranties.................. A-58
9.2. Notices..................................................... A-58
9.3. Further Assurances.......................................... A-59
9.4. Waiver...................................................... A-59
A-3
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9.5. Entire Agreement and Modification........................... A-59
9.6. Assignments, Successors and No Third-Party Rights........... A-59
9.7. Pooling-of-Interests........................................ A-59
9.8. Section Headings, Construction.............................. A-60
9.9. Time of Essence............................................. A-60
9.10. Governing Law............................................... A-60
9.11. Counterparts................................................ A-60
Exhibits:
Exhibit A Form of Shareholder Agreement
Exhibit B Reserved
Exhibit C-1 Form of Company Affiliate Agreement
Exhibit C-2 Form of Parent Affiliate Agreement
Exhibit D-1 Form of Employment Agreement for Daniel L. Richmond
Exhibit D-2 Form of Employment Agreement for Chae U. Kim
Exhibit E Form of Norton Lidstone, P.C. Legal Opinion
Exhibit F Form of Morris, Manning & Martin, L.L.P. Legal Opinion
A-4
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement"), is
made and entered into as of December 21, 1999, by and among INFOCURE
CORPORATION, a Delaware corporation ("Parent"), CADI ACQUISITION CORPORATION, a
Colorado corporation and a wholly-owned subsidiary of Parent ("Merger Sub") and
MEDICAL DYNAMICS, INC., a Colorado corporation ("Company").
RECITALS:
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Colorado Business Corporation Act ("Colorado Law"), Parent
and Company intend to enter into a business combination transaction.
B. The Board of Directors of Company (i) has determined that the Merger (as
defined in Section 2.1.) is consistent with and in furtherance of the long-term
business strategy of Company and fair to, and in the best interests of, Company
and its shareholders; (ii) has approved and declared advisable this Agreement,
and has approved the Merger and the other transactions contemplated by this
Agreement and (iii) has determined to recommend that the shareholders of Company
adopt and approve this Agreement and approve the Merger.
C. The Board of Directors of Parent (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and is fair to, and in the best interests of, Parent and its stockholders; (ii)
has approved this Agreement, the Merger and the other transactions contemplated
by this Agreement and (iii) has approved the issuance of shares of common stock,
$.001 par value per share, of Parent ("Parent Common Stock") pursuant to the
Merger.
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement (i) Edwin L.
Adair, M.D. and Pat Horsley Adair; (ii) Daniel L. Richmond; (iii) Chae U. Kim
and (iv) Van A. Horsley (such individuals collectively referred to as the
"Principal Shareholders") are entering into Shareholder Agreements in the form
attached hereto as Exhibit A (the "Shareholder Agreements").
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
F. It is also intended by the parties hereto that the Merger shall qualify
for pooling-of-interests accounting treatment.
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NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. DEFINITIONS
The following terms shall have the following meanings:
1.1. "AFFILIATE" is used in this Agreement to indicate a relationship with
one (1) or more persons and when used shall mean any corporation or organization
of which such person is an executive officer, director or partner or is directly
or indirectly the beneficial owner of ten percent (10%) or more of any class of
equity securities or financial interest therein; any trust or other estate in
which such person has a beneficial interest or as to which such person serves as
trustee or in any similar fiduciary capacity; any relative or spouse of such
person, or any relative of such spouse (such relative being related to the
person in question within the second degree); or any person that directly, or
indirectly through one (1) or more intermediaries, controls or is controlled by,
or is under common control with, the person specified.
1.2. "BEST EFFORTS" means the efforts that a prudent Person desirous of
achieving a result would reasonably use in similar circumstances to ensure that
such result is achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the Person
subject to that obligation to take actions that would result in a materially
adverse change in the benefits of this Agreement and the Contemplated
Transactions to such Person.
1.3. "BREACH" means a "breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement and will be deemed to have
occurred if there is or has been any inaccuracy in or any failure to perform or
comply with, such representation, warranty, covenant, obligation, or other
provision.
1.4. "CLOSING" is defined in this Agreement in Section 2.2.
1.5. "CLOSING DATE" is defined in this Agreement in Section 2.2.
1.6. "CODE" means the Internal Revenue Code of 1986, as amended, including
regulations or other authoritative notices or rulings issued by the Internal
Revenue Service thereunder.
1.7. "COMPANY DISCLOSURE SCHEDULE" is defined in this Agreement in Section
3.
1.8. "COMPANY MATERIAL ADVERSE EFFECT" means a material adverse effect on
the financial condition, results of operation, business or properties of the
Company and Subsidiary taken as a whole.
1.9. "CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
1.10. "CONTEMPLATED TRANSACTIONS" means all of the transactions
contemplated by this Agreement, including, without limitation:
A. The Merger; and
B. The performance by Merger Sub, Parent and the Company of their
respective covenants and obligations under this Agreement.
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1.11. "CONTRACT" means any agreement, contract, subcontract, lease, binding
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan, commitment, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
1.12. "DAMAGES" means any loss, liability, claim, damages, expense
(including, without limitation, costs of investigation and defense and
reasonable attorneys' fees) or diminution of value, whether or not involving a
third party.
1.13. "EFFECTIVE TIME" is defined in this Agreement in Section 2.2.
1.14. "ENCUMBRANCE" means any security interest, mortgage, lien, charge,
adverse claim or restriction of any kind, including, but not limited to, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
1.15. "ENVIRONMENTAL REQUIREMENTS" means federal, state and local laws
relating to pollution or protection of the environment, including laws or
provisions relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials, substances, or wastes
into air, surface water, groundwater, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials, substances, or wastes.
1.16. "ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
1.17. "ERISA AFFILIATE" means any Person which would be required to be
aggregated with the Company under Code sec. 414(b), (c), (m) and/or (o) and/or
under ERISA sec. 4001(a)(14) at any time during the period beginning seven (7)
years prior to the Closing Date and ending immediately prior to the Closing.
1.18. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
1.19. "FACILITIES" means any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company or any Subsidiary and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by the Company
or any Subsidiary.
1.20. "GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the financial statements
referred to in Section 3.4. were prepared.
1.21. "GOVERNMENTAL AUTHORIZATION" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
1.22. "GOVERNMENTAL BODY" means any national, state or municipal or other
local government, state or municipal or other local governmental body, any
subdivision, agency, commission or authority thereof, or any quasi-governmental
or private body exercising any regulatory or taxing authority thereunder.
1.23. "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, 15 U.S.C. sec. 18a, et seq.
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1.24. "IRS" means the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
1.25. "KNOWLEDGE" means an individual will be deemed to have "Knowledge" of
a particular fact or other matter if such individual is actually aware of such
fact or other matter, or a prudent individual given his position with the
Company could be expected to discover or otherwise become aware of such fact or
other matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving or has served within the last five (5) years as a director, executive,
officer, partner, executor or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter.
1.26. "LEGAL REQUIREMENT" means any federal, state, local, municipal or
other administrative order, constitution, law, ordinance, principle of common
law, regulation, statute, or treaty.
1.27. "ORDER" means any award, decision, injunction, judgment, order,
ruling or verdict entered, issued, made or rendered by any court, administrative
agency or other Governmental Body or by any arbitrator.
1.28. "ORDINARY COURSE OF BUSINESS" means an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person.
1.29. "ORGANIZATIONAL DOCUMENTS" means (i) the Articles of Incorporation
and the Bylaws of a corporation; (ii) any charter or similar document adopted or
filed in connection with the creation, formation, or organization of a Person
and (iii) any amendment to any of the foregoing.
1.30. "PARENT DISCLOSURE SCHEDULE" is defined in this Agreement in Section
4.
1.31. "PARENT MATERIAL ADVERSE EFFECT" means a material adverse effect on
the financial condition, results of operation, business or properties of the
Parent and all of it subsidiaries taken as a whole.
1.32. "PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
1.33. "PLAN" as defined in Section 3.13.A. of this Agreement.
1.34. "PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
1.35. "RELATED PERSON" means with respect to a particular individual:
A. Each other member of such individual's Family;
B. Any Person that is directly or indirectly controlled by such
individual or one (1) or more members of such individual's Family;
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C. Any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
D. Any Person with respect to which such individual or one (1) or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
A. Any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
B. Any Person that holds a Material Interest in such specified Person;
C. Each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
D. Any Person in which such specified Person holds a Material
Interest;
E. Any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
F. Any Related Person of any individual described in clause B. or C.
For purposes of this definition, (i) the "Family" of an individual includes
(1) the individual's spouse and (2) any other natural person who is related to
the individual or the individual's spouse within the second degree and (ii)
"Material Interest" means direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or
other voting interests representing at least five percent (5%) of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least five percent (5%) of the outstanding equity
securities or equity interests in a Person.
1.36. "REPRESENTATIVE" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
1.37. "SECURITIES ACT" means the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
1.38. "SUBSIDIARY" shall mean Computer Age Dentist, Inc., a California
corporation.
1.39. "TAX RETURNS" means any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any Governmental Body in connection with the determination,
assessment or collection of any Taxes or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
1.40. "TAXES" means all taxes, charges, fees, levies, interest, penalties,
additions to tax or other assessments, including, but not limited to, income,
excise, property, sales, use, value added and franchise taxes and customs
duties, imposed by any Governmental Body and any payments with respect thereto
required under any tax-sharing agreement.
1.41. "THREATENED" means a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or
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in writing) or any notice has been given (orally or in writing), or any other
event has occurred or any other circumstances exist, that would lead a prudent
Person to conclude that such a claim, Proceeding, dispute, action or other
matter is likely to be asserted, commenced, taken or otherwise pursued in the
future.
2. MERGER
2.1. THE MERGER. At the Effective Time and subject to and upon the terms
and conditions of this Agreement, Merger Sub shall be merged with and into
Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and Company shall continue as the surviving corporation under the
corporate name it possesses immediately prior to the Effective Time. Company as
the surviving corporation after the Merger is sometimes hereinafter referred to
as the "Surviving Corporation."
2.2. EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing Articles
of Merger with the Secretary of State of the State of Colorado in accordance
with the relevant provisions of Colorado Law (the "Articles of Merger") (the
time of such filing (or such later time as may be agreed in writing by Company
and Parent and specified in the Articles of Merger) being the "Effective Time")
as soon as practicable on or after the Closing Date (as herein defined). The
closing of the Merger (the "Closing") shall take place at the offices of Morris,
Manning & Martin, L.L.P., 1600 Atlanta Financial Center, 3343 Peachtree Road,
N.E., Atlanta, Georgia 30326, at a time and date to be specified by the parties,
which shall be no later than the second (2nd) business day after the
satisfaction or waiver of the conditions set forth in Section 7., or at such
other time, date and location as the parties hereto agree in writing (the
"Closing Date").
2.3. EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Colorado
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
2.4. ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS. At the
Effective Time, the Articles of Incorporation of Company, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
of the Surviving Corporation and thereafter shall continue to be its Articles of
Incorporation (until amended as provided under Colorado Law).
The Bylaws of Company, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation and thereafter shall
continue to be its bylaws (until amended as provided therein and under Colorado
Law).
The initial directors and officers of the Surviving Corporation shall be
the directors and the officers of Merger Sub who are serving in such capacities
immediately prior to the Effective Time, and such directors and officers shall
continue to serve as the directors and officers of the Surviving Corporation in
accordance with the bylaws of the Surviving Corporation.
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2.5. EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, Company or the holders of any of the following
securities, the following shall occur:
A. CONVERSION OF COMPANY COMMON STOCK. Each share of Common Stock,
$.001 par value per share, of Company (the "Company Common Stock") issued
and outstanding immediately prior to the Effective Time, other than any
shares of Company Common Stock to be canceled pursuant to Section 2.5.B.
and any Dissenting Shares (as defined and to the extent provided in Section
2.5.), will be canceled and extinguished and automatically converted
(subject to Section 2.5.F.) into the right to receive .05672 of a share,
subject to adjustment as provided further in this Section 2.5.A., of Parent
Common Stock (the "Exchange Ratio") upon surrender of the certificate
representing such share of Company Common Stock in the manner provided in
Section 2.6. (or in the case of a lost, stolen or destroyed certificate,
upon delivery of an affidavit (and bond, if required) in the manner
provided in Section 2.7.). Subject to Section 2.5.E., the Exchange Ratio
shall not be adjusted if the Share Value (as defined below) is equal to or
greater than Thirteen and 22/100 Dollars ($13.22), but no greater than
Twenty-Two and 04/100 ($22.04). If the Share Value is greater than
Twenty-Two and 04/100 Dollars ($22.04), then the Exchange Ratio shall
automatically be adjusted to equal the product of (i) .05672 multiplied by
(ii) a fraction, the numerator of which is 22.04 and the denominator of
which is the Share Value. If the Share Value is less than 13.22, then the
Exchange Ratio shall automatically be adjusted to equal the product of (i)
.05672 multiplied by (ii) a fraction, the numerator of which is 13.22 and
of the denominator of which is the Share Value. For purposes hereof, the
term "Share Value" shall mean an amount equal to the average closing price
of a share of Parent Common Stock as reported on NASDAQ for the twenty (20)
consecutive trading days immediately preceding closing. If any shares of
Company Common Stock outstanding immediately prior to the Effective Time
are unvested or are subject to a repurchase option, risk of forfeiture or
other condition under any applicable restricted stock purchase agreement or
other agreement with the Company, then the shares of Parent Common Stock
issued in exchange for such shares of Company Common Stock will also be
unvested and subject to the same repurchase option, risk of forfeiture or
other condition, and the certificates representing such shares of Parent
Common Stock may accordingly be marked with appropriate legends. The
Company shall take all action that may be necessary to ensure that, from
and after the Effective Time, Parent is entitled to exercise any such
repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
B. Cancellation of Company-Owned Stock. Each share of Company Common
Stock held by Company or any direct or indirect wholly-owned subsidiary of
Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
C. Warrants. All warrants to purchase Company Common Stock
(collectively, the "Warrants") then outstanding shall be assumed by Parent
in accordance with Section 6.4.
D. Stock Options. All options (collectively, the "Options") to
purchase Company Common Stock then outstanding under the Company's stock
option plans
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referenced in Schedule 3.3 (collectively, the "Company Stock Option Plans")
shall be assumed by Parent in accordance with Section 6.4.
E. Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities
convertible into Company Common Stock or Parent Common Stock),
reorganization, recapitalization or other like change with respect to
Company Common Stock or Parent Common Stock occurring after the date hereof
and prior to the Effective Time.
F. Fractional Shares. As of the Effective Time, all such shares of
Company Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each certificate
previously representing any such shares shall thereafter represent only the
right to receive a certificate representing the shares of Parent Common
Stock into which such Company Common Stock was converted in the Merger. The
holders of such certificates previously evidencing such shares of the
Company Common Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of the Company
Common Stock as of the Effective Time except as otherwise provided herein
or by law. Such certificates previously representing shares of the Company
Common Stock shall be exchanged for certificates representing whole shares
of Parent Common Stock issued in consideration therefor upon the surrender
of such certificates in accordance with the provisions of Section 2.6.,
without interest. No fractional shares of Parent Common Stock will be
issued in connection with the Merger, but in lieu thereof, the holder of
any shares of Company Common Stock who would otherwise be entitled to
receive a fraction of a share of Parent Common Stock shall receive cash in
an amount equal to the value of such fractional shares, which shall be
equal to the fraction of a share of Parent Common Stock that would
otherwise be issued multiplied by the average closing price of Parent
Common Stock for the twenty (20) trading days immediately preceding the
last full trading day prior to the Effective Time, as reported on the
Nasdaq National Market System ("Nasdaq").
2.6. EXCHANGE OF CERTIFICATES.
A. Exchange Agent; Parent to Provide Common Stock. Promptly after the
Effective Time, Parent shall supply, or shall cause to be supplied, to or
for the account of a bank or trust company designated by Parent (the
"Exchange Agent"), for exchange in accordance with this Section 2.6.,
through the Exchange Agent, certificates evidencing the Parent Common Stock
issuable pursuant to Section 2.5. in exchange for outstanding shares of
Company Common Stock, and cash in an amount sufficient for payment in lieu
of fractional shares pursuant to Section 2.5.F. and any dividends or other
distributions to which holders of shares of Company Common Stock may be
entitled pursuant to Section 2.6.C.
B. Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each
holder of record (as of the Effective Time) of a certificate or
certificates which immediately prior to the Effective Time evidenced
outstanding shares of Company Common Stock (the "Certificates") whose
shares were converted into shares of Parent Common Stock pursuant to
Section 2.5. cash in lieu of any fractional shares pursuant to Section
2.5.F. and any dividends or other distributions to which holders of shares
of Company Common Stock may be entitled pursuant to Section 2.6.C. (i) a
letter of transmittal
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(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
certificates evidencing shares of Parent Common Stock, cash in lieu of any
fractional shares pursuant to Section 2.5.F. and any dividends or other
distributions pursuant to Section 2.6.C. Upon surrender of a Certificate
for cancellation to the Exchange Agent or to such other agent or agents as
may be appointed by Parent, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto,
and such other customary documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive
in exchange thereof (1) certificates evidencing that number of whole shares
of Parent Common Stock into which such holder's shares of Company Common
Stock were converted at the Effective Time; (2) any dividends or other
distributions to which such holder is entitled pursuant to Section 2.6.C.
and (3) cash in lieu of fractional shares to which such holder is in
entitled pursuant to Section 2.5.F., and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of
shares of Company Common Stock which is not registered in the transfer
records of the Company as of the Effective Time, Parent Common Stock and
cash may be issued and paid in accordance with this Section 2. to a
transferee if the Certificate evidencing such shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and
effect such transfer pursuant to this Section 2.6. and by evidence that any
applicable stock transfer taxes have been paid. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented
shares of Company Common Stock will be deemed from and after the Effective
Time, for all corporate purposes, other than the payment of dividends, to
evidence only the ownership of the number of full shares of Parent Common
Stock into which such shares of Company Common Stock shall have been so
converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 2.5.F. and any
dividends or distributions payable pursuant to Section 2.6.C.
C. Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time, with respect
to Parent Common Stock with a record date after the Effective Time, shall
be paid to the holder of any unsurrendered Certificate until the holder of
such Certificate shall surrender such Certificate or comply with the lost
instrument procedure set forth in Section 2.7. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, at the time of
such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock.
D. Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any person
designated by it any transfer or other taxes required by reason of the
issuance
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of a certificate for shares of Parent Common Stock in any name other than
that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it
that such tax has been paid or is not payable.
E. Required Withholding. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement
to any holder or former holder of Company Common Stock such amounts as may
be required to be deducted or withheld therefrom under the Code or under
any provision of state, local or foreign tax law or under any other
applicable legal requirement. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this
Agreement as having been paid to the person to whom such amounts would
otherwise have been paid.
F. No Liability. Notwithstanding anything to the contrary in this
Section 2.6., neither the Exchange Agent, Parent, Merger Sub nor the
Company shall be liable to any holder of shares of Company Common Stock or
Parent Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.7. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Company Common
Stock as may be required pursuant to Section 2.5.; provided, however, that
Parent may, in its sole discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
2.8. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash paid in
respect thereof pursuant to Section 2.5.F. and 2.6.C.) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Section 2.
2.9. ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation or Parent shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of the Company or otherwise to carry out the
purposes of this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of the Company, all such deeds, bills of sale, assignments and assurances
and to take and do, in the name and on behalf of the Company, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to
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and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out the purposes of this Agreement.
2.10. TAX AND ACCOUNTING CONSEQUENCES.
A. It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code.
The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United
States Income Tax Regulations.
B. It is intended by the parties hereto that the Merger shall be
treated as a pooling of interests for accounting purposes.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date hereof and as of the Closing Date, Company represents and
warrants to Merger Sub and Parent, subject to such exceptions as are
specifically disclosed in writing in the disclosure schedule and referencing a
specific representation supplied by the Company to Merger Sub and Parent dated
as of the date hereof and certified by a duly authorized officer of Company (the
"Company Disclosure Schedule"), as follows:
3.1. ORGANIZATION, GOOD STANDING, CORPORATE POWER AND SUBSIDIARIES.
A. Schedule 3.1.A of the Company Disclosure Schedule contains a
complete and accurate list of the Company and each Subsidiary's name, its
jurisdiction of incorporation, other jurisdictions in which it is
authorized to do business.
The Company and the Subsidiary are each a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction
in which it is organized, with full corporate power and authority to
conduct its business as it is now being conducted and to own or use the
properties and assets that it purports to own or use.
The Company and the Subsidiary are each duly qualified or licensed to
do business as a foreign corporation and is in good standing under the laws
of each state or other jurisdiction in which either the ownership or use of
the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except where the failure to
be so qualified or licensed would not result in a Company Material Adverse
Effect.
B. The Company and Subsidiary have delivered to Merger Sub copies of
the Organizational Documents of the Company and Subsidiary, as currently in
effect.
C. Neither Company nor Subsidiary has agreed nor is obligated to make
nor be bound by any Contract under which it may become obligated to make,
any future investment in or capital contribution to any other entity.
Neither the Company nor the Subsidiary owns, directly or indirectly, any
equity or similar interest convertible, exchangeable or exercisable for,
any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
3.2. AUTHORITY; NO CONFLICT.
A. The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder
and, subject only to
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obtaining the approval of the shareholders of the Company of the Merger
(the "Shareholder Approval"), to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Company and the
consummation by Company of the transactions contemplated hereby have been
duly and validly approved by the Company Board of Directors, as required by
applicable law and the Company Board of Directors has, as of the date of
this Agreement, determined (i) that the Merger is advisable and fair to,
and in the best interests of Company and its shareholders and (ii) to
recommend that the shareholders of Company approve and adopt this Agreement
and approve the Merger.
This Agreement is, or when executed and delivered by the Company will
be, a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as to the effect, if any, of
(i) applicable bankruptcy and other similar laws affecting the rights of
creditors generally and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
B. Except as set forth in Schedule 3.2 of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement and the
Stock Option Agreement by the Company nor, after obtaining the Shareholder
Approval, the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse
of time):
(i) Contravene, conflict with, or result in a violation of any
provision of the Organizational Documents of the Company or the
Subsidiary;
(ii) Contravene, conflict with, or result in a violation of, or
give any Governmental Body or, to the Knowledge of the Company, other
Person the right to challenge any of the Contemplated Transactions or to
exercise any remedy or obtain any relief under, any Legal Requirement or
any Order to which the Company or the Subsidiary, or any of the assets
owned or used by the Company or the Subsidiary, may be subject;
(iii) Subject to the filing of the Articles of Merger with the
Colorado Secretary of State, contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any Governmental Authorization that is held by the
Company or the Subsidiary or that otherwise relates to the business of,
or any of the assets owned or used by the Company or the Subsidiary;
(iv) Cause the Company or the Subsidiary to become subject to, or
to become liable for the payment of, any Tax;
(v) Cause any of the assets owned by the Company or the Subsidiary
to be reassessed or revalued by any taxing authority or other
Governmental Body;
(vi) Contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any material
Contract to which Company or the Subsidiary is a party or by which
Company or the Subsidiary or its or any of their respective properties
are bound or affected; or
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(vii) Result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by the Company or the
Subsidiary.
C. Except as set forth in Schedule 3.2 of the Company Disclosure
Schedule and such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Company
Material Adverse Effect or have a material adverse effect on the ability of
the parties to consummate the Merger, the Company and the Subsidiary are
not or will not be required to give any notice to or obtain any Consent
from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3. CAPITALIZATION. The authorized capital stock of the Company consists
of (i) thirty million (30,000,000) shares of Company Common Stock, par value
$.001 per share and five million (5,000,000) shares of Preferred Stock, $.001
par value per share ("Company Preferred Stock"). At the close of business on
December 10, 1999 (i) twelve million eight hundred sixty-six thousand two
hundred sixty-nine (12,866,269) shares of Company Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable; (ii)
no shares of Company Common Stock were held in treasury by Company or by any
Subsidiary; (iii) three million four hundred thirty-three thousand two hundred
thirty-seven (3,433,237) shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding options to purchase Company Common
Stock under the Company Stock Option Plans; (iv) one million one hundred four
thousand two hundred twenty (1,104,220) shares of Company Common Stock were
available for future grant under the Company Stock Option Plans and (v) six
hundred seventy-three thousand eight hundred thirty-four (673,834) shares of
Company Common Stock were reserved for future issuance upon conversion of
warrants of the Company. As of the date hereof, no shares of Company Preferred
Stock were issued or outstanding. Schedule 3.3 of the Company Disclosure
Schedule sets forth the following information with respect to each Option and
Warrant (as defined in Section 6.4.) outstanding as of the date of this
Agreement: (i) the name and address of the optionee or warrant holder; (ii) the
particular plan pursuant to which such Option was granted; (iii) the number of
shares of Company Common Stock subject to such Option or Warrant; (iv) the
exercise price of such Option or Warrant; (v) the date on which such Option or
Warrant was granted; (vi) the applicable vesting schedule and (vii) the date on
which such Option or Warrant expires. Company has made available to Parent
accurate and complete copies of all stock option plans pursuant to which the
Company has granted such Options that are currently outstanding and the form of
all stock option agreements and instruments evidencing such Options and
Warrants. Except as set forth in Schedule 3.3, all shares of Company Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instrument pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and nonassessable. There
are no commitments or agreements of any character to which the Company is bound
obligating the Company to accelerate the vesting of any Option as a result of
the Merger. All outstanding shares of Company Common Stock, all outstanding
Options and Warrants, and all outstanding shares of capital stock of Subsidiary
have been issued and granted in compliance with (i) all applicable securities
laws and other applicable Legal Requirements and (ii) all requirements set forth
in applicable Contracts. Except for securities Company owns free and clear of
all Encumbrances, as of the date of this Agreement, there are no equity
securities, partnership interests or similar ownership interests of any class of
equity security of Subsidiary, or any security exchangeable or convertible into
or exercisable for such
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equity securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Schedule 3.3, there
are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which Company or
Subsidiary is a party or by which it is bound obligating Company or Subsidiary
to issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition of, any shares of capital stock, partnership interests or similar
ownership interests of the Company or Subsidiary or obligating the Company or
Subsidiary to grant, extend, accelerate the vesting of or enter into any such
subscription, option, warrant, equity security, call, right, commitment or
agreement. As of the date of this Agreement, except as contemplated by this
Agreement and except as set forth in Schedule 3.3, there are no registration
rights and there is no voting trust, proxy, rights plan, anti-takeover plan or
other agreement or understanding to which the Company or Subsidiary is a party
or by which they are bound with respect to any equity security of any class of
the Company or with respect to any equity security, partnership interest or
similar ownership interest of any class of Subsidiary. Stockholders of the
Company will not be entitled to dissenters' rights under applicable state law in
connection with the Merger.
3.4 SEC FILINGS; FINANCIAL STATEMENTS.
A. Company has made available to Parent a correct and complete copy of
each report, schedule, registration statement and definitive proxy
statement filed by Company with the Securities and Exchange Commission
("SEC") since September 1, 1998 (the "Company SEC Reports"), which are all
the forms, reports and documents required to be filed by Company with the
SEC since September 1, 1998. The Company SEC Reports (i) were prepared in
accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be and (ii) did not at the time they were filed (and if
amended or superseded by a filing prior to the date of this Agreement then
on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of Company's Subsidiaries
is required to file any reports or other documents with the SEC.
B. Each set of consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports was
prepared in accordance with GAAP (except as may be indicated in the notes
thereto or, in the case of unaudited statements, do not contain footnotes
as permitted by Form 10-Q of the Exchange Act) and each fairly presents the
consolidated financial position of Company and the Subsidiary at the
respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal adjustments which were
not or are not expected to be material in amount.
C. Company has previously furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with
the SEC, but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Company with the SEC
pursuant to the Securities Act or the Exchange Act.
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3.5. BOOKS AND RECORDS. The books of account, stock record books, and
other records of the Company and the Subsidiary, all of which have been made
available to Merger Sub and Parent, are complete and correct in all material
respects.
The minute books of the Company and the Subsidiary made available to
counsel for Parent are the only minute books of the Company and the Subsidiary
and contain a reasonably accurate summary, in all material respects, of all
meetings held of, and corporate action taken by, the stockholders, the Board of
Directors and committees of the Board of Directors of Company and the Subsidiary
since the time of its incorporation. At the Closing, all of those books and
records will be in the possession of the Company.
3.6. REAL PROPERTY INTERESTS. Neither the Company nor the Subsidiary owns
real property. Schedule 3.6 of the Company Disclosure Schedule contains a
complete and accurate list of all leaseholds or other interests in real property
of the Company and the Subsidiary. The Company has delivered or made available
to Merger Sub and Parent copies of the lease agreements and other instruments by
which the Company and the Subsidiary acquired such leasehold and other real
property interests.
3.7. CONDITION AND SUFFICIENCY OF ASSETS. Except as set forth on Schedule
3.7 of the Company Disclosure Schedule, to the Company's Knowledge, the
buildings, plants, structures and equipment of the Company and the Subsidiary
are structurally sound, are in good operating condition and repair, subject to
normal wear and tear, and are adequate for the uses to which they are being put.
3.8. ACCOUNTS RECEIVABLE. All accounts receivable of the Company and the
Subsidiary that are reflected on the Financial Statements or on the accounting
records of the Company as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will
be as of the Closing Date current and collectible net of the respective reserves
shown on the Financial Statements or on the accounting records of the Company
and the Subsidiary as of the Closing Date (which reserves are adequate and
calculated consistent with past practice).
Subject to such reserves, each of the Accounts Receivable either has been
or will be collected in full, without any set-off, within one hundred fifty
(150) days on which it first becomes due and payable. To the Knowledge of the
Company, there is no contest, claim, or right of set-off, other than returns in
the Ordinary Course of Business, under any material Contract with any obligor of
an Accounts Receivable relating to the amount or validity of such Accounts
Receivable.
Schedule 3.8 of the Company Disclosure Schedule contains a complete and
accurate list of all Accounts Receivable as of October 31, 1999, which list sets
forth the aging of such Accounts Receivable.
3.9. INVENTORY. All inventory of the Company and the Subsidiary, whether
or not reflected in the Financial Statements, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete items
and items of below-standard quality, all of which have been or will be written
off or written down to net realizable value in the Financial Statements or on
the accounting records of the Company and the Subsidiary as of the Closing Date,
as the case may be.
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3.10. NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 3.10 of
the Company Disclosure Schedule, neither the Company nor the Subsidiary have any
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent or otherwise) except for liabilities or
obligations reflected or reserved against in the Financial Statements and not
heretofore paid or discharged and current liabilities incurred in the Ordinary
Course of Business since June 30, 1999.
3.11. TAXES.
A. Except as set forth on Schedule 3.11 to the Company Disclosure
Schedule, the Company and the Subsidiary have timely filed all Tax Returns
that they were required to file. All such Tax Returns were correct and
complete in all material respects. The Company and the Subsidiary have paid
in full or made adequate provision by the establishment of reserves for all
Taxes which have become due or which are attributable to the conduct of the
Company's and the Subsidiary's business prior to the date hereof. The
Company and the Subsidiary will continue to make adequate provision for all
such Taxes for all periods through the Closing Date. The Company and the
Subsidiary are not the beneficiaries of any extension of time within which
to file any Tax Return.
Except as set forth on Schedule 3.11, the Company has no Knowledge of
any Tax deficiency proposed or Threatened against the Company or the
Subsidiary. There are no Tax liens upon any property or assets of the
Company or the Subsidiary to secure the payment of any delinquent Taxes.
Except as set forth on Schedule 3.11, the Company and the Subsidiary
have made all payments of estimated Taxes when due in amounts sufficient to
avoid the imposition of any penalty.
B. Except as set forth on Schedule 3.11, all Taxes and other
assessments and levies which the Company or the Subsidiary were required by
law to withhold or to collect have been duly withheld and collected, and
have been paid over to the proper Governmental Body.
C. Except as set forth in Schedule 3.11, the Tax Returns of the
Company and the Subsidiary have never been audited by the IRS or other
Governmental Body, nor are any such audits in process. Except as set forth
in Schedule 3.11, there are no outstanding agreements or waivers extending
the statute of limitations applicable to any Tax Returns of the Company or
the Subsidiary for any period.
D. For federal income tax purposes, the Company and the Subsidiary
have a taxable year ending on September 30 in each year.
E. The Company has not filed a consent under Code sec. 341(f)
concerning collapsible corporations. The Company and the Subsidiary have
not made any material payments, are not obligated to make any material
payments, and are not a party to any agreement that under any circumstances
could obligate it to make any material payments that will not be deductible
under Code sec. 280G. The Company and the Subsidiary have not been a United
States real property holding corporation within the meaning of Code sec.
897(c)(2) during the applicable period specified in Code sec.
897(c)(1)(A)(ii). The Company and the Subsidiary are not a party to any Tax
allocation or sharing agreement. Except with respect to the Subsidiary, the
Company (i) has not been a member of an affiliated group filing a
consolidated
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federal income Tax Return and (ii) has no liability for the Taxes of any
Person under Reg. sec.1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise.
F. The Company's and the Subsidiary's Tax basis in its assets for
purposes of determining its future amortization, depreciation and other
federal income tax deductions is accurately reflected on the Company's and
the Subsidiary's books and records in all material respects.
3.12. NO COMPANY MATERIAL ADVERSE EFFECT. Since June 30, 1999, there has
not been any Company Material Adverse Effect, and to the Company's Knowledge, no
event has occurred and no circumstance exists that may result in a Company
Material Adverse Effect other than with respect to general domestic or
international economic conditions.
3.13. EMPLOYEE BENEFITS MATTERS.
A. Schedule 3.13.1 lists all plans, programs, and similar agreements,
commitments or arrangements (including, but not limited to, any bonus,
profit sharing, pension, deferred compensation, stock option, stock
purchase, fringe benefit, severance, post-retirement, scholarship, tuition
reimbursement, disability, sick leave, vacation, commission, retention or
other arrangements), whether oral or written, sponsored or maintained by or
on behalf of, or to which contributions are or were made by, Company and/or
any ERISA Affiliate within the last seven (7) years that provide or
provided benefits, compensation or other remuneration to, or for the
benefit of, current or former employees of Company and/or any ERISA
Affiliate or any or any other individual who provides services to the
Company and/or any ERISA Affiliate (including, but not limited to, any
shareholder, officer, director, employee or consultant), or any spouse,
child or other dependent of such current or former employee or other
individual ("Plan" or "Plans"). Except as disclosed on Schedule 3.13.1,
there are no other benefits to which any current or former employees of
Company and/or any ERISA Affiliate or any or any other individual who
provides services to the Company and/or any ERISA Affiliate (including, but
not limited to, any shareholder, officer, director, employee or
consultant), or any spouse, child or other dependent of such current or
former employee or other individual is entitled or for which the Company
and/or any ERISA Affiliate has any obligation. Except as set forth on
Schedule 3.13.1, only current employees of Company participate in the
Plans, except as required by I.R.C. sec. 4980B and/or ERISA sec.sec.
601-609. Copies of all Plans and, to the extent applicable, all related
trust agreements, actuarial reports, and valuations for the most recent
three (3) years, all summary plan descriptions, prospectuses, Annual Report
Form 5500's or similar forms (and attachments thereto) for the most recent
three (3) years, all Internal Revenue Service determination letters, and
any related documents requested by Buyer, including all amendments,
modifications and supplements thereto, all material employee and/or
participant communications relating to each such Plan, and all insurance
contracts, administrative services agreements or contracts, have been
delivered to Buyer, and all of the same are true, correct and complete.
B. With respect to each Plan to the extent applicable:
(i) No litigation or administrative or other proceeding or
investigation, claim, lawsuit, arbitration or other action is pending or
threatened involving such Plan or any administrator, fiduciary,
employee, contributing employer, contractor
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or agent of such Plan, other than routine claims for benefits in the
ordinary course for such Plan.
(ii) Such Plan has been administered and operated in compliance
with, and has been amended to comply with, all applicable laws, rules,
and regulations, including, without limitation, ERISA, the Code, and the
regulations issued under ERISA and the Code.
(iii) Company and ERISA Affiliates have made and as of the Closing
Date will have made or accrued, all payments and contributions required,
or reasonably expected to be required, to be made under the provisions
of such Plan or required to be made under applicable laws, rules and
regulations, with respect to any period prior to the Closing Date, such
amounts to be determined using the ongoing actuarial and funding
assumptions of the Plan if applicable.
(iv) Such Plan is fully funded in an amount sufficient to pay all
liabilities (whether or not vested) accrued (including liabilities and
obligations for health care, life insurance and other benefits after
termination of employment) and claims incurred to the date hereof.
(v) On the Closing Date such Plan will be fully funded in an amount
sufficient to pay all liabilities (whether or not vested) accrued as of
the Closing Date (including liabilities and obligations for health care,
life insurance and other benefits after termination of employment) and
claims incurred as of the Closing Date, or adequate reserves will be set
up on Company's books and records, or paid-up insurance will be
provided, therefor.
(vi) Such Plan has been administrated and operated only in the
ordinary and usual course and in accordance with its terms, and there
has not been in the four (4) years prior hereto any increase in the
liabilities of such Plan beyond increases typically experienced as a
result of changes in the workforce.
(vii) Such Plan is not a multiemployer plan (as defined in ERISA
sec. 3(37) or 4001(a)(3)), is not a single-employer plan (as defined in
ERISA sec. 4001(a)(15)), and is not a defined benefit plan (as defined
in ERISA sec. 3(35)), and is not a plan maintained by more than one
employer (within the meaning of Code sec. 413(c)).
(viii) No Person has engaged in any "prohibited transaction" (as
defined in ERISA sec. 406 or Code sec. 503(b) or 4975) with respect to
such Plan on or prior to the Closing Date, and no Person who would be a
fiduciary with respect to such Plan has breached any of his
responsibilities or obligations imposed upon fiduciaries under Title I
of ERISA which would subject Company or any ERISA Affiliate, or any
Person whom the Company has an obligation to indemnify, to any
liability.
(ix) Such Plan contains provisions which allow additional benefits
under the Plan to be discontinued at any time and for any reason, and
which allow the Plan to be terminated (or the Company's participation in
the Plan to be terminated) by the Company at any time and for any
reason, and, if such Plan were terminated (or the Company's
participation in such Plan were terminated) on or prior to the Closing
Date, no additional liability would be incurred by the Company by such
action.
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(x) All communications with respect to such Plan by any Person on
or prior to the Closing Date have reflected accurately the documents and
operations of such Plan, and no Person has, as of the Closing Date, any
liability under any applicable law by reason of any communication or
failure to communicate with respect to or in connection with such Plan.
(xi) Such Plan does not provide benefits to any former employee, or
any other Person who is not performing services for the Company, except
as required by Code sec. 4980B and/or ERISA sec.sec. 601-609.
(xii) No liability to the Pension Benefit Guaranty Corporation
("PBGC") has been incurred or will be incurred as of the Closing Date by
Company or any ERISA Affiliate, except for PBGC insurance premiums (if
any), and all such insurance premiums incurred or accrued up to and
including the Closing Date have been timely paid, or will be timely paid
prior to the Closing Date.
(xiii) Neither the Company nor any ERISA Affiliate has ceased
operations at any facility or withdrawn from such Plan in a manner which
could subject the Company to liability under ERISA sec. 4062, 4063 or
4064, and no events have occurred or will occur on or prior to the
Closing Date which might give rise to any liability of Company to the
PBGC under Title IV of ERISA or which could reasonably be anticipated to
result in any claims being made against Company by the PBGC.
(xiv) No entitlement to any benefit (including, but not limited to,
severance pay, unemployment compensation or payment contingent upon a
change in control or ownership of the Company) from such Plan shall
arise, and no acceleration or increase in benefits due any Person shall
occur, by reason of the consummation of the transactions contemplated by
this Agreement.
(xv) An ERISA fiduciary insurance policy issued by a licensed
insurance company is in place covering each and every fiduciary of such
Plan.
(xvi) If such Plan purports to provide benefits which qualify for
tax-favored treatment under Code sec. 79, 105, 106, 117, 120, 125, 127
129 or 132, the Plan satisfies the requirements of said Code sections.
C. The participants and beneficiary records with respect to each Plan
providing benefits to employees or other Persons performing services for
the Company and their spouses, dependents, etc., are in the custody of the
Company (or an agent of the Company who must, upon demand, provide such
records to the Company), and such records accurately state the history of
each participant and beneficiary in connection with each such Plan and
accurately state the benefits earned by and/or owed to each such
participant and beneficiary.
D. Except as otherwise set forth on Schedule 3.13.2, the Company is
not liable for and neither the Company nor Merger Sub nor Parent will be
liable for, any contribution, Tax, lien, penalty, cost, interest, claim,
loss, action, suit, damage, cost assessment or other similar type of
liability or expense of any ERISA Affiliate (including predecessors
thereof) with regard to any Plan maintained, sponsored or contributed to by
an ERISA Affiliate, including, without limitation, withdrawal liability
arising under Title IV of ERISA, liabilities to the PBGC, or liabilities
under Code sec. 412 or ERISA sec. 302.
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3.14. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS. For
purposes of this Section 3.14. only, the term "Company" shall be deemed to
include the Company and the Subsidiary.
A. Except as set forth in Schedule 3.14 of the Company Disclosure Schedule:
(i) The Company is, and at all times since September 30, 1998 has
been, in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets except where the failure to comply
with a Legal Requirement would not have a Company Material Adverse
Effect;
(ii) To the Knowledge of the Company, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (1)
may constitute or result in a violation by the Company of, or a failure
on the part of the Company to comply with, any Legal Requirement or (2)
may give rise to any obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any remedial action of any
nature except for events or circumstances which in the aggregate would
not have a Company Material Adverse Effect; and
(iii) The Company has not received, at any time since September 30,
1998, any written notice or other written communication from any
Governmental Body or any other Person regarding (1) any actual, alleged,
possible, or potential violation of, or failure to comply with, any
Legal Requirement or (2) any actual, alleged, possible, or potential
obligation on the part of the Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature.
B. The Company has all Governmental Authorizations necessary to conduct its
business as presently conducted. Each Governmental Authorization is valid and in
full force and effect. Except as set forth in Schedule 3.14 of the Company
Disclosure Schedule:
(i) The Company is, and at all times since September 30, 1998 has
been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in
Schedule 3.14 of the Company Disclosure Schedule, except where the
failure to comply with a Governmental Authorization would not have a
Company Material Adverse Effect;
(ii) To the Knowledge of the Company, no event has occurred or
circumstance exists that may (with or without notice or lapse of time)
(1) constitute or result directly or indirectly in a violation of or a
failure to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Schedule 3.14 of the
Company Disclosure Schedule or (2) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or
any modification to, any Governmental Authorization listed or required
to be listed in Schedule 3.14 of the Company Disclosure Schedule, except
for events or circumstances which in the aggregate would not have a
Company Material Adverse Effect;
(iii) The Company has not received, at any time since September 30,
1998, any written notice or other written communication from any
Governmental Body
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or any other Person regarding (1) any actual or alleged violation of or
failure to comply with any term or requirement of any Governmental
Authorization or (2) any actual or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) All applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be listed in
Schedule 3.14 of the Company Disclosure Schedule have been duly filed on
a timely basis with the appropriate Governmental Bodies, and all other
filings required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies, except where the failure to make such
filings in a timely manner would not have a Company Material Adverse
Effect.
The Governmental Authorizations listed in Schedule 3.14 of the Company
Disclosure Schedule collectively constitute all of the Governmental
Authorizations that are material to the conduct of the Company's business in the
manner it is currently conducted and to operate such business and to permit the
Company to own and use its assets in the manner in which it currently owns and
uses such assets.
3.15. LEGAL PROCEEDINGS; ORDERS.
A. Except as set forth in Schedule 3.15 of the Company Disclosure
Schedule, there is no pending Proceeding:
(i) That has been commenced by or against the Company or the
Subsidiary; or
(ii) To the Knowledge of the Company, that challenges, or that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
Except as set forth in Schedule 3.15 of the Company Disclosure Schedule, to
the Knowledge of the Company, (i) no such Proceeding has been Threatened and
(ii) no event has occurred or circumstance exists that may give rise to or serve
as a basis for the commencement of any Proceeding that could reasonably be
expected to result in a Company Material Adverse Effect. The Company and the
Subsidiary have delivered to Merger Sub and Parent copies of all pleadings,
correspondence, and other documents relating to each pending Proceeding listed
in Schedule 3.15 of the Company Disclosure Schedule. The Proceedings listed in
Schedule 3.15 of the Company Disclosure Schedule will not have a Company
Material Adverse Effect.
B. Except as set forth in Schedule 3.15 of the Company Disclosure
Schedule:
(i) There is no Order to which the Company or the Subsidiary, or,
to the Company's Knowledge, any of the assets owned or used by the
Company or the Subsidiary, is subject; and
(ii) To the Company's Knowledge, no officer, director, or employee
of the Company or the Subsidiary is subject to any Order that prohibits
such officer, director, or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of the Company
or the Subsidiary as currently conducted.
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C. Except as set forth in Schedule 3.15 of the Company Disclosure
Schedule:
(i) The Company and the Subsidiary are, and at all times since
September 30, 1998 have been, in full compliance with all of the terms
and requirements of each Order to which it, or any of the assets owned
or used by it, is or has been subject, except where the failure to
comply would not have a Company Material Adverse Effect;
(ii) To the Knowledge of the Company, no event has occurred or
circumstance exists that may constitute or result in (with or without
notice or lapse of time) a violation of or failure to comply with any
term or requirement of any Order to which the Company or the Subsidiary,
or any of the assets owned or used by the Company or the Subsidiary, is
subject, except for events or circumstances which in the aggregate would
not have a Company Material Adverse Effect; and
(iii) Neither the Company nor the Subsidiary have received, at any
time since September 30, 1998, any written notice from any Governmental
Body or any other Person regarding any actual or alleged violation of,
or failure to comply with, any term or requirement of any Order to which
the Company, or any of the assets owned or used by the Company or the
Subsidiary, is or has been subject.
3.16. ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 3.16 of the Company Disclosure Schedule, since June 30, 1999, the
Company and the Subsidiary have conducted their businesses only in the Ordinary
Course of Business and there has not been any:
A. Change in the Company's or the Subsidiary's authorized or issued
capital stock; grant of any stock option or right to purchase shares of
capital stock of the Company or the Subsidiary; issuance of any security
convertible into such capital stock; grant of any registration rights;
purchase, redemption, retirement, or other acquisition by the Company or
the Subsidiary of any shares of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in respect of
shares of capital stock;
B. Amendment to the Organizational Documents of the Company or the
Subsidiary;
C. Except in the Ordinary Course of Business, payment or increase by
the Company or the Subsidiary of any bonuses, salaries, or other
compensation to any stockholder, director, officer or employee or entry
into any employment, severance, or similar Contract with any director,
officer, or employee;
D. Adoption of, or substantial increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with
any employees of the Company or the Subsidiary;
E. Damage to or destruction or loss of any asset or property of the
Company or the Subsidiary, whether or not covered by insurance that had a
Company Material Adverse Effect;
F. Entry into, termination of, or receipt of written notice of
termination of any Contract or transaction involving a total remaining
commitment by or to the Company
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or the Subsidiary of at least Twenty-Five Thousand and No/100 Dollars
($25,000.00);
G. Sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the
Company or the Subsidiary or mortgage, pledge, or imposition of any
Encumbrance on any material asset or property of the Company or the
Subsidiary, including the sale, lease, or other disposition of any of the
Software and Intangibles;
H. Cancellation or waiver of any claims or rights with a value to the
Company or the Subsidiary in excess of Twenty-Five Thousand and No/100
Dollars ($25,000.00);
I. Material change in the accounting methods used by the Company or
the Subsidiary; or
J. Agreement, whether oral or written, by the Company or the
Subsidiary to do any of the foregoing.
3.17. CONTRACTS; NO DEFAULTS.
A. Schedule 3.17(a) of the Company Disclosure Schedule contains a
complete and accurate list (other than Customer License Agreements which
are disclosed in Section 3.22.), and the Company has delivered to Merger
Sub and Parent true and complete copies, of:
(i) Each Contract that involves performance of services or delivery
of goods or materials by the Company or the Subsidiary of an amount or
value in excess of Twenty-Five Thousand and No/100 Dollars ($25,000.00);
(ii) Each Contract that involves performance of services or
delivery of goods or materials to the Company or the Subsidiary of an
amount or value in excess of Twenty-Five Thousand and No/100 Dollars
($25,000.00);
(iii) Except for customer Contracts and inventory and equipment
purchase orders incurred in the Ordinary Course of Business, each
Contract that was not entered into in the Ordinary Course of Business
and that involves expenditures or receipts of the Company or the
Subsidiary in excess of Twenty-Five Thousand and No/100 Dollars
($25,000.00);
(iv) Each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Contract affecting
the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements having
a value per item or aggregate payments of less than Twenty-Five Thousand
and No/100 Dollars ($25,000.00) and with terms of less than one (1)
year) of the Company or the Subsidiary;
(v) Each collective bargaining agreement and other Contract to or
with any labor union or other employee representative of a group of
employees relating to the Company or the Subsidiary;
(vi) Each joint venture, partnership, and other Contract (however
named) involving a sharing of profits, losses, costs, or liabilities by
the Company or the Subsidiary with any other Person;
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(vii) Each Contract containing covenants that in any way purport to
restrict the business activity of the Company or the Subsidiary or limit
the freedom of the Company or the Subsidiary to engage in any line of
business or to compete with any Person;
(viii) Each Contract (relating to the Company or the Subsidiary)
providing for payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(ix) Each power of attorney relating to the Company or the
Subsidiary that is currently effective and outstanding;
(x) Each Contract relating to the Company or the Subsidiary for
capital expenditures in excess of Twenty-Five Thousand and No/100
Dollars ($25,000.00);
(xi) Each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the
Company or the Subsidiary other than in the Ordinary Course of Business;
and
(xii) Each amendment, supplement, and modification in respect of
any of the foregoing.
B. Except as set forth in Schedule 3.17(b) of the Company Disclosure
Schedule, to the Knowledge of the Company, no officer, director, or
employee of the Company or the Subsidiary is bound by any Contract that
purports to limit the ability of such officer, director or employee to (i)
engage in or continue any conduct, activity, or practice relating to the
business of the Company or any Subsidiary, as currently conducted or (ii)
assign to the Company or any Subsidiary any rights to any invention,
improvement, or discovery relating to the business of the Company or any
Subsidiary.
C. Except as set forth in Schedule 3.17(c) of the Company Disclosure
Schedule, each Contract identified or required to be identified in Schedule
3.17(a) of the Company Disclosure Schedule is in full force and effect,
except as to matters or default which in the aggregate would not have a
Company Material Adverse Effect.
D. Except as set forth in Schedule 3.17(d) of the Company Disclosure
Schedule:
(i) The Company and each Subsidiary is in full compliance with all
material terms and requirements of each Contract under which Company or
such Subsidiary has or had any obligation or liability or by which
Company or such Subsidiary or any of the assets owned or used by Company
or such Subsidiary is or was bound, except where the failure to comply
with such terms and requirements would not have a Company Material
Adverse Effect;
(ii) To the Knowledge of the Company, each other Person that has or
had any obligation or liability under any Contract under which the
Company has or had any rights is in full compliance with all material
terms and requirements of such Contract;
(iii) To the Knowledge of the Company, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or
give the
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Company or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any material Contract, except for events
or circumstances which in the aggregate would not have a Company
Material Adverse Effect; and
(iv) Neither the Company nor any Subsidiary has given to or
received from any other Person, at any time since March 31, 1999, any
written notice regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any material Contract.
E. There are no renegotiations of or attempts to renegotiate any
material amounts paid or payable to the Company or any Subsidiary under
current or completed Contracts with any Person and the Company has not
received any written demand for such renegotiation.
3.18. INSURANCE.
A. The Company has delivered to Merger Sub and Parent:
(i) True and complete copies of all policies of insurance to which
the Company or the Subsidiary is a party;
(ii) True and complete copies of all pending applications for
policies of insurance; and
(iii) Any written statement by the auditor of the Financial
Statements with regard to the adequacy of such entity's coverage or of
the reserves for claims.
B. Except as set forth on Schedule 3.18(b) of the Company Disclosure
Schedule:
(i) All policies to which the Company or the Subsidiary is a party
or that provide coverage to the Company or the Subsidiary, or any
director of the Company or the Subsidiary:
(1) Are in full force and effect, except as to matters or
defaults which in the aggregate, would not have a Company Material
Adverse Effect; and
(2) Taken together in the reasonable judgment of the Company,
provide adequate insurance coverage for the assets and the
operations of the Company or any Subsidiary for all risks to which
the Company or the Subsidiary is normally exposed.
(ii) Neither the Company nor Subsidiary has received any written
notice of cancellation or other indication that any insurance policy is
no longer in full force or effect or will not be renewed or that the
issuer of any policy is not willing or able to perform its obligations
thereunder.
(iii) The Company and Subsidiary has paid all premiums due and has
otherwise performed all of its material obligations under each policy to
which the Company or such Subsidiary is a party or that provides
coverage to the Company or such Subsidiary or any director thereof,
except where the failure to so perform would not in the aggregate have a
Company Material Adverse Effect.
3.19. ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.19 of the
Company Disclosure Schedule, the Company and the Subsidiary have obtained and
are in
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compliance with all permits, licenses and other authorizations (collectively,
"Permits") required to do business by Environmental Requirements. To the
Company's Knowledge, there are no conditions, circumstances, activities,
practices, incidents, or actions (collectively, "Conditions") resulting from the
conduct of its business which Conditions may reasonably form the basis of any
claim or suit against the Company or the Subsidiary based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling by the Company or the Subsidiary, or the emission,
discharge, release or Threatened release by the Company or the Subsidiary into
the environment, of any pollutant, contaminant, or hazardous or toxic materials,
substances or wastes.
3.20. EMPLOYEES.
A. Schedule 3.20.1 contains a complete and accurate list of the
following information for each employee or director of Company and
Subsidiary, including each employee on leave of absence or layoff status:
name of employee or director; date of hire, job title and "essential
functions" (as defined in 29 C.F.R. Section 1630.2(n)); current
compensation and any change in compensation during the past two (2) years;
vacation accrued; and service credited for purposes of vesting and
eligibility to participate under Company's Plans to the extent applicable
under such Plans.
B. No employee or director of Company or Subsidiary is a party to, or
is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between
such employee or director and any other Person ("Proprietary Rights
Agreement") that in any way adversely affects or will affect (i) the
performance of his duties as an employee or director of Company or
Subsidiary or (ii) the ability of Company or Subsidiary to conduct its
business, including any Proprietary Rights Agreement with Company or
Subsidiary by any such employee or director. No key employee of Company or
Subsidiary intends to terminate his employment with Company or Subsidiary.
C. Schedule 3.20.2 contains a complete and accurate list of the
following information for each retired employee or director of Company or
the Subsidiary, or their dependents, receiving benefits or scheduled to
receive benefits in the future: name, listing of benefits to which they are
entitled and funding mechanism for such benefits.
D. Schedule 3.20.3 contains a complete listing of all "covered
employees" and "qualified beneficiaries" (as each is defined in ERISA
sec.sec. 607(2) and (3) and/or Code sec. 4980B(f)(7)) who have experienced
a qualifying event (within the meaning of ERISA sec. 603 and/or Code sec.
4980B(f)(3)) with respect to a Plan, and/or who are eligible for
continuation coverage (within the meaning of ERISA sec. 602 and/or Code
sec. 4980B(f)(2)) and/or whose period for continuation coverage has not
expired. Included in this listing is the current address for each such
individual, the date on which they would have (absent continuation
coverage) lost coverage, whether the individual has elected continuation
coverage, and for individuals who have not yet elected continuation
coverage, the date on which the individual was notified of their right to
continuation coverage.
E. Schedule 3.20.4 contains a complete listing of all employees who
are on a leave of absence from the Company or the Subsidiary (indicating
also whether or not such leave is pursuant to the Family and Medical Leave
Act of 1993, as amended)
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and denoting whether such employee is receiving or entitled to receive
health coverage under a Plan during such period of leave.
3.21. GOVERNMENT CONTRACTS. Except as set forth in Schedule 3.21 of the
Company Disclosure Schedule, neither the Company nor the Subsidiary have any
business contracts with any independent or executive agency, division,
subdivision, audit group or procuring office of the federal government or of a
state government, including any prime contractor of the federal government and
any higher level subcontractor of a prime contractor of the federal government,
and including any employees or agents thereof, in each case acting in such
capacity.
3.22. INTELLECTUAL PROPERTY RIGHTS OF THE COMPANY. For purposes of this
Section 3.22. only, the term "Company" shall be deemed to include the Company
and the Subsidiary.
3.22.1. Schedule 3.22.1 (i) contains a complete list of each
governmental filing, whether federal, state, local, foreign or otherwise,
related to patents, copyrights, trademarks, service marks, trade names,
maskworks, other Intangibles and Software (such terms are defined in
Section 3.22.2.M.) (collectively "Registrations") of Company; (ii)
identifies each pending Registration of Company with respect to the
Intangibles and Software (defined in Section 4.9.2.M.); (iii) identifies
all of Company's applications for or Registrations regarding the
Intangibles and Software which have been withdrawn, abandoned, or have
lapsed or been denied and (iv) specifies any advice to Company with respect
to such Registration or protectability of the Intangibles and Software
summarizing such advice.
Schedule 3.22.1 also identifies (i) each license agreement or other
written or oral agreement or permission ("License Agreement") and in which
Company has granted to any third party any right with respect to any of the
Intangibles or Software; (ii) each item of the Intangibles and Software
used or possessed by Company that any third party owns and the license,
sublicense, agreement or other permission in connection therewith (the
"Third Party License Agreement"), together with the term thereof, and all
royalties or other amounts due thereon and (iii) each agreement entered
into by Company that provides for the sale of license or access to any
source code of the Software, including, without limitation, any source code
escrow agreement ("Source Code Agreement").
Company has supplied Parent with correct and complete copies of all
License Agreements, Third Party License Agreements and Source Code
Agreements.
Company has complied with all License Agreements, Third Party License
Agreements and Source Code Agreements, and to the best of Company's
knowledge, all other parties to such agreements have complied with all
provisions thereof; and no default or event of default exists under any of
the License Agreements, Third Party License Agreements, or Source Code
Agreements.
3.22.2. A. Schedule 3.22.2 is an accurate and complete list and
description (including a name, product description, the language in which
it is written and the type of hardware platform(s) on which it runs) of all
of the following:
(i) All Software owned by Company, whether purchased from a third
party, developed by or on behalf of Company, currently under development
or otherwise ("Owned Software").
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(ii) All Software, other than the Owned Software, that is either
(x) offered or provided by Company, directly or through Distributors, to
customers of Company or (y) used by Company to provide information or
services to customers of Company for a fee (collectively, "Customer
Software"; the Owned Software and the Customer Software are collectively
referred to as the "Company Software").
(iii) All Software, other than Company Software, that is licensed
or marketed to or from third parties or otherwise used by Company for
any purpose whatsoever (collectively, "Other Software"), other than
Other Software that is generally available for license at retail or
directly via the Internet ("COTS").
B. To the extent not set forth in Schedule 3.22.1, Schedule 3.22.2
separately sets forth an accurate and complete list and description of each
copyright, trademark, trademark application or registration, service mark,
service mark application or registration, patent application or
registration, and name and logo included in the Intangibles (as defined
below in this Section) owned, marketed or licensed by Company to or from
third parties, used or under development by Company. Schedule 3.22.2
indicates Company's ownership of such items or the source of Company's
right to use such items.
C. No Software other than the Owned Software, Customer Software and
Other Software is required to operate the Company's businesses as currently
conducted and as contemplated by existing Company Software product and
service plans. Schedule 3.22.2 identifies all individuals who have
contributed to the development of the Owned Software.
D. Except as explained on Schedule 3.22.2, Company owns and has good
and marketable title to the Owned Software and Intangibles attributable to
the Owned Software, and has the full right to use all of the Customer
Software and Other Software, and Intangibles attributable thereto, as used
or required to operate the Company's businesses as currently conducted and
as contemplated in the future in accordance with Company's written business
plans, free and clear of any liens, claims, charges or encumbrances which
would affect the use of such Software in connection with the operation of
the Company's businesses as currently conducted and as contemplated in the
future in accordance with Company's written business plans.
E. No rights of any third party not previously obtained are necessary
to market, license, sell, modify, update, and/or create derivative works
for any Software as to which Company takes any such action in its
businesses as currently conducted.
F. With respect to Software which is licensed by Company to third
parties or used in connection with the providing of services to third
parties in the Company's businesses:
(i) Company maintains machine-readable master-reproducible copies,
reasonably complete technical documentation and/or user manuals for the
most current releases or versions thereof and for all earlier releases
or versions thereof currently being supported by Company;
(ii) In each case, the machine-readable copy substantially conforms
to the corresponding source code listing;
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(iii) Such Software is written in the language set forth on
Schedule 3.22.2, for use on the hardware set forth on Schedule 3.22.2
with standard operating systems;
(iv) Such Software can be maintained and modified by reasonably
competent programmers familiar with such language, hardware and
operating systems; and
(v) In each case the Software operates in accordance with the user
manual thereof without operating defects of any material nature.
G. None of the Software or Intangibles listed on Schedule 3.22.1 or
Schedule 3.22.2, or their respective past or current uses by or through
Company has violated or infringed upon, or is violating or infringing upon,
any Software, patent, copyright, trade secret or other Intangible of any
person. Company has adequately maintained all trade secrets and copyrights
with respect to the Software. Company has performed all obligations imposed
upon it with regard to the Customer Software and Other Software which are
required to be performed by it on or prior to the date hereof, and neither
Company nor, to the knowledge of Company, any other party, is in breach of
or default thereunder in any respect, nor to Company's knowledge, is there
any event which with notice or lapse of time or both would constitute a
default thereunder.
H. To the knowledge of Company, no person is violating or infringing
upon, or has violated or infringed upon at any time, any of Company's
proprietary rights to any of the Software or Intangibles listed on either
Schedule 3.22.1 or Schedule 3.22.2.
I. None of the Software or Intangibles listed on Schedule 3.22.1 and
Schedule 3.22.2 are owned by or registered in the name of any of Company's
shareholders, any current or former owner or shareholder, partner,
director, executive, officer, employee, salesperson, agent, customer,
contractor of Company or its representative nor does any such person have
any interest therein or right thereto, including, but not limited to, the
right to royalty payments. Except as listed on Schedule 3.22.2, Company has
granted no third party any exclusive rights related to any Owned Software.
J. No litigation is pending and no claim has been made against Company
or, to the knowledge of Company, is threatened, which contests the right of
Company to sell or license to any person or entity or use any of the Owned
Software, Customer Software or Other Software. No former employer of any
employee or consultant of Company has made a claim against Company or, to
the knowledge of Company, against any other person, that Company or such
employee or consultant is misappropriating or violating the Intangibles of
such former employer.
K. Company is not a party to or bound by and, upon the consummation of
the transactions contemplated by this Agreement, will not be a party to or
bound by (as a result of any acts or agreements of Company), any license or
other agreement requiring the payment by Company or its assigns of any
royalty or license payment, excluding such agreements relating to the
Customer Software to the extent such royalty or license payment is
expressly set forth on Schedule 3.22.2.
L. [INTENTIONALLY LEFT BLANK].
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M. For purposes of this Agreement, "Software" means any computer
program, operating system, applications system, microcode, firmware or
software of any nature, whether operational, under development or inactive,
including all object code, source code, technical manuals, compilation
procedures, execution procedures, flow charts, programmers notes, user
manuals and other documentation thereof, whether in machine-readable form,
programming language or any other language or symbols and whether stored,
encoded, recorded or written on disk, tape, film, memory device, paper or
other media of any nature.
"Intangible" means:
(i) Patents, patent applications, patent disclosures, all
re-issues, divisions, continuations, renewals, extensions and
continuation-in-parts thereof and improvements thereto;
(ii) Trademarks, service marks, trade dress, logos, trade names,
and corporate names and registrations and applications for registration
thereof and all goodwill associated therewith;
(iii) Copyrights and registrations and applications for
registration thereof;
(iv) Maskworks and registrations and applications for registration
thereof;
(v) All right, title and interest in all computer software, data
and documentation (including, without limitation, modifications,
enhancements, revisions or versions of or to any of the foregoing and
prior releases of any of the foregoing applicable to any operating
environment);
(vi) Trade secrets and confidential business information
(including, without limitation, ideas, formulas, compositions,
inventions, whether patentable or unpatentable and whether or not
reduced to practice, know-how, manufacturing and production processes
and techniques, research and development information, drawings, flow
charts, processes ideas, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing, and business
data, pricing and cost information, business and marketing plans, and
customer and supplier lists and information);
(vii) Other proprietary rights;
(viii) All rights necessary to prevent claims of invasion of
privacy, right of publicity, defamation, infringement of moral rights,
or any other causes of action arising out of the use, adaptation,
modification, reproduction, distribution, sale, or exhibition of the
Software;
(ix) All income, royalties, damages and payments due at Closing or
thereafter with respect to the Owned Software, Customer Software, Other
Software, or other Intangibles and all other rights thereunder
including, without limitation, damages and payments for past, present or
future infringements or misappropriations thereof, the right to sue and
recover for past, present or future infringements or misappropriations
thereof;
(x) All rights to use all of the foregoing forever; and
(xi) All other rights in, to, and under the foregoing in all
countries.
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"Distributor" means Company and any other person or entity that has
been authorized by Company to sell, license or offer to sell or license any
Company Software, other than an employee of Company. Distributors may
include, without limitation, value added resellers, original equipment
manufacturers, dealers, sales agents, and distributors.
3.22.3. Millennium Compliance. Except as noted in Schedule 3.22.3, the
Owned Software and to the best knowledge of Company, the Customer Software
and Other Software, are "Millennium Compliant." For the purposes of this
Agreement "Millennium Compliant" means:
(i) The functions, calculations, and other computing processes of
the Owned Software, Other Software and Customer Software (collectively,
"Processes") perform in an accurate manner regardless of the date in
time on which the Processes are actually performed and regardless of the
date input to the Owned Software, Other Software, and Customer Software,
whether before, on, or after January 1, 2000, and whether or not the
dates are affected by leap years;
(ii) The Owned Software, Other Software, and Customer Software
accept, store, sort, extract, sequence, and otherwise manipulate date
inputs and date values, and return and display date values, in an
accurate manner regardless of the dates used, whether before, on, or
after January 1, 2000;
(iii) The Owned Software, Other Software, and Customer Software
will function without interruptions caused by the date in time on which
the Processes are actually performed or by the date input to the Owned
Software, Other Software, and Customer Software, whether before, on, or
after January 1, 2000;
(iv) The Owned Software, Other Software, and Customer Software
accept and respond to two (2) digit year and four (4) digit year date
input in a manner that resolves any ambiguities as to the century in a
defined, predetermined, and accurate manner;
(v) The Owned Software, Other Software, and Customer Software
display, print, and provide electronic output of date information in
ways that are unambiguous as to the determination of the century; and
(vi) The Owned Software, Customer Software, and Other Software have
been tested by Company to determine whether the Owned Software, Customer
Software, and Other Software are Millennium Compliant. Company shall
deliver the test plans and results of such tests upon written request
from Parent. Company shall notify Parent immediately of the results of
any tests or any claim or other information that indicates the Owned
Software, Customer Software, and Other Software are not Millennium
Complaint.
B. Except as set forth in Schedule 3.22.3(b) of the Company Disclosure
Schedule and except as described in the next following sentence, the
Company has inquired as to the Millennium Compliance of the Customer
Software and any computer hardware and devices owned or leased by the
Company that operates any of the Company Software ("Company Hardware") with
the vendor thereof, has obtained assurances that such Customer Software and
Company Hardware is Millennium Compliant, and has tested such Customer
Software and Company Hardware in conjunction with the Owned Software to
determine whether the operation of the
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Owned Software would result in dated-related failures or errors in such
Customer Software or Company Hardware. In the event that the Company
obtains information that such Customer Software or Company Hardware is not
Millennium Compliant or such Customer Software or Company Hardware fails
the testing as described above, the Company has established and has timely
implemented written plans to migrate the Company and all Company customers
off of such Customer Software or Company Hardware before the Company
anticipates that errors or failures in such Customer Software or Company
Hardware will occur.
C. Except as set forth in Schedule 3.22.3(c) of the Company Disclosure
Schedule and except as described in the next following sentence, the
Company has inquired as to the Millennium Compliance of the Other Software
with the vendor thereof and has obtained assurances that such Other
Software is Millennium Compliant. In the event that the Company obtains
information that such Other Software is not Millennium Compliant, the
Company has established and has timely implemented written plans to migrate
the Company off of such Other Software before the Company anticipates that
errors or failures in such Other Software will occur.
D. Each customer of Company identified on Schedule 3.22.3(d) has
received a copy of the correspondence attached to Schedule 3.21.3(d).
E. Schedule 3.22.3(e) of the Company Disclosure Schedule sets forth
true and correct information called for therein with respect to each
customer of Company.
3.22.4. Without limiting any of the foregoing, to the best knowledge
of Company, none of Company's current or former officers, executives,
directors, partners, shareholders, employees, salespersons, customers, or
independent contractors have disclosed to (without proper obligation of
confidentiality) or otherwise used or utilized on behalf of any person
other than Company, any trade secrets or proprietary information,
including, without limitation, the source codes for Company Software.
All License Agreements, Third Party License Agreements, software
development agreements, and any other written agreement between Company and
any third party in which trade secrets or confidential information of
Company, Company's customers, agents, or suppliers are disclosed binds the
recipient thereof to take reasonable steps to protect the proprietary
rights of Company and its customers, agents, and suppliers in such trade
secrets and confidential information.
Schedule 3.22.4 identifies all individuals who have materially
contributed to the development of the Owned Software.
3.22.5. Company Software:
A. Performs in accordance with all published specifications for
such Software;
B. Complies with all other published documentation, descriptions
and literature with respect to such Software; and
C. Complies with all representations, warranties and other
requirements specified in all of Company's License Agreements.
3.22.6. Except as set forth on Schedule 3.22.6, none of Company's
shareholders have an ownership right or other interest in any Software or
Intangibles related to the
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Acquired Business, and no claims have been made or, to the knowledge of the
Company, is threatened, that the Company Software substantially fails to
perform as set forth in Section 3.22.5.
3.22.7. All Company's contracts with customers (collectively "Customer
Contracts"), whether completed or outstanding, were or are evidenced by
written agreements containing provisions reasonably equivalent to those
contained in Schedule 3.22.7 hereto, with only such changes as would not
affect the rights of Company and would not impose on Company any additional
obligations.
No Customer Contract provided for the transfer to the customer therein
of any Intangibles relating to Company Software as to which Company
thereafter shall have no further rights. No current Customer Contract
provides that the customer therein shall be entitled to sublicense or
otherwise transfer to a third party any of the Intangibles relating to
Company Software unless such third party agrees to be bound by the
confidentiality provisions thereof and agrees to pay Company royalties and
other amounts comparable to those under such Customer Contract.
Except as set forth on Schedule 3.22.7, each past or present customer
of Company and each past or present customer of Company to whom Company
disclosed any of the Intangibles relating to Company Software is bound by a
confidentiality provision which requires such past or present customer to
take reasonable steps to protect the rights of Company in the Intangibles
relating to Company Software.
3.23. CERTAIN PAYMENTS. To the Knowledge of the Company, neither the
Company or any Subsidiary nor any director, officer, agent, or employee of the
Company or any Subsidiary, nor any other Person associated with or acting for or
on behalf of the Company or any Subsidiary, has directly or indirectly:
A. On behalf of the Company or any Subsidiary or for the Company's or
any Subsidiary's benefit, made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or
services in violation of any Legal Requirement.
B. Established or maintained any fund or asset on behalf of the
Company or any Subsidiary that has not been recorded in the books and
records of the Company or any Subsidiary.
3.24. RELATIONSHIPS WITH RELATED PERSONS. Except as set forth in Schedule
3.24 of the Company Disclosure Schedule, no Related Person of the Company or the
Subsidiary has, or since September 30, 1998, has had, any interest in any
property (whether real, personal, or mixed and whether tangible or intangible),
used in the Company's or the Subsidiary's businesses.
Except as set forth in Schedule 3.24 of the Company Disclosure Schedule, to
the Knowledge of the Company, no Related Person of the Company or the Subsidiary
owns, or since September 30, 1998, has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has a material financial interest in any transaction with the Company or
the Subsidiary.
Except as set forth in Schedule 3.24 of the Company Disclosure Schedule, no
Related Person of the Company is a party to any Contract or commitment with the
Company.
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3.25. BROKERS OR FINDERS. Except as set forth on Schedule 3.25, neither
the Company, the Subsidiary nor their agents have incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
3.26. LABOR RELATIONS; COMPLIANCE. Neither the Company nor the Subsidiary
have been nor are a party to any collective bargaining or other labor Contract.
There has not been, there is not presently pending or existing, and there is not
Threatened:
A. Any strike, slowdown, picketing, work stoppage or employee
grievance process;
B. Any Proceeding against or affecting Company or Subsidiary relating
to the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or complaint filed by
an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute against or
affecting any of Company or their premises; or
C. Any application for certification of a collective bargaining agent.
No event has occurred or circumstance exists that could provide the basis
for any work stoppage or other labor dispute. There is no lockout of any
employees by Company or Subsidiary, and no such action is contemplated by
Company or Subsidiary. Company and Subsidiary have complied in all respects with
all Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and health
and plant closing. The Company and Subsidiary have only employed individuals
authorized to work in the United States.
Company and Subsidiary are not liable for the payment of any compensation,
Damages, taxes, fines, penalties, or other amounts, however, designated, for
failure to comply with any of the foregoing Legal Requirements.
3.27. DISCLOSURE DOCUMENTS. None of the information supplied or to be
supplied by the Company for inclusion in or incorporation by reference in (i)
the Proxy Statement (as defined in section 6.1.) and (ii) the registration
statement (as defined in Section 4.3.) including the Proxy Statement included
therein, will, in the case of the Proxy Statement, at the time of mailing of the
Proxy Statement to stockholders of the Company, contain any untrue statement of
a material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading or will, in the case of
the Registration Statement, at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The Proxy Statement will comply as
to form in all material respects with the provisions of the Exchange Act, the
rules and regulations thereunder, except that no representation is made by the
Company with respect to information supplied by Parent or Merger Sub for
inclusion therein.
3.28. DISCLOSURE. No representation or warranty made by the Company in
this Agreement or any Exhibit hereto or in the Company Disclosure Schedule, when
taken
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together, contains or contained (as of the date made) any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements or facts contained herein or therein not misleading in light of the
circumstances under which they were made.
3.29. VOTE REQUIRED. The affirmative vote of a majority of the votes that
holders of the outstanding shares of Company Common Stock are entitled to vote
with respect to the Merger is the only vote of the holders of any class or
series of Company's capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
3.30. POOLING-OF-INTERESTS. Except for (i) that certain loan previously
obtained by Company and Subsidiary from Parent and (ii) the loan described in
Section 5.8. below, neither the Company, Subsidiary nor any of their directors,
officers or shareholders has taken any action which would interfere with (i)
Parent's ability to account for the Merger as a pooling-of-interests or (ii)
Parent's, Surviving Corporation's or the Company's ability to continue to
account for as a pooling-of-interests any past acquisition by the Company
currently accounted for as a pooling-of-interests.
4. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF MERGER SUB AND PARENT
Merger Sub and Parent, jointly and severally, hereby represent and warrant
to the Company, subject to such exceptions as are specifically disclosed in
writing in the disclosure letter and referenced by a specific representation
supplied by Parent to Company dated as of the date hereof and certified by a
duly authorized officer of Parent (the "Parent Disclosure Schedule"), as
follows:
4.1. ORGANIZATION. Each of Merger Sub and Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and Merger Sub and Parent each has all
requisite corporate power and authority to own, lease and operate its assets and
to carry on its business as now being conducted. Each of Merger Sub and Parent
is duly qualified to transact business, and is in good standing, as a foreign
corporation in each jurisdiction where the character of its activities requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the assets, liabilities, results of operations,
financial condition, business or prospects of Merger Sub, Parent or their
respective subsidiaries taken as a whole.
4.2. AUTHORIZATION. Each of Merger Sub and Parent has full corporate power
and authority to execute and deliver this Agreement and to perform its
respective obligations under this Agreement and to consummate the Merger and the
other transactions contemplated hereby (the "Parent/Merger Sub Ancillary
Agreements"). The execution and delivery of this Agreement by Merger Sub and
Parent and the performance by Merger Sub and Parent of their respective
obligations hereunder and the consummation of the Merger, the Parent/Merger Sub
Ancillary Agreements and the other transactions provided for herein have been
duly and validly authorized by all necessary corporate action on the part of
each of Merger Sub and Parent. This Agreement and the Parent/Merger Sub
Ancillary Agreements have been duly executed and delivered by each of Merger Sub
and Parent and each constitutes the legal, valid and binding agreement of Merger
Sub and Parent, enforceable against each of Merger Sub and Parent in accordance
with its terms, subject to applicable bankruptcy, insolvency and other similar
laws affecting the enforceability of creditors' rights generally, general
equitable principles and the discretion of courts in granting equitable
remedies. Each other agreement to be executed by Merger Sub and Parent in
connection with this Agreement will be duly executed and delivered by
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Merger Sub and Parent in accordance with its terms, subject to applicable
bankruptcy, insolvency and other similar laws affecting the enforceability of
creditors' rights generally, general equitable principles and the discretion of
courts in granting equitable remedies.
4.3. ABSENCE OF RESTRICTIONS AND CONFLICTS. The execution, delivery and
performance of this Agreement, the consummation of the Merger and the other
transactions contemplated by this Agreement, and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, violate or conflict
with, constitute a breach of or default under, result in the loss of any
material benefit under, or permit the acceleration of any obligation under, (i)
any term or provision of the Organizational Documents of Merger Sub or Parent;
(ii) any Contract material to the business and operations of Merger Sub or
Parent; (iii) any judgment, decree, injunction or order of any court or
governmental authority or agency to which Merger Sub or Parent is a party or by
which Merger Sub or Parent or any of their respective properties is bound or
(iv) any statute, law, regulation or rule applicable to Merger Sub or Parent, so
as to have, in the case of subsections (ii) through (iv) above, a material
adverse effect on the assets, liabilities, results of operations, financial
condition, business or prospects of Merger Sub or Parent and their respective
subsidiaries taken as a whole. Except for (i) filing of the Articles of Merger;
(ii) the filing of a Form S-4 Registration Statement (the "Registration
Statement") with the Securities and Exchange Commission ("SEC") in accordance
with the Securities Act; (iii) the filing of the Proxy Statement (as defined in
Section 6.1.) with the SEC in accordance with the Exchange Act and (iv) the
filing of such consents, approvals, orders, authorizations, registrations,
declarations and filing as may be required under applicable state securities
laws, no Consent, approval, order or authorization of, or registration,
declaration or filing with, any government agency or public or regulatory unit,
agency, body or authority with respect to Merger Sub or Parent is required in
connection with the execution, delivery or performance of this Agreement by
Merger Sub or Parent or the consummation of the Contemplated Transactions
contemplated by this Agreement by Merger Sub or Parent, the failure to obtain
which would have a material adverse effect upon the assets, liabilities, results
of operations, financial condition, business or prospects of Merger Sub or
Parent and its subsidiaries taken as a whole.
4.4 CAPITALIZATION OF PARENT AND MERGER SUB. The authorized capital stock
of Parent consists of two hundred million (200,000,000) shares of common stock,
$.001 par value per share of which thirty million three hundred fifty-two
thousand seven hundred sixty-five (30,352,765) shares were issued and
outstanding as of December 10, 1999 and two million (2,000,000) shares of
preferred stock, $.001 par value per share, of which zero (0) shares are issued
and outstanding. The authorized capital stock of Merger Sub consists of one
thousand (1,000) shares of common stock, par value $.01 per share, all of which,
as of the date hereof, are issued and outstanding. All of the outstanding shares
of Parent's and Merger Sub's respective capital stock are duly authorized,
validly issued, fully paid and nonassessable. The shares of Parent Common Stock
to be issued pursuant to this Agreement have been duly authorized and, when
issued, will be validly issued, fully paid and nonassessable.
4.5. SEC FILINGS; FINANCIAL STATEMENTS.
A. Parent has made available to Company a correct and complete copy of
each report, schedule, registration statement and definitive proxy
statement filed by Parent with the SEC on or after January 1, 1999 (the
"Parent SEC Reports"), which are all the forms, reports and documents
required to be filed by Parent with the SEC since
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January 1, 1999. The Parent SEC Reports (i) were prepared in accordance
with the requirements of the Securities Act or the Exchange Act, as the
case may be and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the
date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of Parent's subsidiaries is
required to file any reports or other documents with the SEC.
B. Each set of consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports was
prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or,
in the case of unaudited statements, do not contain footnotes as permitted
by Form 10-Q of the Exchange Act) and each fairly represents the
consolidated financial position of Parent and its subsidiaries at the
respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal adjustments which were
not or are not expected to be material in amount.
C. Parent has previously furnished to Company a complete and correct
copy of any amendments or modifications, which have not yet been filed with
the SEC, but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Parent with the SEC
pursuant to the Securities Act or the Exchange Act.
4.6. LITIGATION. Except as may be disclosed in the Parent SEC Reports,
there are no suits, arbitrations, actions, claims, complaints, grievances,
investigations or proceedings pending or, to the Knowledge of Parent or Merger
Sub, Threatened against Parent or Merger Sub that, if resolved against Parent or
Merger Sub could be reasonably expected to have a material adverse effect on
Parent or Merger Sub on their ability to consummate the Merger and the other
transactions contemplated hereby.
4.7. REGISTRATION STATEMENT; PROXY STATEMENT. None of the information
supplied or to be supplied by Parent for inclusion or incorporation by reference
in (i) the S-4 will, at the time the S-4 becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading and (ii) the Proxy Statement will, at the dates mailed to the
shareholders of Company at the time of the Company Shareholders' Meeting and as
of the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The S-4 will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
promulgated by the SEC thereunder. Notwithstanding the foregoing, Parent makes
no representation or warranty with respect to any information supplied by the
Company which is contained in any of the foregoing documents.
4.8. CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Merger Sub or Parent that challenges, or may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated
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Transactions. To the knowledge of Merger Sub or Parent, no such Proceeding has
been Threatened.
4.9. BROKERS OR FINDERS. Except as set forth on Schedule 4.9 of the Parent
Disclosure Schedule, neither Merger Sub or Parent nor any of their respective
officers or agents have incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
5. CERTAIN AGREEMENTS OF THE PARTIES
5.1. NO SOLICITATION.
A. From and after the date of this Agreement until the Effective Time
or termination of this Agreement pursuant to Section 8, Company and
Subsidiary will not, nor will they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them
to, directly or indirectly, (i) solicit, initiate, encourage or induce the
making, submission or announcement of any Acquisition Proposal (as defined
below); (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, any Acquisition
Proposal; (iii) engage in discussions with any person with respect to any
Acquisition Proposal; (iv) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise relating to
any Acquisition Transaction (as defined below); provided, however, that
nothing contained in this Section 5.1. shall prohibit the Board of
Directors of Company (1) from complying with Rule 14d-9 or 14e-2(a)
promulgated under the Exchange Act with regard to a tender or exchange
offer not made in violation of this Section 5.1. or (2) during the period
between mailing of the Proxy Statement to Company's shareholders and
receipt of the approval by the shareholders of Company of this Agreement
and the Merger from, in response to an unsolicited, bona fide written
Acquisition Proposal that Company's Board of Directors reasonably concludes
based upon the advice of its independent financial advisors constitutes a
Superior Proposal (as defined below), engaging in discussions with and
furnishing information to the party making such Acquisition Proposal to the
extent (a) the Board of Directors of the Company determines in good faith
based on the advice of its outside legal counsel that its fiduciary
obligations under applicable law require it to do so; (b) (x) at least five
(5) days prior to furnishing any such nonpublic information to, or entering
into discussions or negotiations with, such party, Company gives Parent
written notice of Company's intention to furnish nonpublic information to,
or enter into discussions or negotiations with, such party and (y) Company
receives from such party an executed confidentiality agreement containing
customary limitations on the use and disclosure of all nonpublic written
and oral information furnished to such party by or on behalf of Company and
(c) contemporaneously with furnishing any such nonpublic information to
such party, Company furnishes such nonpublic information to Parent (to the
extent such nonpublic information has not been previously furnished by the
Company to Parent). Company and its subsidiaries will immediately case any
and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal. Without
limiting the foregoing, it is understood that any violation of the
restrictions set forth in
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this Section 5.1. by any officer, director or employee of Company or any of
its subsidiaries or any investment banker, attorney or other advisor or
representative of Company or any of its subsidiaries shall be deemed to be
a breach of this Section 5.1. by Company.
For purposes of this Agreement, (i) "Acquisition Proposal" shall mean
any offer or proposal (other than an offer or proposal by Parent) relating
to any Acquisition Transaction. For the purposes of this Agreement; (ii)
"Acquisition Transaction" shall mean any transaction or series of related
transactions other than the transactions contemplated by this Agreement
involving: (1) any acquisition or purchase from the Company by any person
or "group" (as defined under Section 13(d) of the Exchange Act and the
rules and regulations thereunder) of more than a five percent (5%) interest
in the total outstanding voting securities of the Company or any of its
subsidiaries or any tender offer or exchange offer that if consummated
would result in any person or "group" (as defined under Section 13(d) of
the Exchange Act and the rules and regulations thereunder) beneficially
owning five percent (5%) or more of the total outstanding voting securities
of the Company or any of its subsidiaries or any merger, consolidation,
business combination or similar transaction involving the Company pursuant
to which the shareholders of the Company immediately preceding such
transaction hold less than ninety-five percent (95%) of the equity
interests in the surviving or resulting entity of such transaction; (2) any
sale, lease (other than in the ordinary course of business), exchange,
transfer, license (other than in the ordinary course of business),
acquisition or disposition of more than five percent (5%) of the assets of
the Company or (3) any liquidation, dissolution, recapitalization or other
significant corporate reorganization of the Company and (iii) "Superior
Proposal" shall mean an Acquisition Proposal with respect to which (x)
Company's Board of Directors shall have concluded in good faith, after
considering applicable state law; on the basis of the written opinion of
independent outside counsel that such action is necessary to prevent
Company's Board of directors from violating its fiduciary duties to
Company's shareholders under applicable law; (y) if any cash consideration
is involved, shall not be subject to any financing contingency, and with
respect to which Company's Board of Directors shall have determined (based
upon the written opinion of Company's independent financial advisors) in
the exercise of its fiduciary duties to Company's shareholders that the
acquiring party is capable of consummating the proposed Acquisition
Transaction on the terms proposed and (z) Company's Board of Directors
shall have determined in the exercise of its fiduciary duties to Company's
shareholders that the proposed Acquisition Transaction provides greater
value to the shareholders of Company than the Merger (based upon the
written opinion of Company's independent financial advisors that such
Acquisition Transaction is superior to the Merger from a financial point of
view).
B. In addition to the obligations of Company set forth in paragraph A.
of this Section 5.1., Company as promptly as practicable, and in any event
within twenty-four (24) hours, shall advise Parent orally and in writing of
any request for information which Company reasonably believes would lead to
an Acquisition Proposal or of any Acquisition Proposal, or any inquiry with
respect to or which Company reasonably should believe would lead to any
Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the person or group
making any such request, Acquisition Proposal or inquiry. Company will keep
Parent informed in all material respects of the status and details
(including material amendments or proposed amendments) or any such request,
Acquisition
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Proposal or inquiry. In addition to the foregoing, Company shall (i)
provide Parent with at least forty-eight (48) hours prior notice (or such
lesser prior notice as provided to the members of Company's Board of
Directors, but in no event less than eight (8) hours) of any meeting of
Company's Board of Directors at which Company's Board of Directors is
reasonably expected to consider a Superior Offer and (ii) provide Parent
with at least five (5) business days prior written notice of a meeting of
Company's Board of Directors at which Company's Board of Directors is
reasonably expected to recommend a Superior Offer to its shareholders and
together with such notice a copy of the definitive documentation relating
to such Superior Offer.
5.2. PUBLIC DISCLOSURE. Parent and Company will consult with each other
and agree before issuing any press release or otherwise making any public
statement with respect to the Merger, this Agreement or an Acquisition Proposal
and will not issue any such press release or make any such public statement
prior to such agreement, except as may be required by law or any listing
agreement with a national securities exchange, in which case reasonable efforts
to consult with the other party will be made prior to any such release or public
statement. The parties have agreed to the text of the joint press release
announcing the signing of this Agreement.
5.3. REASONABLE EFFORTS; NOTIFICATION.
A. Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including using reasonable efforts to
accomplish the following: (i) the taking of all reasonable acts necessary
to cause the conditions precedent set forth in Section 7. to be satisfied;
(ii) the obtaining of all necessary actions or nonactions, waivers,
consents, approvals, orders and authorizations from Governmental Bodies and
the making of all necessary registrations, declarations and filings
(including registrations, declarations and filings with Governmental
Bodies, if any) and the taking of all reasonable steps as may be necessary
to avoid any suit, claim, action, investigation or proceeding by any
Governmental Body; (iii) the obtaining of all necessary consents, approvals
or waivers from third parties; (iv) the defending of any suits, claims,
actions, investigations or proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions
contemplated hereby, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Body vacated
or reversed and (v) the execution or delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully
carry out the purposes of, this Agreement. In connection with and without
limiting the foregoing, Company and its Board of Directors shall, if any
state takeover statute or similar statute or regulation is or becomes
applicable to the Merger, this Agreement or any of the transactions
contemplated by this Agreement, use all reasonable efforts to ensure that
the Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or
regulation on the Merger, this Agreement and the transactions contemplated
hereby. Notwithstanding anything herein to the contrary, nothing in this
Agreement shall be deemed to require Parent or Company or
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any subsidiary or affiliate thereof to agree to any divestiture by itself
or any of its affiliates of shares of capital stock or of any business,
assets or property, or the imposition of any material limitation on the
ability of any of them to conduct their business or to own or exercise
control of such assets, properties and stock.
B. Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or
inaccurate, or any failure of Company to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement, in each case, such that the
conditions set forth in Section 7.2.A. or 7.2.B. would not be satisfied;
provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
C. Parent shall give prompt notice to Company of any representation or
warranty made by it or Merger Sub contained in this Agreement becoming
untrue or inaccurate, or any failure of Parent or Merger Sub to comply with
or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, in each case,
such that the conditions set forth in Section 7.3.A. or 7.3.B. would not be
satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.4. THIRD PARTY CONSENTS. As soon as practicable following the date
hereof, Parent and Company will each use its commercially reasonable efforts to
obtain any consents, waivers and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
5.5. INDEMNIFICATION. From and after the Effective Time, Parent will cause
the Surviving Corporation to fulfill and honor in all respects the obligations
of Company pursuant to any indemnification agreements between Company and its
directors and officers in effect immediately prior to the Effective Time and any
indemnification provisions under the Company Organizational Documents as in
effect on the date hereof. The Certificate of Incorporation and Bylaws of the
Surviving Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the indemnified parties
thereunder (the "Indemnified Parties") as those contained in the Company
Organizational Documents as in effect on the date hereof, which provisions will
not be amended, repealed or otherwise modified for a period of four (4) years
from the Effective Time in any manner that would adversely affect the rights
thereunder of the Indemnified Parties, unless such modification is required by
law.
5.6. NASDAQ LISTING. Parent agrees to authorize for listing on Nasdaq the
shares of Parent Common Stock issuable and those required to be reserved for
issuance, in connection with the Merger, upon official notice of issuance.
5.7. AFFILIATES.
A. Set forth in Schedule 5.7. of the Company Disclosure Schedule is a
list of those persons who may be deemed to be, in Company's reasonable
judgment, affiliates of Company within the meaning of Rule 145 promulgated
under the Securities Act or Opinion 16 of the Accounting Principles Board
and applicable SEC rules and regulations (each, a "Company Affiliate").
Company will provide Parent with such
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information and documents as Parent reasonably requests of reviewing such
list. Company will use its commercially reasonable efforts to deliver or
cause to be delivered to Parent, as promptly as practicable on or following
the date hereof, from each Company Affiliate an executed affiliate
agreement in substantially the form attached hereto as Exhibit C-1 (the
"Company Affiliate Agreement"), each of which will be in full force and
effect as of the Effective Time. Parent will be entitled to place
appropriate legends on the certificates evidencing any Parent Common Stock
to be received by a Company Affiliate pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the Parent Common Stock, consistent with the terms of
the Company Affiliate Agreement.
B. Set forth in Schedule 5.7. of the Parent Disclosure Schedule is a
list of those persons who may be deemed to be, in Parent's reasonable
judgment, affiliates of Parent under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations (each, a "Parent
Affiliate"). Parent will provide Company with such information and
documents as Company reasonably requests of reviewing such list. Parent
will use its commercially reasonable efforts to deliver or cause to be
delivered to Company, as promptly as practicable on or following the date
hereof, from each Parent Affiliate an executed affiliate agreement in
substantially the form attached hereto as Exhibit C-2 (the "Parent
Affiliate Agreement"), each of which will be in full force and effect as of
the Effective Time.
5.8. PROVISION OF LOAN BY PARENT TO COMPANY. No later than January 15,
2000, Parent shall amend and/or restate that certain Loan and Security Agreement
dated October 28, 1999 by and among Company, Subsidiary and Parent and related
documents (collectively, the "Loan Documents") pursuant to which the following
shall occur: (i) Parent shall advance an additional Five Hundred Thousand and
No/100 Dollars ($500,000.00) to be used for general working capital purposes and
such new advance shall not be used to pay any indebtedness owed to the Principal
Shareholders; (ii) subject to clause (iii) below, the maturity date on the
original advance under the Loan Documents and the advance under clause (i) above
(and all interest accrued thereon) shall be July 31, 2000; (iii) if the
Agreement is terminated by Company pursuant to Section 8.6., the maturity date
for such original advance and such new advance shall be modified to become the
later of (x) one hundred twenty (120) days from the date of such termination or
(y) July 31, 2000; (iv) all security covered under the Loan Documents shall
continue in place and (v) the Principal Shareholders shall sign such
subordination agreements and/or forbearance agreements as are requested by
Parent to ensure that no payments are made by the Company to the Principal
Shareholders until all amounts due Parent for the foregoing advances are paid in
full.
6. ADDITIONAL COVENANTS OF THE PARTIES
The parties hereto hereby agree as follows with respect to the period from
and after the date of this Agreement.
6.1 MUTUAL COVENANTS.
A. Pooling-of-Interests. Each of the parties shall use its Best
Efforts to cause the Merger to qualify for pooling-of-interests accounting
treatment for financial reporting purposes. Neither the Company nor any
Affiliate of the Company shall knowingly take any action that would
jeopardize the treatment of the Merger as a "pooling-of-interests" for
accounting purposes.
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B. Tax-Deferred Treatment. Each of the parties shall use its
reasonable efforts to cause the Merger to constitute a tax-deferred
"reorganization" under Section 368(a) of the Code.
C. Confidentiality; Access to Information.
(i) Prior to the Effective Time and after any termination of this
Agreement each party hereto will hold, and will use its best efforts to
cause its officers, directors, employees, accountants, counsel,
consultants, advisors, affiliates (as such term is used in Rule 12b-2
under the Exchange Act) and representatives (collectively, the
"Representatives"), to hold, in confidence all confidential documents
and information concerning the other parties hereto and the Subsidiary
furnished to such party in connection with the transactions contemplated
by this Agreement, including, without limitation, all analyses,
compilations, studies or records prepared by the party receiving the
information or by such party's Representatives, that contain or
otherwise reflect or are generated from such information (collectively,
the "Confidential Material"). The party furnishing any Confidential
Material is herein referred to as the "Delivering Company" and the party
receiving any Confidential Material is herein referred to as the
"Receiving Company."
(ii) The Receiving Company agrees that the Confidential Material
will not be used other than for the purpose of the transaction
contemplated by this Agreement, and that such information will be kept
confidential by the Receiving Company and its Representatives; provided,
however, that (i) any of such information may be disclosed to the
Representatives who need to know such information for the purpose
described above (it being understood that (a) each such Representative
shall be informed by the Receiving Company of the confidential nature of
such information, shall be directed by the Receiving Company to treat
such information confidentially and not to use it other than for the
purpose described above and shall agree to be bound by the terms of this
Section 6.1.C, and (b) in any event, the Receiving Company shall be
responsible for any breach of this Agreement by any of its
Representatives), and (ii) any other disclosure of such information may
be made if the Delivering Company has, in advance, consented to such
disclosure in writing. The Receiving Company will make all reasonable,
necessary and appropriate efforts to safeguard the Confidential Material
from disclosure to anyone other than as permitted hereby.
(iii) Notwithstanding the foregoing, if the Receiving Company or
any of its Representatives is requested or required (by oral question or
request for information or documents in legal proceedings,
interrogatories, subpoena, civil investigative demand or similar
process) to disclose any Confidential Material, the Receiving Company
will promptly notify the Delivering Company of such request or
requirement so that the Delivering Company may seek an appropriate
protective order and/or waive the Receiving Company's compliance with
the provisions or this Agreement. If, in the absence of a protective
order or the receipt of a waiver hereunder, the Receiving Company or any
of its Representatives is nonetheless, in the reasonable written opinion
of the Receiving Company's counsel, compelled to disclose Confidential
Material to any tribunal, the Receiving Company or such Representative,
after notice to the Delivering Company, may disclose such information to
such tribunal. The Receiving Party shall exercise reasonable efforts to
obtain reliable assurance that confidential
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treatment will be accorded the Confidential Material so disclosed. The
Receiving Company or such Representative shall not be liable for the
disclosure of Confidential Material hereunder to a tribunal compelling
such disclosure unless such disclosure to such tribunal was caused by or
resulted from a previous disclosure by the Receiving Company or any of
its Representatives not permitted by this Agreement.
(iv) This Section 6.1.C shall be inoperative as to particular
portions of the Confidential Material if such information (i) is or
becomes generally available to the public other than as a result of a
disclosure by the Receiving Company or its Representatives, (ii) was
available to the Receiving Company on a non-confidential basis prior to
its disclosure to the Receiving Company by the Delivering Company or the
Delivering Company's Representatives, or (iii) becomes available to the
Receiving Company on a non-confidential basis from a source other than
the Delivering Company or the Delivering Company's Representatives,
provided that such source is not known by the Receiving Company, after
reasonable inquiry, to be bound by a confidentiality agreement with the
Delivering Company or the Delivering Company's Representatives and is
not otherwise prohibited from transmitting the information to the
Receiving Company by a contractual, legal or fiduciary obligation. The
fact that information included in the Confidential Material is or
becomes otherwise available to the Receiving Company or its
Representatives under clauses (i) through (iii) above shall not relieve
the Receiving Company or its Representatives of the prohibitions of the
confidentiality provisions of this Section 9.8 with respect to the
balance of the Confidential Material.
(v) If this Agreement is terminated, each party hereto will, and
will use its best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or
deliver to the party from whom such Confidential Material was obtained,
upon request, all documents and other materials, and all copies thereof,
obtained by such party or on its behalf from any such other parties in
connection with this Agreement that are subject to such confidence.
D. Proxy Statement/Registration Statement; Shareholder
Approval. Following the execution of this Agreement, Parent, Merger Sub
and the Company will mutually cooperate to prepare and file with the SEC a
preliminary proxy statement relating to the Merger (the "Proxy Statement")
and Parent will prepare and file with the SEC the Registration Statement in
which the Proxy Statement will be included as a prospectus. Each of Parent,
Merger Sub and the Company will respond to any comments of the SEC and will
use its best efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing and
when the Registration Statement is declared effective by the SEC, the
Company will thereafter promptly cause the Proxy Statement to be mailed to
its stockholders. In connection therewith, Parent, Merger Sub and the
Company will prepare and file any other filings required under the Exchange
Act, the Securities Act or any other Federal or blue sky laws relating to
the Merger and the transactions contemplated by this Agreement (the "Other
Filings"). Each party will notify the other party promptly upon the receipt
of any comments from the SEC or its staff and of any supplements to the
Registration Statement, the Proxy Statement or any Other Filing or for
additional information and will supply the other party with copies of all
correspon-
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dence between such party or any of its representatives, on the one hand,
and the SEC, or its staff or other government officials, on the other hand,
with respect to the Registration Statement, the Proxy Statement, the Merger
or any Other Filing. The Proxy Statement, the Registration Statement and
the Other Filings will comply in all material respects with all applicable
requirements of law and the rules and regulations promulgated thereunder.
Each party agrees to cooperate with the other to provide all materials,
documents, exhibits and other requested information necessary to assure
such compliance. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement, the
Registration Statement or any Other Filing, Parent or the Company, as the
case may be, will promptly inform the other party of such occurrence and
cooperate in filing with the SEC or its staff or any other government
officials, and/or mailing to stockholders of the Company, such amendment or
supplement. The Proxy Statement will also include the approval of this
Agreement and the Merger and the recommendation of the Board of Directors
of the Company to Company's shareholders that they vote in favor of
approval of this Agreement and the Merger, subject to the right of the
Board of Directors of the Company to withdraw its recommendation and
recommend a Superior Proposal determined to be such in compliance with
Section 5.1. of this Agreement; provided, however, that the Board of
Directors of Company shall submit this Agreement to Company's shareholders
whether or not at any time subsequent to the date hereof such board
determines that it can no longer make such recommendation. Promptly after
the date hereof, the Company will take all action necessary in accordance
with Colorado law and its Certificate of Incorporation and Bylaws to
convene the Meeting to be held as promptly as practicable, and in any event
within (forty-five (45)) days after the declaration of effectiveness of the
Registration Statement, for the purpose of voting upon this Agreement.
Unless Company's Board of Directors has withdrawn its recommendation of
this Agreement and the Merger in compliance with Section 5.1., Company
shall use all reasonable efforts to solicit from its shareholders proxies
in favor of the approval of this Agreement and the Merger pursuant to the
Proxy Statement and shall take all other action necessary or advisable to
secure the vote or consent of shareholders required by Colorado Law or
applicable stock exchange requirements to obtain such approval.
Notwithstanding any provision in this Agreement to the contrary, the
Company acknowledges and agrees that Parent may, by notice to the Company,
postpone the filing of the Registration Statement, the request to
accelerate the declaration of effectiveness of the Registration Statement,
or the mailing of the Proxy Statement to the Company's shareholders if at
any time the Board of Directors of Parent, in good faith, determines that
it would be detrimental to the Parent or Company for such Registration
Statement to be filed or declared effective, or for such Proxy Statement to
be mailed to the shareholders of the Company; provided, that any such
postponement shall not exceed ninety (90) days in duration.
6.2. COVENANTS OF THE COMPANY.
A. Conduct of the Company's Operations. During the period from the
date of this Agreement to the Effective Time or the date of termination of
this Agreement, the Company and the Subsidiary shall use its reasonable
efforts to maintain and preserve their respective business organizations
and to retain the services of their respective officers and key employees
and maintain relationships with customers, suppliers and other third
parties to the end that their goodwill and ongoing business shall not be
impaired in any material respect. Without limiting the generality of the
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foregoing, during the period from the date of this Agreement to the
Effective Time, neither the Company nor Subsidiary shall, except as
otherwise expressly contemplated by this Agreement and the transactions
contemplated hereby, without the prior written consent of Parent, such
consent not to be unreasonably withheld or delayed:
(i) Sell, transfer, lease, pledge, mortgage, encumber or otherwise
dispose of any of its personal property or assets other than sales or
leases of inventory or licensing of Intellectual Property Assets in the
Ordinary Course of Business.
(ii) Make or propose any changes in its Articles of Incorporation or
Bylaws.
(iii) Merge or consolidate with any other Person or acquire a material
amount of assets or capital stock of any other Person or enter into any
confidentiality agreement with any Person other than in the Ordinary Course
of Business.
(iv) Incur, create, assume or otherwise become liable for indebtedness
for borrowed money or assume, guarantee, endorse or otherwise as an
accommodation become responsible or liable for obligations of any other
individual, corporation or other entity, or enter into any arrangement
having the economic effect of any of the foregoing other than in connection
with the financing of ordinary course trade payables consistent with past
practice other than its Subsidiaries, except in the Ordinary Course of
Business.
(v) Create any subsidiaries.
(vi) Enter into or modify any employment, severance, termination or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officer, director,
consultant or employee.
(vii) Change its method of doing business, in any material respect, or
change any material method or principle of accounting in a manner that is
inconsistent with past practice.
(viii) Settle any Proceeding, whether now pending or hereafter made or
brought involving an amount in excess of Twenty-Five Thousand and No/100
Dollars ($25,000.00).
(ix) Modify, amend or terminate, or waive, release or assign any
material rights or claims with respect to, any material Contract to which
the Company or Subsidiary is a party or any confidentiality agreement to
which the Company or Subsidiary is a party.
(x) Incur or commit to any capital expenditures, obligations or
liabilities in respect thereof which in the aggregate exceed or would
exceed Fifty Thousand and No/100 Dollars ($50,000.00) on a cumulative
basis.
(xi) Issue, sell or grant options, warrants or rights to purchase or
subscribe to, or enter into any arrangement or contract with respect to the
issuance or sale of any securities of the Company or Subsidiary, or rights
or obligations convertible into or exchangeable for any securities of the
Company or Subsidiary, or alter the terms of any presently outstanding
options or make any changes, by split-up, combination, reorganization or
otherwise in the capital structure of the Company or Subsidiary.
(xii) Declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock.
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(xiii) Grant any severance or termination pay to any officer or
employee except pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing or made
available to Parent, or adopt any new severance plan.
(xiv) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock.
(xv) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of Company or Subsidiary, except repurchases of
unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or
purchase agreements in effect on the date hereof.
(xvi) Engage in any action that could (1) cause the Merger to fail to
qualify as a "reorganization" under Section 368(a) of the Code or (2)
interfere with Parent's ability to account for the Merger as a pooling of
interests, whether or not (in each case) otherwise permitted by the
provisions of this Section 6.2.
(xvii) Engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated by this Agreement.
(xviii) Make any tax election that, individually or in the aggregate,
is reasonably likely to adversely affect in any material respect the tax
liability or tax attributes of Company or Subsidiary or settle or
compromise any material income tax liability.
(xix) Agree in writing or otherwise to take any of the foregoing
actions.
B. Intellectual Property Matters. The Company shall use its
reasonable efforts to preserve its ownership rights to all of the
intellectual property ("Intellectual Property") described in Section 3.22.
free and clear of any Encumbrances and shall use its reasonable efforts to
assert, contest and prosecute any infringement of any issued foreign or
domestic patent, trademark, service mark, trade name or copyright that
forms a part of the Intellectual Property or any misappropriation or
disclosure of any trade secret, confidential information or know-how that
forms a part of the Intellectual Property.
C. Shareholder Agreements. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement,
from each of the Principal Shareholders, an executed Shareholder Agreement
(the "Shareholder Agreements") in the form attached hereto as Exhibit A,
agreeing, among other things, to vote in favor of the Merger.
6.3. FORM S-8. Parent agrees to file, if available, for use by Parent, a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Options no later than twenty (20) business days
after the Closing Date.
6.4. STOCK OPTIONS AND WARRANTS.
A. At the Effective Time, the Company's obligations with respect to
each outstanding Option or Warrant, whether vested or unvested, will be
assumed by Parent. Each Option so assumed by Parent under this Agreement
shall continue to have, and be subject to, the same terms and conditions
set forth in the Company
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Stock Option Plans, the agreement or Warrant pursuant to which such
security was issued as in effect immediately prior to the Effective Time,
except that (i) such security will be exercisable for that number of whole
shares of Parent Common Stock equal to the product of the number of shares
of Company Common Stock that were purchasable under such security
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded up to the nearest whole number of shares of Parent Common Stock and
(ii) the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed security will be equal to the
quotient determined by dividing the exercise price per share of Company
Common Stock at which such security was exercisable immediately prior to
the Effective Time by the Exchange Ratio and rounding the resulting
exercise price up to the nearest whole cent.
B. It is the intention of the parties that Options assumed by Parent
qualify following the Effective Time as incentive stock options as defined
in the Code ("ISO's") to the extent such Options qualified as ISO's
immediately prior to the Effective Time.
C. After the Effective Time, Parent will issue to each holder of an
outstanding Option or Warrant a document evidencing the foregoing
assumption by Parent.
D. Parent will reserve sufficient shares of Parent Common Stock for
issuance under this Section 6.4. hereof.
7. CONDITIONS
7.1. MUTUAL CONDITIONS. The obligations of the parties hereto to
consummate the Merger shall be subject to the satisfaction at or prior to the
Closing Date of the following conditions:
A. No temporary restraining order, preliminary or permanent injunction
or other order or decree which prevents the consummation of the Merger
shall have been issued and remain in effect, and no statute, rule or
regulation shall have been enacted by any Governmental Body which prevents
the consummation of the Merger.
B. [INTENTIONALLY LEFT BLANK].
C. No Proceeding shall be instituted by any Governmental Body which
seeks to prevent consummation of the Merger or seeking material damages in
connection with the transactions contemplated hereby which continues to be
outstanding.
D. The Registration Statement shall have been declared effective by
the SEC under the Securities Act. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued by the SEC and no proceedings for that purpose and no similar
proceeding in respect of the Proxy Statement shall have been initiated or,
to the knowledge of Parent, Merger Sub or the Company, threatened in
writing by the SEC.
E. The shares of Parent Common Stock issuable to the shareholders of
Company pursuant to this Agreement and such other shares required to be
reserved for issuance in connection with the Merger shall have been
authorized for listing on Nasdaq upon official notice of issuance.
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F. All waiting periods, if any, under the HSR Act relating to the
Merger will have expired or terminated early.
G. The Shareholder Approval shall have been obtained.
H. Parent and Company shall each have received written opinions from
their respective tax counsel in the form and substance reasonably
satisfactory to them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and such
opinions shall not have been withdrawn; provided, however, that if the
counsel to either Parent or Company does not render such opinion, this
condition shall nonetheless be deemed to be satisfied with respect to such
party if counsel to the other party renders such opinion to such party. The
parties to this Agreement agree to make such reasonable representations as
requested by such counsel for the purpose of rendering such opinions.
7.2. CONDITIONS TO OBLIGATIONS OF MERGER SUB AND PARENT. The obligations
of Merger Sub and Parent to consummate and effect the Merger shall be subject to
the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Parent:
A. Representations and Warranties. Each representation and warranty
of Company contained in this Agreement (i) shall have been true and correct
as of the date of this Agreement and (ii) shall be true and correct on and
as of the Closing Date with the same force and effect as if made on and as
of the Closing Date except (1) for such failures to be true and correct
that do not in the aggregate constitute a Company Material Adverse Effect;
provided, however, such Company Material Adverse Effect qualifier shall be
inapplicable with respect to representations and warranties contained in
Sections 3.2.A., 3.3., 3.29., 3.30. and 3.31. and (2) for those
representations and warranties which address matters only as of a
particular date (which representations shall have been true and correct
(subject to the qualifications set forth in the preceding clause (1)) as of
such particular date) (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Company Material Adverse Effect" qualifications and other qualifications
based on the word "material" or similar phrases contained in such
representations and warranties shall be disregarded and (ii) any update of
or modification to the Company Disclosure Schedule made or purported to
have been made after the date of this Agreement shall be disregarded).
B. The Company shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects
with each covenant to be performed and complied with by such parties
hereunder prior to the Effective Time.
C. Since the date of this Agreement, there shall not have been any
Company Material Adverse Effect or any material adverse effect on the
ability of the Company to consummate the transactions contemplated hereby.
D. The Company shall have furnished Merger Sub and Parent with a
certificate dated the Closing Date signed on behalf of it by its President
to the effect that the conditions set forth in Sections 7.2.A., B. and C.
have been satisfied.
E. Each of the Company Affiliates shall have executed a Company
Affiliate Agreement in the form attached hereto as Exhibit C-1.
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F. Daniel L. Richmond and Chae U. Kim shall each have executed an
Employment Agreement, in the forms of which are attached hereto as Exhibit
D-1 and Exhibit D-2, respectively.
G. Merger Sub and Parent shall have received the legal opinion, dated
the Closing Date, of Norton Lidstone, P.C., counsel to the Company, in
substantially the form attached hereto as Exhibit E.
I. The Company shall have obtained all material consents, waivers,
approvals, authorizations or orders, including the consents set forth on
Schedule 3.2, and made all filings in connection with the authorization,
execution and delivery of this Agreement by the Company and the
consummation by each of the transactions contemplated hereby.
7.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by the Company:
A. Each representation and warranty of Merger Sub and Parent set forth
in Section 4. (i) shall have been true and correct as of the date of this
Agreement and (ii) shall be true and correct on and as of the Closing Date
as though made on and as of the Closing Date except (1) for such failures
to be true and correct that do not in the aggregate constitute a Parent
Material Adverse Effect and (2) for those representations and warranties
which address matters only as of a specified date, which need be true and
correct (which representations and warranties shall have been true and
correct (subject to the qualifications set forth in the preceding clause
(1)) as of such particular date (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Parent Material Adverse Effect" qualifications and other qualifications
based on the word "material" or similar phrases contained in such
representations and warranties shall be disregarded and (ii) any update of
or modification to the Parent Disclosure Schedule made or purported to have
been made after the date of this Agreement shall be disregarded).
B. Each of Merger Sub and Parent shall have performed in all material
respects each obligation and agreement and shall have complied in all
material respects with each covenant to be performed and complied with by
it hereunder at or prior to the Effective Time.
C. Since the date of this Agreement, there shall not have been any
material adverse change in the assets, liabilities, results of operations,
business or financial condition of Merger Sub and Parent or any material
adverse effect on the ability of Merger Sub and Parent to consummate the
transactions contemplated hereby.
D. Each of Merger Sub and Parent shall have furnished the Company with
a certificate dated the Closing Date signed on its behalf by its Chairman,
President or any Vice President to the effect that the conditions set forth
in Sections 7.3.A., B. and C. have been satisfied.
E. The Company shall have received the legal opinion, dated the
Closing Date, of Morris, Manning & Martin, L.L.P., counsel to Merger Sub
and Parent, substantially in the form attached hereto as Exhibit F.
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8. TERMINATION
8.1. TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the requisite approval of the
shareholders of Company:
A. By mutual written consent duly authorized by the Boards of
Directors of Parent and Company;
B. By either Company or Parent if the Merger shall not have been
consummated by May 31, 2000 for any reason; provided, however, that the
right to terminate this Agreement under this Section 8.1.B. shall not be
available to any party whose action or failure to act has been a principal
cause of or resulted in the failure of the Merger to occur on or before
such date and such action or failure to act constitutes a breach of this
Agreement;
C. By either Company or Parent if a Governmental Body shall have
issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree, ruling or other action is
final and nonappealable;
D. By either Company or Parent if the required approval of the
shareholders of Company contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting
of Company shareholders duly convened therefor or at any adjournment
therefor;
E. By Company, upon a breach of any representation, warranty, covenant
or agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 7.3.A., B. or C. would
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in Parent's representations and warranties or breach by Parent
is curable by Parent, then Company may not terminate this Agreement under
this Section 8.1.E. for thirty (30) days after delivery of written notice
from Company to Parent of such breach, provided Parent continues to
exercise best efforts to cure such breach (it being understood that Company
may not terminate this Agreement pursuant to this paragraph E. if such
breach by Parent is cured during such thirty (30) day period);
F. By Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of Company set forth in this Agreement, or if any
representation or warranty of Company shall have become untrue, in either
case such that the conditions set forth in Section 7.2.A., B. or C. would
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in Company's representations and warranties or breach by Company
is curable by Company, then Parent may not terminate this Agreement under
this Section 8.1.F. for thirty (30) days after delivery of written notice
from Parent to Company of such breach, provided Company continues to
exercise best efforts to cure such breach (it being understood that Parent
may not terminate this Agreement pursuant to this paragraph F. if such
breach by Company is cured during such thirty (30) day period); or
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G. By Parent, if (i) the Board of Directors of Company withdraws,
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to Parent or its stockholders; (ii) the Board of Directors
of Company shall have recommended to the shareholders of Company an
Acquisition Proposal; (iii) the Company fails to comply with Section 5.1.
or any provision of the Stock Option Agreement; (iv) an Acquisition
Proposal shall have been announced or otherwise become publicly known and
the Board of Directors of Company shall have (1) failed to recommend
against acceptance of such by its shareholders (including by taking no
position, or indicating its inability to take a position, with respect to
the acceptance by its shareholders of an Acquisition Proposal involving a
tender offer or exchange offer) or (2) failed to reconfirm its approval and
recommendation of this Agreement and the transactions contemplated hereby
within five (5) business days thereafter; (v) any of the Principal
Shareholders fail to comply with the Shareholder Agreement or (vi) the
Board of Directors of Company resolves to take any of the actions described
above.
8.2. NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 8.1. above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto
(or such later time as may be required by Section 8.1.). In the event of the
termination of this agreement as provided in Section 8.2., this Agreement shall
be of no further force or effect, except (i) as set forth in this Section 8.2.,
Section 6.1.C.(i), Section 8.3. and Section 9., each of which shall survive the
termination of this Agreement and (ii) nothing herein shall relieve any party
from liability for fraud in connection with, or any willful breach of, this
Agreement.
8.3. FEES AND EXPENSES.
A. General. Except as set forth in this Section 8.3., all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses
whether or not the Merger is consummated; provided, however, that Parent
and Company shall share equally all fees and expenses, other than
attorneys' and accountants fees and expenses, incurred (i) in relation to
the printing and filing of the Proxy Statement (including any preliminary
materials related thereto) and the S-4 (including financial statements and
exhibits) and any amendments or supplements thereto or (ii) for the
premerger notification and report forms under the HSR Act.
B. Termination Fee.
(i) In the event that (1) Parent shall terminate this Agreement
pursuant to Section 8.1.G. or (2) this Agreement shall be terminated (x)
pursuant to Section 8.1.B. or (y) pursuant to Section 8.1.D. and, in the
case of either (x) or (y), (a) at or prior to such termination, there
shall exist or have been proposed an Acquisition Proposal and (b) within
nine (9) months after such termination, Company shall enter into a
definitive agreement with respect to any Company Acquisition or any
Company Acquisition shall be consummated, then, in the case of (1),
promptly after such termination, or in the case of (2), concurrently
with the execution of a definitive agreement with respect to, or the
consummation of, as applicable, such Company Acquisition, Company shall
pay to Parent an amount in cash equal to One Million Three Hundred
Thousand and No/100 Dollars ($1,300,000.00) (the "Termination Fee").
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(ii) In the event that Parent shall terminate this Agreement
pursuant to Section 8.1.F., then Company shall promptly reimburse Parent
for Parent's costs and expenses in connection with this Agreement and
the transactions contemplated hereby ("Parent's Expenses"), and if,
within nine (9) months of such termination of this Agreement, Company
shall enter into a definitive agreement with respect to any Company
Acquisition or any Company Acquisition involving Company shall be
consummated, then concurrently with the execution of a definitive
agreement with respect to, or the consummation of, as applicable, such
Company Acquisition, then Company shall pay to Parent an amount in cash
equal to the amount by which the Termination Fee exceeds the amount of
Parent's Expenses previously reimbursed by Company pursuant hereto.
(iii) The Company acknowledges that the agreements contained in
this Section 8.3.B. are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements,
Parent would not enter into this Agreement; accordingly, if the Company
fails to pay in a timely manner the amounts due pursuant to this Section
8.3.B. and, in order to obtain such payment, Parent makes a claim that
results in a judgment against the Company for the amounts set forth in
this Section 8.3.B., the Company shall pay to Parent its costs and
expenses (including attorneys' fees and expenses) in connection with
such suit, together with interest on the amounts set forth in this
Section 8.3.B. at the prime rate of interest as reported by SunTrust
Bank, N.A. in effect on the date such payment was required to be made.
Payment of the fees described in this Section 8.3.B. shall not be in
lieu of damages incurred in the event of breach of this Agreement. For
the purposes of this Agreement, "Company Acquisition" shall mean any of
the following transactions (other than the transactions contemplated by
this Agreement): (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving the Company pursuant to which the shareholders of the Company
immediately preceding such transaction hold less than fifty percent
(50%) of the aggregate equity interests in the surviving or resulting
entity of such transaction; (ii) a sale or other disposition by the
Company of assets representing in excess of fifty percent (50%) of the
aggregate fair market value of the Company's business immediately prior
to such sale or (iii) the acquisition by any person or group (including
by way of a tender offer or an exchange offer or issuance by the
Company), directly or indirectly, of beneficial ownership or a right to
acquire beneficial ownership of shares representing in excess of fifty
percent (50%) of the voting power of the then outstanding shares of
capital stock of the Company.
8.4. AMENDMENT. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of Parent, Merger Sub and Company.
8.5. EXTENSION; WAIVER. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an
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instrument in writing signed on behalf of such party. Delay in exercising any
right under this Agreement shall not constitute a waiver of such right.
8.6. SPECIAL PARENT PAYMENT. In the event that Company shall terminate
this Agreement pursuant to Section 8.1.E., the Parent shall pay to Company an
amount in cash equal to One Hundred Fifty Thousand and No/100 Dollars
($150,000.00).
9. MISCELLANEOUS
9.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Company, Parent and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
9.2. NOTICES. Except as otherwise set forth herein, all notices given in
connection with this Agreement shall be in writing and shall be delivered either
by personal delivery, by telecopy or similar facsimile means, by certified or
registered mail, return receipt requested, or by express courier or delivery
service, addressed to the parties hereto at the following addresses:
A. Company: Medical Dynamics, Inc.
99 Inverness Drive East
Englewood, Colorado 80112
Attention: Van Horsley, President
Telecopy No.: (303) 799-1378
With a copy to: Norton Lidstone, P.C.
The Quadrant
5445 DTC Parkway
Suite 850
Englewood, Colorado 80111
Attention: Herrick K. Lidstone, Jr., Esq.
Telecopy No.: (303) 221-5553
B. Merger Sub and Parent: InfoCure Corporation and CADI Acquisition
Corporation
1765 The Exchange
Suite 450
Atlanta, Georgia 30339
Attention: Richard E. Perlman
Telecopy No.: (770) 857-1300
With a copy to: Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Richard L. Haury, Jr., Esq.
Telecopy No.: (404) 365-9532
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notices shall be deemed given (i) when received, if sent by telecopy
or similar facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of
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communications sent by telecopy or other facsimile means) and (ii) when
delivered and receipted for (or upon the date of attempted delivery where
delivery is refused), if hand-delivered, sent by express courier or delivery
service, or sent by certified or registered mail, return receipt requested.
9.3. FURTHER ASSURANCES. The parties hereto agree to furnish upon request
to each other such further information, to execute and deliver to each other
such other documents, and to do such other acts and things, all as the other
party hereto may at any time reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to herein.
9.4. WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay on the part of
any party in exercising any right, power or privilege under this Agreement or
the documents referred to herein shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or privilege preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. To the maximum extent permitted by applicable law, no claim or
right arising out of this Agreement or the documents referred to herein can be
discharged by one party hereto, in whole or in part, by a waiver or renunciation
of the claim or right unless in writing signed by the other party hereto; no
waiver which may be given by a party hereto shall be applicable except in the
specific instance for which it is given; and no notice to or demand on one party
hereto shall be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to
herein.
9.5. ENTIRE AGREEMENT AND MODIFICATION. This Agreement, including all
exhibits and schedules hereto, are intended by the parties to this Agreement as
a final expression of their agreement with respect to the subject matter hereof,
and are intended as a complete and exclusive statement of the terms and
conditions of that agreement. This Agreement may not be modified, rescinded or
terminated orally, and no modification, rescission, termination or attempted
waiver of any of the provisions hereof (including this Section) shall be valid
unless in writing and signed by the party against whom the same is sought to be
enforced.
9.6. ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS. This Agreement
shall apply to and be binding in all respect upon, and shall inure to the
benefit of, the successors and assigns of the parties hereto. Nothing expressed
or referred to in this Agreement is intended or shall be construed to give any
person or entity other than the parties to this Agreement any legal or equitable
right, remedy or claim under or with respect to this Agreement, or any provision
hereof, it being the intention of the parties hereto that this Agreement and all
of its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement, their successors and assigns, and for the benefit of
no other person or entity; provided, however, that the parties hereto consent to
the assignment of interests in this Agreement, including all exhibits and
schedules hereto, as collateral security for the obligations of Parent and
Merger Sub following the Closing to Finova Capital Corporation.
9.7. POOLING-OF-INTERESTS. Except for the transaction described in Section
5.8., if any provision of this Agreement or the application of any such
provision to any person or circumstance precludes the use of
"pooling-of-interests" accounting treatment in connection with the transactions
contemplated by this Agreement, then such provision shall be of
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no force and effect to the extent, and solely to the extent necessary to
preserve such accounting treatment and in the event, the remainder of this
Agreement shall not be affected, and in lieu of such provision there shall be
added as part of this Agreement a provision as similar in terms as may be
possible for the transactions contemplated by this Agreement to be treated as a
"pooling-of-interests" for accounting purposes.
9.8. SECTION HEADINGS, CONSTRUCTION. The headings of articles and sections
contained in this Agreement are provided for convenience only. They form no part
of this Agreement and shall not affect its construction or interpretation. All
references to articles and sections in this Agreement refer to the corresponding
articles and sections of this Agreement. All words used herein shall be
construed to be of such gender or number as the circumstances require. Unless
otherwise specifically noted, the words "herein," "hereof," "hereby,"
"hereinabove," "hereinbelow," "hereunder," and words of similar import, refer to
this Agreement as a whole and not to any particular section, subsection,
paragraph, clause or other subdivision hereof.
9.9. TIME OF ESSENCE. With regard to all time periods set forth or
referred to in this Agreement, time is of the essence.
9.10. GOVERNING LAW. Except to the extent mandatorily governed by Colorado
Law, this Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law thereof.
9.11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute,
but one and the same agreement.
[Signatures Begin on the Following Page]
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IN WITNESS WHEREOF, the Company, Merger Sub and Parent, by their duly
authorized officers, have each caused this Agreement to be executed as of the
date first written above.
PARENT:
InfoCure Corporation
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
MERGER SUB:
CADI Acquisition Corporation
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
COMPANY:
Medical Dynamics, Inc.
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
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FIRST AMENDMENT TO AGREEMENT AND PLAN
OF MERGER BY AND AMONG MEDICAL DYNAMICS, INC.,
INFOCURE CORPORATION AND
CADI ACQUISITION CORPORATION
THIS FIRST AMENDMENT TO THE PLAN AND AGREEMENT OF MERGER by and among
INFOCURE CORPORATION, a Delaware corporation ("Parent"), CADI ACQUISITION
CORPORATION, a Colorado corporation and a wholly-owned subsidiary of Parent
("Merger Sub") and MEDICAL DYNAMICS, INC., a Colorado corporation ("Company")
dated December 21, 1999 (the "Merger Agreement") is entered into this tenth day
of April, 2000. Capitalized terms used herein, but not defined shall have the
meanings ascribed to such terms in the Merger Agreement.
W I T N E S S E T H :
WHEREAS, pursuant to the Merger Agreement, Company shall merge with and
into Merger Sub;
WHEREAS, the parties desire to amend the Merger Agreement to provide that
any holder of Company Common Stock who is to receive less than one hundred (100)
shares of Parent Common Stock, shall instead receive cash at the same rate; and
WHEREAS, the parties also desire to amend the Merger Agreement to express
their intention to not attempt to qualify the transaction for
pooling-of-interests accounting treatment.
NOW, THEREFORE, Company, Parent and CADI hereby agree to amend the Merger
Agreement as follows:
1. Term. Section 8.1.B. of the Merger Agreement is hereby amended to
delete Section 8.1.B. in its entirety and to insert in lieu thereof the
following Section 8.1.B.:
"8.1.B. By either Company or Parent if the Merger shall not have been
consummated by July 31, 2000 for any reason; provided, however, that the
right to terminate this Agreement under this Section 8.1.B. shall not be
available to any party whose action or failure to act has been a principal
cause of or resulted in the failure of the Merger to occur on or before
such date and such action or failure to act constitutes a breach of this
Agreement."
2. POOLING. Sections 2.10.B, 3.30, 6.1.A. and 9.7 of the Merger Agreement
are hereby deleted in their entirety and shall be of no further force and
effect.
3. REORGANIZATION. Section 6.2.A.(xvi) of the Merger Agreement is hereby
amended to delete Section 6.2.A.(xvi) in its entirety and to insert in lieu
thereof the following Section 6.2.A.(xvi):
"6.2.A.(xvi) Engage in any action that could cause the Merger to fail
to qualify as a "reorganization" under Section 368(a) of the Code, whether
or not otherwise permitted by the provisions of this Section 6.2."
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Except as modified herein, the terms and conditions of the Merger Agreement
shall remain in full force and effect.
The Boards of Directors of Company and Parent have approved and declared
advisable this Amendment, and have approved the Merger and the other
transactions contemplated by this Agreement and have determined to recommend
that the shareholders of Company adopt and approve (i) the Merger Agreement;
(ii) the Amendment to the Merger Agreement and (iii) the Merger transaction.
This First Amendment may be executed in one or more counterparts, and by
different parties hereto on separate counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, this First Amendment has been executed as of the date
first written above.
PARENT:
InfoCure Corporation
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
MERGER SUB:
CADI Acquisition Corporation
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
COMPANY:
Medical Dynamics, Inc.
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a Delaware
corporation to indemnify officers, directors, employees and agents for actions
taken in good faith and in a manner they reasonably believed to be in, or not
opposed to, the best interests of the corporation, and with respect to any
criminal action, which they had no reasonable cause to believe was unlawful. The
Delaware General Corporation Law provides that a corporation may pay expenses
(including attorneys' fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, and must reimburse a
successful defendant for expenses, including attorney's fees, actually and
reasonably incurred, and permits a corporation to purchase and maintain
liability insurance for its directors and officers. The Delaware General
Corporation Law provides that indemnification may be made for any claim, issue
or matter as to which a person has been adjudged by a court of competent
jurisdiction to be liable to the corporation, unless and only to the extent a
court determines that the person is entitled to indemnity for such expenses as
the court deems proper.
InfoCure's bylaws provide that InfoCure shall, to the full extent permitted
by Section 145, indemnify any person, made or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is, was or is about to become an officer, director, employee or agent of
InfoCure. InfoCure shall pay the expenses (including attorneys' fees) incurred
by a person in defending any proceeding in advance of its final disposition,
provided, however, that, to the extent required by law, such payment of expenses
in advance of the final disposition of the proceeding shall be made by InfoCure
only upon receipt of an undertaking by the person to repay all amounts advanced
if it should be ultimately determined that the person is not entitled to be
indemnified.
In addition, InfoCure's certificate of incorporation eliminates or limits
personal liability of its directors to the full extent permitted by Section
102(b)(7) of the Delaware General Corporation Law.
Section 102(b)(7) provides that a corporation may eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for willful or negligent conduct
in paying dividends or repurchasing stock out of other than lawfully available
funds or (iv) for any transaction from which the director derived an improper
personal benefit. No such provision shall eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such provision
becomes effective.
For four years after the effective time of the merger, InfoCure has agreed
to indemnify and hold harmless, to the fullest extent permitted under applicable
law, its certificate of incorporation and bylaws, each present or former
director or officer of Medical Dynamics or any of its subsidiaries (including
his or her heirs, executors and assigns) against any costs, expenses and amounts
paid in settlement of any claim, action,
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suit, proceeding or investigation arising out of any act or omission in his or
her capacity as a director, or officer which occurred before the effective time
of the merger.
ITEM 21. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 -- Agreement and Plan of Merger and Reorganization by and among
Medical Dynamics, Inc., InfoCure Corporation and CADI
Acquisition Corporation, Inc. dated December 21, 1999
(included as Appendix A to the proxy statement-prospectus
contained in this registration statement)
2.2 -- Stockholder Agreement by and between InfoCure Corporation
and certain stockholders of Medical Dynamics, Inc.*
5.1 -- Opinion of Morris, Manning & Martin, L.L.P. regarding the
legality of the Securities being issued
23.1 -- Consent of BDO Seidman, LLP
23.2 -- Consent of KPMG LLP
23.3 -- Consent of Deloitte & Touche LLP
23.4 -- Consent of Hein + Associates LLP
23.5 -- Consent of Morris, Manning & Martin, L.L.P. (included in
Exhibit 5.1)
24.1 -- Powers of Attorney (included on signature page)
99.1 -- Form of Proxy for Medical Dynamics, Inc. stockholders.
- ---------------
* To be filed by amendment
ITEM 22. UNDERTAKINGS
(a) (1) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act, and is therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(2) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c)
promulgated pursuant to the Securities Act, the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who
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may be deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(3) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415 promulgated
pursuant to the Securities Act, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (as amended and the
rules and regulations thereunder, the "Securities Act"), each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (as amended and the rules and regulations
thereunder, the "Exchange Act") (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no
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more than a 20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto, duly authorized, in the City of Atlanta,
State of Georgia, on April 14, 2000.
InfoCure Corporation
By: /s/ FREDERICK L. FINE
--------------------------------------
Frederick L. Fine
President and Chief Executive Officer
We, the undersigned directors and officers of InfoCure Corporation do
hereby constitute and appoint Frederick L. Fine, Richard E. Perlman and James K.
Price, and each or either of them, our true and lawful attorneys-in-fact and
agents, to do any and all acts and things in our names and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our name in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable said
corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 14th day of April, 2000.
SIGNATURE CAPACITY
--------- --------
/s/ FREDERICK L. FINE President, Chief Executive Officer
- ----------------------------------------------------- and Director (Principal Executive
Frederick L. Fine Officer)
/s/ JAMES K. PRICE Executive Vice President, Secretary
- ----------------------------------------------------- and Director
James K. Price
/s/ RICHARD E. PERLMAN Chairman, Treasurer and Director
- -----------------------------------------------------
Richard E. Perlman
/s/ JAMES A. COCHRAN Senior Vice President -- Finance
- ----------------------------------------------------- and Chief Financial Officer
James A. Cochran (Principal Financial Officer and
Principal Accounting Officer)
II-5
138
SIGNATURE CAPACITY
--------- --------
/s/ MICHAEL E. WARREN Vice President and Director
- -----------------------------------------------------
Michael E. Warren
Director
- -----------------------------------------------------
James D. Elliot
/s/ RAYMOND H. WELSH Director
- -----------------------------------------------------
Raymond H. Welsh
II-6