INFORMATION STATEMENT
DYNAMIC ASSOCIATES, INC.
7373 North Scottsdale Road, Suite B-169
Scottsdale, Arizona 85253
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This Information Statement is being furnished in connection with the
distribution (the "Distribution") to holders of common stock of Dynamic
Associates, Inc. ("Dynamic") of all of the outstanding shares of common stock,
$0.001 par value per share (the "Company Common Stock"), of MW Medical, Inc.
(the "Company") pursuant to the terms of a Contribution Agreement, Plan and
Agreement of Reorganization and Distribution between Dynamic and the Company,
to be dated as of March 11, 1998 ("Contribution Agreement"). Upon the
effectiveness of the Distribution, the Company will own the microwave
technologies businesses currently owned by Dynamic and separately managed as
Microwave Medical Corporation and P&H Laboratories, Inc. See "Certain
Investment Considerations and Risk Factors" and "Business of the Company."
Shares of Company Common Stock will be distributed to holders of Dynamic
common stock of record as of the close of business on February 25, 1998 (the
"Record Date"). Each such holder will receive one share of Company Common Stock
for every one share of Dynamic common stock held on the Record Date. The
Distribution is scheduled to occur at 12:01 a.m. on March 11, 1998 (the
"Distribution Date"). No consideration will be paid by Dynamic shareholders for
shares of Company Common Stock. There is no current trading market for Company
Common Stock, although a market is expected to develop subsequent to the
Distribution Date. Application will be made for listing the shares on the
National Association of Securities Dealers Automated Quotations System (NASDAQ),
as a Bulletin Board Company security.
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NO SHAREHOLDER APPROVAL OF THE DISTRIBUTION IS REQUIRED OR SOUGHT.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS INFORMATION.
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
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Shareholders of Dynamic with inquiries related to the Distribution should
contact Grace Sim, Secretary, Dynamic Associates, Inc., 7373 North Scottsdale
Road, Suite B-169, Scottsdale, Arizona, 85253, telephone: (602) 483-8700; or the
Company's stock transfer agent, National Stock Transfer, 3098 South Highland
Drive, Suite 485, Salt Lake City, Utah 84106 telephone: (801) 485-7978.
The date of this Information Statement is February 25, 1998.
TABLE OF CONTENTS
Page
SUMMARY OF CERTAIN INFORMATION 1
The Distribution 1
INTRODUCTION 3
THE DISTRIBUTION 3
Reasons for the Distribution 3
Distribution Agent 4
Manner of Effecting the Distribution 4
Results of the Distribution 4
Certain Federal Income Tax Consequences of the Distribution 5
Listing and Trading of Shares of Company Common Stock 6
Dividend Policy 7
Relationship Between Dynamic and the Company After the Distribution 7
Reasons for Furnishing the Information Statement 7
FINANCING 7
CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS 8
Lack of Operating History as an Independent Entity 8
Industry Concentration 9
No Prior Public Market for Common Stock 9
Dividend Policy 9
Possible Anti-takeover Effects of Certain Articles and By-Law 9
Provisions, Nevada Law, Certain Agreements and the Rights Plan
SELECTED UNAUDITED HISTORICAL AND PRO FORMA FINANCIAL DATA 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 17
BUSINESS OF THE COMPANY 17
General 18
Principal Services and Products 19
Sales and Marketing 19
Competition 19
Research and Development 19
Environmental Compliance 19
Employees 19
Properties 19
Legal Proceedings 19
Transactions and Agreements Between the Company and Dynamic 20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 20
MANAGEMENT OF THE COMPANY 21
Directors 22
Directors' Compensation 22
Executive Officers 22
EXECUTIVE COMPENSATION 23
Historical Compensation 23
DESCRIPTION OF COMPANY CAPITAL STOCK 24
Authorized Capital Stock 24
Common Stock 24
Transfer Agent 24
PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S 25
ARTICLES OF INCORPORATION, BY-LAWS AND NEVADA STATUTORY LAW
General 25
Number of Directors; Removal; Vacancies 25
Shareholder Action by Written Consent; Special Meetings 25
Advance Notice for Raising Business or Making Nominations at Annual 25
Meetings
Amendments to the Articles of Incorporation 25
Amendment to By-Laws 26
Additional Common Stock 26
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS OF 26
THE COMPANY
Limitation on Liability of Directors 26
Indemnification and Insurance 26
AVAILABLE INFORMATION 27
APPENDIX A ARTICLES OF INCORPORATION OF MW MEDICAL, INC.
APPENDIX B BY-LAWS OF MW MEDICAL, INC.
SUMMARY OF CERTAIN INFORMATION
THIS SUMMARY IS QUALIFIED BY THE MORE DETAILED INFORMATION SET
FORTH ELSEWHERE IN THIS INFORMATION STATEMENT, WHICH SHOULD BE
READ IN ITS ENTIRETY. CAPITALIZED TERMS USED BUT NOT DEFINED
IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS INFORMATION
STATEMENT.
Distributing Company The Distribution will be made by Dynamic
Associates, Inc., a Nevada corporation
("Dynamic"). References herein to Dynamic
include its consolidated subsidiaries except
where the context otherwise requires.
Distributed Company MW Medical, Inc., a Nevada corporation (the
"Company"), which will own the microwave
technologies businesses currently owned by
Dynamic, Microwave Medical Corporation and
P&H Laboratories, Inc. (the "Technologies
Business")("MMC" and "P&H").
The Company will design, develop, manufacture
and market its products primarily for
customers with operations in the United
States, Canada and Mexico. See "Certain
Investment Considerations and Risk Factors"
and "Business of the Company." References
herein to the Company prior to the
Distribution means MW Medical, Inc., a
subsidiary of Dynamic, conducting the
Technologies Business as Microwave Medical
Corporation and P&H Laboratories, Inc.
Distribution Ratio One share of Company Common Stock for every
one share of Dynamic common stock held on the
Record Date.
Securities to be Distributed Based on 14,223,929 shares of Dynamic common
stock outstanding on February 25, 1998,
approximately 409 shares of Company
Common Stock (the "Shares") will be
distributed pursuant to the terms of a
Contribution Agreement, Plan and Agreement of
Reorganization and Distribution between
Dynamic and the Company, to be effective as
of the Distribution Date. The Shares to be
distributed will constitute all of the
outstanding shares of the Company immediately
after the Distribution.
Record Date February 25, 1998 (close of business).
Distribution Date March 11, 1998 (12:01 a.m. Mountain Standard
Time).
Tax Consequences For federal income tax purposes, the
Distribution will be treated as a dividend to
Dynamic shareholders to the extent of the
earnings and profits of Dynamic. Dynamic
expects to have earnings and profits
sufficient to cause the distribution to be a
dividend. Each shareholder is urged to seek
independent tax counsel regarding the impact
of the Distribution. See "The Distribution -
Certain Federal Income Tax Consequences of
the Distribution."
Trading Market and Symbol The shares will be traded on the NASDAQ
Bulletin Board market.
Application will be made by Dynamic prior to
the distribution. At this time no symbol has
been selected.
Distribution Agent and Transfer National Stock Transfer, 3098 South Highland
Agent for the Shares Drive, Suite 485, Salt Lake City, Utah 84106.
Dividends The Company does not intend to pay cash
dividends on the Company Common Stock in the
foreseeable future; rather, it is currently
anticipated that any Company earnings will be
retained for use in its business. The future
payment of dividends will depend on business
decisions that will be made by the Board of
Directors from time to time based on the
results of operations and financial condition
of the Company and such other business
considerations as the Board of Directors
considers relevant. The Company believes it
will be adequately funded in light of its
anticipated capital expenditure, working
capital and operating expenditure
1
requirements following the Distribution.
See "The Distribution -- Dividend Policy"
and "Financing."
Certain Factors See "Certain Investment Considerations and
Risk Factors" for a discussion of certain
factors that should be considered in
connection with the Shares received in the
distribution.
Anti-Takeover Provisions The Articles of Incorporation and By-Laws of
the Company, as well as the Company's
shareholder rights plan and Nevada statutory
law, contain provisions that may have the
effect of discouraging an acquisition of
control of the Company not approved by its
Board of Directors. These provisions have
been designed to enable the Company to
develop its business and foster its long-term
growth without disruptions caused by the
threat of a takeover not deemed by the Board
of Directors to be in the best interests of
the Company and its shareholders. Such
provisions, may also have the effect of
discouraging third parties from making
proposals involving and acquisition or change
of control of the Company, although such
proposals, if made, might be considered
desirable by a majority of the Company's
shareholders. Such provisions could further
have the effect of making it more difficult
for third parties to cause the replacement
of the current management of the Company
without the concurrence of the Board of
Directors. See "Certain Investment
Considerations and Risk Factors -- Possible
Anti-Takeover Effects of Certain Articles and
By-Law Provisions, Nevada Law, Certain
Agreements and the Rights Plan," "Business of
the Company -- Transactions and Agreements
Between the Company and Dynamic,"
"Description of Company Capital Stock,"
"Purposes and Effects of Certain Provisions
of the Company's Articles of Incorporation,
By-Laws and Nevada Statutory Law" and "Rights
Plan."
Principal Office of Company MW MEDICAL, INC., 7373 North Scottsdale Road,
Suite B-169, Scottsdale, Arizona, 85253,
telephone: (602) 483-8700 prior to the
Distribution and (602) 483-8700 following the
Distribution at the same address.
Relationship after Distribution Dynamic will have no stock ownership interest
in the Company after the Distribution. The
Company and Dynamic will have entered into a
Contribution Agreement, however, for the
purpose of giving effect to the distribution
and defining their ongoing relationships.
This Contribution Agreement provides for the
transfer to the Company of substantially all
of the assets and liabilities of the
Technologies Business, pursuant to which
Dynamic generally will indemnify the Company
against liabilities, litigation and claims
arising out of all Dynamic operations not
transferred to the Company, and the Company
generally will indemnify Dynamic against
liabilities, litigation and claims arising
out of the Technologies Business. See "The
Distribution -- Relationship Between Dynamic
and the Company After the Distribution" and
"Business of the Company -- Transactions and
Agreements Between the Company and Dynamic."
2
INTRODUCTION
The Company will own the microwave technologies business (the "Technologies
Business") currently owned by Dynamic Associates, Inc. ("Dynamic") and operated
as P&H Laboratories, Inc. and Microwave Medical Corporation (the "Technologies
Division"). The Technologies Division is a leader in the microwave technologies
field with operations in the United States. See "Certain Investment
Considerations and Risk Factors" and "Business of the Company." Immediately
prior to the Distribution (as defined below) and pursuant to the terms of a
Contribution Agreement, Plan and Agreement of Reorganization and Distribution
between Dynamic and the Company (the "Contribution Agreement"), to be effective
as of the Distribution Date (as defined below), the Technologies Business
will be contributed by Dynamic to the Company, which was incorporated for that
purpose on December 4, 1997. References herein to the Company prior to the
Distribution mean the historical operations of the Technologies Business.
References herein to the Company following the Distribution include its
consolidated subsidiaries except where the context otherwise requires.
References herein to Dynamic include its consolidated subsidiaries, except where
the context otherwise requires.
The Board of Directors of Dynamic has declared a distribution (the
"Distribution"), payable in accordance with the terms of the Contribution
Agreement to the holders of common stock at the close of business on February
25, 1998 (the "Record Date"), of one share of Company Common Stock, ("Share"),
for every one share of common stock of Dynamic (the "Distribution Ratio") held
on the Record Date. The Shares to be distributed will constitute all of the
outstanding Shares of the Company immediately after the Distribution. See
"Description of Company Capital Stock" and "Rights Plan" for information about
the Shares to be distributed. Subject to the satisfaction of certain conditions,
the Distribution is scheduled to occur at 12:01 a.m. on March 11, 1998 (the
"Distribution Date"). See "The Distribution -- Manner of Effecting the
Distribution." Following the Distribution, the Company will be an independent
company. In its resolutions authorizing the Distribution, the Dynamic Board of
Directors has reserved the right to abandon or postpone the Distribution at any
time prior to the Distribution Date, although such action is not anticipated.
See "The Distribution -- Manner of Effecting the Distribution" and "Financing."
The Company's principal executive offices are located at 7373 North
Scottsdale Road, Suite B-169, Scottsdale, Arizona, 85253; telephone: (602)
483-8700 prior to the Distribution and (602) 483-8700 following the
Distribution.
THE DISTRIBUTION
REASONS FOR THE DISTRIBUTION
The primary business purpose for the Distribution is to enable the Company
to independently pursue its own business strategies and objectives tailored to
its unique financial and operating requirements as a microwave technologies
company under the direction of a management group that is experienced in that
business. The Board of Directors of Dynamic believes the Distribution will
permit the Company to provide management of its own business operations and
performance as a separately traded public company, not as an indistinguishable
unit of Dynamic.
Additional business purposes for the Distribution include the following:
1. The Distribution will permit Dynamic to focus on its core business.
2. The Company will gain direct access to the capital markets to finance its
capital requirements on a basis independent of Dynamic's requirements.
3. It is expected that, as a stand-alone operation, the Company will have
greater flexibility in its capital structure and leverage capability.
3
4. Dynamic and the Company recognize that a business unit only adds value to an
enterprise by providing integrating efficiencies through shared skills and
activities. There are no significant synergies between Dynamic and the Company
in terms of operations, customer base or distribution networks.
5. Segregating the Company as an independent entity should enhance shareholder
value by gaining market recognition for the independent worth of the Company.
6. Segregation of the businesses has essentially been accomplished and the
records and financial reports of the businesses have been separately maintained
and will be easy to extricate the Technologies Business.
Dynamic considered a variety of alternatives in determining whether to
pursue the Distribution, including a divestiture of the Technologies Division to
a third party, a 100% spin-off through an initial public offering, a tax free
spin-off and retention of the business. Key factors used to assess these
alternatives were: (i) the value to Dynamic's shareholders to be obtained under
each alternative, (ii) the total costs to Dynamic to facilitate such
alternative, (iii) the disruption to Dynamic and the Company from the
alternative, and (iv) the longer term outlook for the Company, particularly the
ability to finance its own growth. In the initial public offering and spin-off
alternatives, Dynamic also considered the outlook for the Company's share price.
In determining whether the Distribution was in its shareholders' best
interests, Dynamic considered a number of factors, including the short,
intermediate and long-term business impact on Dynamic and the Company, the
likelihood of completing the transaction and the costs to be incurred in
connection with the transaction. Dynamic also considered whether the Company was
the appropriate size and possessed the resources necessary to survive as an
independent entity and whether the Company could finance its own activities
following the Distribution. Dynamic analyzed whether the Company's projected
financial resources would meet its anticipated capital requirements, as well as
the performance of public companies of a similar size in the same industry.
Dynamic concluded that the Company's cash flow and its role as a significant
microwave components supplier should make the Company an attractive publicly-
held entity.
Dynamic recognizes that, like many spun-off companies, the Company may
exhibit volatile stock price trading patterns following the Distribution. While
the trading value of the Shares may be uncertain and potentially volatile at
the outset, Dynamic believes that the Company, because of its market leadership,
proprietary product mix and the increasing technological sophistication of its
products, has the potential, over time, to recognize valuation multiples higher
than comparable microwave technologies suppliers, fostering a lower cost of
capital for the Company as compared to its competitors. In addition, the
Distribution should enhance the Company's access to various sources of debt and
equity capital.
Dynamic recognized that formation of the Company would entail additional
incremental costs to the Company for management, staff, systems and support
functions. Dynamic believed the benefits to Dynamic and its shareholders would
outweigh these incremental costs.
DISTRIBUTION AGENT
The distribution agent ("Distribution Agent") is National Stock Transfer,
3098 South Highland Drive, Suite 485, Salt Lake City, Utah 84106, telephone:
(801) 485-7978.
MANNER OF EFFECTING THE DISTRIBUTION
The Distribution will be made on the Distribution Date to shareholders of
record of Dynamic at the close of business on the Record Date. Prior to the
Distribution Date, and in accordance with the terms of the Contribution
Agreement, Dynamic will deliver all of the outstanding Shares to the
Distribution Agent for distribution. The Distribution Agent will mail, beginning
on or about the Distribution Date, certificates representing the Shares to
Dynamic shareholders of record on the Record Date. Each Dynamic shareholder will
receive one Share for every one share of Dynamic common stock
4
held on the Record Date. Dynamic shareholders will not be required to pay for
Shares received in the Distribution, or to surrender or exchange Dynamic common
stock in order to receive Shares of the Company. No vote of Dynamic shareholders
is required or sought in connection with the Distribution, and Dynamic
shareholders have no appraisal rights in connection with the Distribution.
Upon Distribution to shareholders of Dynamic who are not U.S. persons,
Dynamic will, as required by the federal income tax laws, withhold said
shareholders' U.S. income taxes. This will be done in the following manner.
Within ten days of the Distribution, Dynamic will mail out invoices to the
shareholders for the amount of the withholding tax on the individual shares
based on the valuation of the shares as determined by the Company. Each
shareholder will have one hundred twenty (120) days to pay this invoice. Upon
payment of the invoice Dynamic will distribute the shares to the shareholder and
make the appropriate payment to the tax authorities. If, at the end of one
hundred twenty days, a shareholder has not paid the withholding tax, Dynamic
will sell in the open market a sufficient number of shares to cover that
shareholder's withholding tax. The tax rate is generally thirty percent (30%)
of the amount of the Distribution; however, this rate may be reduced for
residents of countries that have tax treaties with the U.S.
IN ORDER TO BE ENTITLED TO RECEIVE SHARES OF THE COMPANY IN THE
DISTRIBUTION, DYNAMIC SHAREHOLDERS MUST BE SHAREHOLDERS AT THE
CLOSE OF BUSINESS ON THE RECORD DATE, FEBRUARY 25, 1998.
RESULTS OF THE DISTRIBUTION
After the Distribution, the Company will be an independent company, owning
the Technologies Business, under the name of MW Medical, Inc., a Nevada
corporation. The number and identity of shareholders of the Company immediately
after the Distribution will be the same as the number and identity of
shareholders of Dynamic on the Record Date. Immediately after the Distribution,
the Company expects to have approximately 409 holders of record of Shares
and approximately 14,223,929 Shares outstanding, based on the number of record
shareholders and outstanding shares of common stock of Dynamic on February 25,
1998, and the Distribution Ratio of one Share for every one share of Dynamic
common stock. The actual number of Shares to be distributed will be determined
as of the Record Date. The Distribution will not affect the number of
outstanding shares of Dynamic common stock or any rights of Dynamic shareholders
as such.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
The Distribution will result in a taxable disposition by Dynamic of its
shares in the Company. For federal income tax purposes, Dynamic will recognize
a gain if the fair market value of the Company's shares exceeds Dynamic's tax
basis in the Company's Common Stock, and Dynamic will recognize a loss if
Dynamic's tax basis in the Company's Common Stock exceeds the fair market value
of the Dynamic shares. The Distribution will be taxed as a dividend to the
shareholders of Dynamic in an amount equal to the lesser of (i) the fair market
value of the Company's Common Stock received by a shareholder, and (ii) the
current or accumulated earnings and profits of Dynamic. If the aggregate fair
market value of the Company's Common Stock exceeds the current or accumulated
earnings and profits of Dynamic, such excess shall first be treated as return of
basis to each shareholder, and, if such excess exceeds a shareholder's basis in
his or her Dynamic stock, it shall be taxed as a capital gain. Such capital
gain shall be long- or short-term, based on the shareholder's holding period in
its Dynamic stock. The shareholder's holding period for the Company's Common
Stock received shall begin on the date of the Distribution.
For Dynamic shareholders that are foreign corporations or non-resident
aliens, the U.S. imposes a tax of thirty percent (30%) (or such lesser rate as
may apply under an applicable income tax treaty) on the amount of the
Distribution if it is classified as a dividend. This tax is to be withheld by
the payee from the gross amount of the dividend. Current U.S. income tax
regulations require that tax on the Distribution be paid to the Internal Revenue
Service as if the entire Distribution is a dividend, and if some or all of the
Distribution is not a dividend, the excess amounts withheld are to be refunded
by the Internal Revenue Service. As detailed above withholdings of the shares
and ultimate sale of a portion of the shares will be done in order to ensure the
tax payments are made.
5
Dynamic has valued the Company's Common Stock at $1,073,651. This amount
is less than Dynamic's tax basis in the Company's Common Stock. Accordingly,
Dynamic should not recognize any gain on the Distribution. Dynamic has
internally determined that it does not have any accumulated earnings and profits
as of December 31, 1997. The Company cannot know whether or not it will have
earnings and profits in 1998 which would cause all or a portion of the
Distribution to be a dividend to the shareholders of Dynamic. This information
will not be available to Dynamic or its shareholders until January of 1999.
Accordingly, the tax consequences of the Distribution to the shareholders of
Dynamic are not known at this time.
To the extent of the earnings and profits of Dynamic in 1998, the
Distribution will be a dividend to the shareholders of Dynamic. To the extent
Dynamic has no earnings and profits in 1998, or the fair market value of the
Company's Common Stock exceeds the amount of such earnings and profits, the
Distribution will be treated as a return of capital to the shareholders of
Dynamic. Each shareholder's tax basis in his or her Dynamic shares will be
reduced to such extent. If the amount a shareholder receives as a return of
capital exceeds his or her tax basis in Dynamic shares, such excess will be
recognized as a capital gain. The capital gain will be short- or long-term on
the period the shareholder has held his or her Dynamic shares.
THE FOREGOING IS A SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX
CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW. THIS SUMMARY
DOES NOT PURPORT TO COVER ALL FEDERAL INCOME TAX CONSEQUENCES
(INCLUDING THOSE THAT MAY APPLY TO PARTICULAR CATEGORIES OF
SHAREHOLDERS) OR ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE
TAX LAWS OF OTHER JURISDICTIONS. EACH SHAREHOLDER SHOULD CONSULT
HIS OR HER TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF
THE DISTRIBUTION TO SUCH SHAREHOLDER, INCLUDING APPLICATION OF
FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND THE EFFECT
OF POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX
CONSEQUENCES DESCRIBED ABOVE. NO RULING OF THE INTERNAL REVENUE
SERVICE HAS BEEN OR WILL BE REQUESTED OR OBTAINED WITH RESPECT TO THE
TAX CONSEQUENCES OF THE DISTRIBUTION. THE INTERNAL REVENUE SERVICE
MAY CHALLENGE THE VALUATION PLACED ON THE COMPANY'S COMMON STOCK BY
DYNAMIC OR THE CALCULATION OF DYNAMIC'S CURRENT OR ACCUMULATED EARNINGS
AND PROFITS. IF EITHER OF THESE ITEMS IS SUCCESSFULLY CHALLENGED, THE
TAX CONSEQUENCES TO DYNAMIC AND/OR ITS SHAREHOLDERS IN THE
DISTRIBUTION COULD MATERIALLY CHANGE. ACCORDINGLY, A SHAREHOLDER
MAY HAVE TO RESORT, AT ITS OWN EXPENSE, TO ADMINISTRATIVE PROCEEDINGS
OR LITIGATION, WHICH MAY OR MAY NOT BE SUCCESSFUL.
THE FOREGOING IS A SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX
CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW, AS SET FORTH
IN THE INFORMATION RECEIVED BY DYNAMIC FROM COUNSEL. THIS SUMMARY
DOES NOT PURPORT TO COVER ALL FEDERAL INCOME TAX CONSEQUENCES
(INCLUDING THOSE THAT MAY APPLY TO PARTICULAR CATEGORIES OF
SHAREHOLDERS) OR ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE
TAX LAWS OF OTHER JURISDICTIONS. EACH SHAREHOLDER SHOULD CONSULT
HIS OR HER TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF
THE DISTRIBUTION TO SUCH SHAREHOLDER, INCLUDING APPLICATION OF
FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND THE EFFECT OF
POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX CONSEQUENCES
DESCRIBED ABOVE.
LISTING AND TRADING OF SHARES OF COMPANY COMMON STOCK
There is not currently a public market for the Shares and there can be no
assurance that an active market will develop following the Distribution. Prices
at which such Shares may trade prior to the Distribution on a 'when-issued'
basis or after the Distribution cannot be predicted. The prices at which the
Shares trade will be determined by the marketplace and may be influenced by
many factors including, among others, the depth and liquidity of the market
for the Shares,
6
investor perception of the Company, its prospects and the industries in which it
participates, the Company's dividend policy and general economic and market
conditions.
The Shares distributed to Dynamic shareholders will be freely transferable,
except for Shares received by persons who may be deemed to be "affiliates" of
the Company under the Securities Act of 1933, as amended (the "Securities Act").
Persons who may be deemed to be affiliates of the Company after the Distribution
generally include individuals or entities that control, are controlled by, or
are under common control with the Company and may include directors and certain
officers of the Company, as well as principal shareholders of the Company.
Persons who are affiliates of the Company will be permitted to sell Shares owned
by them only pursuant to an effective registration statement under the
Securities Act or an exemption from the registration requirements of the
Securities Act, such as the exemption afforded by Section 4(1) of the Securities
Act and Rule 144 thereunder. It is not expected that Rule 144 will be available
for the sale of Shares by affiliates for certain time periods as defined under
the rule. See "Security Ownership of Certain Beneficial Owners" and "Management
of the Company -- Security Ownership of Directors and Executive Officers."
DIVIDEND POLICY
The Company does not intend to pay cash dividends on the Company Common
Stock in the foreseeable future; rather, it is currently anticipated that any
Company earnings will be retained for use in its business. The future payment of
dividends will depend on business decisions that will be made by the Board of
Directors from time to time based on the results of operations and financial
condition of the Company and such other business considerations as the Board of
Directors considers relevant. Certain covenants in the Company's credit
agreement may restrict the payment of dividends by requiring the maintenance
of certain financial ratios. See "Financing."
RELATIONSHIP BETWEEN DYNAMIC AND THE COMPANY AFTER THE
DISTRIBUTION
After the Distribution, Dynamic will have no stock ownership interest in
the Company. A Contribution Agreement will have been entered into between
Dynamic and the Company providing for, among other things, the transfer of
certain assets to and the assumption of certain liabilities by the Company. As a
result of these arrangements, substantially all of the assets and liabilities of
the Technologies Business reflected in the financial information and related
notes included elsewhere herein will be transferred to the Company. This will
include the assumption by the Company of certain rental and lease commitments
relating to the Technologies Business. See "Selected Historical and Pro Forma
Financial Data" and "Business of the Company Transactions and Agreements Between
the Company and Dynamic." See also the Historical Combined Financial Statements
and notes thereto and the Unaudited Pro Forma Combined Financial Information and
notes thereto included elsewhere herein. In addition, the parties have provided
for certain cross-indemnities principally to place financial responsibility for
the Technologies Business with the Company and to place financial responsibility
for other Dynamic businesses with Dynamic.
REASONS FOR FURNISHING THE INFORMATION STATEMENT
This Information Statement is being furnished by Dynamic solely to provide
information to shareholders of Dynamic who will receive Shares in the
Distribution. It is not, and is not to be construed as, an inducement or
encouragement to buy or sell any securities of Dynamic or the Company. The
information contained in this Information Statement is believed by Dynamic to be
accurate as of the date set forth on the cover of this Information Statement.
Changes may occur after that date, and neither Dynamic nor the Company will
update the information except as required by law in the normal course of their
respective public disclosure practices.
FINANCING
The Company's financing requirements have historically been met by Dynamic.
The Company believes that cash flow from operations of P&H will be adequate to
meet its anticipated capital expenditure, working capital and operating
7
expenditure requirements as a separate entity. MMC has no
operations which generate cash flow. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
In connection with the Distribution, the Company will assume indebtedness
associated with certain assets to be acquired by the Company as detailed in the
Contribution Agreement.
CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS
Shareholders of Dynamic should be aware that the Distribution and ownership
of the Shares involves certain investment considerations and risk factors,
including those described below and elsewhere in this Information Statement,
which could adversely affect the value of their holdings. Neither Dynamic nor
the Company makes, nor is any other person authorized to make, any
representation as to the future market value of the Shares.
Any forward-looking statements contained in this Information Statement
should not be relied upon as predictions of future events. Such statements are
necessarily dependent on assumptions, data or methods that may be incorrect or
imprecise and that may be incapable of being realized. Investors are hereby
notified that such information reflects the opinions of Company management as to
the future. Investors should use their own judgment as to the significance of
this information to their individual investment decisions.
The information contained in this Information Statement constitutes a
"forward-looking statement" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, and is subject to the safe harbors created thereby. While the
Company believes that the assumptions underlying such forward looking
information are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the forward looking information will
prove to be accurate. Accordingly, there may be differences between the actual
results and the predicted results, and actual results may be materially higher
or lower than those indicated in the forward looking information contained
herein. Further, the Company assumes no obligation to update or otherwise
publicly revise the forward looking information disclosed herein to reflect
circumstances existing after the date hereof.
LACK OF OPERATING HISTORY AS AN INDEPENDENT ENTITY
The Technologies Business has been conducted as a division of Dynamic for
approximately 2 years and, accordingly, the Company does not have an operating
history as an independent public company. The Company was formed in December
1997 solely for the purpose of effecting the Distribution, and will own and
conduct the business previously conducted by the Technologies Division.
Management of the Company has historically relied upon Dynamic for substantially
all administrative services required by the Company. After the Distribution
Date, the Company will be responsible for maintaining its own administrative
functions, except for certain transitional services provided by Dynamic. The
subsidiaries of the Company, P&H and MMC do have prior operating
history and have experience in manufacturing, developing, and bringing to market
the products of the Company. The officers and directors of Dynamic reasonably
believe that management and operations of the Company will be adequately
maintained. See "The Distribution -- Relationship Between Dynamic and the
Company After the Distribution," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business of the Company --
Transactions and Agreements Between the Company and Dynamic."
As a division of Dynamic, the Technologies Business had short-term debt of
$39,804 and long-term debt of $175,122 as of September 30, 1997. Following the
Distribution, the Company will be responsible for obtaining and maintaining
its own financing relationships. All accounts, clients and obligations of P&H
and MMC will be transferred to the Company and no new debt will
be incurred as a result of the spinoff. See "Financing."
8
INDUSTRY CONCENTRATION
The Company's business is highly focused in the microwave technologies
industry with approximately all sales coming from medical, communications and
aerospace industry customers. Management believes that the best use of the
Company's resources is in serving these industries and continuously improving
its responsiveness to its customers' needs. It is therefore unlikely that the
Company's customer base will significantly broaden beyond the medical,
communications and aerospace industries. The Company believes, however, that
further growth in market share within the industry is possible. See "Business of
the Company."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK
There is presently no public market for the Shares and there can be no
assurance that an active market will develop following the Distribution. The
Company will apply with the NASDAQ Bulletin Board for listing. The prices at
which the Shares trade will be determined by the marketplace and could be
subject to significant fluctuations in response to many factors, including,
among others, variations in the Company's quarterly operating results, changing
economic conditions in the industries in which the Company participates and
changes in governmental regulations. In addition, the general stock market has
in recent years experienced significant price fluctuation, often unrelated to
the operating performance of the specific companies whose stock is traded.
Market fluctuations, as well as economic conditions, may adversely affect the
market price of the Company Common Stock. Furthermore, given the relatively
small market capitalization of the Company, the market for the Shares may be
subject to greater volatility than would be the case for a larger company. See
"The Distribution -- Listing and Trading of Shares of Company Common Stock."
DIVIDEND POLICY
The Company does not intend to pay cash dividends on the Company Common
Stock in the foreseeable future; rather, it is currently anticipated that any
Company earnings will be retained for use in its business. The future payment of
dividends will depend on business decisions that will be made by the Company's
Board of Directors from time to time based on the results of operations and
financial condition of the Company and such other business considerations as the
Board of Directors considers relevant. Certain covenants in the Company's credit
agreement may restrict the payment of dividends by requiring the maintenance of
certain financial ratios. See "The Distribution Dividend Policy" and
"Financing."
POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN ARTICLES AND BY-LAW
PROVISIONS, NEVADA LAW, CERTAIN AGREEMENTS AND THE RIGHTS PLAN
Certain provisions of the Company's Articles of Incorporation, as amended
and By-Laws and Nevada statutory law could discourage potential acquisition
proposals and could delay or prevent a change in control of the Company. Such
provisions could diminish the opportunities for a shareholder to participate in
tender offers, including tender offers at a price above the then-current market
value of the Company Common Stock. Such provisions may also inhibit fluctuations
in the market price of the Company Common Stock that could result from takeover
attempts. In addition, the Board of Directors, without further shareholder
approval, may issue additional Company Common Stock which could have the same
effect of delaying, deterring or preventing a change in control of the Company,
and could adversely affect the voting power of the existing holders of Company
Common Stock, including the loss of voting control to others. The Company has no
present plans to issue any such additional Company Common Stock. See "Business
of the Company -- Transactions and Agreements Between the Company and Dynamic,"
"Description of Company Capital Stock," "Purposes and Effects of Certain
Provisions of the Company's Articles of Incorporation, By-Laws and Nevada
Statutory Law" and "Rights Plans." Review also Nevada Revised Statutes, NRS
s. 78.378-78.3793,
9
SELECTED UNAUDITED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth certain historical combined financial data
for the Technologies Business and Dynamic for the nine-month period ended
September 30, 1997. The historical combined financial data for the nine-month
period ended September 30, 1997 was derived from the combined financial
statements of the Technologies Business. The historical combined financial data
for the nine-month period ended September 30, 1997 have not been audited and
were derived from the accounting records of the Technologies Business. In the
opinion of management, the historical combined financial data of the
Technologies Business as of and for the nine-month period ended September 30,
1997 include all adjusting entries (consisting only of normal recurring
adjustments) necessary to present fairly the information set forth therein. The
historical combined financial data are not necessarily indicative of the results
of operations for any future period. Furthermore, the results of operations for
the nine-month period ended September 30, 1997 should not be regarded as
indicative of the results that may be expected for the full year.
The summary pro forma combined income statement data for the nine-month
period ended September 30, 1997 reflect the effects on the historical results of
the Technologies Business of: (i) the transfer to the Company of substantially
all of the assets and liabilities of the Technologies Business and (ii) the
distribution of the Shares to Dynamic shareholders.
The summary pro forma combined financial data are not necessarily
indicative of the results of operations or financial position of the
Technologies Business had the transactions reflected therein actually been
consummated on the dates assumed and are not necessarily indicative of the
Company's future performance as an independent entity. The summary pro forma
combined financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operation," the
Historical Combined Financial Statements and notes thereto and the Unaudited Pro
Forma Combined Financial Information and notes thereto included elsewhere
herein.
10
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30,
1997
-------------
ASSETS
CURRENT ASSETS
Cash $ 2,964,106
Short-term commercial paper 108,413
Accounts receivable (less allowance for doubtful
accounts of $759,925) 4,059,853
Loans receivable - related parties 52,500
Other receivables 111,585
Inventories 671,335
Prepaid expense and other current assets 85,352
Deferred Tax Benefit 388,000
---------
TOTAL CURRENT ASSETS 8,441,144
PROPERTY, PLANT & EQUIPMENT 823,266
OTHER ASSETS
Deferred debt issue costs 1,719,439
Investment - restricted stock 27,100
Deferred Tax Benefit 463,000
Goodwill 22,776,375
Deposits 136,504
Organization Costs 700
----------
25,123,118
----------
$ 34,387,528
==========
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 599,831
Accrued expenses 485,997
Current portion of long-term debt 57,311
Income taxes payable 219,404
Accrued interest payable 396,164
---------
TOTAL CURRENT LIABILITIES 1,758,707
LONG-TERM DEBT 200,349
CONVERTIBLE NOTES 17,001,500
DEPOSITS 20,000
DEFERRED INCOME TAX 55,500
----------
17,277,349
----------
TOTAL LIABILITIES 19,036,056
STOCKHOLDERS' EQUITY
Common stock $.001 par value:
Authorized - 25,000,000 shares
Issued and outstanding 13,875,929 shares 13,876
Additional paid-in capital 18,309,889
Retained deficit (2,972,293)
----------
TOTAL STOCKHOLDERS' EQUITY 15,351,472
----------
$ 34,387,528
==========
11
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS
Nine Months ended September 30, 1997
SUBSIDIARIES
Health Care Hi-Tech
Consolidated Pro Forma
----------------------
Net sales $ 0 $ 2,670,511
Management fees 11,193,175 0
Cost of sales 0 2,046,345
---------- ---------
GROSS PROFIT 11,193,175 624,166
Selling and general and administrative
expenses 6,680,488 569,954
Depreciation and amortization 50,895 65,503
Research and development 0 588,888
---------- ---------
6,731,383 1,224,345
NET OPERATING INCOME (LOSS) 4,461,792 (600,179)
OTHER INCOME (EXPENSE)
Interest income 8,336 21,710
Interest expense (6,228) (8,781)
Loss on disposition (2,138) 0
Miscellaneous income 1,172 29,550
---------- ---------
1,142 42,479
---------- ---------
NET INCOME (LOSS) BEFORE
INCOME TAXES $ 4,462,934 $ (557,700)
========== =========
12
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS
Nine months ended September 30, 1996
Pro Forma Consolidated
Dynamic(1) Genesis Adjustments Pro Forma
---------- ------- ----------- ------------
Net sales $ 2,374,162 $ 0 $ $ 2,374,162
Management fees 0 6,235,860 6,235,860
Cost of sales 1,689,841 0 1,689,841
--------- --------- ----------- -----------
GROSS PROFIT 684,321 6,235,860 6,920,181
Selling and general and
administrative expenses 1,335,816 3,974,776 5,310,592
Depreciation and amortization 43,614 36,614 80,228
Research and development 425,039 0 425,039
--------- --------- ----------- ---------
1,804,469 4,011,390 5,815,859
--------- --------- ----------- ---------
NET OPERATING INCOME (LOSS) (1,120,148) 2,224,470 1,104,322
OTHER INCOME (EXPENSE)
Interest income 87,307 0 87,307
Interest expense (79,295) (12,448) (91,743)
Loss on disposition 0 (14,253) (14,253)
Miscellaneous income 11,548 426 11,974
Miscellaneous expense (4,430) 0 (4,430)
---------- --------- ------------ ----------
15,130 (26,275) (11,145)
---------- --------- ------------ ----------
NET INCOME (LOSS) BEFORE
INCOME TAXES AND
MINORITY INTEREST (1,105,018) 2,198,195 1,093,177
INCOME TAX EXPENSE 52,500 1,284 53,784
NET INCOME (LOSS) BEFORE
MINORITY INTEREST (1,157,518) 2,196,911 1,039,393
MINORITY INTEREST 51,129 0 51,129
---------- ---------- ---------- ---------
NET INCOME (LOSS) $(1,208,647) $2,196,911 $ $ 988,264
========== ========== ========== =========
Net income (loss) per weighted
average share $ (.15) $ (.09)
========== ========== ========== =========
Weighted average number of
common shares used to
compute net income (loss)
per weighted average share 7,869,877 11,119,877
========== ==========
(1) Includes the activities of MMC and P & H
13
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS
Nine Months ended September 30, 1997
SUBSIDIARIES
Health Care Hi-Tech
Consolidated Pro Forma
----------------------------
Net sales $ 0 $2,670,511
Management fees 11,193,175 0
Cost of sales 0 2,046,345
__________ _________
GROSS PROFIT 11,193,175 624,166
Selling and general and administrative
expenses 6,680,488 569,954
Depreciation and amortization 50,895 65,503
Research and development 0 588,888
--------- ---------
6,731,383 1,224,345
--------- ---------
NET OPERATING INCOME (LOSS) 4,461,792 (600,179)
OTHER INCOME (EXPENSE)
Interest income 8,336 21,710
Interest expense (6,228) (8,781)
Loss on disposition (2,138) 0
Miscellaneous income 1,172 29,550
-------- --------
1,142 42,479
-------- --------
NET INCOME (LOSS) BEFORE
INCOME TAXES $ 4,462,934 $ (557,700)
========= =========
Board of Directors
Dynamic Associates, Inc.
The accompanying pro forma consolidated balance sheet of MMC and P & H as
of September 30, 1997 and the accompanying pro forma consolidated condensed
statement of operations for the nine months then ended were not audited by us
and, accordingly, we do not express an opinion on them.
SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
November 25, 1997
14
MMC AND P & H
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1997
Consolidated
MMC P & H Pro Forma
--------- ----- ------------
ASSETS
CURRENT ASSETS
Cash $ 213,705 $ 424,891 $ 638,596
Short-term commercial paper 0 108,413 108,413
Accounts receivable (less allowance for
doubtful accounts of $20,000) 0 667,403 667,403
Other receivables 100,817 819 101,636
Inventories 0 671,335 671,335
Prepaid expense and other current assets 6,741 20,660 27,401
Deferred Tax Benefit 0 61,000 61,000
----------- ---------- ---------
TOTAL CURRENT ASSETS 321,263 1,954,521 2,275,784
PROPERTY, PLANT & EQUIPMENT 239,543 377,108 616,651
OTHER ASSETS
Deposits 2,212 21,315 23,527
Organization Costs 700 0 700
---------- --------- ---------
2,912 21,315 24,227
---------- --------- ---------
$ 563,718 $2,352,944 $2,916,662
========== ========= =========
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 85,073 $ 168,151 $ 253,224
Accrued expenses 11,350 152,713 164,063
Current portion of long-term debt 0 39,804 39,804
Income taxes payable 0 12,843 12,843
---------- --------- ---------
TOTAL CURRENT LIABILITIES 96,423 373,511 469,934
LONG-TERM DEBT 0 175,122 175,122
PAYABLE TO PARENT (may be converted to equity
at time of spin-off) 1,770,422 0 1,770,422
DEPOSITS 0 20,000 20,000
DEFERRED INCOME TAX 0 55,500 55,500
--------- -------- ---------
1,770,422 250,622 2,021,044
--------- -------- ---------
TOTAL LIABILITIES 1,866,845 624,133 2,490,978
STOCKHOLDERS' EQUITY
Common stock 100 27,500 27,600
Additional paid-in capital 0 22,500 22,500
Retained earnings (deficit) (1,303,227) 1,678,811 375,584
----------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY (1,303,127) 1,728,811 425,684
----------- --------- ---------
$ 563,718 $2,352,944 $2,916,662
=========== ========= =========
16
MMC AND P & H
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
Nine months ended September 30, 1997
Pro Forma Consolidated
MMC P & H Adjustments Pro Forma
--------- ----- ----------- ------------
Net sales $ 0 $ 2,670,511 $ $ 2,670,511
Cost of sales 0 2,046,345 2,046,345
--------- ----------- ----------- ------------
GROSS PROFIT 0 624,166 624,166
Selling and general and
administrative expenses 0 569,954 569,954
Depreciation and amortization 28,076 37,427 65,503
Research and development 596,008 0 (7,120) 588,888
--------- ----------- ----------- ------------
624,084 607,381 (7,120) 1,224,345
--------- ----------- ----------- ------------
NET OPERATING INCOME (LOSS) (624,084) 16,785 7,120 (600,179)
OTHER INCOME (EXPENSE)
Interest income 4,960 16,750 21,710
Interest expense 0 (8,781) (8,781)
Miscellaneous income 0 36,670 (7,120) 29,550
--------- ------------ ------------ ------------
4,960 44,639 (7,120) 42,479
--------- ------------ ------------ ------------
NET INCOME (LOSS) BEFORE
INCOME TAXES (619,124) 61,424 0 (557,700)
INCOME TAX EXPENSE 800 11,800 12,600
--------- ------------ ------------ ------------
NET INCOME (LOSS) $ (619,924) $ 49,624 $ 0 $ (570,300)
========= ============ ============ ============
This pro forma assumes Micro and P & H were consolidated for all of 1997.
No income tax adjustment is make as the two entities are not eligible to file
a consolidated income tax return.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations covers periods when the Company was owned by Dynamic and operated
as the medical technologies business of Dynamic. It should be read in
conjunction with the Company's Historical Combined Financial Statements and
notes thereto included elsewhere herein. It covers the nine month periods ended
September 30, 1996 and September 30, 1997. Unless otherwise indicated, all
references to years refer to fiscal years. Additional information concerning the
Company's business strategy, products and customers is contained in the section
entitled "Business of the Company."
The unaudited pro forma capitalization reflects: (i) the transfer to the
Company of substantially all of the assets and liabilities of the Technologies
Business and (ii) distribution of the Shares to the shareholders of Dynamic.
This table should be read in conjunction with the Historical Combined Financial
Statements and notes thereto and the Unaudited Pro Forma Combined Financial
Information and notes thereto included elsewhere herein. The unaudited pro forma
information set forth below does not necessarily reflect the capitalization of
the Company in the future.
Dynamic is engaged in (i) the development and acquisition of microwave
technologies for medical purposes through MMC, a wholly owned
subsidiary, (ii) managing the operations of psychiatric/geriatric units for
various hospitals through Genesis, a wholly owned subsidiary, and Geriatric
Care Centers of America, Inc. (GCCA) and (iii) the manufacturing of highly
technologically advanced microwave components and subsystems for the
communications and aerospace industries through P&H, a wholly owned subsidiary.
On October 10th, 1997 the Board of Directors of Dynamic approved the
"spin-off" of two of its subsidiaries, Microwave Medical Corporation and P&H
Laboratories, (to be combined as one company). The Company plans to proceed
with the spin-off in an expedited manner. On December 4, 1997 Dynamic formed
MW Medical, Inc. as a Nevada corporation (MW Medical) with a capital structure
similar to Dynamic to provide for a one for one stock issuance upon the spin off
of MW Medical.
The Pro Forma table above reflects the spin-off as if it occurred as of
the date of the financial statements and shows the operations of the two
separate entities for the nine months ending September 30, 1997. The Pro Forma
reflects a cost savings of $1,000,000 in management fees that will be achieved
by removing the overhead of the Parent Company. This management fee is used in
part to pay the interest on the 10% Convertible Notes which will total
$2,023,784 in 1997. After the spin-off, Dynamic / Genesis will be responsible
for the interest payments. No income tax calculations are included.
BUSINESS OF THE COMPANY
GENERAL
The Company designs, develops and markets microwave technologies for
medical purposes. The Company also manufactures highly technologically advanced
microwave components and subsystems for the communications and aerospace
industries.
As a unit of Dynamic, the Company has been in the microwave technologies
business for approximately 2 years. The Company was incorporated as a Nevada
corporation on December 4, 1997 solely for the purpose of effecting the
Distribution. The Company consists of two subsidiaries: P&H Laboratories, Inc.
and Microwave Medical Corporation, companies that were previously wholly owned
subsidiaries of Dynamic. P&H and MMC have maintained separate
operations and financial reporting and provide for management of the spun off
companies subsequent to the divestiture.
P&H is incorporated in the state of California. The executive offices of
the company are at 4496 Runway Street, Simi Valley, California and include
manufacturing and engineering space of approximately 18,000 square feet.
17
The Board of Directors manages the affairs of the corporation and consists
of seven members. Two members are active in the normal daily operations at P&H
and the remaining five directors are outside directors and experienced business
persons. This team controls the long term strategic planning of the corporation
and directs the officers of the corporation, who handle the day to day affairs
and manage the business. It is contemplated that the board will remain in place
after the spin off and all officers will continue to function as prior to the
Distribution Date.
Dynamic's wholly-owned subsidiary Microwave Medical Corporation
("MMC"), formerly Microthermia Acquisition Corporation, entered into a
license agreement with Microthermia Technology, Inc. (of California), whereby
MMC obtained an exclusive license to develop and manufacture medical device
products related to the treatment of spider veins (telangiectasia). The license
is for an initial period of two years with automatic one year renewals for the
next eight years, at no cost (total license period of 10 years). The license
is prepaid for the first two years; however, MMC does not intend to use
this technology at the present time. MMC is independently developing a
platform of proprietary and patentable microwave technologies for the treatment
of various medical conditions. MMC is currently testing and evaluating
microwave equipment it has developed for the permanent removal of hair and a
second device to be used for the treatment of spider veins (telangiectasia).
PRINCIPAL SERVICES AND PRODUCTS
MMC has patented a microwave instrument for the treatment of Benign
Prostatic Hyperplasia (BPH), the non-cancerous enlargement of the prostate
gland, that delivers precise amounts of microwave energy to specifically
targeted prostate tissue. MMC has also patented a microwave therapy
system to treat Telangiectasia, or, spider veins. These are thread-like,
red-to-purplish veins that stem from a network of small veins just below the
surface of the skin. Spider veins develop more predominately on the legs and
faces of women. These are usually caused by the female hormone estrogen. At
this time surgery, laser and injection (sclerotherapy) are the predominant
treatments for the condition.
P&H has been engaged since its inception in Military Standard and
Aerospace programs for various types of devices utilizing microwave technology.
The devices include isolators, circulators, power monitor devices, filters,
diplexers, switching diplexers, multi-junction circulators, microwave subsystems
and integrated packages and subsystems. Devices of these types have been built
in both waveguide, microstrip and coaxial configurations, and operate in
frequency ranges from 50 MHZ to 110 Ghz. The primary focus of the technical
expertise at P&H is in microwave ferrite and filter components.
Using existing procedures detailed above P&H also provides special
engineering services to customers with specific needs. P&H will be able to
provide MMC with this capability to produce and develop manufacturing
processes for the medical systems. P&H has experience with the engineering and
manufacturing of microwave components, super components and subsystems and also
supports major programs and operating platforms. P&H manufacturing operations
includes the thin film processing, top assembly, production testing and tuning
and subsystems integration, wire bonding environmental test and packaging.
The objective of MMC is to develop proprietary technology relating to
the use of microwave energy for medical applications. MMC has a patent
pending entitled, "Method and Apparatus for Treating Subcutaneous Histological
Features," which focuses on the application of microwave energy to the treatment
of spider veins and for use in hair removal.
The use of microwave for hair removal is based upon the selective heating
of hair follicles while cooling the surface of the skin to protect the
epidermis. MMC has used computer modeling and laboratory studies to
optimize the system for hair removal. Preclinical studies have shown
effectiveness in destroying follicles while maintaining the integrity of the
skin surface. MMC's microwave system for hair removal is now in Phase II
clinical trials.
18
Laboratory studies at MMC have been shown that spider veins
selectively absorb microwave energy, and preclinical studies have verified the
ability to thrombose small veins. Clinical studies are expected to begin within
a two month time frame.
SALES AND MARKETING
MMC regards North America (US/Canada) and the European Community as
its primary markets. Based on the approval condition, it will apply for both
markets simultaneously. On the assumption of efficacy, the European market
launch will be prepared either in Q4 1998 or Q1 1999. The commence of the
American launch is conditional on FDA approval. In both markets, MMC will
apply for hair removal and spider beins. After starting business in these two
core markets, MMC will prepare a market launch in South America and
Australia/NewZealand.
Conditional on type of end user and region, MMC is preparing three
kinds of marketing strategies. The strategy for the market launch is determined
by possibility of rapid growth and cash flow.
Sales in MMC will depend on the respective marketing strategy.
Breakeven is planned in Q4 1999.
COMPETITION
Lasers and incoherent light systems are in clinical use for hair removal
and for the treatment of spider veins. These companies range from a $25 to 800
million market cap and represent MMC's primary competition. However,
these methods are only partially effective and MMC represents, to our
knowledge, the only microwave system being developed for these applications.
RESEARCH AND DEVELOPMENT
MMC began its R&D program in April, 1996, which included computer
modeling, laboratory studies and preclinical studies which led to the
development of prototype microwave system that is now in clinical trials for
hair removal, and will soon be in clinical trials for spider veins. Initial
development work began as early as September 1995, through Microwave Acquisition
Corp., owned 100% by Dynamic. P&H Laboratories has supported the technical
development of MMC's prototype system.
ENVIRONMENTAL COMPLIANCE
MMC must be in compliance with the FCC regulations on Part 18, Title
47 and with the European standard EN 55011. MMC has performed internal
field strength measurements to demonstrate compliance with FCC regulations.
MMC will furthermore contract with an environmental consulting group to
confirm environmental compliance.
EMPLOYEES
Microwave Medical Corporation employs four individuals, including its
President and a Chief Scientist, as well as an electrical/microwave engineer and
a microwave technician.
PROPERTIES
MMC does not own any physical property. MMC leases a space
within P&H Laboratories, located at 4496 Runway Street, Simi Valley, CA 93063.
LEGAL PROCEEDINGS
There are no pending legal proceedings relating to the Technologies
Division.
19
TRANSACTIONS AND AGREEMENTS BETWEEN THE COMPANY AND DYNAMIC
In connection with the Distribution, the Company and Dynamic will enter
into the Contribution Agreement for the purpose of giving effect to the
Distribution and defining their ongoing relationships. This agreement was
negotiated while the Company was wholly-owned by Dynamic and therefore will not
be the result of arms-length negotiations between independent parties, although
the Company believes the various terms to be comparable to what could be
achieved through arms-length negotiations. Certain provisions contained in this
agreement relating to a change in control, merger or acquisition of the Company
may have the effect of discouraging third parties from making proposals
involving an acquisition or change in control prior to the termination of such
agreements.
Following the Distribution, additional or modified agreements, arrangements
and transactions may be entered into among the Company, Dynamic and their
respective subsidiaries. Any such future agreements, arrangements and
transactions will be determined through arms-length negotiations between the
parties in the ordinary course of business. The Company may also seek
alternative arrangements to provide for the financing of the Company via
additional sale of equity or debt, a merger or other acquisition arrangement
with a third party or the disposal of certain assets of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All of the Company's outstanding shares are currently held by Dynamic. The
following table sets forth information concerning Shares that are projected to
be beneficially owned after the Distribution by each of the directors and each
of the executive officers named in the Summary Compensation Table under
"Executive Compensation" below and by all persons chosen to be directors and
executive officers of the Company as a group. The projections reflect the
Distribution Ratio and are based upon: the number of shares of Dynamic common
stock owned by such persons as of February 25, 1998, and the number of options
to acquire Dynamic common stock held as of such date which are exercisable
within 60 days thereof.
Class Name and Address Number of Projected
of Beneficial Owner Shares to be Percent
Beneficially Owned of Class
- --------------------------------------------------------------------------------
Class A Common Cede & Co. 7,828,966 55.%
P.O. Box 222
Bowling Green Station
New York, NY 10274 - 0000
Class A Common Vickie T. Lucky 2,370,000 16.7%
1613 Jimmie Davis Hwy.
Suite #1&2
Bossier City, LA 71112
Class A Common Jan Wallace 500,000 3.5%
(President & Director)
6929 East Cheney
Paradise Valley, AZ 85253
Class A Common William Means, Jr. 30,000 0.2%
(Director)
1613 Jimmie Davis Hwy.
Suite #1&2
Bossier City, LA 71112
20
The above beneficial ownership information is based on information furnished by
the specified persons and is determined in accordance with Rule 13d-3, as
required for purposes of this Information Statement. It is not necessarily
to be construed as an admission of beneficial ownership for other purposes.
MANAGEMENT OF THE COMPANY
DIRECTORS
The following table sets forth information as to the persons who are
expected to serve as directors of the Company following the Distribution. As
provided in the Amended and Restated Articles of Incorporation of the Company,
the Company's Board of Directors will be divided into three classes effective
upon the Distribution. The table also sets forth the names of the directors of
each class and their original terms. The Company's initial Board of Directors
following the Distribution will be comprised of five directors. The Company's
By-Laws provide that any director reaching the age of 70 may continue in such
office only until the next annual meeting of shareholders and may not be
nominated for an additional term. The following table contains information
concerning directors selected as of the date hereof.
MW Medical Directors:
Name Age
- ---------------- ----
Jan Wallace 42
Grace Sim 37
Microwave Medical Corporation Directors:
Name Age
- ---------------- ----
Rainer Marquart 42
Jan Wallace 42
Grace Sim 37
P&H Laboratories Directors:
Harold Saltzman
Logan Anderson
Jan Wallace
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Directors' Compensation
Annual Compensation All Other
Compensation Award Compensation
Year Salary($) Options ($)
---- --------- ------------ ------------
MW Medical:
Jan Wallace 1998 -0- -0- -0-
Grace Sim 1998 -0- -0- -0-
MMC:
Rainer Marquart 1998 $180,000 -0- -0-
Jan Wallace 1998 -0- -0- -0-
Grace Sim 1998 -0- -0- -0-
P&H Laboratories Inc.:
Harold Saltzman 1998 ???
Logan Anderson 1998 -0- -0- -0-
Jan Wallace 1998 -0- -0- -0-
EXECUTIVE OFFICERS
Listed below is certain information concerning the Company's executive
officers. Pursuant to the Company's By-Laws, each officer is appointed by the
Board of Directors and holds office until his or her resignation, death or
removal, or until the Board appoints a different person to the office.
MW Medical Officers:
Name Age Title
- ---------------- --- ------------
Jan Wallace 42 President
Grace Sim 37 Secretary/Treasurer
Microwave Medical Corporation Officers:
Name Age Title
- ----------------- --- -------------
Rainer Marquart 42 President
Grace Sim 37 Secretary/Treasurer
Robert Spertell Chief Operating Officer
P&H Laboratories Directors:
Name Title
- ----------------- --------------
Harold Saltzman President
Officers' Biographies:
Jan Wallace has been employed by Dynamic since April 1995, when she was elected
to the Board of Directors and accepted the position of Chief Operating Officer.
Ms. Wallace was previously Vice President of Active Systems, Inc. a Canadian
Company specializing in SGML Software an ISO standard in Ottawa, Ontario. Prior
to that she was President and Owner of Mailhouse Plus, Ltd., an office equipment
distribution company which was sold to Ascom Corporation. She has also been in
management with Pitney Bowes-Canada and Bell Canada where she received its
highest award in Sales and Marketing. Ms. Wallace was educated at Queens
University in Kingston, Ontario and
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Carleton University, Ottawa, Ontario in Political Science with a minor in
Economics. Ms. Wallace is also an officer and director of Claire Technologies,
Inc.
Grace Sim has been Secretary/Treasurer of Dynamic Associates, Inc. since October
10, 1997. Ms. Sim joined Dynamic is January 1997. Prior to joining Dynamic, Ms.
Sim owned an accounting consulting company in Ottawa, Ontario, Canada. Ms. Sim
received her Bachelor of Mathematics with honors from the University of Waterloo
in Waterloo, Ontario. Ms. Sim is also an Officer in Claire Technologies, Inc.,
a company which file annual reports pursuant to the Securities Exchange Act of
1934.
Dr. Rainer Marquart is a director of Dynamic Associates, Inc. and President of
Microwave Medical Corporation. Dr. Marquart has been employed by the Company
since October 1997. Dr. Marquart was previously Member of the Board of the
second biggest PC Retail company in Europe and was responsible for $600 million
in sales. Prior to that, he ran a consulting company with offices in Munich,
Zurich and Vienna. This company specialized in reorganization of medium-sized
companies and start up management. Dr. Marquart was also a manager with the
Boston Consulting Group for 4 years. Dr. Marquart obtained a Ph.D. in Chemical
Engineering from the Technical University in Darmstadt, Germany.
Dr. Robert Spertell is the Chief Scientist and C.O.O. of MMC. Dr.
Spertell received a Ph.D. in Chemical Engineering from Princeton University, and
a M.D. from the University of California, San Diego. He was in private practice
in neurology before taking a position as Vice President and Medical Director of
a medical device company in Silicon Valley. Dr. Spertell has consulted in the
areas of microwave hyperthermia, stroke therapies, medical software, and
business and strategic planning for various medical device companies before
joining MMC.
Harold Saltzman is founder and President of P&H Laboratories, which designs,
develops and manufactures microwave components. A life member of IEEE, Mr.
Saltzman has a Bachelor of Science in Engineering from University of Oklahoma
and a Masters in Electrical Engineering from University of Southern California.
He has 48 years' experience in the field of microwave electronics, with a
speciality in customized microwave ferrite devices, and holds numerous patents.
Mr. Saltzman was the vice-president of engineering at E&M Laboratories prior to
founding P&H Laboratories.
EXECUTIVE COMPENSATION
HISTORICAL COMPENSATION
Summary Compensation Table
The following table sets forth certain information with respect to the
annual and long-term compensation of the Company's Chief Executive Officer and
each of the Company's three other most highly compensated executive officers for
services rendered to Dynamic during Dynamic's fiscal 1996. During this period,
the named individuals were compensated in accordance with Dynamics' plan and
policies. Only information with respect to the last completed fiscal year is
being provided. All references in the following table to securities relate to
awards of stock options of Dynamic. No stock appreciation rights ('SARs') were
awarded.
ANNUAL COMPENSATION TABLE
Long Term
Annual Compensation All Other
Compensation Award Compensation
Year Salary($) Options ($)
---- --------- ------------ ------------
Jan Wallace 1996 120,000 150,000 ---
President, Chief 1995 25,000 -- 400(1)
Executive Officer 1994 -- -- --
Logan Anderson 1996 120,000 405,000 --
Secretary, 1995 4,000 -- 400(2)
Treasurer 1994 -- -- --
(1) For services rendered to the Company, Ms. Wallace received 400,000 shares of
Common Stock valued at $.001 per share.
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The following table sets forth certain information regarding stock option
grants made to each of the Executive Officers named in the Summary Compensation
Table during the fiscal year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
% of Total
Options
Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted Fiscal Year ($/sh) Date
- ----------- ------- ------------ ----------- ----------
Jan Wallace 150,000 7.50% $1.00 4/9/99
150,000 7.50% $1.00 4/9/99
255,000 12.75% $1.00 10/4/99
DESCRIPTION OF COMPANY CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Under the Company's Articles of Incorporation, which are attached as
Appendix B to this Information Statement, the total number of shares of all
classes of stock that the Company shall have authority to issue is 100,000,000,
par value $.001 per share, all of which shall be Company Common Stock. As of the
date hereof, no shares of Company Common Stock are issued and outstanding.
Based on the number of shares of Dynamic common stock outstanding on
February 25, 1998 and the Distribution Ratio, it is expected that approximately
14,223,929 shares of Company Common Stock (with associated Rights) will be
issued to shareholders of Dynamic in the Distribution. The Shares to be
distributed will constitute all of the outstanding Company Common Stock (with
associated Rights) immediately after the Distribution. All of the Shares to be
distributed to Dynamic shareholders in the Distribution will be fully paid and
non-assessable except as provided under applicable Nevada statutory law.
COMMON STOCK
Holders of Company Common Stock are entitled to one vote for each share on
all matters voted on by shareholders. Holders of Company Common Stock do not
have cumulative voting rights in the election of directors. The first annual
meeting of shareholders is expected to be held during within 12 months of the
Distribution Date.
Holders of Company Common Stock do not have preemptive rights, or any
subscription, redemption or conversion privileges. Holders of Company Common
Stock are entitled to participate ratably in dividends on the Company Common
Stock as declared by the Board of Directors, and are entitled to share ratably
in all assets available for distribution to shareholders in the event of
liquidation or dissolution of the Company. See "The Distribution -- Dividend
Policy" for information concerning dividend restrictions.
TRANSFER AGENT
National Stock Transfer, 3098 South Highland Drive, Suite 485, Salt Lake
City, Utah 84106 will be the transfer agent for the Shares immediately
following the Distribution.
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PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES
OF INCORPORATION, BY-LAWS AND NEVADA STATUTORY LAW
GENERAL
The provisions of the Articles of Incorporation, the Company's By-Laws and
Nevada statutory law described in this section may delay or make more difficult
acquisitions or changes of control of the Company not approved by the Company's
Board of Directors. Such provisions have been implemented to enable the Company,
particularly (but not exclusively) in the initial years of its existence as an
independent company, to develop its business in a manner which will foster its
long-term growth without disruption caused by the threat of a takeover not
deemed by its Board of Directors to be in the best interests of the Company
and its shareholders. Such provisions could have the effect of discouraging
third parties from making proposals involving an acquisition or change of
control of the Company, although such proposals, if made, might be considered
desirable by a majority of the Company's shareholders. Such provisions may also
have the effect of making it more difficult for third parties to cause the
replacement of the current management of the Company without the concurrence of
the Board of Directors.
NUMBER OF DIRECTORS; REMOVAL; VACANCIES
The Bylaws provide that the number of directors shall be determined from
time to time exclusively by vote of a majority of the Company's Board of
Directors then in office, provided that in no case shall the authorized number
of directors be less than one (1) or more than seven (7). The Bylaws also
provide that the Company's Board shall have the exclusive right to fill
vacancies in the Board of Directors, including vacancies created by expansion of
the Board, and that any director elected to fill a vacancy shall serve until the
next election of the class for which such director shall have been chosen. These
provisions, could prevent shareholders from removing incumbent directors without
cause and filling the resulting vacancies with their own nominees.
SHAREHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
The By-Laws provide that special meetings of shareholders may be called by
the Company's Chairman of the Board, the President or a majority of the Board of
Directors, and shall be called, if and as required by the Nevada Revised
Statutes ('NRS'), upon written demand by holders of shares with at least ten
percent of the votes entitled to be cast at such a meeting.
ADVANCE NOTICE FOR RAISING OR MAKING NOMINATIONS AT ANNUAL
MEETINGS
The Company's By-Laws establish an advance notice procedure for shareholder
proposals to be brought before an annual meeting of shareholders of the Company
and for nominations by shareholders of candidates for election as directors at
an annual meeting or a special meeting at which directors are to be elected.
The chairman of the meeting shall refuse to acknowledge the nomination of
any person or the consideration of any business not made in compliance with the
procedures of the Company.
AMENDMENTS TO THE ARTICLES OF INCORPORATION
The NRS provides authority to the Company to amend its articles of
incorporation at any time to add or change a provision that is required or
permitted to be included in the articles of incorporation or to delete a
provision that is not included in the articles of incorporation. The Company's
Board of Directors may propose one or more amendments to its articles of
incorporation for submission to shareholders and may condition its submission of
the proposed amendment on any basis if the Board of Directors notifies each
shareholder, whether or not entitled to vote, of the shareholders meeting at
which the proposed amendment shall be voted upon. The meeting notice shall state
that the purpose, or one of the purposes, of the meeting is to consider and to
act upon a proposed amendment to the articles of incorporation. Any such notice
shall contain or be accompanied by a copy or summary of the amendment.
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AMENDMENTS TO BY-LAWS
The By-Laws provide that the holders of at least a majority of all shares
of Company Common Stock then outstanding and entitled to vote thereon shall have
the power to adopt, amend, alter, change or repeal the Company's By-Laws. The
By-Laws further provide that the Company's Board of Directors may amend or
repeal existing By-Laws and adopt new By-Laws by the vote of at least a majority
of the directors present at a meeting at which a quorum is present, provided
that: (i) no By-Law adopted by shareholders shall be amended, repealed or
readopted by the Board of Directors if the By-Law so adopted so provides; and
(ii) a By-Law adopted or amended by the shareholders that fixes a greater or
lower quorum requirement or a greater voting requirement for the Board of
Directors than otherwise provided in the NRS may not be amended or repealed by
the Board of Directors unless the By-Law expressly provides that it may be
amended or repealed by a specified vote of the Board of Directors. Action by the
Board of Directors to adopt or amend a By-Law that changes the quorum or voting
requirement for the Board of Directors must meet the same quorum requirement and
be adopted by the same vote required to take action under the quorum and voting
requirement then in effect, unless a different voting requirement is specified
as provided by the preceding sentence. A By-Law that fixes a greater or lower
quorum requirement or a greater voting requirement for shareholders or voting
groups of shareholders than otherwise is provided in the NRS may not be adopted,
amended or repealed by the Board of Directors.
ADDITIONAL COMMON STOCK
Under the Company's Articles of Incorporation, the Board of Directors of
the Company has the authority to issue additional Company Common Stock. The
Company believes that the Board's ability to issue additional Company Common
Stock could facilitate certain financings and acquisitions and provide a means
for meeting other corporate needs that might arise. The authorized but unissued
shares of Company Common Stock will be available for issuance without further
action by the Company's shareholders, unless shareholder action is required by
applicable law or the rules of any stock exchange or system on which the
Company Common Stock may then be listed. The Board's ability to issue additional
Company Common Stock could, under certain circumstances, either impede or
facilitate the completion of a merger, tender offer or other takeover attempt.
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE
COMPANY
LIMITATION ON LIABILITY OF DIRECTORS
Under the NRS, director immunity from liability to a corporation or its
shareholders for monetary liabilities applies automatically unless it is
specifically limited by a corporation's articles of incorporation (which is not
the case with the Company's Articles of Incorporation). Excepted from that
immunity are: (i) a willful failure to deal fairly with the corporation or its
shareholders in connection with a matter in which the director has a material
conflict of interest; (ii) a violation of criminal law (unless the director had
reasonable cause to believe that his or her conduct was lawful or no reasonable
cause to believe that his or her conduct was unlawful); (iii) a transaction from
which the director derived an improper personal profit; and (iv) willful
misconduct.
INDEMNIFICATION AND INSURANCE
The Bylaws provide that the Company shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a Director, Officer, employee or agent of
this corporation, or is or was serving at the request of this corporation as a
Director, Officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), judgements, fines, and amounts paid in settlement actually and reasonably
incurred by a director in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of this corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe this conduct
was unlawful. The termination of any action, suit,
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or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of this corporation, and
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful. The Company also indemnifies any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of this corporation to
procure a judgment in its favor by reason of the fact that that person is or
was a Director, Officer, employee, or agent of the Company, or is or was
serving at the request of the Company as a Director, Officer, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of this
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his or her duty to the
Company unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
To the extent that a Director, Officer, employee, or agent of the Company
has been successful on the merits or otherwise in defense of any action, suit,
or proceeding referred to above, or in defense of any claim, issue, or matter
therein, he or she shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection therewith.
Any indemnification shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Director,
Officer, employee, or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in paragraphs (a) and (b)
above. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who where not parties to such
action, suit, or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
Expenses incurred in defending a civil or criminal action, suit, or
proceeding may be paid by the Company in advance of the final disposition of
such action, suit, or proceeding as authorized by the board of directors in the
manner provided above under receipt of an undertaking by or on behalf of the
director, officer, employee, or agent to repay such amount unless it shall
ultimately be determined that he or she is entitled to be indemnified by the
Company as authorized in the Bylaws.
The indemnification shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in
his or her official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
AVAILABLE INFORMATION
The Company intends to furnish holders of Shares with annual reports
containing consolidated financial statements (beginning with the year ending
December 31, 1998) audited by independent accountants.
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