<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 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
-------------------------
INFOCURE CORPORATION
(Exact name of Registrant as specified in its charter)
-------------------------
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<S> <C> <C>
DELAWARE 7372 58-2271614
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
1765 THE EXCHANGE
SUITE 200
ATLANTA, GEORGIA 30339
(770) 221-9990
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
-------------------------
JAMES A. COCHRAN
SENIOR VICE PRESIDENT -- FINANCE AND
CHIEF FINANCIAL OFFICER
1765 THE EXCHANGE
SUITE 200
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
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
effective time of the merger of a 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 PER SHARE OFFERING PRICE FEE
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Common Stock, $.001 par value per share........ 1,322,000(1) N/A $2,888,160.00(2) $762.47(2)
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Series A Convertible Redeemable Preferred
Stock, $.001 par value per share (liquidation
preference $5.44 per share)("Series A
Preferred Stock")............................. 1,000,000(3) N/A (2) (2)
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Depositary Shares ("Depositary Shares")
representing shares of Series A Preferred
Stock......................................... 10,000,000(4) N/A (2) (2)
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(1) This amount reflects (1) up to 1,050,000 shares of Common Stock to be issued
upon consummation of the transactions contemplated by the Amended and
Restated Agreement and Plan of Reorganization, dated as of October 10, 2000,
as amended on October 30, 2000, by and among Medical Dynamics, Inc.,
InfoCure Corporation and CADI Acquisition Corporation (the "Merger
Agreement") and (2) 272,000 shares of Common Stock issuable upon conversion
of the Series A Preferred Stock. No additional consideration will be
received upon the conversion of the Series A Preferred Stock into the Common
Stock and therefore, pursuant to Rule 457(i) of the Securities Act of 1933,
as amended, no registration fee is required with respect to the registration
of the Common Stock issuable upon conversion of the Series A Preferred
Stock.
(2) Pursuant to the Merger Agreement, the Registrant will issue the shares of
Common Stock and Series A Preferred Stock (which will be represented by the
Depositary Shares) registered by this Registration Statement in exchange for
all of the outstanding shares of Medical Dynamics common stock and all
outstanding options or warrants to purchase shares of Medical Dynamics
common stock. The registration fee was computed pursuant to Rules 457(f)(1)
and 457(c) of the Securities Act of 1933, as amended, based on the market
value of the shares of Medical Dynamics common stock that were outstanding
or were issuable upon exercise of such outstanding options or warrants as of
November 8, 2000. The market value of these shares of Medical Dynamics
common stock was estimated for the purpose of calculating the registration
fee based on the average of the high and low sale prices of Medical Dynamics
common stock on The Over-the-Counter Bulletin Board System on November 3,
2000 ($.2188).
(3) Represents the maximum number of shares of Series A Preferred Stock issuable
upon consummation of the transactions contemplated by the Merger Agreement.
In the merger, Medical Dynamics stockholders will receive Depositary Shares
representing the Series A Preferred Stock to which they are entitled under
the Merger Agreement. Each Depositary Share represents ownership of
one-tenth of a share of Series A Preferred Stock.
(4) Represents the maximum number of Depositary Shares issuable upon
consummation of the transactions contemplated in the Merger Agreement.
-------------------------
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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<PAGE> 2
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This 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.
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.
Medical Dynamics and InfoCure originally entered into a merger agreement
relating to the acquisition on December 21, 1999. Medical Dynamics then
scheduled a stockholders' meeting on August 15, 2000 to approve the merger
agreement and mailed a proxy statement-prospectus relating to the meeting to its
stockholders. Prior to the stockholders' meeting, InfoCure and Medical Dynamics
agreed to discuss potential amendments to the terms of the original merger
agreement. As a result, Medical Dynamics adjourned and then cancelled the August
15, 2000 stockholders' meeting. InfoCure and Medical Dynamics entered into an
amended and restated merger agreement on October 10, 2000 and entered into an
amendment to the amended and restated merger agreement on October 30, 2000. The
amended and restated merger agreement, as amended, is described in this proxy
statement-prospectus. In the amended and restated merger agreement, InfoCure and
Medical Dynamics agreed to, among other things, change the exchange ratio and
form of consideration to be paid to stockholders of Medical Dynamics from the
terms of the original merger agreement. On December 27, 2000, Medical Dynamics
will hold a special meeting of its stockholders to vote to approve the amended
and restated merger agreement.
In the merger, if you own more than 100 shares of Medical Dynamics common
stock, each share of Medical Dynamics common stock you own will be exchanged
for:
- 0.06873 shares of InfoCure common stock, and
- 0.07558 shares of InfoCure series A convertible redeemable preferred
stock.
The preferred stock will be issued in the form of depositary shares. Each
depositary share will represent ownership of one-tenth of a share of InfoCure
series A convertible redeemable preferred stock. Dividends will accrue on each
share of preferred stock from the date of original issuance at a rate equal to
6% per annum on the liquidation preference per share (initially $5.44 per share)
then in effect. Each share of preferred stock will be convertible into InfoCure
common stock (or the common stock of a newly formed company as described in this
proxy statement-prospectus) at the conversion price then in effect (initially
$20.00), subject to certain anti-dilution adjustments. InfoCure must redeem all
of the outstanding preferred stock on the fifth anniversary of the date of
original issuance at the redemption price described in this proxy
statement-prospectus.
In the merger, if you own 100 or fewer shares of Medical Dynamics common
stock, you will receive $0.75 in cash in exchange for each share of Medical
Dynamics common stock you own.
InfoCure common stock is traded on The Nasdaq National Market under the
symbol "INCX," and on November 9, 2000, InfoCure common stock closed at $6.25
per share.
The merger cannot be completed unless the holders of a majority of Medical
Dynamics' outstanding shares of common stock approve the amended and restated
merger agreement. Only stockholders who hold shares of Medical Dynamics at the
close of business on October 18, 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 AMENDED AND RESTATED MERGER AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE TO APPROVE THE MERGER AGREEMENT.
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 24 OF THIS PROXY STATEMENT-PROSPECTUS.
<PAGE> 3
The special meeting of Medical Dynamics stockholders will be held on
December 27, 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 amended and restated 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.
Proxies submitted in connection with the August 15, 2000 stockholders'
meeting will not be counted at the special meeting on December 27, 2000.
Therefore, even if you voted on the original merger agreement, you must vote
again on the amended and restated merger agreement or your vote will not be
counted.
We appreciate your consideration of this matter.
/s/ Van A. Horsley
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 November , 2000 and is first
being mailed to stockholders on or about November , 2000.
<PAGE> 4
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:
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Medical Dynamics, Inc. InfoCure Corporation
99 Inverness Drive East 1765 The Exchange, Suite 200
Englewood, Colorado 80112 Atlanta, Georgia 30339
Attention: Investor Relations Attention: Investor Relations
Department Department
Telephone: (303) 790-2990 Telephone: (770) 221-9990
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY DECEMBER 15, 2000
IN ORDER TO RECEIVE THEM BEFORE THE MEDICAL DYNAMICS SPECIAL MEETING.
See "Where You Can Find More Information" beginning on page 97.
<PAGE> 5
MEDICAL DYNAMICS, INC.
99 INVERNESS DRIVE EAST
ENGLEWOOD, COLORADO 80112
NOTICE OF SPECIAL MEETING OF MEDICAL DYNAMICS STOCKHOLDERS
DECEMBER 27, 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 December 27, 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 Amended and
Restated Agreement and Plan of Merger and Reorganization, dated as of
October 10, 2000, as amended on October 30, 2000, by and among InfoCure
Corporation, CADI Acquisition Corporation, a wholly owned subsidiary of
InfoCure, and Medical Dynamics, 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,
stockholders who own more than 100 shares of Medical Dynamics common stock
will receive in exchange for each share of Medical Dynamics common stock
owned 0.06873 shares of InfoCure common stock and 0.07558 shares of InfoCure
series A convertible redeemable preferred stock. The preferred stock will be
represented by depositary shares. Each depositary share will represent one
tenth of a share of InfoCure series A convertible redeemable preferred
stock. The terms of the preferred stock and the depositary shares are
described in detail in this proxy statement-prospectus. In the merger,
stockholders who own 100 or fewer shares of Medical Dynamics common stock
will receive $0.75 in cash in exchange for each share of Medical Dynamics
common stock owned. 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 October 18, 2000, the record date, are entitled to vote at
the special meeting or any adjournment of the special meeting. 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.
/s/ Van A. Horsley
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.
<PAGE> 6
TABLE OF CONTENTS
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Questions and Answers About the Merger...................... 1
Summary..................................................... 8
The Companies............................................. 8
The Merger................................................ 9
Reasons for the Merger.................................... 9
Accounting Treatment...................................... 9
Replacement of Medical Dynamics Options and Warrants...... 9
Non-Solicitation of Third Party Proposals................. 10
Conditions to Completion of the Merger.................... 10
Termination of the Merger Agreement....................... 10
Fees and Expenses......................................... 11
Restrictions on Your Ability to Sell the Common Stock and
Depositary Shares You Receive in the Merger............ 11
Special Meeting of Stockholders........................... 12
Stockholder Vote Required to Approve the Merger........... 12
Voting Rights at the Special Meeting...................... 12
Medical Dynamics' Recommendation to Stockholders.......... 12
Voting by Directors and Executive Officers................ 12
Interests of Certain Persons in the Merger That May be
Different from Yours................................... 13
Completion of the Merger and Regulatory Approvals......... 13
Differences in Stockholders' Rights....................... 13
Listing of InfoCure and PracticeWorks Common Stock........ 13
Market Price Information.................................. 13
Forward-Looking Statements May Prove Inaccurate........... 14
Who Can Help Answer Your Questions........................ 14
Selected Historical Financial Data........................ 15
Unaudited Pro Forma Condensed Combined Financial
Statements............................................. 18
Comparative Per Common Share Data......................... 23
Risk Factors................................................ 24
If InfoCure's stock price declines, the total
consideration to be issued to you in the merger may
change................................................. 24
InfoCure May Not Achieve the Anticipated Benefits from the
Merger................................................. 24
The Medical Dynamics Board of Directors Did Not Obtain Any
Third Party Opinion as to the Fairness of the Merger... 25
Certain of Medical Dynamics' Officers and Directors Have
Conflicts of Interest That May Influence Them to
Support or Approve the Merger.......................... 25
Medical Dynamics' Operating Losses Will Increase
InfoCure's Losses Per Share............................ 25
Your Rights as a Medical Dynamics Stockholder Differ from
the Rights You Will Have as an InfoCure Stockholder.... 25
Failure to Complete the Merger Could Negatively Impact
Medical Dynamics' Future Business and Operations....... 26
InfoCure Has Recently Incurred Losses and Expects to
Continue to Incur Losses for the Foreseeable Future.... 26
InfoCure's Quarterly Operating Results May Vary and in the
Past it Has Experienced Losses......................... 26
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..................................... 27
InfoCure's ASP Product Strategy is Unproven and Customers
May Not Respond Favorably to its New Products.......... 27
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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................................... 28
InfoCure's ASP Product Strategy is Dependent Upon the
Continued Development of the Internet.................. 28
InfoCure's Systems May be Vulnerable to Security Breaches
and Viruses............................................ 28
InfoCure Plans to Expand Rapidly and it May be Difficult
to Manage its Growth................................... 29
InfoCure's Growth Could be Limited if it is Unable to
Attract and Retain Qualified Personnel................. 29
If InfoCure Fails to Protect its Intellectual Property
Rights from Third Party Challenges, it May
Significantly Impair InfoCure's Competitive Position... 29
Intellectual Property Infringement Claims Against InfoCure
Could be Costly to Defend and Could Divert Management's
Attention Away from InfoCure's Business................ 30
InfoCure May Undertake Acquisitions Which Can Pose Risks
to its Business........................................ 30
InfoCure May Face Difficulties Integrating Acquired
Businesses............................................. 30
Technology Solutions May Change Faster Than InfoCure is
Able to Update its Technology.......................... 31
InfoCure is Subject to Government Regulation and Legal
Uncertainties.......................................... 31
Changes in State and Federal Laws Relating to
Confidentiality of Patient Medical Records Could Limit
InfoCure's Customers' Ability to Use its Services...... 32
Changes in the Regulatory and Economic Environment in the
Healthcare Industry Could Adversely Affect InfoCure's
Business............................................... 32
Competition Could Reduce Revenue from InfoCure's Products
and Services........................................... 33
InfoCure's New Product Strategy and Subscription Pricing
Model will Require Additional Financing Which May Not
be Available........................................... 33
Investment Risks............................................ 34
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..... 34
InfoCure's Ability to Issue Senior Preferred Stock in the
Future Could Adversely Affect the Rights of Holders of
the InfoCure Preferred Stock Issued to You............. 34
There is no Public Market for the Preferred Stock or
Depositary Shares...................................... 34
InfoCure is Currently Precluded from Paying Cash Dividends
on the Preferred Stock................................. 34
InfoCure's Certificate of Incorporation and Bylaws Have
Anti-takeover Provisions............................... 35
Privately-sold Shares Eligible for Public Resale Could
Have a Negative Effect on InfoCure's Stock Price....... 35
Forward-looking Statements May Prove Inaccurate........... 35
The Special Meeting......................................... 37
Purpose................................................... 37
Date, Place and Time...................................... 37
Record Date............................................... 37
Medical Dynamics Stockholders Entitled to Vote............ 37
Vote Required; Voting at the Meeting...................... 37
Voting of Proxies......................................... 38
Solicitation of Proxies................................... 38
Dissenters' Rights........................................ 38
Recommendation of the Medical Dynamics Board of
Directors.............................................. 42
Interests of Certain Medical Dynamics Directors, Officers
and Affiliates in the Merger........................... 43
Description of the Merger................................... 44
The Merger................................................ 45
What You Will Receive in the Merger If You Own More Than
100 Shares of Medical Dynamics Common Stock............ 45
Merger Consideration If You Own 100 or Fewer Shares of
Medical Dynamics Common Stock.......................... 45
Terms of the Preferred Stock.............................. 45
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Effect of InfoCure's Proposed Spin-Off of PracticeWorks... 46
Cash in Lieu of Fractional Shares......................... 46
Potential Adjustment of Merger Consideration.............. 47
Effect of the Merger on Medical Dynamics Options and
Warrants............................................... 48
Options................................................ 48
Warrants............................................... 49
Material Federal Income Tax Consequences of the Merger.... 50
Federal Income Tax Consequences if the Merger Qualifies
as a Reorganization................................... 50
Tax Consequences if the Merger is Not a
Reorganization........................................ 52
Tax Consequences to Medical Dynamics Stockholders
Owning 100 or Fewer Shares............................ 52
Dissenting Stockholders................................ 53
Backup Withholding..................................... 53
Loan to Medical Dynamics.................................. 53
Background of and Reasons for the Merger.................. 54
Background to the Merger............................... 54
Medical Dynamics' Reasons for the Merger............... 58
InfoCure's Reasons for the Merger...................... 61
Completion of the Merger.................................. 61
Distribution of InfoCure Stock Certificates............... 61
Regulatory Approval....................................... 62
Management and Operations After the Merger................ 62
Accounting Treatment...................................... 62
Resales of InfoCure Preferred Stock and InfoCure Common
Stock.................................................. 63
Voting Agreement.......................................... 63
The Merger Agreement........................................ 64
Conditions to Completion of the Merger.................... 64
No Solicitation........................................... 65
Waiver, Amendment, and Termination........................ 66
Fees and Expenses......................................... 67
Termination Fee........................................... 67
Representations and Warranties............................ 68
Conduct of Business Pending the Merger.................... 70
The Stockholders Agreement.................................. 71
Description of the Depositary Shares........................ 72
General................................................... 72
Dividends and Other Distributions......................... 72
Record Date............................................... 73
Withdrawal of Preferred Stock............................. 73
Redemption or Conversion of Depositary Shares............. 73
Payment and Conversion.................................... 74
Voting of Preferred Stock................................. 74
Amendment and Termination of the Deposit Agreement........ 75
Charges of Depositary..................................... 76
Miscellaneous............................................. 76
Resignation and Removal of Depositary..................... 76
Description of the Preferred Stock.......................... 77
General................................................... 77
Selected Definitions...................................... 77
Ranking................................................... 78
Dividends................................................. 78
Liquidation Preference.................................... 80
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<PAGE> 9
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Redemption................................................ 81
Conversion Rights......................................... 82
Conversion Price Adjustment............................... 84
Voting Rights............................................. 89
Exchange into PracticeWorks Preferred Stock............... 89
Comparative Stock Prices and Dividends...................... 91
Recent Closing Prices..................................... 91
Dividend Information...................................... 92
Number of Stockholders.................................... 92
Ratios of Earnings to Combined Fixed Charges and Preferred
Stock Dividends........................................... 92
Principal Stockholders...................................... 93
Effect of the Merger on Rights of Stockholders.............. 94
Classes of Stock and Voting Rights of Medical Dynamics and
InfoCure............................................... 94
Board of Directors........................................ 94
Number of Directors....................................... 94
Filling Vacancies on the Board............................ 95
Quorum.................................................... 95
Stockholder Action by Written Consent..................... 95
Ability to Call Special Meeting........................... 95
Notice of Meeting......................................... 95
Advance Notice of Stockholder Proposals................... 96
Voting Requirements....................................... 97
Amending Certificate of Incorporation or Articles of
Incorporation.......................................... 97
Amending Bylaws........................................... 97
Interested Director Transactions.......................... 98
Stockholder Proposals....................................... 99
Other Matters............................................... 99
Experts..................................................... 99
Legal Matters............................................... 100
Where You Can Find More Information......................... 100
APPENDIX A -- Amended and Restated Agreement and Plan of
Merger and Reorganization................................. A-1
APPENDIX B -- Article 113 of the Colorado Business
Corporation Act........................................... B-1
</TABLE>
(iv)
<PAGE> 10
QUESTIONS AND ANSWERS ABOUT THE MERGER
Unless stated otherwise, all references in this proxy statement-prospectus
to the merger agreement refer to the amended and restated merger agreement dated
as of October 10, 2000 between InfoCure and Medical Dynamics, as amended on
October 30, 2000, and all references to the merger refer to the transactions
contemplated by the amended and restated merger agreement.
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 54 through 60.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If you own more than 100 shares of Medical Dynamics common stock, in
exchange for each share of Medical Dynamics common stock you own, you will
receive 0.06873 shares of InfoCure common stock and 0.07558 shares of
InfoCure series A convertible redeemable preferred stock. The preferred
stock will be issued in the form of depositary shares. Each depositary share
will represent one-tenth of one share of the InfoCure preferred stock. Each
depositary share you receive will entitle you to all the rights and
preferences of the preferred stock in proportion to the fraction of a share
of preferred stock represented by the depositary share. Please note,
however, under the circumstances described on page 3, the amount and form of
consideration payable to you may change.
Q: WHAT WILL I RECEIVE IN THE MERGER IF I OWN 100 OR FEWER SHARES OF MEDICAL
DYNAMICS?
A: If you own 100 or fewer shares of Medical Dynamics common stock, you will
receive $0.75 in cash in exchange for each share of Medical Dynamics common
stock you own.
Q: WHAT ARE THE TERMS OF THE PREFERRED STOCK?
A: The terms of the preferred stock include the following:
- The preferred stock has an initial liquidation preference of $5.44 per
share.
- Each share of preferred stock may be converted at any time at the option
of the holder into the number of shares of InfoCure common stock equal to
the liquidation preference in effect at the time divided by the
conversion price, which initially will be $20.00, subject to certain
anti-dilution adjustments. As of November , 2000, each share of
preferred stock would have been convertible into shares of InfoCure
common stock.
In addition, InfoCure has proposed to spin-off its dental division in a
tax-free transaction following completion of the merger by transferring
the assets and liabilities of this division to a newly formed, wholly
owned subsidiary and then distributing all of the outstanding common
stock of this company to InfoCure's stockholders of record on the
applicable record date. If InfoCure completes this spin-off, which is
subject to satisfaction of certain conditions, each share of preferred
stock will be convertible into common stock of this newly formed company
at the conversion rate then in effect, subject to certain anti-dilution
adjustments.
- Dividends will accrue on each share of preferred stock from the date of
original issuance at a rate equal to 6% per annum on the liquidation
preference per share then in effect and shall be paid quarterly in
arrears on March 31, June 30, September 30 and
1
<PAGE> 11
December 31. At its option, InfoCure may pay dividends either in cash or
shares of InfoCure common stock equal in value to the amount of the
dividend based on the average of the closing prices of InfoCure common
stock for the 20 trading days immediately prior to the dividend payment
date. Any dividends not paid on the applicable payment date in respect of
any share of preferred stock will be added to the liquidation preference
in effect with respect to such share.
- InfoCure must redeem all outstanding shares of preferred stock in cash on
the fifth anniversary of the date of original issuance at a redemption
price equal to the liquidation preference plus all accrued and unpaid
dividends through the redemption date.
- Holders of shares of preferred stock may vote on all matters on which
holders of InfoCure common stock are entitled to vote. Holders of
preferred stock will be entitled to the number of votes equal to the
number of shares of common stock into which their shares of preferred
stock are convertible (rounded down to the nearest whole number) on the
date for determination of the stockholders entitled to vote on a matter.
Q: WHAT IS INFOCURE'S PROPOSED SPIN-OFF TRANSACTION? HOW WILL IT AFFECT ME?
A: On August 22, 2000, InfoCure announced its intention to spin-off its dental
division by transferring the assets and liabilities of this division to
PracticeWorks, Inc., a wholly owned subsidiary of InfoCure, and then
distributing 100% of the PracticeWorks common stock to the holders of
InfoCure common stock in a tax-free transaction. Certain information
regarding the spin-off and PracticeWorks has been incorporated by reference
into this proxy statement-prospectus. You are urged to read this
information.
If InfoCure completes the spin-off, each share of InfoCure preferred stock
would be automatically exchanged for 10 shares of series A preferred stock
of PracticeWorks. Each InfoCure depositary share would be automatically
cancelled and converted into the right to receive one share of
PracticeWorks preferred stock. Shares of PracticeWorks preferred stock
would not be represented by depositary shares and you would hold these
shares directly. The terms of the PracticeWorks preferred stock would be
identical to the terms of the InfoCure preferred stock, except that the
PracticeWorks preferred stock would be convertible into shares of
PracticeWorks common stock. The per share conversion price of the
PracticeWorks preferred stock would be set at the time of the distribution
such that all of the shares of PracticeWorks preferred stock issued to the
former owners of Medical Dynamics common stock would, in the aggregate, be
convertible into 1.5% of the PracticeWorks common stock outstanding
immediately after the spin-off.
Q: WILL I RECEIVE FRACTIONAL SHARES IN THE MERGER?
A: InfoCure will not issue fractional shares of common stock in the merger. As
a result, the number of shares of InfoCure common stock you 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 any fraction of a
share of InfoCure common stock you otherwise would have been entitled to
receive equal to the fraction multiplied by $4.93.
In the merger the preferred stock will be issued in the form of depositary
shares, each of which represents a tenth of a share of preferred stock.
InfoCure will not issue any fractional shares of preferred stock in the
merger other than in tenths of a share of preferred stock which will be
represented by a whole number of depositary shares. As a result, the number
of shares of InfoCure preferred stock you will receive in the merger will be
rounded down to the
2
<PAGE> 12
nearest tenth of a share of preferred stock. You will receive a cash
payment, without interest, for the value of a fraction of a share of
preferred stock representing less than a tenth of a share you otherwise
would have been entitled to receive in an amount equal to the fraction
multiplied by $5.44.
Q: CAN THE EXCHANGE RATIO OR FORM OF CONSIDERATION PAID TO ME IN THE MERGER BE
CHANGED?
A: Yes, if you own more than 100 shares of Medical Dynamics common stock. If
the average closing price of InfoCure common stock as reported on the Nasdaq
National Market for the 20 trading days ending on the fourth trading day
prior to the date of the special meeting (we refer to such average price as
the "20-day average price") is less than $3.45 per share, Medical Dynamics
may provide notice to InfoCure of its intent to terminate the merger
agreement. If Medical Dynamics provides such notice, InfoCure may reject the
notice and proceed with the merger if it agrees to (1) adjust the exchange
ratio relating to the number of shares of InfoCure common stock you will
receive so that for each share of Medical Dynamics common stock you own you
will receive the number of shares of InfoCure common stock equal to 0.06873
multiplied by a fraction, the numerator of which is $3.45 and the
denominator of which is the 20-day average price or (2) pay you $0.2372 in
cash for each share of Medical Dynamics common stock you own. In addition,
if InfoCure agrees to make one of these changes, you will also still receive
0.07558 shares of InfoCure preferred stock for each share of Medical
Dynamics common stock you own. If Medical Dynamics provides notice that it
intends to terminate the merger agreement and InfoCure does not agree to
make one of the changes described above, the merger agreement will be
terminated.
The special meeting will be held on December 27, 2000, unless adjourned or
postponed. Therefore the 20-day average price will be the average closing
price of InfoCure common stock for the twenty trading days ending on
December 20, 2000, which is the fourth trading day prior to the special
meeting. However, if we adjourn or postpone the special meeting, the 20-day
average price will be the average closing price of InfoCure common stock
for the 20 trading days ending on the fourth trading day prior to the date
to which the special meeting is adjourned or postponed. We currently do not
anticipate adjourning or postponing the special meeting. In any case, we
will announce the 20-day average price and any adjustments to the merger
consideration by press release prior to 9:00 a.m., Eastern Standard Time,
on the third trading day prior to the special meeting date.
Q: IF I OWN MORE THAN 100 SHARES OF MEDICAL DYNAMICS COMMON STOCK, HOW DO I
KNOW WHAT I WILL RECEIVE IN THE MERGER?
A: If you own more than 100 shares of Medical Dynamics common stock, the
following factors will determine whether you will receive InfoCure common
stock (and how many shares) or cash in the merger:
- whether the 20-day average price is $3.45 or greater;
- whether the 20-day average price is less than $3.45 per share and Medical
Dynamics delivers notice of its intent to terminate the merger agreement;
and
- whether the events set forth in the preceding bullet occur and InfoCure
rejects Medical Dynamics' termination notice and elects to either (1)
adjust the exchange ratio or (2) pay you $0.2372 in cash for each share
of Medical Dynamics common stock you own.
IF THE 20-DAY AVERAGE PRICE IS $3.45 OR GREATER OR IF THE 20-DAY AVERAGE PRICE
IS LESS THAN $3.45
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<PAGE> 13
AND MEDICAL DYNAMICS DOES NOT DELIVER NOTICE OF ITS INTENT TO TERMINATE THE
MERGER AGREEMENT, for each share of Medical Dynamics common stock you own, you
will receive 0.06873 shares of InfoCure common stock and 0.07558 shares of
InfoCure preferred stock.
IF THE 20-DAY AVERAGE PRICE IS LESS THAN $3.45, MEDICAL DYNAMICS DELIVERS NOTICE
OF ITS INTENT TO TERMINATE THE MERGER AGREEMENT AND INFOCURE REJECTS THE NOTICE
AND ELECTS TO MODIFY THE EXCHANGE RATIO, for each share of Medical Dynamics
common stock you own, you will receive a fraction of a share of InfoCure common
stock as determined under the new exchange ratio and 0.07558 shares of InfoCure
preferred stock.
IF THE 20-DAY AVERAGE PRICE IS LESS THAN $3.45, MEDICAL DYNAMICS DELIVERS NOTICE
OF ITS INTENT TO TERMINATE THE MERGER AGREEMENT AND INFOCURE REJECTS THIS NOTICE
AND ELECTS TO PAY CASH, for each share of Medical Dynamics common stock you own,
you will receive $0.2372 in cash and 0.07558 shares of InfoCure preferred stock.
The table below shows what you would receive in the merger if you own 1,000
shares of Medical Dynamics common stock under the possible scenarios outlined
above at varying 20-day average prices. In each case, you will receive cash in
lieu of a fractional share of common stock in an amount equal to the fraction
multiplied by $4.93. If the 20-day average price is $3.45 or greater, you would
need to own at least 15 shares of Medical Dynamics common stock to receive at
least one whole share of InfoCure common stock. If the 20-day average price is
less than $3.45 and InfoCure elects to adjust the exchange ratio, the number of
shares of Medical Dynamics common stock you would need to own to receive at
least one whole share of InfoCure common stock may be more than 15.
<TABLE>
<CAPTION>
INFOCURE
COMMON STOCK CASH DELIVERED INFOCURE
DELIVERED PER PER 1,000 PREFERRED STOCK
1,000 MEDICAL MEDICAL DELIVERED PER
20-DAY INFOCURE DYNAMICS DYNAMICS 1,000 MEDICAL
AVERAGE PRICE ELECTION SHARES SHARES(1) DYNAMICS SHARES
------------- -------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
$3.50 N/A 68 N/A 75
$3.40 Cash N/A $ 237.2 75
$3.40 Stock 69 N/A 75
$3.30 Stock 71 N/A 75
$3.20 Stock 74 N/A 75
$3.10 Stock 76 N/A 75
$3.00 Stock 79 N/A 75
$2.90 Stock 81 N/A 75
$2.80 Stock 84 N/A 75
$2.70 Stock 87 N/A 75
$2.60 Stock 91 N/A 75
$2.50 Stock 94 N/A 75
</TABLE>
---------------
(1) If the 20-day average price is less than $3.45, Medical Dynamics delivers
notice of its intent to terminate the merger agreement and InfoCure rejects
the notice and elects to pay cash, you will receive a cash payment of
$237.20 for each 1,000 shares of Medical Dynamics you own regardless of what
the 20-day average price is.
Q: AM I ENTITLED TO DISSENTERS' RIGHTS?
A: If you own 100 or fewer shares of Medical Dynamics common stock, you will be
entitled to dissenters' rights under Colorado law. Likewise, if you own 100
or more shares of Medical Dynamics common stock, you will be entitled to
dissenters' rights if the 20-day average price is less than $3.45, Medical
Dynamics delivers notice of its intent to terminate the merger agreement and
InfoCure rejects the notice and elects to pay cash for each share of Medical
Dynamics common stock. If you own more than 100 shares of Medical Dynamics
common stock but will only receive InfoCure common stock, InfoCure preferred
stock and cash in lieu of fractional shares, you will not be entitled to
dissenters' rights.
If applicable, dissenters' rights would entitle you to receive the "fair
value" of your shares of Medical Dynamics common stock in lieu of receiving
the merger consideration, provided that you comply with the requirements of
Colorado law. These rights, as well as the procedures for perfecting these
rights under Colorado law, are described under "Dissenters' Rights"
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<PAGE> 14
beginning on page 38. In addition, the full text of the relevant sections of
the Colorado statute is attached hereto as Appendix B to this proxy
statement-prospectus. We will announce the 20-day average price and any
adjustments to the merger consideration by press release at prior to 9:00
a.m., Eastern Standard Time, on the third trading day prior to the special
meeting date. If you own more than 100 shares of Medical Dynamics common
stock, this announcement will allow you to determine if you are entitled to
dissenters' rights.
Q: WHAT RISKS SHOULD I CONSIDER?
A: You should review "Risk Factors" on pages 24 through 36.
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" beginning on page 54.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger on or before December 31, 2000.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: If you own more than 100 shares of Medical Dynamics common stock and only
receive InfoCure common stock and InfoCure preferred stock and cash in lieu
of fractional shares in the merger, then, for U.S. federal income tax
purposes, you generally will recognize any gain, but not any loss, that you
realize in the exchange. However, the amount of gain that you recognize will
be limited to the fair market value of the preferred stock you receive in
the merger plus any cash you receive in lieu of a fractional share of
preferred stock. If you receive any cash in lieu of a fractional share of
InfoCure common stock, you generally will be treated as if you had received
the fractional share in the merger and then as if InfoCure had redeemed it
for cash, and you will recognize gain or loss equal to the difference
between the cash received for the fractional share and your tax basis in the
fractional share.
If the 20-day average price of InfoCure common stock is less than $3.45,
Medical Dynamics delivers notice of its intent to terminate the merger
agreement and InfoCure rejects the notice and elects to pay cash to
stockholders who own more than 100 shares of Medical Dynamics common stock,
then you generally will recognize gain or loss in an amount equal to the
difference between the fair market value of the consideration you receive in
the merger (shares of InfoCure preferred stock and cash) and the tax basis
in your shares of Medical Dynamics common stock.
If you own 100 or fewer shares of Medical Dynamics common stock, then you
generally will recognize gain or loss equal to the difference between the
cash received for your shares and your tax basis in such shares. To review
the tax consequences in greater detail, see pages 50 through 54.
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. Medical Dynamics will survive the merger and become a
wholly owned subsidiary of InfoCure. Approval of the merger agreement
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.
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<PAGE> 15
Q: WHY AM I RECEIVING A SECOND PROXY STATEMENT-PROSPECTUS RELATING TO THE
MERGER?
A: Medical Dynamics and InfoCure originally entered into a merger agreement
relating to the acquisition on December 21, 1999. Medical Dynamics then
scheduled a stockholders' meeting on August 15, 2000 to approve the merger
agreement and mailed a proxy statement-prospectus relating to the meeting to
its stockholders. Prior to the stockholders' meeting, InfoCure and Medical
Dynamics agreed to discuss potential amendments to the terms of the original
merger agreement. As a result, Medical Dynamics adjourned and then cancelled
the August 15, 2000 stockholders' meeting. InfoCure and Medical Dynamics
entered into an amended and restated merger agreement on October 10, 2000
and entered into an amendment to the amended and restated merger agreement
on October 30, 2000. The amended and restated merger agreement, as amended,
is described in this proxy statement-prospectus. In the amended and restated
merger agreement, InfoCure and Medical Dynamics agreed to, among other
things, change the exchange ratio and form of consideration to be paid to
stockholders of Medical Dynamics from the terms of the original merger
agreement. On December 27, 2000, Medical Dynamics will hold a special
meeting of its stockholders to vote to approve the amended and restatement
merger agreement.
The amended and restated merger agreement has material differences from the
original merger agreement, so you should read this proxy-statement
prospectus carefully. In particular, under the terms of the original merger
agreement you would have received only shares of InfoCure common stock in
exchange for your shares of Medical Dynamics common stock, regardless of how
many shares you own. Under the amended and restated merger agreement, if you
own more than 100 shares of Medical Dynamics common stock, you may receive
shares of InfoCure common stock and preferred stock in exchange for your
shares and, if you own 100 or fewer shares of Medical Dynamics common stock,
you will receive $0.75 in cash for each share of Medical Dynamics common
stock you own. In addition, under certain circumstances, InfoCure may elect
to either increase the exchange ratio relating to the number of shares of
InfoCure common stock to be delivered in exchange for each share of Medical
Dynamics common stock you own or to pay you cash.
See pages 54 through 60 for a more detailed description of the background of
the original merger agreement and the amended and restated merger agreement.
Q: DO I NEED TO VOTE AGAIN IF I VOTED ON THE MERGER WHEN I RECEIVED THE
PREVIOUS PROXY STATEMENT?
A: Yes. You may have received a proxy statement-prospectus relating to the
original merger agreement. However, votes for or against the approval of the
original merger agreement will not be counted at the special meeting. If you
previously voted on the original merger agreement, you must vote again on
the amended and restated merger agreement or your vote will not be counted.
You may vote for or against the approval of the amended and restated merger
agreement, regardless of whether you voted for, against or abstained from
voting with respect to the original merger agreement.
Q: WHAT DO I NEED TO DO NOW?
A: After you review the proxy statement-prospectus 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.
6
<PAGE> 16
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
December 27, 2000 at 10:00 a.m. local time 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 38 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, InfoCure will send you written
instructions for exchanging your Medical Dynamics common stock certificates
representing InfoCure common stock or depositary shares and/or any cash
consideration to which you are entitled.
7
<PAGE> 17
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 proxy
statement-prospectus 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 97 of this proxy statement-prospectus.
THE COMPANIES
INFOCURE CORPORATION
1765 THE EXCHANGE
SUITE 200
ATLANTA, GEORGIA 30339
(770) 221-9990
InfoCure is a leading national provider of information management
technology to targeted healthcare specialties. 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.
In December 1999, InfoCure reorganized its business to consist of a medical
division, named VitalWorks, and a dental division, named PracticeWorks. This
reorganization was intended to facilitate changes in the pricing of practice
management software products, the delivery of those products and the scope of
InfoCure's products offerings. InfoCure intends to develop new practice
management software applications that can be delivered through the application
services provider delivery model, and it is also developing Internet-based
applications and services and wireless solutions designed to allow its customers
to utilize new technology to enhance office workflow and conduct business-
to-business e-commerce. For a description of the risks associated with this
reorganization, please see "Risk Factors -- Risks Related to InfoCure and
Medical Dynamics as a Combined Company" beginning on page 24.
On August 22, 2000 InfoCure announced its intention to spin-off its dental
division by transferring the assets and liabilities of its dental division to
PracticeWorks, Inc., a wholly owned subsidiary of InfoCure, and then
distributing 100% of the PracticeWorks common stock to its stockholders in a
tax-free transaction. If InfoCure completes the spin-off it will provide its
stockholders with an information statement that will discuss PracticeWorks'
business and the risks associated with the distribution and ownership of
PracticeWorks common stock. InfoCure can make no assurance that it will complete
the spin-off.
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. For the six
months ended June 30, 2000, InfoCure generated revenues of $69.9 million and a
net loss of $25.6 million. On June 30, 2000, InfoCure had consolidated assets of
$215.9 million and consolidated stockholders' equity of $110.3 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'
8
<PAGE> 18
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 revenues
of $11.0 million and a net loss of $5.4 million. For the nine months ended June
30, 2000, Medical Dynamics generated revenues of $3.0 million and a net loss of
$1.6 million. On June 30, 2000, Medical Dynamics had consolidated assets of $4.6
million and consolidated stockholders' equity of $1.6 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. Medical Dynamics will be the surviving corporation in the
merger. 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 64 through 70 of this
proxy statement-prospectus.
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 or, if you own 100 or fewer shares of Medical
Dynamics common stock, to receive $0.75 in cash in exchange for each
share of Medical Dynamics you hold.
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.
ACCOUNTING TREATMENT
InfoCure intends to account for the merger as a purchase business
combination. Under this method of accounting, after the closing of the merger,
Medical Dynamics' assets and liabilities will be recorded at fair value and any
excess of the total value of shares exchanged for Medical Dynamics' assets over
its net assets will be recorded as goodwill.
REPLACEMENT OF 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 be
terminated and InfoCure will issue replacement options and warrants to purchase
shares of InfoCure common stock. The number of shares
9
<PAGE> 19
of InfoCure common stock issuable upon exercise or conversion of each
replacement option or warrant will be equal to the number of shares of Medical
Dynamics common stock issuable upon exercise of the terminated option or warrant
multiplied by 0.1521298, rounded up to the nearest whole number of shares. The
exercise price of each replacement option or warrant will be equal to the
exercise price of the terminated option or warrant divided by 0.1521298, rounded
up to the nearest whole cent. The replacement options granted to certain current
officers and directors and former employees and directors of Medical Dynamics
will expire on the expiration dates of the corresponding terminated options,
which occur on various dates from April 2001 through October 2005. The remaining
replacement options will expire on the later of (1) one year from the closing of
the merger and (2) 30 days after the date the employee is terminated by Medical
Dynamics, but in no event will the expiration date extend beyond the expiration
date provided in the corresponding terminated option. The replacement warrants
will expire on the earlier of (1) one year from the closing of the merger and
(2) the expiration date in the corresponding terminated warrant. If the spin-off
of PracticeWorks occurs, the replacement options and warrants will be
automatically exchanged for options and warrants to acquire shares of
PracticeWorks common stock on the same basis as other PracticeWorks options and
warrants granted to replace existing InfoCure options and warrants.
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 65
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 treatment of the merger as a
"reorganization" for federal income tax purposes; provided, however, that
receipt of a tax opinion will not be required if the 20-day average price
is less than $3.45, Medical Dynamics delivers notice of its intent to
terminate the merger agreement and InfoCure rejects that notice and
elects to pay cash to Medical Dynamics stockholders who own more than 100
shares; 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 December 31, 2000;
10
<PAGE> 20
- 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.
InfoCure also 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; or
- the 20-day average price is greater than $6.41.
If the 20-day average price is less than $3.45, Medical Dynamics may
provide notice to InfoCure of its intent to terminate the merger agreement. If
Medical Dynamics provides such notice, InfoCure may reject the notice and
proceed with the merger if it agrees to (1) adjust the exchange ratio relating
to the number of shares of InfoCure common stock you will receive in the merger
if you own more than 100 shares of Medical Dynamics common stock, as described
above or (2) pay you $0.2372 in cash for each share of Medical Dynamics common
stock you own if you own 100 or more shares of Medical Dynamics common stock. In
addition, if InfoCure agrees to make one of these changes, you will also still
receive 0.07558 shares of InfoCure preferred stock for each share of Medical
Dynamics common stock you own if you own more than 100 shares of Medical
Dynamics common stock. If Medical Dynamics provides notice that it intends to
terminate the merger agreement and InfoCure does not agree to make one of the
changes described above, the merger agreement will be terminated.
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 $250,000, 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 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 $250,000 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 THE COMMON STOCK AND DEPOSITARY SHARES YOU
RECEIVE IN THE MERGER
All shares of InfoCure common stock and depositary shares representing
InfoCure preferred stock you receive 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 and depositary shares
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.
11
<PAGE> 21
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., local time on December 27, 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 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 October 18, 2000, the record date. As of the record
date, there were 13,229,206 shares of Medical Dynamics common stock outstanding
held by 11,577 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 in
person 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.
Proxies submitted in connection with the August 15, 2000 stockholders'
meeting will not be counted at the special meeting on December 27, 2000.
Therefore, even if you voted on the original merger agreement, you must vote
again on the amended and restated merger agreement or your vote will not be
counted.
MEDICAL DYNAMICS' RECOMMENDATION TO STOCKHOLDERS
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. Medical Dynamics' board of
directors approved and declared advisable the merger agreement 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. These officers and directors have agreed to vote
those shares in favor of the merger agreement. Those shares do not include
shares 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-
12
<PAGE> 22
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 before
December 31, 2000.
DIFFERENCES IN STOCKHOLDERS' RIGHTS
When the merger is completed, if you own more than 100 shares of Medical
Dynamics common stock, whether or not you surrender your Medical Dynamics stock
certificates, you will automatically become a holder of:
- InfoCure common stock (unless, under the circumstances described above,
InfoCure elects to pay cash to you) and
- a holder of InfoCure preferred stock.
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. See "Effect of
the Merger on Rights of Stockholders" beginning on page 90 for a description of
the differences in these rights. In addition, as a holder of InfoCure preferred
stock, you will have the rights defined in the certificate of designations for
the preferred stock. These rights are described under "Description of the
Preferred Stock" beginning on page 77.
LISTING OF INFOCURE AND PRACTICEWORKS 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. InfoCure
expects that if it completes the spin-off, PracticeWorks will apply to have its
common stock listed on The Nasdaq National Market. InfoCure does not currently
anticipate listing the InfoCure preferred stock on The Nasdaq National Market.
Furthermore, InfoCure does not anticipate that PracticeWorks would apply to have
the PracticeWorks preferred stock that would be exchanged for the InfoCure
preferred stock to be listed any securities exchange or 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 were
traded on The Nasdaq SmallCap Market under the trading symbol "MEDY" until
October 11, 2000 and thereafter have been traded on the Over-the-Counter
Bulletin Board System. No shares of InfoCure preferred stock will be issued
prior to the merger and therefore there has been no trading market for those
shares. 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
13
<PAGE> 23
- the market value of one share of Medical Dynamics common stock on an
equivalent per share basis;
on December 20, 1999, the last full trading day before the public announcement
of the original merger agreement, on October 10, 2000, the last trading day
before the public announcement of the amended and restated merger agreement and
on November , 2000, the last practicable day before the date of this proxy
statement-prospectus. The equivalent price per share data for Medical Dynamics
common stock reflects the sum of the market value of the InfoCure common stock
and the InfoCure preferred stock (on an as-converted basis) you would have
received in exchange for one share of Medical Dynamics common stock had the
merger been completed on each of these dates. The market value of the InfoCure
common stock that you would have received was determined by multiplying the last
reported sales price of one share of InfoCure common stock on the applicable
date by 0.06873. The market value of the InfoCure preferred stock was calculated
by determining the number of shares of common stock into which 0.07558 shares of
preferred stock may be converted (based on the initial liquidation preference
and conversion price) and multiplying that number by the last reported sales
price of one share of InfoCure common stock on the applicable date.
INFOCURE:
<TABLE>
<CAPTION>
PRICE PER SHARE
DATE COMMON STOCK
---- ---------------
<S> <C>
December 20, 1999............ $27.00
October 10, 2000............. 3.91
November , 2000............
</TABLE>
MEDICAL DYNAMICS:
<TABLE>
<CAPTION>
EQUIVALENT
PRICE PER SHARE PRICE PER SHARE
DATE COMMON STOCK COMMON STOCK
---- --------------- ---------------
<S> <C> <C>
December 20, 1999.... $0.94 $2.41
October 10, 2000..... 0.25 0.35
November , 2000....
</TABLE>
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 to which we have referred you 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 24.
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.
14
<PAGE> 24
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, and are
not included or incorporated by reference into this proxy statement-prospectus.
The selected historical consolidated financial data set forth below as of June
30, 2000, December 31, 1999 and 1998, and for the six months ended June 30, 2000
and 1999, for the years ended December 31, 1999 and 1998, and for 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, except as
noted below. 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 fiscal year ended December 31, 1999, as amended by InfoCure's
Annual Report on Form 10-K/A filed on May 1, 2000 and Quarterly Report on Form
10-Q for the three months ended June 30, 2000 incorporated by reference in this
proxy statement-prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ELEVEN
ENDED YEAR ENDED MONTHS YEAR ENDED
CONSOLIDATED STATEMENT JUNE 30, DECEMBER 31, ENDED JANUARY 31,
OF OPERATIONS DATA (IN THOUSANDS, ------------------- ------------------- DECEMBER 31, -----------------
EXCEPT PER SHARE DATA): 2000 1999 1999 1998(1) 1997 1997 1996
--------------------------------- -------- -------- -------- -------- ------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue.......................... $ 69,923 $101,593 $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........ 1,616 836 10,681 1,874 13,052 -- --
Merger costs........................... -- -- 3,764 123 -- -- --
Operating income (loss)................ (35,929) 14,229 3,230 (4,007) (25,340) (7,576) (4,287)
Net income (loss) available to common
stockholders before extraordinary
item................................. (25,597) 6,835 (859) (6,799) (18,709) (5,946) (4,686)
Net income (loss) per share before
extraordinary item (2):
Basic................................ (0.78) 0.28 (0.03) (0.39) (1.21)
Diluted.............................. (0.78) 0.22 (0.03) (0.39) (1.21)
Shares used in computing net loss per
share:
Basic................................ 32,889 24,637 27,994 19,312 15,523
Diluted.............................. 32,889 30,442 27,994 19,312 15,523
</TABLE>
15
<PAGE> 25
<TABLE>
<CAPTION>
AS OF
JUNE 30, AS OF DECEMBER 31, AS OF JANUARY 31,
CONSOLIDATED BALANCE SHEET DATA ----------- ----------------------------- -----------------
(IN THOUSANDS): 2000 1999 1998(1) 1997 1997 1996
------------------------------- ----------- -------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents........... $ 15,339 $ 16,836 $ 10,302 $ 6,795 $ 3,822 $ 1,280
Working capital..................... 15,736 25,993 (3,598) (6,736) (5,233) (5,000)
Total assets........................ 215,914 220,504 160,132 65,794 33,013 24,434
Long-term debt, less current
portion........................... 59,901 41,178 72,896 12,394 5,962 5,883
Convertible, redeemable preferred
stock............................. -- -- 8,501 -- -- --
Convertible, redeemable subsidiary
preferred stock issuable.......... 10,000 -- -- -- -- --
Stockholders' equity (capital
deficit).......................... 110,335 135,339 22,772 11,615 5,501 (1,138)
</TABLE>
(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 InfoCure's initial
public offering and acquisition of six companies in conjunction with the
formation of InfoCure 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,
1998, 1997, 1996 and 1995, and for each of the years in the three 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 June 30, 2000, September 30, 1999, and for the nine months ended June 30,
2000 and 1999 and for each of the years in the two 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. The consolidated financial statements as of September 30,
1999 and for the years ended September 30, 1999 and 1998 have been audited by
Hein + Associates LLP, whose report on these consolidated financial statements
is also incorporated by reference in this proxy statement-prospectus, except as
noted below. 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.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
STATEMENT OF JUNE 30, YEARS ENDED SEPTEMBER 30,
OPERATIONS DATA (IN THOUSANDS, --------------------- -----------------------------------------------
EXCEPT PER SHARE DATA) 2000 1999 1999 1998 1997 1996 1995
------------------------------ ----------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................... $ 2,965 $ 9,130 $10,959 $ 7,847 $ 983 $ 668 $ 1,195
Cost of revenues........... 1,418 4,560 6,108 4,059 1,296 652 1,012
Gross profit............... 1,547 4,570 4,851 3,788 (313) 16 183
Operating loss............. (1,285) (2,733) (4,520) (2,304) (1,684) (1,787) (1,618)
Net loss................... (1,578) (3,093) (5,398) (2,522) (1,548) (1,742) (1,484)
Net loss per share......... (0.12) (0.29) (0.52) (0.27) (0.21) (0.25) (0.22)
</TABLE>
16
<PAGE> 26
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, -------------------------------------------
BALANCE SHEET DATA (IN THOUSANDS): 2000 1999 1998 1997 1996 1995
---------------------------------- ----------- ------- ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents............. $ 417 $ 180 $ 553 $ 836 $ 993 $1,072
Working capital....................... (2,452) (1,787) 449 1,343 1,148 2,203
Total assets.......................... 4,637 5,603 9,170 1,917 2,237 2,886
Long-term debt, less current
portion............................. 139 578 1,769 -- -- --
Stockholders' equity.................. 1,597 2,593 5,464 1,547 1,926 2,531
</TABLE>
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 data as of June
30, 2000 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 data for the year ended December 31, 1999 and the six months ended
June 30, 2000 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.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
----------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue.......................................... $ 72,166 $214,593
Compensatory stock awards.............................. -- 1,481
Restructuring and other charges........................ 1,616 11,336
Merger costs........................................... -- 3,764
Operating loss......................................... (38,625) (1,609)
Net loss before extraordinary item available to common
stockholders......................................... (28,215) (4,840)
Net loss per share before extraordinary item, basic and
diluted.............................................. (0.84) (0.16)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 2000
-------------
(IN
THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 14,931
Working capital............................................. 14,034
Total assets................................................ 227,459
Long-term debt, less current portion........................ 60,040
Series A convertible redeemable preferred stock............. 5,252
Convertible, redeemable subsidiary preferred stock
issuable.................................................. 10,000
Stockholders' equity........................................ 115,163
</TABLE>
17
<PAGE> 27
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. Pursuant to the merger
agreement, assuming that the 20-day average price is $3.45 or greater, each
holder of greater than 100 shares of Medical Dynamics common stock will receive
0.06873 shares of InfoCure common stock and 0.07558 shares of InfoCure preferred
stock in exchange for each share of Medical Dynamics common stock held. If the
20-day average price is $3.45 or greater, each holder of 100 or fewer shares of
Medical Dynamics common stock will receive $0.75 in cash for each share of
Medical Dynamics common stock held. The unaudited pro forma condensed combined
financial statements assume 13.2 million shares of Medical Dynamics common stock
are outstanding on a fully diluted basis as of the date of the acquisition and
that the 20-day average price is $3.45 or greater, in which case InfoCure would
issue approximately 878,000 shares of InfoCure common stock and approximately
965,400 shares of InfoCure preferred stock shares in the merger and pay
approximately $350,000 in cash.
The pro forma condensed combined financial statements included herein
reflect application of the purchase method of accounting for the acquisition.
Such financial statements have been prepared from, and should be read in
conjunction with, the historical 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 and its quarterly report on Form 10-Q for the six
months ended June 30, 2000, incorporated herein by reference, and the Medical
Dynamics historical consolidated financial statements and notes thereto of
Medical Dynamics 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 nine months ended June 30, 2000, incorporated herein by reference.
The pro forma condensed combined balance sheet gives effect to the
acquisition as if it had occurred on June 30, 2000 combining the balance sheets
of InfoCure and Medical Dynamics as of that date. The pro forma condensed
combined statements of operations give effect to the acquisition as if it had
occurred on January 1, 1999, combining the results of InfoCure and Medical
Dynamics for the six months ended June 30, 2000 and 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 six months ended
June 30, 2000 and 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.
18
<PAGE> 28
INFOCURE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
MEDICAL PRO FORMA
INFOCURE DYNAMICS ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents................... $ 15,339 $ 417 $ (475)(A) $ 14,931
(350)(B)
Accounts and notes receivable, net.......... 23,364 28 -- 23,392
Other receivable............................ 1,263 -- -- 1,263
Inventory................................... 4,376 3 -- 4,379
Refundable income taxes..................... 256 -- 256
Deferred tax assets......................... 4,053 -- -- 4,053
Prepaid expense and other current assets.... 1,800 1 -- 1,801
-------- -------- -------- --------
Total current assets................... 50,451 449 (825) 50,075
Property and equipment, net................. 27,298 332 -- 27,630
Intangible assets, net...................... 109,756 3,834 9,033(B) 122,623
Deferred tax asset.......................... 24,603 -- -- 24,603
Other assets................................ 3,806 22 (1,300)(C) 2,528
-------- -------- -------- --------
Total assets........................... $215,914 $ 4,637 $ 6,908 $227,459
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Note payable................................ $ 1,222 $ -- $ -- $ 1,222
Accounts payable............................ 4,388 97 -- 4,485
Accrued expense............................. 12,228 501 (148)(A) 12,781
200(B)
Accrued restructuring costs................. 1,970 -- -- 1,970
Deferred revenue and customer deposits...... 14,501 300 -- 14,801
Current portion of long-term debt........... 406 2,003 (327)(A) 782
(1,300)(C)
-------- -------- -------- --------
Total current liabilities.............. 34,715 2,901 (1,575) 36,041
Long-term debt, less current portion........ 59,901 139 -- 60,040
Other liabilities........................... 963 -- -- 963
-------- -------- -------- --------
Total liabilities...................... 95,579 3,040 (1,575) 97,044
-------- -------- -------- --------
Series A convertible redeemable preferred
stock..................................... -- -- 5,252(B) 5,252
Convertible redeemable subsidiary preferred
stock issuable............................ 10,000 -- -- 10,000
Stockholders' equity:
Common stock................................ 34 13 (12)(B) 35
Additional paid-in capital.................. 202,603 28,353 (23,526)(B) 207,430
Notes receivable -- Stockholders............ (12,175) -- -- (12,175)
Accumulated deficit......................... (80,127) (26,769) 26,769(B) (80,127)
-------- -------- -------- --------
Total stockholders' equity............. 110,335 1,597 3,231 115,163
-------- -------- -------- --------
Total liabilities and stockholders'
equity............................... $215,914 $ 4,637 $ 6,908 $227,459
======== ======== ======== ========
</TABLE>
See accompanying notes to pro forma financial statements.
19
<PAGE> 29
INFOCURE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
INFOCURE MEDICAL DYNAMICS ADJUSTMENTS COMBINED
--------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
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 1,129 319(D) 15,938
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 15,479 319 216,202
--------- -------- ------- ---------
Operating income (loss)............... 3,230 (4,520) (319) (1,609)
Interest and other expense, net....... 3,513 878 -- 4,391
--------- -------- ------- ---------
Loss before income taxes and
extraordinary item.................. (283) (5,398) (319) (6,000)
Provision (benefit) for income
taxes............................... 576 -- (2,051)(E) (1,475)
--------- -------- ------- ---------
Loss before extraordinary item........ (859) (5,398) $ 1,732 (4,525)
Preferred stock dividend.............. -- -- 315(F) 315
--------- -------- -------
Net loss before extraordinary item
available to common stockholders.... $ (859) $ (5,398) $ 1,417 $ (4,840)
========= ======== ======= =========
Loss per share before extraordinary
item:
Basic and diluted.............. $ (0.03) $ (0.16)
========= =========
Weighted average shares
outstanding:..................... 27,994 28,872
========= =========
</TABLE>
See accompanying notes to pro forma financial statements
20
<PAGE> 30
INFOCURE CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
MEDICAL PRO FORMA PRO FORMA
INFOCURE DYNAMICS ADJUSTMENTS COMBINED
-------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Total revenue................................ $ 69,923 $ 2,243 $ -- $ 72,166
-------- ------- ------- --------
Operating expense:
Hardware and other items purchased for
resale.................................. 16,896 356 -- 17,252
Selling, general and administrative........ 56,819 2,538 -- 59,357
Research and development................... 9,309 -- -- 9,309
Depreciation and amortization.............. 21,742 250 1,574(D) 23,566
Restructuring and other charges............ 1,616 -- -- 1,616
Gain on disposal of fixed assets........... (530) -- -- (530)
-------- ------- ------- --------
Total operating expense................. 105,852 3,144 1,574 110,570
-------- ------- ------- --------
Operating loss............................... (35,929) (901) (1,574) (38,404)
Interest and other expense, net.............. 2,524 172 -- 2,696
-------- ------- ------- --------
Loss before income taxes and extraordinary
item....................................... (38,453) (1,073) (1,574) (41,100)
Income tax benefit........................... (12,856) -- (408)(E) (13,264)
-------- ------- ------- --------
Net loss (25,597) (1,073) (1,166) (27,836)
Preferred stock dividend................ -- -- 158(F) 158
-------- ------- ------- --------
Net loss available to common
stockholders.......................... $(25,597) $(1,073) $(1,324) $(27,994)
======== ======= ======= ========
Net loss per share available to common
stockholders:
Basic and diluted..................... $ (0.78) $ (0.82)
======== ========
Weighted average shares outstanding:.... 32,889 33,767
======== ========
</TABLE>
See accompanying notes to pro forma financial statements.
21
<PAGE> 31
INFOCURE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS
(A) Records payments of accrued salary and vacation and certain promissory notes
to Medical Dynamics stockholders, officers and directors upon closing.
(B) Records issuance of approximately 878,000 shares of InfoCure common stock
and approximately 965,400 shares of InfoCure preferred stock and the cash
payment of approximately $350,000 in exchange for 13.2 million shares of
Medical Dynamics common stock, including the estimated fair value of
InfoCure options exchanged for Medical Dynamics options and estimated merger
costs of the transaction. The InfoCure common stock to be exchanged in the
merger will be valued on the basis of the closing price of InfoCure common
stock on the day of closing. The preferred stock valuation is based on the
liquidation preference of the preferred stock and cash is valued at face
value. For pro forma purposes, the aggregate consideration is equal to
approximately $10.6 million.
This acquisition will be accounted for as a purchase with the total
consideration estimated to be allocated to the assets acquired as follows:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- --------------
(IN THOUSANDS)
<S> <C>
Current assets.............................................. $ 449
Property and equipment...................................... 332
Other assets................................................ 22
Current liabilities......................................... (2,901)
Long-term debt, net of current portion...................... (139)
-------
Net assets................................................ (2,237)
Goodwill.................................................... 12,867
-------
$10,630
=======
</TABLE>
(C) Records elimination of InfoCure loan to Medical Dynamics.
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 three-year
life effective in the fourth quarter consistent with InfoCure's adoption of
a change in accounting estimate effected in 1999.
(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.
(F) Records the annual dividends on InfoCure series A convertible redeemable
preferred stock to be issued in the merger.
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<PAGE> 32
COMPARATIVE PER COMMON SHARE DATA
We are providing the following comparative per common 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 18. 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 June 30, 2000. The Medical Dynamics pro forma equivalent per
share data were calculated by multiplying the InfoCure pro forma per share data
by 0.06873 (the exchange ratio relating to the number of shares of InfoCure
common stock that Medical Dynamics stockholders would have received in the
merger for each share of Medical Dynamics common stock held had the merger been
completed as of the dates presented), 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.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
LOSS PER COMMON SHARE BEFORE EXTRAORDINARY ITEM (BASIC AND
DILUTED):
InfoCure historical...................................... $(0.78) $(0.03)
Medical Dynamics historical(1)........................... 0.08 (0.52)
Pro forma combined....................................... (0.82) (0.16)
Medical Dynamics pro forma equivalent(2)................. (0.06) (0.01)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 2000
-------------
<S> <C>
BOOK VALUE PER COMMON SHARE:
InfoCure historical....................................... $3.24
Medical Dynamics historical............................... 0.12
Pro forma combined........................................ 3.39
Medical Dynamics pro forma equivalent(2).................. 0.23
</TABLE>
-------------------------
(1) Medical Dynamics historical data for the year ended December 31, 1999 is
derived from its consolidated financial statements for the year ended for
the year ended September 30, 1999.
(2) The Medical Dynamics pro forma equivalent per share data does not give
effect to the conversion of the InfoCure preferred stock that would have
been issued in the merger because, as of the dates presented, the preferred
stock was "out-of-the money" in that the conversion price of the InfoCure
preferred stock would have been substantially greater than the market price
of the InfoCure common stock.
23
<PAGE> 33
RISK FACTORS
If the merger is consummated, you may receive shares of InfoCure common
stock and/or depositary shares representing shares of InfoCure preferred 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 and InfoCure preferred 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
IF INFOCURE'S STOCK PRICE DECLINES, THE TOTAL CONSIDERATION TO BE ISSUED TO YOU
IN THE MERGER MAY CHANGE.
The total consideration you will receive upon closing of the merger if you
own more than 100 shares of Medical Dynamics common stock will depend on the
20-day average price. If the 20-day average price is less than $3.45, Medical
Dynamics may provide notice to InfoCure of its intent to terminate the merger
agreement. If Medical Dynamics provides such notice, InfoCure may reject the
notice and proceed with the merger if it agrees to (1) adjust the exchange ratio
relating to the number of shares of InfoCure common stock you will receive if
you own more than 100 shares of Medical Dynamics common stock so that for each
share of Medical Dynamics you own you will receive the number of shares of
InfoCure common stock equal to 0.06873 multiplied by a fraction, the numerator
of which is $3.45 and the denominator of which is the 20-day average price or
(2) pay you $0.2372 in cash for each share of Medical Dynamics common stock you
own if you own more than 100 shares of Medical Dynamics common stock. If
InfoCure agrees to make any one of these changes, you will also still receive
0.07558 shares of InfoCure preferred stock for each share of Medical Dynamics
common stock you own if you own more than 100 shares of Medical Dynamics common
stock.
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 original merger agreement, was $27.00, on October 10, 2000,
the last trading day prior to the public announcement of the amended and
restated merger agreement, was $3.91, and on November , 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.
You should obtain current market quotations for InfoCure common stock.
INFOCURE MAY NOT ACHIEVE THE ANTICIPATED BENEFITS FROM THE MERGER.
InfoCure cannot guarantee you 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;
- delays in realizing the benefits of InfoCure's strategies for Medical
Dynamics' business;
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<PAGE> 34
- 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 and depositary shares representing shares of
InfoCure preferred 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 and
number of depositary shares 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.
MEDICAL DYNAMICS' OPERATING LOSSES WILL INCREASE INFOCURE'S LOSSES PER SHARE.
Medical Dynamics has experienced recent operating losses. As a result,
InfoCure's losses per share will be increased, which may negatively affect the
market price of InfoCure common stock.
YOUR RIGHTS AS A MEDICAL DYNAMICS STOCKHOLDER DIFFER FROM THE RIGHTS YOU WILL
HAVE AS AN INFOCURE STOCKHOLDER.
Following the merger, you may become a holder of InfoCure common stock
and/or InfoCure preferred 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. In addition, as a holder of
25
<PAGE> 35
InfoCure preferred stock, you will have the rights defined in the certificate of
designations for the preferred stock.
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; and
- employee turnover may increase.
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 HAS RECENTLY INCURRED LOSSES AND EXPECTS TO CONTINUE TO INCUR LOSSES
FOR THE FORESEEABLE FUTURE.
InfoCure had net losses of $14.4 million for the three months ended June
30, 2000 and $25.6 million for the six months ended June 30, 2000. InfoCure
expects the transition to a subscription pricing model (as discussed below) to
continue to adversely impact its cash flow until revenue from subscription fees
replaces revenue from software license fees and hardware sales. InfoCure also
expects to incur increased marketing and sales expenses in connection with
offering its ASP products and Internet solutions, each of which is discussed
below. As a result, based on current estimates, InfoCure expects to continue to
incur net losses for the foreseeable future.
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;
26
<PAGE> 36
- its release of the ASP-delivered products 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 of its new products;
- the length of sales cycles; and
- the levels of advertising and promotional expenditures.
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 recently reorganized its business to facilitate changes in its
pricing of information management technology products, its delivery of these
products to customers and the scope of its product offerings. As part of the
reorganization, InfoCure plans to convert its customers to subscription-based
pricing for substantially all of its products and services. InfoCure began
offering those products and services on the subscription pricing model during
the second quarter of 2000. Under the subscription pricing model, customers pay
a fixed, monthly fee for use of InfoCure's 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. Existing and 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.
The markets for information management products and services 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 three to 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 InfoCure's reorganization, 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 information
27
<PAGE> 37
management technology 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 entering into strategic
relationships. If InfoCure is unsuccessful in completing the development of its
Internet solutions or fails to enter into strategic relationships, the offering
of these products may be delayed or these products may never become available.
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 it 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
28
<PAGE> 38
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 ITS 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. The expansion of its product offerings,
target markets and customers will place additional demands on its sales,
marketing and administrative resources. 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, its business may be harmed.
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 it 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 FAILS TO PROTECT ITS INTELLECTUAL PROPERTY RIGHTS FROM THIRD PARTY
CHALLENGES, IT MAY SIGNIFICANTLY IMPAIR INFOCURE'S COMPETITIVE POSITION.
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
29
<PAGE> 39
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 its technology,
particularly in foreign countries where the laws may not protect its 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, its business, financial condition and results of operations could be
harmed.
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 success depends on its successful integration of the businesses
it has acquired. 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.
30
<PAGE> 40
TECHNOLOGY SOLUTIONS MAY CHANGE FASTER THAN INFOCURE IS ABLE TO UPDATE ITS
TECHNOLOGY.
The information management technology 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 conducts 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 under HIPAA and with the final rule under HIPAA adopting
standards for electronic healthcare transactions and code sets to be used in
those transactions. However, InfoCure cannot assure you that it will be able to
comply with the proposed regulations or final standards in a timely manner or at
all. Moreover, until the proposed regulations become final, they could 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 complying 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 its 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
31
<PAGE> 41
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.
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.
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COMPETITION COULD REDUCE REVENUE FROM INFOCURE'S PRODUCTS AND SERVICES.
InfoCure's principal competitors include both national and regional
information management technology vendors. Currently, the information management
technology 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 information management
technology industry 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 national competitors have greater financial, development, technical,
marketing and sales resources than InfoCure. If competition in the information
management technology 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 MAY 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. If additional
financing is required as a result of this change in InfoCure's pricing model,
such financing may not be available to InfoCure on acceptable terms or at all.
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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. Since the signing of the original merger
agreement, the closing price of InfoCure's common stock has dropped from a high
of $36.63 on January 24, 2000 to a low of $3.50 on September 7, 2000. 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.
INFOCURE'S ABILITY TO ISSUE SENIOR PREFERRED STOCK IN THE FUTURE COULD ADVERSELY
AFFECT THE RIGHTS OF HOLDERS OF THE INFOCURE PREFERRED STOCK ISSUED TO YOU.
InfoCure is authorized to issue additional preferred stock in one or more
series on terms that may be determined at the time of issuance by its board of
directors. In some instances, a series of preferred stock could include voting
rights, preferences as to dividends and liquidation, conversion and redemption
rights that will rank senior to the InfoCure preferred stock that will be issued
in the merger. The future issuance of preferred stock could effectively diminish
or supersede the dividends and liquidation preferences of the InfoCure preferred
stock that will be issued in the merger.
THERE IS NO PUBLIC MARKET FOR THE PREFERRED STOCK OR THE DEPOSITARY SHARES.
No trading market for the preferred stock currently exists. InfoCure does
not intend to apply to list the depositary shares or the preferred stock on any
exchange or automated inter-dealer quotation system. Thus, no trading market for
the depositary shares or the preferred stock is likely to develop and holders of
preferred stock or depositary shares may be unable to find a buyer for such
shares (without first converting them into common stock).
INFOCURE IS CURRENTLY PRECLUDED FROM PAYING CASH DIVIDENDS ON THE PREFERRED
STOCK.
The certificate of designation for the preferred stock allows InfoCure, at
its option, to pay dividends on the preferred stock in shares of common stock
and InfoCure currently intends to pay dividends on the preferred stock in
InfoCure common stock. InfoCure's ability to pay cash dividends on the preferred
stock will be subject to the terms of its line
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of credit and any other outstanding debt. Under InfoCure's line of credit, it is
prohibited from paying cash dividends at any time that it has an outstanding
balance under the line of credit or that its lender is obligated to make
advances under the line of credit.
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
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.
A substantial number of shares of InfoCure's common stock are eligible to
be resold in the public market, including shares that may be issued upon the
exercise of outstanding options and shares issued in acquisitions that 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 those of InfoCure; additional charges and
estimated transaction costs that the combined company may encounter; the
potential fluctuation in market price of InfoCure common stock; 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; the
anticipated spin-off of InfoCure's PracticeWorks division; InfoCure's transition
to subscription pricing; InfoCure's develop-
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ment 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 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 December 27, 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
December , 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
October 18, 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
October 18, 2000 will be entitled to notice of, and to vote at, the special
meeting.
MEDICAL DYNAMICS STOCKHOLDERS ENTITLED TO VOTE
As of October 18, 2000, there were 13,229,206 shares of Medical Dynamics
common stock outstanding and held by 11,577 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 approximately 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.
Proxies submitted in connection with the August 15, 2000 stockholders'
meeting will not be counted at the special meeting on December 27, 2000.
Therefore, even if you submitted a proxy with respect to voting on the original
merger agreement, you must submit another proxy with respect to voting on the
amended and restated merger agreement or your vote will not be counted.
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.
DISSENTERS' RIGHTS
If you own 100 or fewer shares of Medical Dynamics common stock, under
Article 113 of Title 7 the Colorado Business Corporation Act, or Article 113,
you are
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entitled to dissent from the merger and receive cash equal to the "fair value"
of your shares of Medical Dynamics common stock in lieu of receiving the cash
payment to which you otherwise would be entitled if the merger is completed.
Likewise, if you own 100 or more shares of Medical Dynamics common stock, you
will be entitled to dissenters' rights if the 20-day average price is less than
$3.45, Medical Dynamics delivers notice of its intent to terminate the merger
agreement and InfoCure rejects the notice and elects to pay cash for each share
of Medical Dynamics common stock. If you own more than 100 shares of Medical
Dynamics common stock but will only receive InfoCure common stock, InfoCure
preferred stock and cash in lieu of fractional shares, you will not be entitled
to dissent from the merger under Article 113. For purposes of Article 113, "fair
value" means the value of Medical Dynamics common stock immediately before the
effective time of the merger, excluding any appreciation or depreciation in
anticipation of the merger, unless that exclusion would be inequitable.
Article 113 is attached to this proxy statement-prospectus as Appendix B.
The following is a brief summary of the dissenters' rights provided under
Article 113. This discussion is not a complete statement of the law relating to
dissenters' rights and is qualified in its entirety by reference to Appendix B.
THIS DISCUSSION AND APPENDIX B SHOULD BE REVIEWED CAREFULLY BY ANY HOLDER WHO
WISHES TO EXERCISE STATUTORY DISSENTERS' RIGHTS OR WHO WISHES TO PRESERVE THE
RIGHT TO DO SO BECAUSE FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH
HEREIN AND THEREIN WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Article 113 provides that stockholders of a corporation in a merger that
must be approved by the corporation's stockholders generally are entitled to
dissenters' rights. However, Article 113 further provides that a stockholder
will not be entitled to dissent from a merger if (1) the shares of stock of that
corporation are held of record by at least 2,000 stockholders and (2) in the
merger, the stockholder will receive in exchange for the stockholders' shares
(A) shares of a corporation which are 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., (B) shares that
are held by 2,000 or more holders and/or (C) cash in lieu of fractional shares.
Therefore, stockholders who own more than 100 shares of Medical Dynamics common
stock will not be entitled to dissent from the merger if they are entitled to
receive only InfoCure common stock, InfoCure preferred stock and cash in lieu of
fractional shares because (1) shares of Medical Dynamics common stock are held
by more than 2,000 stockholders of record, (2) shares of InfoCure common stock
are quoted on The Nasdaq National Market and (3) the depositary shares
representing shares of InfoCure preferred stock will be held by 2,000 or more
stockholders. However, if the 20-day average price is less than $3.45, Medical
Dynamics delivers notice of its intent to terminate the merger agreement and
InfoCure rejects the notice and elects to pay cash for each share of Medical
Dynamics common stock, stockholders who own more than 100 shares will be
entitled to dissent from the merger under Article 113 because they will receive,
in part, a cash payment in exchange for their shares of Medical Dynamics.
InfoCure and Medical Dynamics will announce the 20-day average price and any
adjustments to the merger consideration by press release prior to 9:00 a.m.,
Eastern Standard Time, on the third trading day prior to the special meeting
date. If you own more than 100 shares of Medical Dynamics common stock, this
announcement will allow you to determine if you are entitled to dissent from the
merger under Article 113. Medical Dynamics stockholders who own 100 or fewer
shares of Medical Dynamics common stock will receive a cash payment in exchange
for their shares of Medical Dynamics common stock and therefore are also
entitled to dissent from the merger under Article 113 regardless of the value of
the 20-day average price.
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If you are entitled to dissenters' rights, to exercise those rights, you
must:
- file with Medical Dynamics, before the vote is taken at the special
meeting, written notice of your intent to demand the fair value for your
Medical Dynamics common stock if the merger is consummated and becomes
effective; and
- not vote your shares of Medical Dynamics common stock in favor of the
proposal to approve the merger agreement.
If you do not satisfy each of these requirements, you cannot exercise
dissenters' rights and will be bound by the terms of the merger agreement.
Submitting a proxy card that does not direct how the Medical Dynamics
common stock represented by that proxy is to be voted will constitute a vote in
favor of the merger and a waiver of your statutory dissenters' rights. In
addition, voting against the proposal to approve the merger will not satisfy the
notice requirement referred to above. You must file the written notice of the
intent to exercise dissenters' rights with Medical Dynamics at: Medical
Dynamics, Inc., 99 Inverness Drive East, Englewood, Colorado 80112, Attention:
Investor Relations Department.
If the merger is approved, Medical Dynamics will send written notice as
described above to all stockholders who have given written notice of an intent
to exercise dissenters' rights under Article 113 and have not voted in favor of
the merger. Medical Dynamics will provide this notice within 10 days of the
effective date of the merger and it will contain:
- a statement that the merger was approved and the effective date of the
merger;
- the address where the demand for payment and certificates representing
shares of Medical Dynamics common stock must be sent and the date by
which they must be received, which shall not be less than 30 days after
the date the notice is given;
- any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
- a form for demanding payment that requests the dissenting stockholder's
address for sending payment and requires certification of whether the
stockholder, or the beneficial owner on whose behalf the stockholder
dissents, acquired the Medical Dynamics common stock before October 11,
2000, the date the amended and restated merger agreement was first
publicly announced;
- the date by which Medical Dynamics must receive the payment demand and
certificates for certificated shares, which date shall not be less than
30 days after the date the notice is given; and
- a copy of Article 113.
If you wish to assert dissenters' rights, you must demand payment in
writing, which may be in the form of the demand payment form included in the
notice from Medical Dynamics or another writing, and deposit your Medical
Dynamics certificates by the date given in the dissenter's notice. If you fail
to make a demand for payment and deposit your Medical Dynamics certificates by
this date, you will lose the right to receive fair value for your shares under
Article 113, even if you filed a timely notice of intent to demand payment. A
stockholder who demands payment and deposits his or her certificates retains all
rights of a stockholder, except the right to transfer shares, until the
effective date of the
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merger, after which the stockholder only has the right to receive payment for
the shares. The demand for payment and deposit of certificates is irrevocable.
Except as provided below, upon the later of the effective time of the
merger or Medical Dynamics' receipt of a valid demand for payment, Medical
Dynamics will remit to each dissenting stockholder who complied with the
requirements of Article 113 the amount Medical Dynamics estimates to be the fair
value of the stockholder's Medical Dynamics common stock, plus accrued interest.
Medical Dynamics will include the following information with the payment:
- audited financial statements of Medical Dynamics for and as of the end of
the most recent fiscal year and the latest available financial
statements, audited or unaudited, for and as of the end of any interim
period since the end of the most recent fiscal year;
- a statement of Medical Dynamics' estimate of the fair value of the
shares;
- an explanation of how the interest was calculated;
- a copy of Article 113; and
- a description of the procedures to be followed in demanding supplemental
payment.
For any dissenting stockholder who does not certify in writing that the
stockholder was the beneficial owner of the stockholder's shares of Medical
Dynamics common stock before October 11, 2000, Medical Dynamics may withhold
payment and instead send a statement setting forth its estimate of the fair
value of their shares and offering to pay such amount, with interest, as a final
settlement of the dissenting stockholder's demand for payment.
If the effective date of the merger does not occur within 60 days after the
date by which Medical Dynamics must receive the payment demand and Medical
Dynamics stock certificates from dissenting stockholders, Medical Dynamics will
return the deposited certificates to the stockholders and release the transfer
restrictions on uncertificated shares. If the effective date of the merger
occurs then occurs more than 60 days after the date by which Medical Dynamics
must receive the payment demand, Medical Dynamics must send a new notice as
described above to stockholders entitled to dissent from the merger and the
provisions described herein will be applicable with respect to the new notice.
If you believe the amount paid or offered is less than the fair value of
your shares or that interest was incorrectly calculated, you may, within 30 days
of the payment or offer for payment, notify Medical Dynamics in writing of and
demand payment of your estimate of the fair value of your shares and the amount
of interest due. In addition, you may demand payment of your estimate of the
fair value of your shares and the amount of interest due if (i) Medical Dynamics
fails to make payment of the fair value of your shares within 60 days after the
date by which Medical Dynamics must receive the payment demand and you have
certified to Medical Dynamics that you held your shares of Medical Dynamics
common stock before October 11, 2000 or (ii) Medical Dynamics does not return
your certificates or release the transfer restrictions on uncertificated shares
if the merger is not completed with 60 days after the date by which Medical
Dynamics must receive the payment demand. If any dissenting stockholder's demand
for payment is not settled within 60 days after its receipt by Medical Dynamics,
Medical Dynamics must either pay to each dissenter whose demand remains
unresolved the amount demanded or commence a court proceeding to determine the
fair value of the shares and accrued
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interest, naming all the dissenting stockholders whose demands remain unsettled
as parties to the proceeding. The proceeding will be commenced in a district
court in Colorado, and the court will determine the fair value of the share of
common stock and accrued interest.
The court may appoint one or more appraisers to receive evidence and make
recommendations to the court as to the amount of the fair value of the shares.
The fair value of the shares as determined by the court is binding on all
dissenting stockholders and may be less than, equal to or greater than the
amount of the cash payment the dissenter stockholder would otherwise have
received in the merger for his or her shares of Medical Dynamics common stock.
If the court determines that the fair value of the shares is in excess of any
amount remitted or offered by Medical Dynamics, then the court will enter a
judgment for cash in favor of the dissenting stockholders in an amount by which
the value determined by the court, plus interest, exceeds the amount previously
remitted or offered by Medical Dynamics.
The court will determine the costs and expenses of the court proceeding and
assess them against Medical Dynamics, except that the court may assess part or
all of the costs against any dissenting stockholders whose actions in demanding
supplemental payments the court finds to be arbitrary, vexatious or not in good
faith. If the court finds that Medical Dynamics did not substantially comply
with the relevant provisions of Article 113, the court may also assess against
Medical Dynamics any fees and expenses of attorneys or experts that the court
deems equitable. The court may also assess those fees and expenses against any
party if the court finds that the party has acted arbitrarily, vexatiously or
not in good faith in bringing the proceedings. The court may award, in its
discretion, fees and expenses of an attorney for the dissenting stockholders out
of the amount awarded to the stockholders, if it finds the services of the
attorney were of substantial benefit to the other dissenting stockholders and
that those fees should not be assessed against Medical Dynamics.
A stockholder of record may assert dissenters' rights as to fewer than all
of the shares registered in the stockholder's name only if he or she dissents
with respect to all shares beneficially owned by any one person and notices
Medical Dynamics in writing of the name and address of each person on whose
behalf he or she asserts dissenters' rights. The rights of the partial
dissenting stockholder are determined as if the shares as to which he or she
dissents and his or her other shares were registered in the names of different
stockholders.
Beneficial owners of Medical Dynamics common stock who desire to exercise
dissenters' rights themselves must obtain and submit the registered owner's
written consent at or before the time they file the notice of intent to dissent
from the merger. A beneficial owner may exercise dissenters' rights only if the
beneficial owner exercises dissenters' rights with respect to all shares of
Medical Dynamics common stock he or she owns.
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. Medical Dynamics' board of
directors approved and declared advisable the merger agreement and recommends
that Medical Dynamics stockholders vote FOR the proposal to approve the merger
agreement.
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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.
REPLACEMENT 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 terminated and replaced with options and
warrants to acquire shares of InfoCure common stock. The InfoCure options
granted to Van A. Horsley, President of Medical Dynamics, I. Dean Bayne, M.D.
and Leroy Bilanich, Ed. D, each an officer and director of Medical Dynamics,
will expire on the expiration dates set forth in the corresponding terminated
options, which occur on various dates from April 2001 through October 2005.
ACCELERATION OF OPTIONS AND PAYMENT OF CASH SEVERANCE. Upon closing of the
merger, the InfoCure options granted to Mr. Horsley to replace existing unvested
options to acquire 400,000 shares of Medical Dynamics common stock will be
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.
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 were payable in full on August 1, 2000, or, if
earlier, upon the sale of Medical Dynamics. However, Messrs. Richmond and Kim
have entered into subordination agreements pursuant to which they will not be
repaid until InfoCure has been repaid all amounts outstanding under the loan
agreement between InfoCure and 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.
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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 was due on July 30, 2000, or, if earlier, upon the sale of Medical
Dynamics. However, Dr. and Mrs. Adair have entered into a subordination
agreement pursuant to which they will not be repaid until InfoCure has been
repaid all amounts outstanding under the loan agreement between InfoCure and
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 Dr. Bayne, 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 fullest
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.
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, which is attached
to this proxy statement-prospectus. You are urged to read Appendix A in its
entirety. Unless otherwise indicated, all references to the
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merger agreement in this proxy statement-prospectus refer to the amended and
restated merger agreement, as amended, set forth in Appendix A.
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 IF YOU OWN MORE THAN 100 SHARES OF MEDICAL
DYNAMICS COMMON STOCK
If you own more than 100 shares of Medical Dynamics common stock and
assuming that the 20-day average price is equal to or greater than $3.45, in
exchange for each share of Medical Dynamics common stock you own, you will
receive 0.06873 shares of InfoCure common stock and 0.07558 shares of InfoCure
preferred stock. The preferred stock will be issued in the form of depositary
shares. Each depositary share will represent one-tenth of one share of the
InfoCure preferred stock. Each depositary share you receive will entitle you to
all the rights and preferences of the preferred stock in proportion to the
fraction of a share of preferred stock represented by the depositary share.
Please note, however, under the circumstances described on page 47, the amount
and form of consideration payable to you may change.
MERGER CONSIDERATION IF YOU OWN 100 OR FEWER SHARES OF MEDICAL DYNAMICS
COMMON STOCK
If you own 100 or fewer shares of Medical Dynamics common stock, you will
receive $0.75 in cash in exchange for each share of Medical Dynamics common
stock you own. The cash payment you will receive will not change if the
consideration payable to stockholders who own more than 100 shares is changed as
described below.
TERMS OF THE PREFERRED STOCK
The terms of the preferred stock include the following:
- The preferred stock has an initial liquidation preference of $5.44 per
share.
- Each share of preferred stock may be converted at any time at the option
of the holder into the number of shares of InfoCure common stock equal to
the liquidation preference in effect at the time divided by the
conversion price, which initially will be $20.00, subject to certain
anti-dilution adjustments. As of November , 2000, each share of
preferred stock would have been convertible into shares of InfoCure
common stock.
In addition, InfoCure has proposed to spin-off its dental division in a
tax-free transaction following completion of the merger by transferring
the assets and liabilities of this division to a newly formed, wholly
owned subsidiary and then distributing all of the outstanding common
stock of this company to InfoCure's stockholders of record on the
applicable record date. If InfoCure completes this spin-off, which is
subject to satisfaction of certain conditions, each share of preferred
stock will be convertible into common stock of this newly formed
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company at the conversion rate then in effect, subject to certain
anti-dilution adjustments.
- Dividends will accrue on each share of preferred stock from the date of
original issuance at a rate equal to 6% per annum on the liquidation
preference per share then in effect and shall be paid quarterly in
arrears on March 31, June 30, September 30 and December 31. At its
option, InfoCure may pay dividends either in cash or shares of InfoCure
common stock equal in value to the amount of the dividend based on the
average of the closing prices of InfoCure common stock for the 20 trading
days immediately prior to the dividend payment date. Any dividends not
paid on the applicable payment date in respect of any share of preferred
stock will be added to the liquidation preference in effect with respect
to such share.
- InfoCure must redeem all outstanding shares of preferred stock in cash on
the fifth anniversary of the date of original issuance at a redemption
price equal to the liquidation preference plus all accrued and unpaid
dividends through the redemption date.
- Holders of shares of preferred stock may vote on all matters on which
holders of InfoCure common stock are entitled to vote. Holders of
preferred stock will be entitled to the number of votes equal to the
number of shares of common stock into which their shares of preferred
stock are convertible (rounded down to the nearest whole number) on the
date for determination of the stockholders entitled to vote on a matter.
EFFECT OF INFOCURE'S PROPOSED SPIN-OFF OF PRACTICEWORKS
On August 22, 2000, InfoCure announced its intention to spin-off its dental
division by transferring the assets and liabilities of this division to
PracticeWorks, Inc., a wholly owned subsidiary of InfoCure, and then
distributing 100% of the PracticeWorks common stock to the holders of InfoCure
common stock in a tax-free transaction.
If InfoCure completes the spin-off, each share of InfoCure preferred stock
would be automatically exchanged for 10 shares of series A preferred stock of
PracticeWorks. Accordingly, each InfoCure depositary share would be
automatically cancelled and converted into the right to receive one share of
PracticeWorks preferred stock. Shares of PracticeWorks preferred stock would not
be represented by depositary shares and you would hold these shares directly.
The terms of the PracticeWorks preferred stock would be identical to the terms
of the InfoCure preferred stock, except that the PracticeWorks preferred stock
would be convertible into shares of PracticeWorks common stock. The per share
conversion price of the PracticeWorks preferred stock would be set at the time
of the distribution such that all of the shares of PracticeWorks preferred stock
issued to the former owners of Medical Dynamics common stock would, in the
aggregate, be convertible into 1.5% of the PracticeWorks common stock
outstanding immediately after the spin-off.
CASH IN LIEU OF FRACTIONAL SHARES
InfoCure will not issue fractional shares of common stock in the merger. As
a result, the number of shares of InfoCure common stock you 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 any fraction of a share of InfoCure
common stock you otherwise would be entitled to receive equal to the fraction
multiplied by $4.93.
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In the merger, the preferred stock will be issued in the form of depositary
shares, each of which represents a tenth of a share of preferred stock. InfoCure
will not issue any fractional shares of preferred stock in the merger other than
in even tenths of a share of preferred stock which will be represented by a
whole number of depositary shares. As a result, the number of shares of InfoCure
preferred stock you will receive in the merger will be rounded down to the
nearest tenth of a share of preferred stock. You will receive a cash payment,
without interest, for the value of a fraction of a share of preferred stock
representing less than a tenth of a share you otherwise would have been entitled
to receive in an amount equal to the fraction multiplied by $5.44.
POTENTIAL ADJUSTMENT OF MERGER CONSIDERATION
If you own more than 100 shares of Medical Dynamics common stock, the
consideration you receive in the merger may change. If the 20-day average price
is less than $3.45 per share, Medical Dynamics may provide notice to InfoCure of
its intent to terminate the merger agreement. If Medical Dynamics provides such
notice, InfoCure may reject the notice and proceed with the merger if it agrees
to (1) adjust the exchange ratio relating to the number of shares of InfoCure
common stock you will receive so that for each share of Medical Dynamics stock
you own you will receive the number of shares of InfoCure common stock equal to
0.06873 multiplied by a fraction, the numerator of which is $3.45 and the
denominator of which is the 20-day average price or (2) pay you $0.2372 in cash
for each share of Medical Dynamics common stock you own. In addition, if
InfoCure agrees to make one of these changes, you will also still receive
0.07558 shares of InfoCure preferred stock for each share of Medical Dynamics
common stock you own. If Medical Dynamics provides notice that it intends to
terminate the merger agreement and InfoCure does not agree to make one of the
changes described above, the merger agreement will be terminated.
The special meeting will be held on December 27, 2000, unless adjourned or
postponed. Therefore the 20-day average price will be the average closing price
of InfoCure common stock for the twenty trading days ending on December 20,
2000, which is the fourth trading day prior to the special meeting. However, if
we adjourn or postpone the special meeting, the 20-day average price will be the
average closing price of InfoCure common stock for the 20 trading days ending on
the fourth trading day prior to the date to which the special meeting is
adjourned or postponed. We currently do not anticipate adjourning or delaying
the special meeting. In any case, we will announce the 20-day average price and
any adjustments to the merger consideration by press release prior to 9:00 a.m.,
Eastern Standard Time, on the third trading day prior to the special meeting
date.
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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 be
terminated and replaced with an option to purchase InfoCure common stock. After
the merger becomes effective:
- InfoCure and its compensation committee will administer the replacement
options;
- each replacement option may be exercised only for shares of InfoCure
common stock;
- the number of shares of InfoCure common stock subject to each replacement
option will be equal to the number of shares of Medical Dynamics common
stock subject to the terminated option immediately before the merger is
completed multiplied by .1521298, rounded up to the nearest whole share;
and
- the per share exercise price of each replacement option will be equal to
the exercise price of the corresponding terminated option divided by
.1521298, rounded up to the nearest cent.
The shares subject to each replacement option will be immediately
exercisable in proportion to the percentage of shares subject to the
corresponding terminated option that are exercisable immediately prior to the
closing of the merger. The remaining shares subject to each replacement option
will become exercisable according to the vesting schedule of the corresponding
terminated option, as adjusted proportionately to reflect the number of shares
subject to the replacement option as compared to the number of shares subject to
the corresponding terminated option. The replacement options granted to Mr.
Horsley, Dr. Bayne and Dr. Bilanich and individuals who were former employees or
directors of Medical Dynamics as of the date of the merger agreement will expire
on the expiration dates set forth in the corresponding terminated options, which
occur on various dates from April 2001 through October 2005. Each option held by
any other individual, including current Medical Dynamics employees, will expire
on the later of (1) one year from the closing of the merger and (2) 30 days
after the date the employee is terminated by Medical Dynamics, but in no event
will the expiration date extend beyond the expiration date provided in the
corresponding terminated option.
Each replacement option will provide that if InfoCure consummates the
spin-off of PracticeWorks, at the time of the spin-off, the InfoCure replacement
option will be automatically exchanged for an option to acquire shares of common
stock of PracticeWorks. The number of shares subject to each PracticeWorks
replacement option and the exercise price of the option will be adjusted in the
same manner as all other PracticeWorks options granted to replace existing
InfoCure options. InfoCure currently anticipates the exercise price for each
PracticeWorks replacement option will be determined by dividing the exercise
price for the corresponding InfoCure replacement option by the PracticeWorks
conversion factor and that the number of shares of PracticeWorks common stock
subject to each PracticeWorks replacement option will be determined by
multiplying the number of shares subject to the corresponding InfoCure option by
the PracticeWorks conversion factor. The PracticeWorks conversion factor is a
number equal to (1) the closing price of InfoCure common stock on The Nasdaq
National
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Market on the record date, divided by (2) the opening price of the PracticeWorks
common stock on The Nasdaq National Market on the day following the distribution
date.
WARRANTS
When the merger is effective, each warrant to purchase Medical Dynamics
common stock will be terminated and replaced with a warrant to purchase InfoCure
common stock. After the merger becomes effective:
- each replacement warrant may be exercised only for shares of InfoCure
common stock;
- the number of shares of InfoCure common stock subject to each replacement
warrant will be equal to the number of shares of Medical Dynamics common
stock subject to the corresponding terminated warrant immediately before
the merger is completed multiplied by .1521298, rounded up to the nearest
whole share; and
- the per share exercise price of each replacement warrant will be equal to
the exercise price of the corresponding terminated warrant divided by
.1521298, rounded up to the nearest cent.
The shares subject to each replacement warrant will be immediately
exercisable in proportion to the percentage of shares subject to the
corresponding terminated warrant that are exercisable immediately prior to the
closing of the merger. The remaining shares subject to each replacement warrant
will become exercisable according to the vesting schedule of the corresponding
terminated warrant adjusted proportionately to reflect the number of shares
subject to the replacement as compared to the number of shares subject to the
terminated warrant. The replacement warrants will expire on the earlier of (1)
one year from the closing of the merger and (2) the expiration date provided in
the corresponding terminated warrant.
Each replacement warrant will provide that if InfoCure consummates the
spin-off of PracticeWorks, at the time of the spin-off, the InfoCure replacement
warrant will be automatically exchanged for a warrant to acquire shares of
common stock of PracticeWorks. The number of shares subject to each
PracticeWorks replacement warrant and the exercise price of the warrant will be
adjusted in the same manner as all other PracticeWorks warrants granted to
replace existing InfoCure warrants. InfoCure currently anticipates the exercise
price for each PracticeWorks replacement warrant will be determined by dividing
the exercise price for the corresponding InfoCure replacement warrant by the
PracticeWorks conversion factor and that the number of shares of PracticeWorks
common stock subject to each PracticeWorks replacement warrant will be
determined by multiplying the number of shares subject to the corresponding
InfoCure warrant by the PracticeWorks conversion factor. The PracticeWorks
conversion factor is a number equal to (1) the closing price of InfoCure common
stock on The Nasdaq National Market on the record date, divided by (2) the
opening price of the PracticeWorks common stock on The Nasdaq National Market on
the day following the distribution date.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
In the opinion of Morris, Manning & Martin, L.L.P., counsel to InfoCure,
the following discussion summarizes the material U.S. federal income tax
consequences of the merger to the stockholders of Medical Dynamics. Because the
following discussion is a summary that is intended to address only federal
income tax consequences of the merger generally applicable 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 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.
FEDERAL INCOME TAX CONSEQUENCES IF THE MERGER QUALIFIES AS A REORGANIZATION
The merger is intended to qualify as a "reorganization" under section
368(a) of the Internal Revenue Code unless the 20-day average price is less than
$3.45 per share, Medical Dynamics delivers notice of its intent to terminate the
merger agreement, and InfoCure rejects this notice and elects to pay cash to
each stockholder who owns more than 100 shares of Medical Dynamics common stock.
In that case, the merger will not
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constitute a reorganization and will be taxable to the Medical Dynamics
shareholders. The discussion set forth immediately below assumes the merger will
qualify as a reorganization for federal income tax purposes.
Assuming that InfoCure does not elect to pay cash under the circumstances
described above, 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.
Further, even assuming the merger qualifies as a reorganization within the
meaning of section 368(a) of the Internal Revenue Code, the federal income tax
consequences of the merger to the stockholders of Medical Dynamics will depend
upon whether the depositary shares are treated as "nonqualified preferred stock"
within the meaning of section 351(g) of the Internal Revenue Code. Because the
depositary shares are required to be redeemed within five years of their issue
date, the depositary shares will constitute nonqualified preferred stock unless
the right to convert the depositary shares into shares of InfoCure common stock
is considered to provide significant participation in InfoCure's corporate
growth for purposes of section 351(g). The legislative history accompanying the
enactment of section 351(g) in 1997 states that a conversion privilege into
stock of the issuer will not "automatically" be considered to provide
significant participation in corporate growth under the statute. To date,
however, the Internal Revenue Service has not issued any regulations or other
administrative guidance regarding the circumstances under which convertible
preferred stock is treated as nonqualified preferred stock. In preparing the
discussion set forth below, counsel to InfoCure and counsel to Medical Dynamics
have assumed that the depositary shares will be treated as nonqualified
preferred stock but you should consult your own tax advisor regarding this
matter and its effect upon the tax consequences of the merger to you.
If the merger constitutes a reorganization within the meaning of section
368(a) of the Internal Revenue Code, and if the depositary shares are treated as
nonqualified preferred stock, the merger will have the following material
federal income tax consequences to the stockholders of Medical Dynamics who own
more than 100 shares of Medical Dynamics common stock:
- You will recognize any gain, but not any loss, that you realize in the
merger. The amount of gain that you recognize will not exceed the fair
market value of the depositary shares you receive, plus any cash you
receive in lieu of a fractional depositary share. Any such gain that you
recognize generally should be taxable as a capital gain and should be
long-term capital gain if you held your Medical Dynamics shares for more
than one year at the effective time of the merger.
- The aggregate tax basis of the InfoCure common stock you receive in the
merger (including any fractional share of InfoCure common stock deemed to
be received and then redeemed for cash, as described below) will be the
same as the aggregate tax basis of your shares of Medical Dynamics common
stock, decreased by the sum of the fair market value of the depositary
shares and cash you receive in lieu of a
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fractional depositary share, and increased by the amount of gain you
recognize in the merger. The tax basis of the depositary shares you
receive will be equal to the fair market value of the depositary shares
at the effective time of the merger.
- The holding period of the InfoCure common stock you receive in the merger
(including any fractional share of InfoCure common stock deemed to be
received and then redeemed for cash, as described below) will include the
holding period of the Medical Dynamics common stock you surrender in the
merger. The holding period of the depositary shares you receive in the
merger will begin on the day after the merger.
- If you receive cash in lieu of a fractional share of InfoCure common
stock, you will be treated for federal income tax purposes as if the
fractional share was issued to you in the merger and then redeemed by
InfoCure for cash. You generally will recognize capital gain or loss
equal to the difference between the amount of cash received for the
fractional share and your tax basis in the fractional share, determined
as discussed above.
The tax consequences of the merger to you will be different than the
consequences described above if the depositary shares are not treated as
nonqualified preferred stock. In that event, you generally will not recognize
any gain or loss in the merger except with respect to any cash received in lieu
of fractional shares, and the basis and holding period of your depositary shares
will be determined in a manner similar to the determination of the basis and
holding period (as described above) of your InfoCure common stock received in
the merger.
TAX CONSEQUENCES IF THE MERGER IS NOT A REORGANIZATION
If you own more than 100 shares of Medical Dynamics common stock, the
federal income tax consequences of the merger to you will be different than the
consequences described above if either the Internal Revenue Service successfully
challenges the status of the merger as a reorganization or if the merger fails
to qualify as a reorganization because the 20-day average price is less than
$3.45 per share, Medical Dynamics notifies InfoCure of its intent to terminate
the merger agreement and InfoCure rejects that notice and elects to pay cash to
each stockholder who owns more than 100 shares of Medical Dynamics common stock.
If the merger fails to qualify as a reorganization, you generally will recognize
gain or loss in an amount equal to the difference between the aggregate fair
market value of the consideration that you receive (InfoCure depositary shares
and cash) in the merger and the tax basis in your Medical Dynamics common stock
surrendered. The remaining federal income tax consequences to you if the merger
does not qualify as a reorganization will be the same as described below for
Medical Dynamics stockholders owning 100 or fewer shares of Medical Dynamics
common stock.
TAX CONSEQUENCES TO MEDICAL DYNAMICS STOCKHOLDERS OWNING 100 OR FEWER SHARES
If you own 100 or fewer shares of Medical Dynamics common stock and receive
solely cash in the merger in exchange for your shares, you will be treated for
federal income tax purposes as having sold your shares to InfoCure for cash in a
fully taxable transaction. The amount of gain or loss that you recognize will
equal the difference between the amount of cash you receive in the merger and
the adjusted tax basis in your shares of Medical Dynamics common stock
surrendered in the merger. If you hold your
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Medical Dynamics shares as a capital asset, any gain or loss that you recognize
will be capital gain or loss. If, at the effective time of the merger, you have
held your shares of Medical Dynamics common stock for more than one year, any
capital gain that you recognize will be long-term capital gain, which is subject
to a maximum federal income tax rate of 20% in the case of taxpayers other than
corporations. Any capital losses recognized by a taxpayer other than a
corporation that are not offset by capital gains may be deducted only up to a
maximum of $3,000 per year, although unused capital losses may be carried
forward to future taxable years. In the case of a corporation, capital gain is
subject to federal income tax at the same rate as ordinary income. A
corporation's capital losses may be deducted only to the extent of its capital
gains, but unused capital losses may be carried back three years and forward
five years. If you own 100 or fewer shares of Medical Dynamics common stock and
receive solely cash in the merger in exchange for your shares, the federal
income tax consequences to you will not change even if the merger does not
qualify as a reorganization for the reasons described above.
DISSENTING STOCKHOLDERS
If you are a Medical Dynamics stockholder who dissents from the merger, you
will recognize gain or loss on the exchange of your Medical Dynamics common
stock for cash in an amount equal to the difference between the cash received
(other than amounts, if any, which are or are deemed to be interest for U.S.
federal income tax purposes, which amounts will be taxed as ordinary income) and
the tax basis in your Medical Dynamics common stock. Such gain or loss generally
will be capital gain or loss and generally will be long-term capital gain or
loss with respect to Medical Dynamics stock held for more than one year at the
effective time of the merger. If you dissent, you may be required to recognize
any gain or loss in the year the merger closes, irrespective of whether you
actually receive payment for your shares in that year.
BACKUP WITHHOLDING
Under certain circumstances, you may be subject to backup withholding at a
rate of 31% with respect to the amount of cash, if any, received in the merger
(including cash received in lieu of fractional shares or upon exercise of
dissenters' rights), unless you provide proof of an applicable exemption or
correct taxpayer identification number and otherwise comply with applicable
requirements of the backup withholding rules. Any amounts withheld under the
backup withholding rules are not additional tax and may be refunded or credited
against your federal income tax liability, so long as the required information
is furnished to the Internal Revenue Service.
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. On May 23, 2000, InfoCure advanced an additional $300,000 to Medical
Dynamics pursuant to a second amendment to the loan agreement. On October 20,
2000, InfoCure advanced an additional $250,000 to Medical Dynamics pursuant to a
third amendment to the loan agreement. These additional advances were for
general working capital purposes. The total principal amount of all advances
under the loan is $1,550,000.00. The maturity date on all advances and interest
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under the loan, is September 30, 2001. All security for the original loan will
remain in place and each principal stockholder has signed a subordination
agreement to ensure that InfoCure is repaid in full by Medical Dynamics before
any principal stockholder receives payment from Medical Dynamics pursuant to
outstanding promissory notes issued by 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 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.
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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.
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 which Medical Dynamics stockholders would have received InfoCure
common stock in exchange for their shares of Medical Dynamics common stock.
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
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Nasdaq Stock Market. The merger agreement provided that in the merger each share
of Medical Dynamics common stock would have been exchanged for 0.05672 shares of
InfoCure common stock. This exchange ratio was subject to adjustment if the
average of the closing prices of InfoCure's common stock for the twenty trading
days immediately prior to the closing of the merger was below $13.22 or above
$22.04. On December 20, 1999, the trading day immediately prior to the
announcement of the merger agreement, the closing price of InfoCure's common
stock was $27.00. If the average closing price of InfoCure's common stock for
the 20 consecutive trading days prior to the closing of the merger had been
$27.00, InfoCure would have issued approximately 160,000 shares in the merger.
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. On June 22, 2000,
InfoCure and Medical Dynamics entered into a second amendment to the merger
agreement to extend the termination date of the merger to August 31, 2000.
Medical Dynamics scheduled a special meeting for August 15, 2000 for its
shareholders to approve the merger and Medical Dynamics and InfoCure commenced
mailing a joint proxy statement-prospectus relating to the special meeting to
the Medical Dynamics stockholders on July 17, 2000.
On August 14, 2000, Mr. Perlman and Mr. Price had a telephone conversation
with Mr. Horsley during which they indicated that InfoCure had a pending
announcement of material information that required delaying the Medical Dynamics
stockholder meeting until the proxy statement-prospectus could be amended or
supplemented. Mr. Perlman and Mr. Price explained to Mr. Horsley this material
information was that InfoCure was preparing to announce its intention to
spin-off PracticeWorks, its dental division. Mr. Perlman and Mr. Price also
indicated to Mr. Horsley that InfoCure wished to discuss amending the terms of
the merger agreement in light of its intention to spin-off PracticeWorks and the
significant change in trading price of InfoCure's common stock since the time
the original merger agreement was signed. At that time, Medical Dynamics agreed
to adjourn the stockholders meeting to allow the parties to meet to discuss the
need to supplement the proxy statement-prospectus. On August 15, 2000, Medical
Dynamics adjourned its special stockholder meeting to August 18, 2000 without
taking action on the proposal to approve the merger.
On August 17, 2000, Mr. Perlman, Mr. Price, Mr. Horsley, Mr. Richmond and
Mr. Chae met in Atlanta to discuss the merger. At that meeting, representatives
of InfoCure and Medical Dynamics further discussed the need to amend or
supplement the proxy statement-prospectus to reflect the pending announcement
regarding the PracticeWorks spin-off. However, InfoCure also indicated to
Medical Dynamics that although InfoCure continued to have interest in a merger
with Medical Dynamics, InfoCure believed that completing the merger on its
current terms would be excessively dilutive to InfoCure's stockholders as
compared to the value of Medical Dynamics' business to InfoCure. From December
20, 1999, the trading day immediately prior to the original merger agreement to
August 17, 2000, InfoCure's stock price dropped from $27.00 per share to $4.50
per share. As a result of the significant decline in the trading price of
InfoCure's common stock at that time, InfoCure would have been obligated to
issue approximately 2.0 million shares of common stock, representing
approximately 6.1% of InfoCure's outstanding stock, to complete the merger. Mr.
Perlman and Mr. Price
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indicated that InfoCure believed that this dilution would negatively affect
InfoCure's stock price following the merger, which would be detrimental to the
interests of both existing InfoCure stockholders and the former Medical Dynamics
stockholders.
After meeting privately, Mr. Horsley, Mr. Richmond and Mr. Chae indicated
that, in light of the issues raised by InfoCure, Medical Dynamics was willing to
discuss possible amendments to the terms of the merger agreement. On August 18,
2000, Medical Dynamics adjourned its shareholder meeting indefinitely pending
renegotiation of the merger agreement.
Between August 17, 2000 and August 31, 2000, the parties negotiated the
provisions of the amended and restated merger agreement. On August 31, 2000, the
parties agreed to amend the merger agreement to provide that each share of
Medical Dynamics common stock would be exchanged for 0.06873 shares of InfoCure
common stock and 0.07558 shares of InfoCure redeemable preferred stock. The
parties further agreed to the designations, rights and preferences of the
preferred stock and the terms on which the InfoCure preferred stock would be
exchanged for PracticeWorks preferred stock, the reduction of the termination
fee payable to InfoCure by Medical Dynamics from $1.3 million to $250,000 and to
provide that holders of 100 or fewer shares of Medical Dynamics common stock
will receive $0.75 in cash for each share of Medical Dynamics common stock they
own in lieu of receiving InfoCure common stock and preferred stock. Finally, the
parties agreed that (1) if the 20-day average price is above $6.41, InfoCure may
terminate the merger agreement and (2) if the 20-day average price is below
$3.45, Medical Dynamics may provide notice of its intent to terminate the merger
agreement and that InfoCure may reject that notice, if given, if it agrees to
adjust the consideration to be paid to stockholders who own more than 100 shares
of Medical Dynamics common stock by
- adjusting the exchange ratio relating to the number of shares of InfoCure
common stock those stockholders will receive, as described elsewhere in
the proxy statement-prospectus or
- paying $0.2372 in cash for each share of Medical Dynamics common stock
owned.
In addition, if InfoCure agrees to make one of these changes, stockholders
who own more than 100 shares of Medical Dynamics common stock would still
receive 0.07558 shares of InfoCure preferred stock for each share of Medical
Dynamics common stock owned. If Medical Dynamics provides notice that it intends
to terminate the merger agreement and InfoCure does not make one of the changes
described above, the merger agreement will be terminated. Under the terms of the
amended and restated merger agreement entered into on October 10, 2000, the
20-day average price was equal to the average closing price of InfoCure common
stock for the 20 trading days ending on the date of the closing of the merger.
In connection with this amendment, InfoCure advanced an additional $250,000 to
Medical Dynamics. The parties agreed to enter into the amended and restated
merger agreement on those terms only after receiving required third party
approvals of the merger agreement, including approval of InfoCure's senior
lender. On August 31, 2000, Medical Dynamics and InfoCure publicly announced
that they had agreed to the terms of an amended and restated merger agreement
and would execute the agreement upon receipt of third party approvals.
On October 10, 2000, InfoCure and Medical Dynamics received all required
third party approvals and, following approval of the amended and restated merger
agreement by
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the InfoCure board and the Medical Dynamics board, InfoCure and Medical Dynamics
executed the amended and restated merger agreement. On October 11, 2000,
InfoCure and Medical issued a press release announcing the terms of the amended
and restated merger agreement prior to the opening of trading on The Nasdaq
Stock Market.
After further discussion between the parties, InfoCure and Medical Dynamics
amended the amended and restated merger agreement on October 30, 2000 to provide
that the 20-day average price would be the average closing price for InfoCure
common stock for the 20 trading days ending on the fourth trading day prior to
the date of the special meeting rather than the average closing price for the 20
trading days ending on the date of the closing of the merger. The parties agreed
that this amendment would be beneficial to stockholders who own more than 100
shares of Medical Dynamics common stock because it would allow those
stockholders to know the amount and nature of the consideration they would
receive in the merger and whether they were entitled to dissenters' rights prior
to the special meeting. Under the amended and restated merger agreement, as
amended, if Medical Dynamics elects to provide notice of its intent to terminate
the merger agreement because the 20-day average price is less than $3.45, it
must provide that notice before 5:00 p.m., Eastern Standard Time, on the fourth
trading day prior to the special meeting. If Medical Dynamics provides this
notice and InfoCure elects to reject the notice, it must provide Medical
Dynamics notice that it agrees to adjust the exchange ratio or pay cash by 8:00
p.m., Eastern Standard Time, on the fourth trading day prior to the date of the
Special Meeting. Therefore, any change to the consideration payable in the
merger will occur on the fourth trading day prior to the special meeting.
InfoCure and Medical Dynamics will issue a press release prior to 9:00 a.m.,
Eastern Standard Time, on the third trading day prior to the special meeting
indicating the consideration payable in the merger. In addition, if the 20-day
average price is less than $3.45, Medical Dynamics delivers notice of its intent
to terminate the merger and InfoCure rejects the notice and elects to pay cash,
the press release issued by the parties would also indicate that Medical
Dynamics stockholders who own more than 100 shares of Medical Dynamics common
stock are entitled to dissenters' rights. InfoCure and Medical Dynamics agreed
that it would be beneficial for Medical Dynamics stockholders to have such
information prior to the date of the special meeting, allowing them to vote or
change proxies they have previously provided, based on this information. The
amendment to the amended and restated merger agreement also clarified that the
merger would not qualify as "reorganization" for federal income tax purposes if
the 20-day average price is less than $3.45, Medical Dynamics delivers notice of
its intent to terminate the merger and InfoCure rejects the notice and elects to
pay cash. The consequences of the merger not qualifying as a "reorganization"
are discussed above under the caption "Material Federal Income Tax Consequences
of the Merger." On October 31, 2000, InfoCure and Medical Dynamics issued a
press release announcing the terms of the amendment to the amended and restated
merger agreement prior to the opening of trading on The Nasdaq Stock Market.
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:
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- 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.
- 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 Medical
Dynamics stockholders who own 100 or more shares with InfoCure common
stock for which there is an active and liquid trading market and shares
of preferred stock that are convertible into shares of InfoCure common
stock.
- The merger is expected to be treated as a "reorganization" for federal
income tax purposes 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.
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- 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
and depositary shares in the merger will have to rely on the operating
success of InfoCure to maximize the value of their investment.
- All of the consideration that would be received by Medical Dynamics
stockholders who own more than 100 shares of Medical Dynamics common
stock in the merger would consist of InfoCure common stock and depositary
shares representing InfoCure preferred stock, rather than cash (unless,
after receiving a termination notice from Medical Dynamics, InfoCure
elects to pay $.2372 in cash in lieu of issuing InfoCure common stock in
exchange for each share of Medical Dynamics common stock).
- 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 each amendment thereto and unanimously recommends to the
stockholders of Medical Dynamics that you approve the merger agreement.
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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 merger
agreement and each amendment thereto.
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 December 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 December 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 and depositary shares and/or to receive a check for the
amount of cash to which you are entitled, depending on the consideration payable
to you under the terms of the merger agreement.
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 (1) a certificate or certificates representing the number of
shares of InfoCure common stock and/or depositary shares 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 and/or
depositary shares, without interest thereon, if any and/or (2) a check for any
other cash payment to which you are entitled for your shares. InfoCure will not
be obligated to
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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 and depositary shares 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 and depositary shares 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 deliver to you the
consideration to which you are entitled 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 the holder thereof will receive the applicable merger consideration.
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 97 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, Medical Dynamics' assets and liabilities will be recorded at fair value
and any excess of the total value of shares exchanged for Medical Dynamics'
assets over its net assets will be recorded as goodwill.
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RESALES OF INFOCURE PREFERRED STOCK AND INFOCURE COMMON STOCK
The shares of InfoCure common stock and the depositary shares to be issued
to you in the merger will be registered under the Securities Act of 1933, as
amended, or the Securities Act. All shares of InfoCure common stock that you
receive 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 and the depositary shares 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 may resell publicly the InfoCure common stock and the
depositary shares they receive in the merger but only within certain limitations
as to the amount of InfoCure common stock and the depositary shares they can
sell in any three-month period and as to the manner of sale provided that
InfoCure continues to satisfy its reporting requirements under the Securities
Exchange Act of 1934, or the Exchange Act. 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 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 been affiliates for at least three months may resell
their shares without restriction. Affiliates also would be permitted to resell
InfoCure common stock and the depositary shares 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 and the
depositary shares 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 and the
depositary shares received in the merger except in compliance with the
Securities Act, and the applicable rules. The stock certificates representing
InfoCure common stock and the depositary shares issued to affiliates in the
merger will bear a legend summarizing these restrictions on transfer.
VOTING AGREEMENT
The holders of approximately 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 treatment of the merger as a
"reorganization" for federal income tax purposes; provided, however, that
receipt of a tax opinion will not be required if the 20-day average price
is less than $3.45, Medical Dynamics delivers notice of its intent to
terminate the merger agreement and InfoCure rejects that notice and
elects to pay cash to Medical Dynamics stockholders who own more than 100
shares;
- 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 December 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 December 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. 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;
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; or
7. InfoCure, if the 20-day average price is greater than $6.41 per
share.
In addition, if the 20-day average price is less than $3.45 per share,
Medical Dynamics may provide a notice to InfoCure of its intent to terminate the
merger agreement. If Medical Dynamics provides such notice, InfoCure may reject
the notice and then proceed with the merger if it agrees to (1) adjust the
exchange ratio relating to the number of shares of InfoCure common stock you
will receive if you own more than 100 shares of Medical Dynamics common stock or
(2) pay you $0.2372 in cash for each share of Medical Dynamics stock you own if
you own more than 100 shares of Medical Dynamics common stock. If InfoCure
agrees to make one of these changes, you will also still receive 0.07558 shares
of InfoCure preferred stock for each share of Medical Dynamics common stock you
own if you own more than 100 shares of Medical Dynamics common stock. If Medical
Dynamics provides notice that it intends to terminate the merger agreement and
InfoCure does not agree to make one of the changes described above, the merger
agreement will be terminated.
If Medical Dynamics terminates the merger agreement as a result of
InfoCure's breach of any representation or warranty contained in the merger
agreement, InfoCure will pay a termination fee of $250,000 in cash to Medical
Dynamics, and InfoCure will waive any right to offset such amount against any
amounts then owned to InfoCure pursuant to the advance made by InfoCure to
Medical Dynamics on October , 2000.
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 $250,000 cash termination fee if:
1. InfoCure terminates the merger agreement for the reasons described
in paragraph 6 above under "-- Waiver, Amendment, and Termination"; or
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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 9 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 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 $250,000 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 $250,000 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
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- 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
- 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
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- 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 approximately 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 (1) in favor of the merger
agreement and the merger, (2) in favor of any matter to facilitate the
merger, and (3) as directed by InfoCure with respect to any shareholder
proposal related to the merger;
- 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 stockholders agreement terminates on the earlier of the termination of
the merger agreement or the effective time of the merger.
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DESCRIPTION OF THE DEPOSITARY SHARES
The summary contained herein of the terms of the depositary shares does not
purport to be complete and is subject to and qualified in its entirety by
reference to all of the provisions of the deposit agreement and the depositary
receipts described below, copies of which may be obtained from us or the
depositary at the principal office of the depositary, at which its depositary
business shall be administered upon request.
GENERAL
Each depositary share represents ownership of one-tenth of a share of
InfoCure series A convertible redeemable preferred stock deposited under the
deposit agreement, among InfoCure, StockTrans, Inc., as depositary, and all
holders from time to time of depositary receipts issued thereunder. Subject to
the terms of the deposit agreement, each owner of a depositary share will be
entitled, in proportion to the applicable fraction of a share of preferred stock
represented by such depositary share, to all the rights and preferences of the
preferred stock represented thereby (including dividend, voting, redemption,
conversion and liquidation rights) and subject, proportionately, to all of the
limitations of the preferred stock represented thereby, contained in the
certificate of designation of the preferred stock summarized below under
"Description of the Preferred Stock."
Immediately following the consummation of the merger, InfoCure will deposit
the preferred stock with the depositary which will then issue the depositary
shares to the Medical Dynamics stockholders pursuant to the terms of the merger
agreement. The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement. Depositary receipts will be issued evidencing
only whole depositary shares.
Pending the preparation of definitive engraved depositary receipts, the
depositary may issue temporary depositary receipts substantially identical to,
and entitling the holders thereof to all the rights pertaining to, the
definitive depositary receipts but not in definitive form. Definitive depositary
receipts will be prepared thereafter and will be exchangeable for temporary
depositary receipts at the depositary's expense.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash and common stock distributions, if
any, and other distributions received from InfoCure in respect of the preferred
stock for dividends and otherwise to the record holders of depositary shares in
proportion to the number of such depositary shares owned by such holders.
In the event of a distribution other than in cash or common stock, the
depositary will distribute property delivered by it by InfoCure to the record
holders of depositary shares entitled thereto, unless the depositary determines
that it is not feasible to make such distribution, in which case InfoCure may
instruct the depositary to sell such property and distribute the net proceeds
from such sale to such holders. If fractional shares of common stock would be
issuable in connection with dividend payments, InfoCure will pay to each holder
cash in lieu of such fractional shares.
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RECORD DATE
Whenever:
- any dividend or other cash distribution becomes payable, any distribution
other than cash is made, or any rights, preferences or privileges are at
any time offered with respect to the preferred stock, or
- the depositary receives notice of any meeting at which holders of
preferred stock are entitled to vote or of which holders of preferred
stock are entitled to notice or any solicitation of consents in respect
of the preferred stock, or of the mandatory redemption of the preferred
stock, or if at any time the depositary and InfoCure otherwise deem it
appropriate,
the depositary will in each such instance fix a record date, which date shall be
the same date as the record date for the preferred stock, for the determination
of the holders of depositary receipts who are entitled to:
- receive such dividend, distribution, rights, preferences or privileges or
the net proceeds of the sale thereof;
- receive notice of, and give instructions for the exercise of voting
rights at any such meeting, or otherwise; or
- receive notice of the mandatory redemption of the preferred stock,
subject to the provisions of the deposit agreement.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of the depositary receipts to the depositary, unless the
related depositary shares have been previously called for redemption, the holder
of the depositary shares evidenced thereby is entitled to delivery at such
office to or upon his or her order of the number of whole shares of preferred
stock and any money or other property represented by such depositary shares or
cash in lieu of fractional shares. Holders of depositary shares will be entitled
to receive whole shares of preferred stock on the basis of one share of
preferred stock for each ten depositary shares. Upon surrender of their
depositary receipts, the holder will receive one or more certificates
representing the number of whole shares of preferred stock to be withdrawn, and
one or more receipts for the depositary shares representing the number of whole
shares of preferred stock not to be withdrawn. If the depositary receipts
delivered by the holder evidence a number of depositary shares in excess of the
number of depositary shares representing the number of whole shares of preferred
stock to be withdrawn, the depositary will deliver to such holder at the same
time a new depositary receipt or receipts evidencing such excess number of
depositary shares. InfoCure does not expect that there will be any public
trading market for the preferred stock.
REDEMPTION OR CONVERSION OF DEPOSITARY SHARES
As described under "Description of the Preferred Stock -- Redemption" and
"-- Conversion Rights," the preferred stock is subject to InfoCure's obligation
to redeem all of the preferred stock for cash on the fifth anniversary of the
date it is issued pursuant to the terms of the merger agreement and the holders'
right at any time to convert the preferred stock into common stock at their
option. The depositary shares are subject to
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redemption or conversion upon the same terms and conditions as the preferred
stock held by the depositary using the common stock received by the depositary,
except that the number of shares of common stock received upon conversion of
each depositary share will be equal to one-tenth of the number of shares of
common stock received upon conversion of each share of the preferred stock. To
effect a conversion, a holder of depositary shares must deliver depositary
receipts evidencing the depositary shares to be converted, together with written
notice of conversion and a proper assignment of the depositary receipts to
InfoCure or in blank to the depositary or its agent. At such time, InfoCure will
deliver to the holder a certificate or certificates representing the number of
whole shares of common stock to which the holder is entitled, along with any
other money or property to which the holder is entitled. Each conversion of
depositary shares shall be deemed to have been effected immediately prior to the
close of business on the date on which the foregoing requirements have been
satisfied. To the extent that depositary shares are converted into shares of
common stock and all such shares of common stock cannot be distributed to the
record holders of depositary receipts without creating fractional interests in
such shares, InfoCure will cause the depositary to distribute cash to holders in
lieu of fractional shares of common stock as provided above under "Description
of the Depositary Shares -- General." The amount distributed in the foregoing
case will be reduced by any amount required to be withheld by us or the
depositary on account of taxes or otherwise required pursuant to law, regulation
or court process. If fractional shares of common stock would be issuable upon
conversion of the preferred stock, InfoCure will pay to each holder, in lieu of
shares of InfoCure common stock, cash equal to the closing price of InfoCure
common stock on the trading day immediately prior to the conversion date
multiplied by the fractional interest.
PAYMENT AND CONVERSION
All amounts payable in cash with respect to the depositary shares will be
payable in United States dollars at InfoCure's office or agency maintained for
such purpose with the City of Atlanta or, at our option, payment of dividends,
will be made by check mailed to the holders of the depositary shares at their
respective addresses set forth in the register of holders of the depositary
shares maintained by the depositary.
Any payment on the depositary shares due on any day that is not a business
day need not be made on such day, but may be made on the succeeding business day
with the same force and effect as if made on such due date.
VOTING OF PREFERRED STOCK
Upon receipt by the depositary of notice of any meeting at which holders of
preferred stock are entitled to vote or upon receipt of any written consent to
which holders of preferred stock are entitled to give their consent, the
depositary will mail the information contained in such notice of meeting or
consent to the record holders of the depositary shares relating to preferred
stock. Each record holder of such depositary shares on the record date (which
will be the same date as the record date of the preferred stock) will be
entitled to instruct the depositary as to the exercise of the voting rights
pertaining to the amount of shares of preferred stock represented by such
holder's depositary shares. The depositary will use best efforts insofar as
practicable, to vote the amount of shares of preferred stock represented by such
depositary shares in accordance with such instructions and we will agree to take
all reasonable action which may be deemed necessary by the depositary in order
to enable the depositary to do so. The depositary will abstain from
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voting preferred stock to the extent it does not receive specific instructions
from the holders of depositary shares representing preferred stock.
Each depositary share shall entitle the holder thereof to instruct the
depositary to cast a one-tenth of a share of preferred stock vote on each matter
submitted to a vote of holders of preferred stock or InfoCure common stock. See
"Description of the Preferred Stock -- Voting Rights."
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may at any time be amended by agreement
between InfoCure and the depositary. However, any amendment which materially and
adversely alters the rights of the holders of depositary shares will not be
effective unless approved by the holders of at least a majority of the
depositary shares then outstanding. In no event may any amendment impair the
right of any holder of depositary receipts, subject to the conditions specified
in the deposit agreement, upon such surrender of the depositary receipts
evidencing such depositary shares, to receive shares of preferred stock or upon
conversion of the preferred stock represented by the depositary receipts, to
receive shares of common stock, and in each case any money or other property
represented thereby, including any accumulated dividends and return of the
liquidation preference (as defined below in "Description of the Preferred
Stock -- Selected Definitions"), except in order to comply with mandatory
provision of applicable law. Every holder of depositary receipts at the time any
such amendment becomes effective shall be deemed to consent and agree to such
amendment and to be bound by the deposit agreement.
The deposit agreement may be terminated by InfoCure or the depositary only
if:
- all outstanding depositary shares have been redeemed, converted or
exchanged for shares of preferred stock of PracticeWorks; or
- there has been a final distribution in respect of the preferred stock in
connection with any liquidation, dissolution or winding up of InfoCure
and such distribution has been distributed to the holders of depositary
receipts.
The depositary may terminate the deposit agreement if at any time 90 days
shall have expired after the depositary shall have delivered to InfoCure a
written notice of its election to resign and a successor depositary shall not
have been appointed and accepted its appointment. If any depositary receipts
remain outstanding after the date of termination, the depositary thereafter will
discontinue the transfer of depositary receipts, will suspend the distribution
of dividends to the holders thereof, and will not give any further notices
(other than notices of such termination) or perform any further acts under the
deposit agreement except as provided below and except that the depositary will
continue to:
- collect dividends on the preferred stock and any other distributions with
respect thereto, and
- deliver the preferred stock together with such dividends and
distributions and the net proceeds of any sales of rights, preferences,
privileges or other property, without liability for interest thereon, in
exchange for depositary receipts surrendered.
At any time after the expiration of two years from the date of termination,
the depositary may sell the preferred stock then held by it at public or private
sales, at such
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place or places and upon such terms as it deems proper and may thereafter hold
the net proceeds of any such sale, together with any money and other property
then held by it, without liability for interest thereon, for the pro rata
benefit of the holders of depositary receipts which have not been surrendered.
InfoCure does not intend to terminate the deposit agreement or to permit
the resignation of the depositary without appointing a successor depositary.
CHARGES OF DEPOSITARY
InfoCure will pay all transfer and other governmental charges arising
solely from the existence of the depositary arrangements. InfoCure will pay
charges of the depositary in connection with the initial deposit of the
preferred stock, and any redemption of such preferred stock. Holders of
depositary receipts will pay transfer and other taxes and governmental charges
and such other charges as are expressly provided in the deposit agreement to be
for their accounts. The depositary may refuse to effect any transfer of a
depositary receipt or any withdrawal of preferred stock evidenced thereby until
all such taxes and charges with respect to such depositary receipt or such
preferred stock are paid by the holder thereof.
MISCELLANEOUS
The depositary will forward to holders of preferred stock all reports and
communications from InfoCure which are delivered to the depositary and which
InfoCure is required to furnish to the holders of preferred stock.
The deposit agreement will be governed by, and construed in accordance
with, the laws of the State of Delaware. Neither the depositary nor InfoCure
will be liable if it is prevented or delayed by law or any circumstances beyond
its control in performing its obligations under the deposit agreement.
InfoCure's obligations and those of the depositary under the deposit agreement
will be limited to performance in good faith of their and InfoCure's duties
thereunder and neither InfoCure nor the depositary will be obligated to
prosecute or defend any legal proceeding in respect of any depositary shares or
preferred stock unless satisfactory indemnity is furnished. They may rely on
written advice of counsel or accountants, or information provided by persons
presenting preferred stock for deposit, holders of depositary shares or other
persons believed to be competent and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to InfoCure notice of
its election to do so, and InfoCure may at any time remove the depositary. Any
such resignation or removal of the depositary will take effect upon the
appointment of a successor depositary, which successor depositary must be
appointed within 60 days after delivery of the notice of resignation or removal
and must be a bank or trust company having its principal office in the United
States and having a combined capital and surplus of at least $50.0 million.
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DESCRIPTION OF THE PREFERRED STOCK
GENERAL
Under InfoCure's certificate of incorporation, InfoCure's board of
directors is authorized, without further stockholder action to provide for the
issuance of up to a total of 2,000,000 shares of preferred stock, par value
$0.001 per share, in one or more series, with such voting powers or without
voting powers, and with such designations, preferences, rights, qualifications,
limitations and restrictions as shall be set forth in the resolutions providing
therefor. Immediately prior to the consummation of the merger, no shares of any
series of our preferred stock will be outstanding.
InfoCure is authorized for issuance to stockholders of Medical Dynamics,
without any further stockholder action required, 1,000,000 shares of InfoCure's
preferred stock, designated as series A convertible redeemable preferred stock.
The preferred stock will be represented by depositary shares and depositary
receipts (as each is defined above in "Description of Depositary
Shares -- General"), the terms of which are described above in the same. Each
depositary share represents one-tenth of a share of preferred stock. The holders
of the preferred stock (and the corresponding depositary shares) will have no
preemptive rights with respect to any shares of InfoCure's capital stock or any
of InfoCure's other securities which are convertible into or carrying rights or
options to purchase any such shares. The preferred stock will, when issued, be
fully paid and nonassessable.
The transfer agent, registrar, redemption, conversion and dividend
disbursing agent for shares of the preferred stock (and the corresponding
depositary shares) will initially be StockTrans, Inc. StockTrans will also serve
as the depositary. (See above in "Description of Depositary Shares"). The
transfer agent will send notices to stockholders of any special meetings at
which holders of the preferred stock have the right to vote. See "-- Voting
Rights" below.
Set forth below is a description of the terms of the preferred stock. The
following summary of the preferred stock does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the provisions of
InfoCure's certificate of incorporation and the certificate of designation,
which constitutes part of InfoCure's certificate of incorporation and sets forth
rights and designations of the preferred stock.
SELECTED DEFINITIONS
"CLOSING PRICE" for each day shall mean on such day the reported last sales
price for the InfoCure common stock or, in case no sale takes place on such day,
the average of the reported closing bid and asked prices for the common stock,
in either case as reported on The Nasdaq National Market, or if the common stock
is not quoted on The Nasdaq National Market, on the principal national
securities exchange on which the common stock shall then be listed or admitted
for trading or, if not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices for the common stock
on such day in the over-the-counter market as reported by Nasdaq or, if bid and
asked prices for the common stock on each such date shall not have been reported
by Nasdaq, the average of the bid and asked prices of the common stock for such
day as furnished by any New York Stock Exchange member firm regularly making a
market in the common stock selected for such purpose by InfoCure's board of
directors or, if no such
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quotations are available, the fair market value (as defined) of the common stock
furnished by any New York Stock Exchange member firm selected from time to time
by InfoCure's board of directors for that purpose.
"CONVERSION NOTICE" shall mean the written notice to the transfer agent
that the holder of preferred stock elects to convert all or a specified portion
of their preferred stock.
"CURRENT MARKET PRICE" per share of common stock on any date means the
average of the daily closing prices for the 30 consecutive trading days
commencing 45 trading days before the date of determination.
"DISTRIBUTION" shall mean the transfer of the assets and liabilities of
InfoCure's dental operating division to PracticeWorks, Inc., an indirect wholly
owned subsidiary of InfoCure, and the pro rata distribution of PracticeWorks'
common stock to the holders of InfoCure's common stock.
"FAIR MARKET VALUE" means fair market value as determined in good faith by
InfoCure's board of directors, after consultation with an investment banker of
recognized national standing, which determination shall be evidenced by a
resolution of InfoCure's board of directors.
"LIQUIDATION PREFERENCE" means an amount equal to $5.44 per share of
preferred stock, subject to change in accordance with the terms of the
certificate of designation.
"TRADING DAY" with respect to common stock means (1) if the common stock is
quoted on The Nasdaq National Market, or any similar system of automated
dissemination of quotations or securities prices, a day on which trades may be
made on such system, (2) if the common stock is listed or admitted for trading
on the New York Stock Exchange or another a national securities exchange, a day
on which the New York Stock Exchange or such other national securities exchange
is open for business, (3) if not quoted or listed as described in clause (1) and
(2), days on which quotations are reported by the National Quotation Bureau
Incorporated or (4) otherwise, any business day.
RANKING
InfoCure may issue a class or series of stock which may rank senior to,
pari passu with, or junior to the preferred stock with respect to dividends or
amounts distributable upon liquidation, dissolution or winding up.
DIVIDENDS
Holders of the preferred stock will be entitled to receive cumulative
dividends from the date on which the shares of preferred stock are issued at an
annual rate of 6% on the amount of the then effective liquidation preference of
the shares of preferred stock. Dividends will be payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year commencing December
31, 2000, for so long as any shares of preferred stock (and the corresponding
depositary shares) are outstanding. InfoCure may, in its sole discretion, elect
to pay dividend payments on any dividend payment date in either cash or common
stock. InfoCure will take all actions required or permitted under the General
Corporation Law of the state of Delaware to permit the payment of dividends on
the shares of preferred stock on the dividend payment date. Dividends will
accrue on a daily basis whether or not InfoCure has earnings or profits, whether
or not there are funds legally available for the payment of such dividends and
whether or not the dividends are
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declared. If any dividend payable on any dividend payment date is not declared
and paid in full on such dividend payment date, the amount so payable, to the
extent not paid, shall automatically, without any action on the part of InfoCure
or the holders of the shares of preferred stock, be added to the then effective
liquidation preference on the first business day following such dividend payment
date. Notwithstanding anything else contained herein, once any dividends for the
preceding dividend period are added to the then effective liquidation
preference, such dividends shall no longer be payable in cash or common stock
and such dividends shall be deemed to have been fully paid. For any dividend
period for which InfoCure elects to pay dividends on the preferred stock (and
the corresponding depositary shares) in InfoCure common stock, the number of
shares of common stock payable on each share shall be equal to the dividend due
per share divided by the average of the closing prices of the common stock on
the 20 consecutive trading days ending on the trading day immediately prior to
the dividend payment date for such dividend period. No fractional shares of
common stock shall be issued as dividends on the preferred stock (and the
corresponding depositary shares), and in lieu of any fractional shares to which
the holder would otherwise be entitled, InfoCure shall pay cash to such holder.
If fractional shares of common stock would be issuable in connection with
dividend payments, InfoCure will pay to each holder cash in lieu of such
fractional shares. Except as otherwise provided herein, if at any time InfoCure
pays less than the total amount of dividends then accrued with respect to the
preferred stock (and the corresponding depositary shares), such payment shall be
distributed pro rata among the holders thereof based upon the number of shares
of preferred stock (and the corresponding depositary shares) held by each such
holder.
The amount of dividends payable for each full dividend period for the
preferred stock will be computed by multiplying the annual dividend rate by the
liquidation preference as of the first day of the dividend period and dividing
the product therefrom by four (rounding down to the nearest cent). The amount of
dividends payable for the initial dividend period on the preferred stock (and
the corresponding depositary shares), or any other period shorter or longer than
a full dividend period on the preferred stock (and the corresponding depositary
shares) shall be computed on the basis of a 360-day year consisting of twelve
30-day months. Holders of shares of preferred stock (and the corresponding
depositary shares) to be redeemed on a redemption date falling between the close
of business on a dividend payment record date and the opening of business on the
corresponding dividend payment date shall, in lieu of receiving such dividend on
the dividend payment date fixed therefor, receive such dividend payment together
will all other accrued and unpaid dividends on the date fixed for redemption
(unless such holder converts such shares in accordance with the terms of the
certificate of designations). Holders of shares of preferred stock shall not be
entitled to any dividends, whether payment in cash, property or securities, in
excess of the dividends on the preferred stock (and the corresponding depositary
shares) provided for herein. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on the preferred
stock (and the corresponding depositary shares) which are in arrears.
Notwithstanding any provision to the contrary contained in the certificate
of designation, InfoCure is not obligated or permitted to pay any dividends on
the preferred stock (and the corresponding depositary shares) to the extent that
InfoCure is prohibited from doing so under any agreements, documents or
instruments related to any outstanding indebtedness for borrowed money of
InfoCure or any of its subsidiaries.
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LIQUIDATION PREFERENCE
In the event that InfoCure liquidates, dissolves or winds up, whether
voluntary or involuntary, before any payment or distribution of its assets
(whether capital or surplus) shall be made to or set apart for the holders of
InfoCure common stock or any other series or class or classes of InfoCure stock
ranking junior to the preferred stock upon liquidation, dissolution or winding
up, the holders of the shares of preferred stock shall be entitled to receive
the greater of (1) the then effective liquidation preference, plus an amount per
share equal to all dividends (whether or not or declared) accrued and unpaid
thereon to the date of final distribution to such holders, or (2) the amount per
share that would be distributed among the holders of the preferred stock (and
the corresponding depositary shares) and common stock pro rata based on the
number of shares of common stock held by each holder assuming conversion of all
shares of preferred stock (and the corresponding depositary shares). InfoCure
will make no payment on account of any liquidation, dissolution or winding up of
its operations to the holders of any class or series of stock ranking on a
parity with the preferred stock in respect of the distribution of assets upon
dissolution, liquidation or winding up unless there will likewise be paid at the
same time to the holders of the preferred stock (and the corresponding
depositary shares) like proportionate amounts determined ratably in proportion
to the full amounts to which the holders of all outstanding shares of preferred
stock (and the corresponding depositary shares) and the holders of all
outstanding shares of such parity stock are respectively entitled with respect
to such distribution. If, upon InfoCure's liquidation, dissolution or winding up
of operations, InfoCure's assets or proceeds thereof, distributable among the
holders of the shares of preferred stock shall be insufficient to pay in full
the preferential amount aforesaid and liquidating payments on any other shares
of stock ranking, as to liquidation, dissolution or winding up, on a parity with
the preferred stock, then such assets, or the proceeds thereof, shall be
distributed among the holders of shares of preferred stock (and the
corresponding depositary shares) and any such other parity stock ratably in
accordance with the respective amounts which would be payable on such shares of
preferred stock (and the corresponding depositary shares) and any such other
stock if all amounts payable thereof were paid in full. For purposes of the
certificate of designation, (1) a consolidation or merger of InfoCure with one
or more corporations or other entities; (2) a sale, lease, exchange or transfer
of all or any part of InfoCure's assets; (3) a statutory share exchange or (4)
the distribution of PracticeWorks common stock to InfoCure's stockholders are
not deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary.
Subject to the rights of the holders of shares of any series or class or
classes of stock ranking on a parity with or senior to the preferred stock upon
liquidation, dissolution or winding up, upon any liquidation, dissolution or
winding up of InfoCure, after payment shall have been made in full to the
holders of preferred stock (and the corresponding depositary shares), as
provided in the certificate of designations, any other series or class or
classes of stock ranking junior to the preferred stock upon liquidation,
dissolution or winding up shall, subject to the respective terms and provisions
(if any) applying thereto, be entitled to receive any and all assets remaining
to be paid or distributed, and the holders of preferred stock (and the
corresponding depositary shares) shall not be entitled to share therein.
InfoCure shall give written notice of liquidation, dissolution or winding
up, stating the payment date or dates and the place or places where the amounts
distributable in such circumstances shall be payable, by first class mail,
postage prepaid, not less than 30 days
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prior to any payment date stated therein, to the holders of record of the
preferred stock (and the corresponding depositary shares) at their respective
addresses as the same shall appear on our stock record books.
REDEMPTION
On the fifth anniversary of the date the shares of preferred stock (and the
corresponding depositary shares) are issued in the merger InfoCure will redeem
all outstanding shares of preferred stock (and the corresponding depositary
shares) in cash at a price per share equal to the then effective liquidation
preference plus an amount equal to all accrued and unpaid dividends (whether or
not declared) on the redemption date. Prior to the redemption date, InfoCure
will give notice of redemption not less than 30 nor more than 60 days prior to
the redemption date, which shall set forth the material terms of the redemption
as required by the certificate of designation.
If funds legally available for redemption shall be insufficient to redeem
all of the outstanding shares of preferred stock (and the corresponding
depositary shares), funds to the extent legally available shall be used for such
purpose and InfoCure shall effect such redemption pro rata according to the
number of outstanding shares of preferred stock (and the corresponding
depositary shares) held by each holder thereof. The redemption requirements
provided hereby shall be continuous, so that if such requirements cannot be
fully discharged, without further action by any holder of the preferred stock
(and the corresponding depositary shares), funds legally available shall be
applied therefor until such requirements are fulfilled.
On or after the redemption date, each holder of shares of preferred stock
(and the corresponding depositary shares) shall surrender a certificate or
certificates representing the number of shares of the preferred stock (and the
corresponding depositary shares) to be redeemed as stated in the redemption
notice. If the redemption notice shall have been duly given, unless InfoCure has
been in default in providing money for the payment of the redemption price
(including any accrued and unpaid dividends to (and including) the redemption
date), (1) dividends on the shares of the preferred stock (and the corresponding
depositary shares) to be redeemed will cease to accrue on the redemption date,
(2) said shares shall be deemed no longer outstanding, and (3) all rights of the
holders thereof as stockholders of InfoCure, except the right to receive from us
the monies payable upon redemption without interest thereon, shall cease on the
redemption date, or if earlier, on the date specified in the following sentence.
InfoCure's obligation to provide monies in accordance with the preceding
sentence will be deemed fulfilled if, on or before the redemption date, InfoCure
deposits with a bank or trust company funds necessary for such redemption, in
trust for the account of the holders of the shares to be redeemed (and so as to
be and continue to be available therefor), with irrevocable instructions and
authority to such bank or trust company that such funds be applied to the
redemption of the shares of preferred stock (and the corresponding depositary
shares) to be so redeemed. Any interest accumulated on such funds will be paid
to InfoCure from time to time. Any funds so deposited and unclaimed at the end
of two years from the redemption date will be released or repaid to InfoCure,
after which, subject to any applicable laws relating to escheat or unclaimed
property, the holder or holders of such shares of preferred stock (and the
corresponding depositary shares) so called for redemption will look only to
InfoCure for payment of the redemption price.
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Upon surrender in accordance with the notice of redemption of the
certificates for the shares so redeemed, InfoCure will redeem such shares at the
applicable redemption price aforesaid. There is no restriction on the redemption
of the preferred stock while there is an arrearage in the payment of dividends.
Notwithstanding any provision to the contrary in the certificate of
designations, InfoCure shall not be obligated or permitted to redeem or
otherwise acquire any shares of preferred stock (and the corresponding
depositary shares) to the extent that it is prohibited from doing so under any
agreements, documents or instruments related to any outstanding indebtedness for
borrowed money of InfoCure or any of its subsidiaries.
CONVERSION RIGHTS
Holders of shares of preferred stock (and the corresponding depositary
shares) will have the right to convert all or a portion of such shares,
including fractions of such shares, into shares of InfoCure common stock, as
follows:
A holder of shares of preferred stock (and the corresponding depositary
shares) will have the right, at such holder's option, at any time to convert any
of such shares (or fractions thereof) into the number of fully paid and
nonassessable shares of InfoCure common stock, calculated as to each conversion
to the nearest 1/100th of a share, obtained by dividing the aggregate of the
then effective liquidation preference of the shares to be converted by the
conversion price, which is initially $20.00 and subject to adjustment, and by
surrender of such shares; provided, however, that the right to convert shares
subject to a notice of redemption will terminate at the close of business on (i)
the redemption date, or (ii) if InfoCure so elects and states in the notice of
redemption, the business day immediately before the date (which date shall be
the redemption date or any earlier date not less than 30 days after the date of
mailing of the redemption notice) on which InfoCure irrevocably deposits with a
designated bank or trust company as paying agent, money sufficient to pay, on
the redemption date, the redemption price for the shares of preferred stock (and
the corresponding depositary shares) to be redeemed. If a part of a share of
preferred stock (and the corresponding depositary shares) is converted, then
InfoCure will convert such share into the appropriate number of shares of
InfoCure's common stock, and cash instead of fractional shares of common stock,
and issue a fractional share of preferred stock (and corresponding depositary
shares) evidencing the remaining interest of such holder.
Holders of shares of preferred stock (and the corresponding depositary
shares) at the close of business on the record date to set the dividend payment
date shall be entitled to receive the dividend payable on such shares on the
corresponding dividend payment date (unless the redemption date is between the
close of business on such record date and the opening of business on the
corresponding dividend payment date in which case, in lieu of receiving such
dividend on the dividend payment date fixed therefor, the holder of such shares
will receive such dividend payment together with all other accrued and unpaid
dividends on the redemption date, unless such holder first converts such shares
pursuant to the provisions of the certificate of designation) notwithstanding
the conversion thereof following such dividend payment record date and prior to
such dividend payment date.
As promptly as practicable after the surrender of certificates for shares
of preferred stock (and the corresponding depositary shares) as aforesaid,
InfoCure will issue and deliver at such office to such holder, or on such
holder's written order, a certificate or certificates for the number of shares
of common stock issuable upon the conversion of such
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shares, and any fractional interest in respect of a share of common stock
arising upon such conversion, as the case may be.
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the written notice of conversion (as
delivered to the transfer agent) shall have been received by InfoCure, and the
person or persons in whose name or names any certificate or certificates for
shares of common stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares represented thereby at
such time on such date and such conversion shall be at the conversion price in
effect at such time on such date, unless the stock transfer books of InfoCure
shall be closed on that date, in which event such person or persons shall be
deemed to have become such holder or holders of record at the close of business
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the conversion price in effect at the close of business
on the date prior to the date the conversion notice is received. All shares of
common stock delivered upon conversion of the preferred stock (and the
corresponding depositary shares) will upon delivery be duly and validly issued
and fully paid and nonassessable.
In connection with the conversion of any shares of preferred stock (and the
corresponding depositary shares), fractions of such shares may be converted;
however, no fractional shares or scrip representing fractions of shares of
common stock shall be issued upon conversion of the preferred stock (and the
corresponding depositary shares). Instead of any fractional interest in a share
of common stock which would otherwise be deliverable upon the conversion of a
share (or fraction thereof) of preferred stock (and the corresponding depositary
shares), InfoCure will pay to the holder of such share an amount in cash
(computed to the nearest cent) equal to the closing price of InfoCure's common
stock on the trading day immediately preceding the day of conversion multiplied
by the fraction of a share of common stock represented by such fractional
interest. If more than one share (or fraction thereof) shall be surrendered for
conversion at one time by the same holder, the number of full shares of common
stock issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of preferred stock (and the corresponding depositary
shares) so surrendered.
In connection with the conversion of any shares of preferred stock (and the
corresponding depositary shares), fractions of such shares may be converted;
however, no fractional shares or scrip representing fractions of shares of
common stock shall be issued upon conversion of the preferred stock (and the
corresponding depositary shares). Instead of any fractional interest in a share
of common stock which would otherwise be deliverable upon the conversion of a
share of preferred stock (or the corresponding depositary shares), or a fraction
thereof, InfoCure shall pay to the holder of such share an amount in cash
(computed to the nearest cent) equal to the closing price of common stock on the
trading day immediately preceding the day of conversion multiplied by the
fraction of a share of common stock represented by such fractional interest. If
more than one share (or fraction thereof) shall be surrendered for conversion at
one time by the same holder, the number of full shares of common stock issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of shares of preferred stock (and the corresponding depositary shares) so
surrendered.
InfoCure may not consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets to, any entity unless the holders of a majority of the then outstanding
shares of preferred stock (and the corresponding depositary shares) consent
thereto, or (1) if InfoCure is the surviving or
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continuing entity, the preferred stock (and the corresponding depositary shares)
shall remain outstanding without any amendment that would adversely affect the
preferences, rights or powers of the preferred stock, provided that the
preferred stock (and the corresponding depositary shares) will thereafter no
longer be subject to conversion into common stock pursuant to the terms of the
certificate of designations, but each share of preferred stock (and the
corresponding depositary shares) instead shall be convertible into the kind of
shares of stock and other securities and property receivable (including cash)
upon the consummation of such transaction by a holder of that number of shares
or fractions thereof of common stock into which one share of preferred stock
(and the corresponding depositary shares) was convertible immediately prior to
such transaction with the amount of shares of stock and other securities and
property to be received determined based upon the conversion price and
liquidation preference on the date of conversion, (2) if InfoCure is not the
surviving or continuing person, (a) the entity formed by such consolidation or
merger or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made (in any such case, the "resulting entity") is a
corporation organized and existing under the laws of any State of the United
States; and (b) the shares of preferred stock (and the corresponding depositary
shares) are converted into or exchanged for and become shares of such resulting
entity, having in respect of such resulting entity the same (or more favorable)
powers, preferences and relative, participating, optional or other special
rights that the shares of preferred stock had immediately prior to such
transaction, provided that the preferred stock (and the corresponding depositary
shares) will thereafter no longer be subject to conversion into common stock
pursuant to the certificate of designations, but instead each share of preferred
stock (and the corresponding depositary shares) shall be convertible into the
kind of shares of stock and other securities and property receivable (including
cash) upon the consummation of such transaction by a holder of that number of
shares or fractions thereof of common stock into which one share of preferred
stock (and the corresponding depositary shares) was convertible immediately
prior to such transaction with the amount of shares of stock and other
securities and property to be received determined based upon the conversion
price and liquidation preference on the date of conversion; and (3) InfoCure
shall have delivered to the transfer agent an officers' certificate and an
option of counsel, reasonably satisfactory in form and content, each stating
that such consolidation, merger, conveyance or transfer complies with the terms
of the certificate of designations and that all conditions precedent herein
provided for relating to such transaction have been complied with. These
provisions of this paragraph shall similarly apply to successive transactions.
These provisions shall not apply to the distribution of the PracticeWorks common
stock.
CONVERSION PRICE ADJUSTMENT
The conversion price shall be adjusted from time to time as follows;
provided however, the consummation of the distribution of the PracticeWorks
common stock will not result in a conversion price adjustment to the preferred
stock (or the corresponding depositary shares):
- If InfoCure should, after the issue date (1) pay a dividend or make a
distribution on its common stock in shares of InfoCure common stock, (2)
subdivide or split InfoCure outstanding common stock into a greater
number of shares, (3) combine InfoCure outstanding common stock into a
smaller number of shares or (4) issue any shares of capital stock by
reclassification of InfoCure common stock, the conversion price in effect
immediately prior thereto will be adjusted so that the
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holder of any share of preferred stock (and the corresponding depositary
shares) thereafter surrendered for conversion will be entitled to receive
the number of shares of InfoCure common stock which such holder would
have owned or have been entitled to receive after the occurrence of any
of the events described above had such share been surrendered for
conversion immediately prior to the occurrence of such event or the
record date therefor, whichever is earlier. An adjustment made pursuant
to this paragraph will become effective immediately after the close of
business on the record date for determination of stockholders entitled to
receive such dividend or distribution in the case of a dividend or
distribution, except as provided elsewhere in the certificate of
designation, and shall become effective immediately after the close of
business on the effective date in the case of a subdivision, split,
combination or reclassification. Any shares of common stock issuable in
payment of a dividend shall be deemed to have been issued immediately
prior to the close of business on the record date for such dividend for
purposes of calculating the number of outstanding shares of common stock
below.
- If InfoCure should issue after the issue date rights or warrants to all
holders of common stock entitling them (for a period expiring within 45
days after the issuance date) to subscribe for or purchase common stock
at a price per share less than the current market price per share of
common stock at the record date for the determination of stockholders
entitled to receive such rights or warrants, then the conversion price in
effect immediately prior thereto will be adjusted to equal the price
determined by multiplying (1) the conversion price in effect immediately
prior to the date of issuance of such rights or warrants by (2) a
fraction, the numerator of which will be the sum of (a) the number of
shares of common stock outstanding on the date of issuance of such rights
or warrants (without giving effect to any such issuance) and (b) the
number of shares which the aggregate proceeds from the exercise of such
rights or warrants for common stock would purchase at such current market
price, and the denominator of which will be the sum of (1) the number of
shares of common stock outstanding on the date of issuance of such rights
or warrants (without giving effect to any such issuance) and (2) the
number of additional shares of common stock that are subject to such
rights or warrants. Such adjustment will be made successively whenever
any such rights or warrants are issued, and will become effective
immediately after such record date. In determining whether any rights or
warrants entitle the holders of common stock to subscribe for or purchase
shares of common stock at less than such current market price, there
shall be taken into account the fair market value of any consideration
received by us upon issuance and upon exercise of such rights or
warrants.
- If InfoCure should pay a dividend or make a distribution to all holders
of its common stock after the issue date of any shares of its capital
stock or its subsidiaries (other than in InfoCure common stock) or
evidences of indebtedness or assets (excluding cash dividends payable
solely in cash that may from time to time be fixed by InfoCure's board of
directors, or dividends or distributions in connection with liquidation,
dissolution or winding up) or rights or warrants to subscribe for or
purchase any of its securities or those of its subsidiaries (excluding
those referred to above), then in each such case, the conversion price
will be adjusted so that it shall equal the price determined by
multiplying (A) the conversion price in effect on the record date
mentioned below by (B) a fraction, the numerator of which shall be the
current market price per share of the common stock on the record date
mentioned below less the then fair market value as of such record date of
the portion of the
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capital stock or assets or evidences of indebtedness so distributed or of
such rights or warrants applicable to one share of common stock, and the
denominator of which will be the current market price per share of the
common stock on such record date; provided, however, that in the event
the then fair market value of the portion of securities so distributed
applicable to one share of common stock is equal to or greater than the
Current Market Price per share of common stock on the record date
mentioned above, in lieu of the foregoing adjustment, adequate provision
shall be made so that each holder of shares of Series A Preferred Stock
(and the corresponding Depositary Shares) shall have the right to receive
the amount and kind of Securities such holder would have received had
such holder converted each such share of Series A Preferred Stock (and
the corresponding depositary shares) immediately prior to the record date
for the distribution of the securities. Such adjustment shall become
effective immediately, except as provided elsewhere in the certificate of
designation, after the record date for the determination of stockholders
entitled to receive such distribution.
- Notwithstanding anything in the second and third bullet points above, if
rights or warrants, the distribution of which results an adjustment under
either of such subparagraphs shall by their terms provide for an increase
or increases with the passage of time or otherwise in the price payable
to InfoCure upon the exercise thereof, the conversion price upon any such
increase becoming effective shall forthwith be readjusted (but to no
greater extent than originally adjusted by reason of such issuance or
sale) to reflect the same. Upon the expiration or termination of such
rights or warrants, if any such rights or warrants shall not have been
exercised, then the conversion price shall forthwith be readjusted and
thereafter be the rate which it would have been had an adjustment been
made on the basis that (1) the only rights or warrants so issued or sold
were those so exercised and they were issued or sold for the
consideration actually received by us upon such exercise plus the
consideration, if any, actually received by InfoCure for the granting of
all such options, rights or warrants whether or not exercised and (2)
InfoCure issued and sold a number of shares of common stock equal to
those actually issued upon exercise of such rights, and such shares were
issued and sold for a consideration equal to the aggregate exercise price
in effect under the exercise rights actually exercised at the respective
dates of their exercise. For purposes of the second and third bullets
above, the aggregate consideration received by InfoCure in connection
with the issuance of shares of common stock or of rights or warrants
shall be deemed to be equal to the sum of the aggregate offering price
(before deduction of underwriting discounts or commissions and expenses
payable to third parties) of all such securities plus the minimum
aggregate amount, if any, payable upon the exercise of such rights or
warrants into shares of common stock.
- If InfoCure should, by dividend or otherwise, at any time distribute to
all holders of InfoCure's common stock cash, excluding distributions
specified in the certificate of designation, in an aggregate amount that,
together with (1) the aggregate amount of any other distributions to all
holders of the common stock made exclusively in cash within the 12 months
preceding the date fixed for the determination of stockholders entitled
to such distribution and in respect of which no conversion price
adjustment pursuant to the third bullet point above or this bullet point
has been made previously and (2) the aggregate of any cash plus the fair
market value as of such date of determination of consideration payable in
respect of any tender or exchange offer by InfoCure or a subsidiary for
all or any portion of the common
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stock consummated within 12 months preceding such date of determination
and in respect of which no conversion price adjustment pursuant to the
sixth bullet point below has been made previously, exceeds the greater of
(a) 1% of the product of the current market price per share of common
stock on such date of determination multiplied by the number of shares of
common stock outstanding on such date or (b) 5% of our net income
reported for the 12 month period ending with the fiscal quarter next
preceding such payment, then in each such case the conversion price shall
be reduced so that it shall equal the price obtained by multiplying the
conversion price in effect immediately prior to the close of business on
such date of determination by a fraction of which the numerator shall be
the current market price per share of common stock on such date less the
amount of cash to be distributed at such time applicable to one share of
common stock and the denominator shall be such current market price, such
reduction to become effective immediately prior to the opening of
business on the day after such date; provided, however, that in the event
the portion of the cash so distributed applicable to one share of common
stock is equal to or greater than the current market price per share of
common stock on the record date mentioned above, in lieu of the foregoing
adjustment, adequate provision shall be made so that each holder of
shares of preferred stock (and the corresponding depositary shares) shall
have the right to receive the amount of cash such holder would have
received had such holder converted each such share of preferred stock
(and the corresponding depositary shares) immediately prior to the record
date for such distribution.
- If a tender or exchange offer made by InfoCure or any subsidiary for all
or any portion of the common stock shall be consummated and such tender
or exchange offer shall involve an aggregate consideration having a fair
market value as of the last time that tenders or exchanges may be made
pursuant to such tender or exchange offer (as it shall have been amended)
that, together with (1) the aggregate of the cash plus the fair market
value as of the expiration time of the other consideration paid in
respect of any other tender or exchange offer by InfoCure or a subsidiary
for all or any portion of the common stock consummated within the 12
months preceding the expiration time and in respect of which no
conversion price adjustment pursuant to this bullet has been made
previously and (2) the aggregate amount of any distributions to all
holders of the common stock made exclusively in cash within the 12 months
preceding the expiration time and in respect of which no conversion price
adjustment pursuant to the third and fifth bullets above has been made
previously, exceeds the greater of (a) 1% of the product of the current
market price per share of common stock on such date of determination
multiplied by the number of shares of common stock outstanding on such
date or (b) 5% of InfoCure's net income reported for the 12 month period
ending with the fiscal quarter next preceding such payment, then in each
such case the conversion price shall be reduced so that it shall equal
the price obtained by multiplying the conversion price in effect
immediately prior the expiration time by a fraction of which the
numerator shall be (x) the product of the current market price per share
of common stock immediately prior to the expiration time multiplied by
the number of shares of common stock outstanding (including any tendered
or exchanged shares) at the expiration time minus (y) the fair market
value of the aggregate consideration payable to stockholders upon
consummation of such tender or exchange offer and the denominator shall
be the product of (A) such current market price multiplied by (B) such
number of outstanding shares at the expiration time minus the number of
shares accepted for payment in
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such tender or exchange offer, such reduction to become effective
immediately prior to the opening of business on the day following the
expiration time; provided, however, that if the number of shares accepted
for payment or the aggregate consideration payable therefor have not been
finally determined by such opening of business, the adjustment required
by this bullet shall, pending such final determination, be made based
upon the preliminarily announced results of such tender or exchange
offer, and, after such final determination shall have been made, the
adjustment required by this bullet will be made based upon the number of
shares accepted for payment and the aggregate consideration payable
therefore as so finally determined.
- No adjustment in the conversion price will be required unless such
adjustment would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this
bullet are not required to be made shall be carried forward and taken
into account in any subsequent adjustment; and provided, however, that
any adjustment shall be required and shall be made in accordance with the
provisions of the certificate of designations (other than this bullet)
not later than such time as may be required in order to preserve the
tax-free nature of a distribution to the holders of shares of common
stock. All calculations under this section shall be made to the nearest
cent (with $.005 being rounded upward) or to the nearest 1/100th of a
share (with .005 of a share being rounded upward), as the case may be.
Notwithstanding anything in this paragraph to the contrary, InfoCure
shall be entitled, to the extent permitted by law, to make such
reductions in the conversion price, in addition to those required by this
paragraph, as we, in our discretion shall determine to be advisable in
order that any stock dividends, subdivision of shares, distribution of
rights or warrants to purchase stock or securities, or a distribution of
other assets or any other transaction which could be treated as any of
the foregoing transactions pursuant to Section 305 of the Internal
Revenue Code of 1986, as amended, hereafter made by us to its
stockholders shall not be taxable for such stockholders.
If (1) InfoCure shall declare a dividend (or any other distribution) on its
common stock that would cause an adjustment to the conversion price of the
preferred stock pursuant to the terms of any of the certificate of designations;
(2) InfoCure shall authorize the granting to the holders of its common stock of
rights or warrants to subscribe for or purchase any shares of any class or any
other rights or warrants; (3) there shall be any reclassification or change of
its common stock (except as set forth specifically in the certificate of
designations); (4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of InfoCure; or (5) InfoCure or any subsidiary shall
commence a tender offer or exchange offer for all or a portion of its common
stock, then InfoCure shall cause to be filed with its transfer agent and shall
cause to be mailed to the holders of shares of the preferred stock (and the
corresponding depositary shares), as promptly as possible, but at least 30 days
prior to the applicable date hereinafter specified, a notice stating (a) the
date on which a record is to be taken for the purpose of such dividend,
distribution or granting of rights or warrants, or, if a record is not to be
taken, the date as of which the holders of InfoCure common stock of record to be
entitled to such dividend, distribution or rights or warrants are to be
determined or (b) the date on which such reclassification, change, dissolution,
liquidation or winding up is expected to become effective or occur or the
expiration date of any such tender offer or exchange offer, and the date as of
which it is expected that holders of InfoCure common stock of record shall be
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entitled to exchange their shares of common stock for securities or other
property deliverable upon such reclassification, dissolution, liquidation or
winding up.
VOTING RIGHTS
Except as required by law, holders of the preferred stock (and
corresponding depositary shares) will have the right to vote on all matters on
which InfoCure common stockholders are entitled to vote and shall be entitled to
the number of votes equal to the largest number of full shares of common stock
into which the preferred stock (and the corresponding depositary shares) could
be converted as of the record date for determining eligibility to vote on such
matters. Except as required by law, shares of preferred stock and shares of
common stock are to be voted together as a single class and not as separate
classes.
EXCHANGE INTO PRACTICEWORKS PREFERRED STOCK
Upon consummation of the distribution of the PracticeWorks common stock,
each outstanding share of InfoCure preferred stock will automatically be
exchanged for ten shares of PracticeWorks series A convertible redeemable
preferred stock. This PracticeWorks preferred stock, in the aggregate, will be
convertible into that number of shares of the common stock of PracticeWorks, par
value $0.001 per share, equal to the product of (A) the quotient from (i) the
number of outstanding shares of PracticeWorks preferred stock issued upon the
exchange of the InfoCure preferred stock pursuant to the terms of the
certificate of designations (the "Exchanged Shares") divided by (ii) 10,000,000,
multiplied by (B) the product of (i) 0.015 multiplied by (ii) the Fully Diluted
PracticeWorks Common Stock (as defined below). Each share of PracticeWorks
preferred stock will thus be convertible into that number of shares of
PracticeWorks common stock equal to the quotient from (A) the aggregate number
of shares of PracticeWorks common stock issuable upon the conversion of all of
the PracticeWorks preferred stock derived in the previous sentence, divided by
(B) the number of Exchanged Shares. "Fully Diluted PracticeWorks Common Stock"
for purposes hereof shall mean all shares of PracticeWorks Common Stock
outstanding immediately after the distribution of PracticeWorks common stock;
all shares of PracticeWorks common stock issuable upon the exercise of options,
warrants or other rights to acquire PracticeWorks common stock outstanding
immediately after the distribution of PracticeWorks common stock not held by
employees, officers, directors and consultants of PracticeWorks, assuming all
such options, warrants or other rights to acquire PracticeWorks common stock are
fully exercised at such time regardless of when such options, warrants or other
rights to acquire PracticeWorks common stock are actually exercisable; and all
shares of PracticeWorks common stock issuable upon the conversion of all
PracticeWorks preferred stock (including the PracticeWorks preferred stock),
assuming the conversion of all such PracticeWorks preferred stock at such time
regardless of when such PracticeWorks preferred stock is actually convertible.
For each share of InfoCure preferred stock exchanged for shares of
PracticeWorks preferred stock pursuant to the terms of the certificate of
designations, the record holder thereof on the date of the distribution of
PracticeWorks common stock shall receive, in lieu of receiving the dividend
normally payable on the next dividend payment date fixed therefor, a dividend
payment equal to the accrued and unpaid dividends on such share of InfoCure
preferred stock to the date of the distribution of PracticeWorks common stock
from InfoCure on the date of the exchange.
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The initial liquidation preference of the PracticeWorks preferred stock
shall be equal to the liquidation preference of the InfoCure preferred stock in
effect on the date of the distribution of PracticeWorks common stock divided by
ten. The initial conversion price of the PracticeWorks preferred stock shall be
equal to the conversion price of the InfoCure preferred stock in effect on the
date of the distribution of PracticeWorks common stock divided by ten. The
PracticeWorks preferred stock shall otherwise have designations, rights and
preferences substantially identical to the designations, rights and preferences
set forth herein for the InfoCure preferred stock, except as necessary to affect
the foregoing.
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COMPARATIVE STOCK PRICES AND DIVIDENDS
InfoCure common stock is quoted on The Nasdaq National Market under the
trading symbol "INCX". Prior to the merger, none of the depositary shares or
shares of InfoCure preferred stock will be issued and there will be no market
for those shares. Medical Dynamics common stock was quoted on The Nasdaq
SmallCap Market under the trading symbol "MEDY" until October 11, 2000 and
thereafter has been traded .
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 for all periods
through October 11, 2000 and on the Over-the-Counter Bulletin Board System for
the period from October 12, 2000 through the date of this proxy
statement-prospectus. 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.
<TABLE>
<CAPTION>
MEDICAL
INFOCURE DYNAMICS
COMMON STOCK COMMON STOCK
---------------- ---------------
HIGH LOW HIGH LOW
------- ------ ------ ------
<S> <C> <C> <C> <C>
Year Ending December 31, 2000:
Fourth Quarter*.............................. $ 6.75 $ 3.69 $ 0.31 $ 0.16
Third Quarter................................ 6.44 3.50 0.59 0.31
Second Quarter............................... 18.38 4.00 0.94 0.25
First Quarter................................ 37.38 14.75 2.00 0.75
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
</TABLE>
-------------------------
* through November 10, 2000.
RECENT CLOSING PRICES
The closing sales price per share of InfoCure common stock on The Nasdaq
National Market was $27.00 on December 20, 1999, the last trading day prior to
the public announcement of the proposed merger, $3.91 on October 10, 2000, the
last trading day before public announcement of the amended and restated merger
agreement and $ on November , 2000, the latest practicable day before
the mailing of this proxy statement-prospectus.
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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 and that you will be entitled to receive upon
conversion of the depositary shares may increase or decrease prior to and
following the merger. In addition, 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.
DIVIDEND INFORMATION
Neither InfoCure nor Medical Dynamics has ever paid cash dividends on their
common 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. InfoCure will pay dividends on its preferred stock in
an amount equal to 6% of the liquidation preference. InfoCure will pay dividends
on its preferred stock either in cash or in shares of its common stock, and
these dividends will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31. Any dividends not paid on the applicable payment
date will be added to the liquidation preference
NUMBER OF STOCKHOLDERS
As of October 18, 2000, there were 428 stockholders of record who held
shares of InfoCure common stock and as of October 18, 2000, there were 11,577
stockholders of record who held shares of Medical Dynamics common stock.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth InfoCure's consolidated ratios of earnings
to combined fixed charges and preferred stock dividends for the periods shown:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED ELEVEN MONTHS YEAR ENDED
ENDED DECEMBER 31, ENDED JANUARY 31,
JUNE 30, ------------- DECEMBER 31, -----------
2000 1999 1998 1997 1997 1996
---------- ----- ----- ------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio............................ (1) (1) (1) (1) (1) (1)
</TABLE>
-------------------------
(1) For the six months ended June 30, 2000, the years ended December 31, 1999
and 1998, the eleven months ended December 31, 1997, and the years ended
January 31, 1997 and 1996 InfoCure's earnings were insufficient to cover
fixed charges by $38.5 million, $283,000, $7.8 million, $25.9 million, $8.4
million and $5.0 million, respectively.
InfoCure's consolidated ratios of earnings to combined fixed charges and
preferred stock dividends were computed by dividing its earnings in the
applicable year by its combined fixed charges for the corresponding year. For
the purposes of these calculations, InfoCure's earnings consist of pre-tax
income from continuing operations plus fixed charges. InfoCure's fixed charges
consist of interest expense. InfoCure neither declared nor paid dividends on
preferred stock during the periods presented.
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<PAGE> 102
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known by Medical
Dynamics regarding the beneficial ownership of common stock as of October 18,
2000, 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.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER SHARES OWNED BENEFICIALLY(1) PERCENT OF CLASS*
------------------------ ---------------------------- -----------------
<S> <C> <C>
Edwin L. Adair, M.D.................... 1,054,298(2) 8.0%
Pat Horsley Adair...................... 1,054,298(2) 8.0
Daniel L. Richmond..................... 1,097,760(3) 8.3
Chae U. Kim............................ 1,097,760(3) 8.3
I. Dean Bayne, M.D..................... 40,000(4) 0.3
Van A. Horsley......................... 519,686(5) 3.9
Leroy Bilanich, Ed.D................... 40,000(4) 0.3
All officers and directors as a group
(7 persons).......................... 4,005,396(6) 30.3
</TABLE>
-------------------------
* Percent of class based upon 13,229,206 shares outstanding on October 18,
2000.
(1) The term beneficial ownership with respect to a security is defined by Rule
13d-3 under the Exchange Act 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 175,000 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 429,780 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, if you own more than 100
shares of Medical Dynamics common stock, you may become a holder of InfoCure
common stock and depositary shares representing shares of InfoCure series A
convertible preferred stock. As an InfoCure stockholder, your rights will be
governed by InfoCure's amended certificate of incorporation, including the
certificate of designations which sets forth the rights preferences and
designations of the preferred stock, and InfoCure's 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. The rights, preferences and
designations of the preferred stock and the corresponding depositary shares are
described above under the captions "Description of the Depositary Shares" and
"Description of the Preferred Stock."
CLASSES OF STOCK AND VOTING RIGHTS OF INFOCURE AND MEDICAL DYNAMICS
InfoCure and Medical Dynamics 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. Upon
consummation of the merger, InfoCure will have outstanding shares of its
preferred stock (and corresponding depositary shares) issued in the merger.
Holders of the preferred stock (and the corresponding depositary shares) will be
entitled to vote on all matters on which holders of InfoCure common stock are
entitled to vote. Holders of preferred stock (and the corresponding depositary
shares) will be entitled to the number of votes equal to the number of shares
into which their shares of preferred stock (or corresponding depositary shares)
are convertible (rounded down to the nearest whole number) on the date for
determination of stockholders entitled to vote on a matter.
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 5 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.
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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 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 votes entitled to
be cast, 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.
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 60 days prior to the date
of the meeting.
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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 60
days nor more than 90 days prior to the meeting as originally scheduled;
provided, however, that in the event that less than 60 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 60 days
nor more than 90 days prior to the meeting; provided, however, that in the event
that less than 60 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 of 1934, as amended;
and
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(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.
The Medical Dynamics bylaws do not contain any provisions related to
advance notice of stockholder proposals.
VOTING REQUIREMENTS
InfoCure's bylaws provide that when a quorum is present at any stockholder
meeting, a majority of the number of votes entitled to be cast present in person
or represented by proxy 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 votes
entitled to be cast and the affirmative vote of a majority of the outstanding
stock of each class entitled to vote as a class 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 votes entitled to be cast 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 Securities 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 the stockholders to amend the bylaws.
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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:
- 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 does not expect to hold a 2000 annual meeting of
stockholders. Any proposals of stockholders intended to be presented at the next
annual meeting of stockholders must be received by the Secretary of Medical
Dynamics within a reasonable time before Medical Dynamics will print and mail
its proxy materials to be considered for inclusion in the Medical Dynamics proxy
materials relating to that meeting. Any submission of a stockholder proposal,
even if it is not intended for inclusion in the proxy materials, must be
received by the Secretary of Medical Dynamics within a reasonable time before
Medical Dynamics will print and mail its proxy materials to be timely. Medical
Dynamics will provide public notice to its stockholders of the time and place of
its next annual meeting.
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 Prospectus filed pursuant to
Rule 424(b)(4) on April 22, 1999, which constitutes part of the 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 +
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<PAGE> 109
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 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 46,650 shares of InfoCure's
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:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
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 November , 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 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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<PAGE> 110
This proxy statement-prospectus incorporates by reference the documents set
forth below that InfoCure and Medical Dynamics have previously filed with the
SEC. 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.
<TABLE>
<CAPTION>
INFOCURE FILINGS (FILE NO. 001-12799)
-------------------------------------
<S> <C>
Annual Report on Form 10-K for the
year ended December 31, 1999, as
amended by Annual Report on Form
10-K/A filed on May 1, 2000......... Fiscal year ended December 31, 1999
Quarterly Report on Form 10-Q......... Three months ended March 31, 2000
Quarterly Report on Form 10-Q......... Three months ended June 30, 2000
Proxy Statement....................... For meeting held June 14, 2000
Current Report on Form 8-K............ Filed September 6, 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
</TABLE>
<TABLE>
<CAPTION>
MEDICAL DYNAMICS FILINGS (FILE NO. 0-8632)
------------------------------------------
<S> <C>
Annual Report on Form 10-KSB............ Fiscal Year ended September 30, 1999
Quarterly Report on Form 10-QSB......... Three months ended December 31, 1999
Quarterly Report on Form 10-QSB......... Three months ended March 31, 2000
Quarterly Report on Form 10-QSB......... Three months ended June 30, 2000
Current Reports on Form 8-K............. Dated November 2, 1999 (filed November
5, 1999), December 21, 1999 (filed
December 23, 1999), April 10, 2000
(filed April 25, 2000), May 22, 2000
(filed May 26, 2000), September 13,
2000 (filed September 19, 2000),
October 11, 2000 (filed October 16,
2000) and October 30, 2000 (filed
November 6, 2000)
</TABLE>
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
101
<PAGE> 111
Act between the date of this proxy statement-prospectus and the date of the
Medical Dynamics special meeting on December 27, 2000.
Medical Dynamics' Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1999 and Quarterly Report on Form 10-QSB for the three months
ended June 30, 2000, excluding exhibits, accompany 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.
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 December 15, 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 NOVEMBER
, 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 PREFERRED STOCK OR INFOCURE COMMON STOCK IN THE
MERGER CREATES ANY IMPLICATION TO THE CONTRARY.
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<PAGE> 112
APPENDIX A
AMENDED AND RESTATED
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: OCTOBER 10, 2000
<PAGE> 113
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
1. DEFINITIONS........................................................ A-2
1.1. "Affiliate"................................................. A-2
1.2. "Best Efforts".............................................. A-2
1.3. "Breach".................................................... A-2
1.4. "Closing"................................................... A-2
1.5. "Closing Date".............................................. A-2
1.6. "Code"...................................................... A-2
1.7. "Company Disclosure Schedule"............................... A-2
1.8. "Company Material Adverse Effect"........................... A-2
1.9. "Consent"................................................... A-2
1.10. "Contemplated Transactions"................................. A-2
1.11. "Contract".................................................. A-3
1.12. "Damages"................................................... A-3
1.13. "Effective Time"............................................ A-3
1.14. "Encumbrance"............................................... A-3
1.15. "Environmental Requirements"................................ A-3
1.16. "ERISA"..................................................... A-3
1.17. "ERISA Affiliate"........................................... A-3
1.18. "Exchange Act".............................................. A-3
1.19. "Facilities"................................................ A-3
1.20. "GAAP"...................................................... A-3
1.21. "Governmental Authorization"................................ A-3
1.22. "Governmental Body"......................................... A-3
1.23. "HSR Act"................................................... A-3
1.24. "IRS"....................................................... A-4
1.25. "Knowledge"................................................. A-4
1.26. "Legal Requirement"......................................... A-4
1.27. "Order"..................................................... A-4
1.28. "Ordinary Course of Business"............................... A-4
1.29. "Organizational Documents".................................. A-4
1.30. "Parent Disclosure Schedule"................................ A-4
1.31. "Parent Material Adverse Effect"............................ A-4
1.32. "Person".................................................... A-4
1.33. "Plan"...................................................... A-4
1.34. "Proceeding"................................................ A-4
1.35. "Related Person"............................................ A-5
1.36. "Representative"............................................ A-5
1.37. "Securities Act"............................................ A-5
1.38. "Subsidiary"................................................ A-5
1.39. "Tax Returns"............................................... A-5
1.40. "Taxes"..................................................... A-6
1.41. "Threatened"................................................ A-6
2. MERGER............................................................. A-6
2.1. The Merger.................................................. A-6
2.2. Effective Time; Closing..................................... A-6
2.3. Effect of the Merger........................................ A-6
2.4. Articles of Incorporation; Bylaws; Directors and Officers... A-6
</TABLE>
A-i
<PAGE> 114
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
2.5. Effect on Capital Stock..................................... A-7
2.6. Exchange of Certificates.................................... A-9
2.7. Lost, Stolen or Destroyed Certificates...................... A-10
2.8. No Further Ownership Rights in Company Common Stock......... A-11
2.9. Additional Actions.......................................... A-11
2.10. Tax and Accounting Consequences............................. A-11
2.11. Automatic Conversion of Parent Preferred Stock Into
PracticeWorks Preferred Stock............................. A-11
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................... A-11
3.1. Organization, Good Standing, Corporate Power and
Subsidiaries.............................................. A-11
3.2. Authority; No Conflict...................................... A-12
3.3. Capitalization.............................................. A-13
3.4. SEC Filings; Financial Statements........................... A-14
3.5. Books and Records........................................... A-15
3.6. Real Property Interests..................................... A-15
3.7. Condition and Sufficiency of Assets......................... A-15
3.8. Accounts Receivable......................................... A-15
3.9. Inventory................................................... A-16
3.10. No Undisclosed Liabilities.................................. A-16
3.11. Taxes....................................................... A-16
3.12. No Company Material Adverse Effect.......................... A-17
3.13. Employee Benefits Matters................................... A-17
3.14. Compliance With Legal Requirements; Governmental
Authorizations............................................ A-20
3.15. Legal Proceedings; Orders................................... A-21
3.16. Absence of Certain Changes and Events....................... A-22
3.17. Contracts; No Defaults...................................... A-23
3.18. Insurance................................................... A-25
3.19. Environmental Matters....................................... A-25
3.20. Employees................................................... A-26
3.21. Government Contracts........................................ A-27
3.22. Intellectual Property Rights of the Company................. A-27
3.23. Certain Payments............................................ A-33
3.24. Relationships With Related Persons.......................... A-33
3.25. Brokers or Finders.......................................... A-33
3.26. Labor Relations; Compliance................................. A-33
3.27. Disclosure Documents........................................ A-34
3.28. Disclosure.................................................. A-34
3.29. Vote Required............................................... A-34
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF MERGER SUB AND
4. PARENT............................................................. A-34
4.1. Organization................................................ A-34
4.2. Authorization............................................... A-35
4.3. Absence of Restrictions and Conflicts....................... A-35
4.4. Capitalization of Parent and Merger Sub..................... A-36
4.5. SEC Filings; Financial Statements........................... A-36
4.6. Litigation.................................................. A-37
4.7. Registration Statement; Proxy Statement..................... A-37
4.8. Certain Proceedings......................................... A-37
4.9. Brokers or Finders.......................................... A-37
</TABLE>
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<PAGE> 115
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
5. CERTAIN AGREEMENTS OF THE PARTIES.................................. A-37
5.1. No Solicitation............................................. A-37
5.2. Public Disclosure........................................... A-39
5.3. Reasonable Efforts; Notification............................ A-39
5.4. Third Party Consents........................................ A-40
5.5. Indemnification............................................. A-40
5.6. Nasdaq Listing.............................................. A-41
5.7. Reimbursement of Employee Costs and Expenses................ A-41
5.8. Provision of Loan By Parent to Company...................... A-41
5.9. PracticeWorks Spin-off...................................... A-41
6. ADDITIONAL COVENANTS OF THE PARTIES................................ A-41
6.1. Mutual Covenants............................................ A-41
6.2. Covenants of the Company.................................... A-44
6.3. Form S-8.................................................... A-46
6.4. Stock Options and Warrants.................................. A-46
7. CONDITIONS......................................................... A-47
7.1. Mutual Conditions........................................... A-47
7.2. Conditions to Obligations of Merger Sub and Parent.......... A-48
7.3. Conditions to Obligations of the Company.................... A-49
8. TERMINATION........................................................ A-50
8.1. Termination................................................. A-50
8.2. Notice of Termination; Effect of Termination................ A-51
8.3. Fees and Expenses........................................... A-51
8.4. Amendment................................................... A-53
8.5. Extension; Waiver........................................... A-53
8.6. Special Parent Payment...................................... A-53
9. MISCELLANEOUS...................................................... A-53
9.1. Survival of Representations and Warranties.................. A-53
9.2. Notices..................................................... A-53
9.3. Further Assurances.......................................... A-54
9.4. Waiver...................................................... A-54
9.5. Entire Agreement and Modification........................... A-54
9.6. Assignments, Successors and No Third-Party Rights........... A-55
9.7. Section Headings, Construction.............................. A-55
9.8. Time of Essence............................................. A-55
9.9. Governing Law............................................... A-55
9.10. Counterparts................................................ A-55
</TABLE>
EXHIBITS:
<TABLE>
<S> <C>
Exhibit A Form of Shareholder Agreement.
Exhibit B Form of Certificate of Designation.
Exhibit C-1 Form of Employment Agreement for Daniel L. Richmond.
Exhibit C-2 Form of Employment Agreement for Chae U. Kim.
Exhibit D Form of Norton Lidstone, P.C. Legal Opinion.
Exhibit E Form of Morris, Manning & Martin, L.L.P. Legal Opinion.
</TABLE>
A-iii
<PAGE> 116
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
(this "Agreement"), is made and entered into as of this 10th day of October,
2000, 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,
Merger Sub and Company intend to enter into a transaction pursuant to which
Merger Sub will be merged with and into Company.
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; (iii) has approved the issuance of shares of common stock,
$.001 par value per share, of Parent ("Parent Common Stock") pursuant to the
Merger and (iv) has approved the issuance of shares of Series A preferred stock,
$.001 par value per share, of Parent ("Parent Preferred Stock"), having the
designations, preferences and rights set forth on EXHIBIT B, 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. This Agreement amends and restates in its entirety that certain original
Agreement and Plan Merger and Reorganization dated December 21, 1999, as amended
by that First Amendment to the Agreement and Plan of Merger dated April 10,
2000, and as further amended by that certain Second Amendment to the Agreement
and Plan of Merger dated June 21, 2000.
A-1
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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.
A-2
<PAGE> 118
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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<PAGE> 119
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. In the case
of Company, the term "Ordinary Course of Business" shall include the changes in
the Company's operations since December 21, 1999 taken at the specific request
of Parent, including, but not limited to: (i) Company's cessation of marketing
and selling of it's Computer Age Dentist software product; (ii) Company's
compensating sales personnel who are selling the PracticeWorks product; (iii)
Company's termination of approximately thirty-five (35) employees and (iv) the
other changes in Company's business resulting therefrom as disclosed in the
reports filed by the Company under the Exchange Act.
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.
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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;
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.
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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 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
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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.
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 (i) .06873 of a share, unless adjusted as
provided for herein, of Parent Common Stock ("Common Exchange Ratio") and (ii)
0.07558 of a share of Parent Preferred Stock, such shares to be represented by
depository receipts representing 0.100 per share of Parent Preferred Stock
rounded up to the nearest 1/100th share of Parent Preferred Stock. When used
herein unless the context otherwise requires, the term "Parent Preferred Stock"
also includes the depository receipts.
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 terminated and replaced with new
warrants to purchase Parent Common Stock in the manner described in 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
referenced in SCHEDULE 3.3 (collectively, the "Company Stock Option Plans")
shall be terminated and replaced with new options to purchase Parent Common
Stock in the manner described in Section 6.4.
E. ADJUSTMENTS TO CONVERSION. The conversion rights of holders of Company
Common Stock 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, Parent Common Stock or Parent
Preferred Stock), reorganization, recapitalization or other like change with
respect to Company Common Stock, Parent Common Stock or Parent Preferred 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 and Parent
Preferred 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
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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 and Parent Preferred 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 or Parent
Preferred 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 (i) 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 Four and 93/100 Dollars ($4.93) or (ii) a
depository receipt representing less than 0.10 of a share of Parent Preferred
Stock shall receive cash in an amount equal to the value of such depository
receipt, which shall be equal to the fraction of a share of Parent Preferred
Stock less than 0.10 share that would otherwise be issued multiplied by Five and
44/100 Dollars ($5.44).
G. CONDITIONAL STOCK. If any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with the Company, then
the shares of Parent Common Stock and Parent Preferred Stock issued in exchange
for such shares of Company Common Stock will also be unvested and subject to the
same repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Common Stock and Parent
Preferred Stock may accordingly be marked with appropriate legends. The Company
shall take all action that may be necessary to ensure that, from and after the
Effective Time, Parent is entitled to exercise any such repurchase option or
other right set forth in any such restricted stock purchase agreement or other
agreement.
H. ODD LOT CASH-OUT. Notwithstanding Sections 2.5.A. and 2.5.F. above, any
holder, owning in the aggregate, one hundred (100) or fewer shares of Company
Common Stock ("Odd Lot Shareholder"), shall instead receive cash in an amount
equal to 75/100 Dollars ($.75) per share of Company Common Stock held by such
Odd Lot Shareholder.
I. DISSENTERS RIGHTS.
(i) Notwithstanding any provision of this Agreement to the contrary, any
shares of Company Common Stock held by a holder who has demanded and perfected
appraisal or dissenters' rights for such shares in accordance with Colorado Law
and who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal or dissenters' rights (the "Dissenting Shares") shall not be converted
into or represent a right to receive the consideration set forth pursuant to
this Section 2.5., but the holder thereof shall only be entitled to such rights
as are granted by Colorado Law.
(ii) Notwithstanding the provisions of subsection (i), if any holder of
shares of Company Common Stock who demands appraisal of such shares under
Colorado Law shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
and the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive Parent Common Stock,
Parent Preferred Stock and payment for any fractional share as provided in this
Section 2.5., without interest thereon, upon surrender of the certificate
representing such shares.
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(iii) The Company shall give Parent (1) prompt notice of any written
demands for appraisal of any shares of Company Common Stock, withdrawals of such
demands, and any other instruments served pursuant to Colorado Law and received
by the Company and (2) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under Colorado Law. The
Company shall not, except with the prior written consent of Parent, voluntarily
make any payment with respect to any demands for appraisal of capital stock of
the Company or offer to settle or settle any such demands.
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 and Parent Preferred
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 and Parent Preferred 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 (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 and Parent Preferred 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 (i) certificates
evidencing that number of whole shares of Parent Common Stock and Parent
Preferred Stock into which such holder's shares of Company Common Stock were
converted at the Effective Time; (ii) any dividends or other distributions to
which such holder is entitled pursuant to Section 2.6.C. and (iii) 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 Parent Preferred 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
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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 and Parent Preferred 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 or Parent Preferred 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 and
Parent Preferred 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 and Parent Preferred Stock.
D. TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent Common
Stock or Parent Preferred 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 of a certificate
for shares of Parent Common Stock or Parent Preferred 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, Parent Common Stock or
Parent Preferred 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
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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 and Parent Preferred 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 Sections 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 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. 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.
2.11. AUTOMATIC CONVERSION OF PARENT PREFERRED STOCK INTO PRACTICEWORKS
PREFERRED STOCK. All Parent Preferred Stock issued pursuant to Section 2.5.
shall be subject to automatic exchange into shares of PracticeWorks Preferred
Stock upon a spin-off of Parent's PracticeWorks division as further described in
EXHIBIT B hereto (the "PracticeWorks Spin-off"). The PracticeWorks Spin-off,
while expected, is at InfoCure's discretion and subject to, among other things,
appropriate consents (including consents of senior lenders) and no guarantee is
made hereunder that the PracticeWorks Spin-off will occur.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
As of September 25, 2000 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 September 25, 2000 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.
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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 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 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;
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(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
(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
August 21, 2000 (i) thirteen million two hundred forty thousand sixty-six
(13,240,066) 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 one hundred twenty-five thousand eight hundred thirty-seven
(3,125,837) 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 three hundred forty-nine thousand
(1,349,000) shares of Company Common Stock were available for future grant under
the Company Stock Option Plans and (v) one hundred fifty thousand (150,000)
shares of Company Common Stock were reserved for future issuance upon conversion
of
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warrants of the Company. As of August 31, 2000, 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 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 interest s 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
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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.
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.
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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 September 25, 2000, 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.
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 August 31, 2000. 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
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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 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 and other than the changes in the Company's
financial condition, business and operations as disclosed in Company's reports
filed under the Exchange Act, which changes are continuing to date.
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
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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 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 through August 31, 2000.
(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.
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(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.
(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.
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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.
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;
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(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 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:
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(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.
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 and in the recent changes in
capitalization as reflected in Section 3.3. hereto, 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;
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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 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;
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(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;
(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 Company or other Person the right to
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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 Codess. 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) and denoting whether such employee is receiving or entitled to receive
health coverage under a Plan during such period of leave.
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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").
(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
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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;
(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.
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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 August 31, 2000, 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].
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;
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(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.
"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.
A. 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
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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 Compliant.
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
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
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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 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.
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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.
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.
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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 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.
4. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF MERGER SUB AND PARENT.
As of September 25, 2000 and as of the Closing Date, 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 September 25, 2000 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,
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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 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
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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 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.
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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 (the
"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 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,
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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 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
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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 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
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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 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
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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. REIMBURSEMENT OF EMPLOYEE COSTS AND EXPENSES. Beginning October 1,
2000 and continuing until the earlier of (i) the termination of this Agreement
pursuant to Section 8 below or (ii) the Closing Date, the Parent will reimburse
the Subsidiary on a monthly basis for all costs and expenses, including salary,
benefits, commissions and travel or related expenses associated with the
following employees of Subsidiary who directly devote all or a portion of their
time and effort to the sales, training or support of the Parent's products and
services: (i) Karen Barbera; (ii) Michelle Peabody-Meyers; (iii) Fran Melda;
(iv) Art Michele; (v) Dan Sands and (vi) Jeff Weiss. The Subsidiary will provide
documentation of such efforts and expenses to the Parent and the Parent will pay
the stated amount within twenty (20) days of receipt of such documentation. If
the Parent disagrees with the amount stated by the Subsidiary, the Parent will
nevertheless pay such amount, subject to recoupment if the Parent's review of
the Subsidiary's books and records indicates that any portion of the amount was
not due. Any dispute on whether any recoupment is due or as to the amount of the
recoupment, will be negotiated between the principals of the Subsidiary and the
Parent and, if not resolved to the parties' satisfaction, will be conclusively
resolved by the independent certified public accountant for the Parent after a
review of records which the Subsidiary may supply to such independent public
accountant.
5.8. PROVISION OF LOAN BY PARENT TO COMPANY. Pursuant to that certain
Third Amendment to Loan Documents dated as of October 10, 2000 by and among
Company, Subsidiary and Parent and related documents (the "Loan Documents"),
Parent has agreed to advance an additional Two Hundred Fifty Thousand and No/100
Dollars ($250,000.00) to Company and Subsidiary to be used for general working
capital purposes, which advance shall made on or before October 20, 2000 and
upon such advance, the total aggregate principal loan balance outstanding will
be ($1,550,000.00).
5.9. PRACTICEWORKS SPIN-OFF. Unless this Agreement is terminated prior to
the Effective Time pursuant to Section 8 below, the parties shall cause the
proposed Merger to be consummated prior to the PracticeWorks Spin-off.
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. [RESERVED].
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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 (1) 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 (2) 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 treatment
will be accorded the Confidential Material so disclosed. The Receiving
Company or such Representative shall not be liable for the disclosure of
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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 (1) is or becomes
generally available to the public other than as a result of a disclosure by
the Receiving Company or its Representatives; (2) 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 (3) 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 (1) through (2) above shall
not relieve the Receiving Company or its Representatives of the
prohibitions of the confidentiality provisions of this Section 6.1. 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 correspondence 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
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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 exercise its best efforts and 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 (40)) 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 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.
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(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.
(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
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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 cause the Merger to fail to
qualify as a "reorganization" under Section 368(a) of the Code, 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 terminated
and such Option or Warrant shall be replaced with an option or warrant, as the
case may be, (such replacement options or warrants shall hereinafter be referred
to collectively as "Parent Securities" or individually as "Parent Security") to
acquire shares of Parent Common Stock equal to the product of the number of
shares of Company Common Stock that were purchasable under such Option or
Warrant immediately prior to the Effective Time multiplied by .1521298, rounded
up to the nearest whole number of shares of Parent Common Stock. The per share
exercise price for the shares of Parent Common Stock issuable upon exercise of
such Parent Security will be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which the related Option or
Warrant was exercisable immediately prior to the Effective Time by .1521298 and
rounding the resulting exercise price up to the nearest whole cent. Each Parent
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Security shall be evidenced by an option or warrant agreement in a form
acceptable to Parent and shall contain the following additional provisions: (i)
with respect to any Parent Security to be issued to Messrs. Horsley, Bayne and
Bilanich or to individuals who are former employees or directors of either
Company or Subsidiary as of the date of this Agreement, the expiration date of
such Parent Security shall be the same expiration date as presently provided in
such party's existing option or warrant agreement with the Company; (ii) with
respect to any Parent Security to be issued to any other party not described in
clause (i) above, the expiration date of such Parent Security shall be the later
of (x) one (1) year from the date of Closing or (y) the thirtieth (30th) day
following termination of such employee's employment with the Company or
Subsidiary, but in no event shall such expiration date extend beyond the
expiration date presently provided in such party's existing option or warrant
agreement with the Company and (iii) the Parent Security shall be subject to
automatic exchange for a comparable option or warrant to acquire PracticeWorks
common stock upon the PracticeWorks Spin-off, adjusted to reflect the exchange
rate applicable to other options or warrants of the Parent which are exchanged
in connection with the PracticeWorks Spin-off.
B. Upon execution of this Agreement, Company will promptly send notice to
each Option or Warrant holder of the proposed termination and exchange of such
holder's Options or Warrants as described above, and the Company further agrees
to take any and all other action as may be required under any existing option or
warrant agreements to effectuate the transactions contemplated by this Section
6.4.
C. 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
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connection with the Merger shall have been authorized for listing on Nasdaq upon
official notice of issuance.
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
December 31, 1999 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.
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E. Daniel L. Richmond and Chae U. Kim shall each have executed an
Employment Agreement, in the forms of which are attached hereto as EXHIBIT C-1
and EXHIBIT C-2, respectively.
F. 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 D.
G. 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.
H. The Company and Parent shall have fully complied with all of their
obligations and covenants set forth in Section 6.1.D. above.
I. The total aggregate amount of cash paid by Parent pursuant to Section
2.5.H. shall not exceed Five Hundred Thousand and No/100 Dollars ($500,000.00).
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 September 25, 2000 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.
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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 E.
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 December 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);
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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.; (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; or
H. By Company, if the Share Value, as defined below, is less than Three and
45/100 Dollars ($3.45), or by Parent, if the Share Value is greater than Six and
41/100 Dollars ($6.41). Termination of the Agreement by either party pursuant to
this Section 8.1.H. shall require delivery of written notice of termination to
the other party; however, if Company provides notice pursuant to this Section
8.1.H., that notice shall be irrevocable and Parent shall have the option, in
its sole discretion, by giving written notice to Company of such election prior
to Closing to reject the notice and proceed with Closing (i) using an adjusted
Common Exchange Ratio equal to the product of .06873 multiplied by a fraction,
the numerator of which is $3.45 and the denominator of which is the Share Value
or (ii) in lieu of issuing Parent Common Stock as otherwise set forth herein,
pay cash in the amount of $.2372 per share of Company Common Stock. 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 the Closing Date.
Termination of the Agreement under this section does not entitle the
non-terminating party to any termination fee, reimbursement of expenses, or
payment of a penalty of any kind.
8.2. NOTICE OF TERMINATION; EFFECT OF TERMINATION. Except as otherwise
provided in Section 8.1.H. above, 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.
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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 Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) (the "Termination Fee").
(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
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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 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., Parent shall pay to Company an amount
in cash equal to Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00),
and Parent hereby waives the right to offset such amount against any amounts due
Parent by Company pursuant to the loan described in Section 5.8.
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:
<TABLE>
<S> <C> <C>
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.
5445 DTC Parkway
The Quadrant, Suite 850
Englewood, Colorado 80111
Attention: Herrick K. Lidstone, Jr., Esq.
Telecopy No.: (303) 221-5553
</TABLE>
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<TABLE>
<S> <C> <C>
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
</TABLE>
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 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.
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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. 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.
9.8. TIME OF ESSENCE. With regard to all time periods set forth or
referred to in this Agreement, time is of the essence.
9.9. 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.
9.10. 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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<PAGE> 172
FIRST AMENDMENT TO THE
AMENDED AND RESTATED
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: OCTOBER 30, 2000
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<PAGE> 173
FIRST AMENDMENT TO THE
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS FIRST AMENDMENT TO THE AMENDED AND RESTATED AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION (this "Agreement"), is made and entered into as of
this 30th day of October, 2000, 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. The Parent, the Merger Sub and the Company entered into an amended and
restated agreement and plan of merger and reorganization as of October 10, 2000
(the "Merger Agreement").
B. The parties desire to amend the Merger Agreement as described herein.
C. Unless otherwise defined herein, capitalized terms used in this first
amendment to the Merger Agreement have the same definitions given them in the
Merger Agreement.
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.THE MERGER AGREEMENT BE AND HEREBY IS AMENDED TO DELETE SECTION 2.10 IN
ITS ENTIRETY AND TO INSERT IN LIEU THEREOF THE FOLLOWING AS SECTION 2.10:
2.10 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties hereto
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Code unless, pursuant to Section 8.1.H. hereof, Parent shall agree to
pay cash in the amount of $.2372 per share of Company Common Stock in lieu of
each share of Company Common Stock being automatically converted into the right
to receive Parent Common Stock as set forth in Section 2.5.A. 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.
2.THE MERGER AGREEMENT BE AND HEREBY IS AMENDED TO DELETE SECTION 6.1.B. IN
ITS ENTIRETY AND TO INSERT IN LIEU THEREOF THE FOLLOWING AS SECTION
6.1.B.:
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 unless and until, pursuant to Section 8.1.H. hereof,
Parent shall agree to pay cash in the amount of $.2372 per share of Company
Common Stock in lieu of each share of Company Common Stock being automatically
converted into the right to receive Parent Common Stock as set forth in Section
2.5.A.
3.THE MERGER AGREEMENT BE AND HEREBY IS AMENDED TO INSERT THE FOLLOWING NEW
SECTION 6.5:
6.5 COMPANY PLAN. Company shall terminate the Computer Age Dentist 401(k)
Plan (the "401(k) Plan") effective immediately prior to the Closing, shall cease
all further
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<PAGE> 174
contributions to the 401(k) Plan for pay periods beginning on and after the
Closing Date and, to the extent the 401(k) Plan provides for loans to
participants, shall cease making any such additional loans effective immediately
prior to the Closing Date. Company agrees to cooperate with Parent after the
Closing Date to amend the 401(k) Plan in order to bring the 401(k) Plan into
compliance with all applicable laws and regulations, to vest all participants in
their accounts, to distribute all such accounts to the extent permitted under
applicable laws and regulations and to bear all expenses that may apply in
connection with obtaining a favorable determination letter from the Internal
Revenue Service with respect to the tax-qualified status of the 401(k) Plan at
its termination.
4.THE MERGER AGREEMENT BE AND HEREBY IS AMENDED TO DELETE SECTION 7.1.H. IN
ITS ENTIRETY AND TO INSERT IN LIEU THEREOF THE FOLLOWING AS SECTION
7.1.H.:
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; provided, further, that this Section 7.1.H. shall not be
a condition to the obligations of the parties to consummate the Merger if,
pursuant to Section 8.1.H. hereof, Parent shall agree to pay cash in the amount
of $.2372 per share of Company Common Stock in lieu of each share of Company
Common Stock being automatically converted into the right to receive Parent
Common Stock as set forth in Section 2.5.A. The parties to this Agreement agree
to make such reasonable representations as requested by such counsel for the
purpose of rendering such opinions.
5.THE MERGER AGREEMENT BE AND HEREBY IS AMENDED TO DELETE SECTION 8.1.H. IN
ITS ENTIRETY AND TO INSERT IN LIEU THEREOF THE FOLLOWING AS SECTIONS
8.1.H. AND 8.1.I.:
H. By Company, if the Share Value, as defined below, is less than Three and
45/100 Dollars ($3.45) unless Parent shall agree (i) to adjust the Common
Exchange Ratio to be equal to the product of .06873 multiplied by a fraction,
the numerator of which is Three and 45/100 Dollars ($3.45) and the denominator
of which is the Share Value or (ii) in lieu of each share of Company Common
Stock being automatically converted into the right to receive Parent Common
Stock as set forth in Section 2.5.A. hereof, to pay cash in the amount of $.2372
per share of Company Common Stock. 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
ending on (and including) the fourth (4th) trading day immediately prior to the
date on which the Company receives the Shareholder Approval. On the fourth (4th)
trading day immediately prior to the date for which the Shareholder meeting
("Meeting") is scheduled (or any date on which the Meeting is scheduled to
reconvene following an adjournment or to be held following a rescheduling of the
Meeting), if the Share Value is less than Three and 45/100 Dollars ($3.45) and
Company elects to terminate the Agreement pursuant to this Section 8.1.H.,
Company shall deliver a written notice of termination to Parent before 5:00
p.m., eastern time, on such date. If Parent elects to change the consideration
as set forth in this Section 8.1.H., it shall deliver a written notice to
Company by 8:00 p.m., eastern time, on such date indicating whether it will (i)
adjust the Common Stock Exchange Ratio or (ii) pay cash in the amount of $.2372
per share of Company Common Stock in lieu of issuing Parent Common Stock. If,
subsequent to the
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giving of any notice of termination by Company or notice by Parent that it has
elected to change the consideration, the Meeting is adjourned without the
Company receiving the Shareholder Approval or if the Meeting is otherwise
delayed or rescheduled without being held, such notices shall have no effect and
the provisions of this Section 8.1.H. relating to the timing of such notices
shall apply on the fourth (4th) trading day prior to the date on which the
Meeting is scheduled to be reconvened or the date for which the Meeting is
rescheduled. The preceding sentence shall apply in the case of each adjournment
or rescheduling of the Meeting until the Shareholder Approval is received by
Company. Termination of the Agreement under this section does not entitle either
party to any termination fee, reimbursement of expenses, or payment of a penalty
of any kind;
I. By Parent, if the Share Value is greater than Six and 41/100 Dollars
($6.41). Termination of the Agreement under this section does not entitle
Company to any termination fee, reimbursement of expenses, or payment of a
penalty of any kind.
6. COUNTERPARTS. This First Amendment to the Merger 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.
7. NO OTHER MODIFICATIONS. The Merger Agreement remains in full force and
effect except as specifically modified hereby.
8. APPROVALS AND RECOMMENDATIONS. 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) this Amendment to the Merger Agreement and (iii) the
Merger transaction.
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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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<PAGE> 177
APPENDIX B
ARTICLE 113 OF THE COLORADO BUSINESS CORPORATION ACT
PART 1
RIGHT OF DISSENT -- PAYMENT FOR SHARES
7-113-101. DEFINITIONS.
For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held in a
voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at the
time and in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion would
be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in section
7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102. RIGHT TO DISSENT.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in the event of
any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party if:
(I) Approval by the shareholders of that corporation is required
for the merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation; or
(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired;
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(c) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102 (1); and
(d) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to the disposition pursuant to section
7-112-102 (2).
(1.3) A shareholder is not entitled to dissent and obtain payment, under
subsection (1) of this section, of the fair value of the shares of any class or
series of shares which either were listed on a national securities exchange
registered under the federal "Securities Exchange Act of 1934", as amended, or
on the national market system of the national association of securities dealers
automated quotation system, or were held of record by more than two thousand
shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders' meeting at
which the corporate action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate action;
or
(c) The effective date of the corporate action if the corporate action
is authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section shall
not apply if the shareholder will receive for the shareholder's shares, pursuant
to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan
of merger or share exchange;
(b) Shares of any other corporation which at the effective date of the
plan of merger or share exchange either will be listed on a national
securities exchange registered under the federal "Securities Exchange Act
of 1934", as amended, or on the national market system of the national
association of securities dealers automated quotation system, or will be
held of record by more than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu
of fractional shares.
(2) (Deleted by amendment, L. 96, p. 1321, sec. 30, effective June 1,
1996.)
(2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share or
scrip so created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
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(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
7-113-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and causes the corporation to receive written notice which states such
dissent and the name, address, and federal taxpayer identification number, if
any, of each person on whose behalf the record shareholder asserts dissenters'
rights. The rights of a record shareholder under this subsection (1) are
determined as if the shares as to which the record shareholder dissents and the
other shares of the record shareholder were registered in the names of different
shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
such beneficial shareholder must certify to the corporation that the beneficial
shareholder and the record shareholder or record shareholders of all shares
owned beneficially by the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to which there is no
limitation on the ability to exercise dissenters' rights. Any such requirement
shall be stated in the dissenters' notice given pursuant to section 7-113-203.
PART 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
7-113-201. NOTICE OF DISSENTERS' RIGHTS.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting, the notice
of the meeting shall be given to all shareholders, whether or not entitled to
vote. The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and shall be accompanied by a copy of this
article and the materials, if any, that, under articles 101 to 117 of this
title, are required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this subsection (1)
shall not affect any action taken at the shareholders' meeting for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202(1).
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(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202(2).
7-113-202. NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting and if
notice of dissenters' rights has been given to such shareholder in connection
with the action pursuant to section 7-113-201 (1), a shareholder who wishes to
assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken,
written notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201(2), a
shareholder who wishes to assert dissenters' rights shall not execute a writing
consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection (1)
or (2) of this section is not entitled to demand payment for the shareholder's
shares under this article.
7-113-203. DISSENTERS' NOTICE.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized, the corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand payment for
their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section shall
be given no later than ten days after the effective date of the corporate action
creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated
shares must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
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(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be
less than thirty days after the date the notice required by subsection (1)
of this section is given;
(f) State the requirement contemplated in section 7-113-103 (3), if
such requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204. PROCEDURE TO DEMAND PAYMENT.
(1) A shareholder who is given a dissenters' notice pursuant to section
7-113-203 and who wishes to assert dissenters' rights shall, in accordance with
the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may be
the payment demand form contemplated in section 7-113-203(2)(d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of
this section retains all rights of a shareholder, except the right to transfer
the shares, until the effective date of the proposed corporate action giving
rise to the shareholder's exercise of dissenters' rights and has only the right
to receive payment for the shares after the effective date of such corporate
action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the demand
for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the shareholder's
share certificates as required by the date or dates set in the dissenters'
notice is not entitled to payment for the shares under this article.
7-113-205. UNCERTIFICATED SHARES.
(1) Upon receipt of a demand for payment under section 7-113-204 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206. PAYMENT.
(1) Except as provided in section 7-113-208, upon the effective date of the
corporate action creating dissenters' rights under section 7-113-102 or upon
receipt of a payment demand pursuant to section 7-113-204, whichever is later,
the corporation shall pay each dissenter who complied with section 7-113-204, at
the address stated in the payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, the
amount the corporation estimates to be the fair value of the dissenter's shares,
plus accrued interest.
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(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet
as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, and, if the
corporation customarily provides such statements to shareholders, a
statement of changes in shareholders' equity for that year and a statement
of cash flow for that year, which balance sheet and statements shall have
been audited if the corporation customarily provides audited financial
statements to shareholders, as well as the latest available financial
statements, if any, for the interim or full-year period, which financial
statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
(e) A copy of this article.
7-113-207. FAILURE TO TAKE ACTION.
(1) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 does not occur within sixty days after the date
set by the corporation by which the corporation must receive the payment demand
as provided in section 7-113-203, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall send a new dissenters'
notice, as provided in section 7-113-203, and the provisions of sections
7-113-204 to 7-113-209 shall again be applicable.
7-113-208. SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT OF
PROPOSED CORPORATE ACTION.
(1) The corporation may, in or with the dissenters' notice given pursuant
to section 7-113-203, state the date of the first announcement to news media or
to shareholders of the terms of the proposed corporate action creating
dissenters' rights under section 7-113-102 and state that the dissenter shall
certify in writing, in or with the dissenter's payment demand under section
7-113-204, whether or not the dissenter (or the person on whose behalf
dissenters' rights are asserted) acquired beneficial ownership of the shares
before that date. With respect to any dissenter who does not so certify in
writing, in or with the payment demand, that the dissenter or the person on
whose behalf the dissenter asserts dissenters' rights acquired beneficial
ownership of the shares before such date, the corporation may, in lieu of making
the payment provided in section 7-113-206, offer to make such payment if the
dissenter agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206 (2).
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7-113-209. PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section
7-113-206 or offered under section 7-113-208 is less than the fair value of
the shares or that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206
within sixty days after the date set by the corporation by which the
corporation must receive the payment demand; or
(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as
required by section 7-113-207 (1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
PART 3
JUDICIAL APPRAISAL OF SHARES
7-113-301. COURT ACTION.
(1) If a demand for payment under section 7-113-209 remains unresolved, the
corporation may, within sixty days after receiving the payment demand, commence
a proceeding and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay to each dissenter whose demand remains
unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in subsection
(1) of this section in the district court of the county in this state where the
corporation's principal office is located or, if the corporation has no
principal office in this state, in the district court of the county in which its
registered office is located. If the corporation is a foreign corporation
without a registered office, it shall commence the proceeding in the county
where the registered office of the domestic corporation merged into, or whose
shares were acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unresolved parties to the proceeding commenced
under subsection (2) of this section as in an action against their shares, and
all parties shall be served with a copy of the petition. Service on each
dissenter shall be by registered or certified mail, to the address stated in
such dissenter's payment demand, or if no such address is stated in the payment
demand, at the address shown on the corporation's current record of shareholders
for the record shareholder holding the dissenter's shares, or as provided by
law.
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(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to such order. The parties to
the proceeding are entitled to the same discovery rights as parties in other
civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or for the fair value,
plus interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
7-113-302. COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under section 7-113-301
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation; except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the
court finds the corporation did not substantially comply with the
requirements of part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in favor
of any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to said counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefitted.
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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 not 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
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
2.1 -- Amended and Restated Agreement and Plan of Merger and
Reorganization by and among Medical Dynamics, Inc., InfoCure
Corporation and CADI Acquisition Corporation, Inc. dated
October 10, 2000, as amended on October 30 (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.
4.1 -- Certificate of Designation of Series A Convertible Preferred
Stock
5.1 -- Opinion of Morris, Manning & Martin, L.L.P. regarding the
legality of the Securities being issued
8.1 -- Opinion of Morris, Manning & Martin, L.L.P. regarding the
federal income tax consequences of the merger
12.1 -- Calculation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
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.
99.2 -- Form of Deposit Agreement to be entered by InfoCure
Corporation and StockTrans, Inc., as depositary.
</TABLE>
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
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<PAGE> 187
called for by the applicable registration form with respect to reofferings by
persons who 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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<PAGE> 189
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 November 10, 2000.
InfoCure Corporation
By: /s/ FREDERICK L. FINE
--------------------------------------
Frederick L. Fine
President and Chief Executive Officer
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 10th day of November, 2000.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
/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)
/s/ JAMES D. ELLIOT Director
-----------------------------------------------------
James D. Elliot
/s/ RAYMOND H. WELSH Director
-----------------------------------------------------
Raymond H. Welsh
</TABLE>
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