Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
File by the Registrant [XX]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of
[xx] Definitive Proxy Statement Commission Only (as Permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2)
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
MEDICAL DYNAMICS, INC.
----------------------
(Name of Registrant as Specified In Its Charter)
Van A. Horsley, President
-------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate Box:)
[XX] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and O-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11:1
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
- ----------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
MEDICAL DYNAMICS, INC.
99 Inverness Drive East
Englewood, CO 80112
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To
Be Held on September 30, 1999
- --------------------------------------------------------------------------------
August 26, 1999
TO THE SHAREHOLDERS OF MEDICAL DYNAMICS, INC.:
The Annual Meeting of Shareholders of Medical Dynamics, Inc., a Colorado
corporation, ("Medical Dynamics" or the "Company") will be held at 10:00 a.m.
local time, in the Company's office located at 99 Inverness Drive East,
Englewood, CO 80112, on September 30, 1999, to consider and take action on:
1. The election of seven directors to serve until the next annual meeting
of shareholders and until their successors have been elected and qualified.
2. Such other business as may properly come before the meeting, or any
adjournments or postponements thereof.
The discussion of the proposals set forth above is intended only as a
summary, and is qualified in its entirety by the information contained in the
accompanying Proxy Statement.
Only holders of record of common stock at the close of business on August
26, 1999, will be entitled to notice of and to vote at this Annual Meeting, and
any postponements or adjournments thereof.
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON AND THE
MANAGEMENT OF THE COMPANY HOPES THAT YOU WILL FIND IT CONVENIENT TO ATTEND.
Shareholders, whether or not they expect to be present at the meeting, are
requested to sign and date the enclosed proxy and return it promptly in the
envelope enclosed for that purpose. Any person giving a proxy has the power to
revoke it at any time by following the instructions provided in the Proxy
Statement.
By Order of the Board of Directors:
Van A. Horsley, President
<PAGE>
PLEASE DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES MAY BE
VOTED IN ACCORDANCE WITH YOUR WISHES. THE GIVING OF SUCH PROXY DOES NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
YOUR VOTE IS IMPORTANT
<PAGE>
MEDICAL DYNAMICS, INC.
99 Inverness Drive East
Englewood CO 80112
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 30, 1999
August 26,1999
This Proxy Statement is being furnished to shareholders of Medical
Dynamics, Inc. ("Medical Dynamics" or the "Company") in connection with the
solicitation of proxies by and on behalf of the Company's Board of Directors for
use at the Annual Meeting of shareholders of the Company (the "Annual Meeting")
and at any adjournments or postponements thereof. The Annual Meeting will be
held at 10:00 a.m. local time, in the Company's office located at 99 Inverness
Drive East, Englewood, CO 80112, on September 30, 1999. This Proxy Statement
will be first mailed to the shareholders on or about September 7, 1999.
VOTING SECURITIES
Holders of record of the Company's common stock (the "Common Stock") at the
close of business on August 26, 1999 (the "Record Date") will be entitled to
vote on all matters. On the Record Date, the Company had 11,773,462 shares of
Common Stock outstanding. The holders of shares of Common Stock are entitled to
one vote per share. The Company's only class of voting securities is the Common
Stock.
A majority of the issued and outstanding shares of the Common Stock
entitled to vote, represented in person or by proxy, constitutes a quorum for
the transaction of business at the Annual Meeting. As described in more detail
below, if there is a quorum present:
the seven nominees for the Board receiving the greatest number of
affirmative votes will be elected as directors (proposal 1).
Management may seek an adjournment if a quorum is not present, although
Management has not determined whether to do so.
Abstentions will be treated as shares present or represented and entitled
to vote for purposes of determining the presence of a quorum, but will not be
considered as votes cast in determining whether a matter has been approved by
the shareholders. Any shares a broker indicates on its proxy that it does not
have the authority to vote on any particular matter because it has not received
direction from the beneficial owner thereof will not be counted as voting on a
particular matter.
1
<PAGE>
A shareholder who gives his proxy pursuant to this solicitation may revoke
it at any time before it is voted either by giving notice of the revocation
thereof to the Secretary of the Company, by filing another proxy with the
Secretary or by attending the Annual Meeting and voting in person. All properly
executed and unrevoked proxies, if received in time, will be voted in accordance
with the instructions of the beneficial owners contained thereon.
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to supply proxy materials to the beneficial
owners of the Company's common stock for whom they hold shares and will
reimburse them for their reasonable expenses in so doing.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At August 26, 1999, Medical Dynamics had only one class of outstanding
voting securities, its common stock. The following table sets forth information
as of August 26, 1999, with respect to the ownership of the common stock for all
directors, individually, all executive officers named in the compensation table,
all executive officers and directors as a group, and all beneficial owners of
more than five percent of the common stock.
Shares owned Percent
Name of beneficial owner beneficially (1) of class
- ------------------------ ---------------- --------
Edwin L. Adair, M.D. 1,239,298 (2) 10.3%
and Pat Horsley Adair
317 Paragon Way
Castle Pines Village
Colorado 80104
Daniel L. Richmond 1,097,760 (4) 9.0%
6500 Baird Av
Reseda, CA. 91335
Chae U. Kim 1,097,760 (4) 9.0%
3231 Cheviot Vista Place
Los Angeles, CA. 90034
I. Dean Bayne, M.D. 20,000 (7) 0.2%
Van A. Horsley 518,412 (3) 4.3%
Leroy Bilanich, Ed.D. 20,000 (7) 0.2%
2
<PAGE>
The Tail Wind Fund, Ltd. 826,923 (6) 6.6%
400 East Bay Road
P.O. Box 55-5539
Nassau, Bahamas
All officers and 3,993,230 (5) 29.6%
directors as a
group (8 persons)
(1) As used in this section, the term beneficial ownership with respect to a
security is defined by Rule 13d-3 under the Securities Exchange Act of 1934
as consisting of sole or shared voting power (including the power to vote
or direct the vote) and/or sole or shared investment power (including the
power to dispose or direct the disposition) with respect to the security
through any contract, arrangement, understanding, relationship or
otherwise. Unless otherwise indicated, beneficial ownership is of record
and consists of sole voting and investment power.
(2) Includes 175,000 stock options held by Dr. Adair of which all are presently
exercisable. Also includes 120,000 options held by Dr. Adair issued in
consideration for cancellation of fiscal 1996 royalty payments due him
totaling $120,000, also presently exercisable.
(3) Includes 433,506 shares under presently exercisable stock options. Does not
include options to acquire 400,000 shares exercisable at a price of $3.25
per share which vest based upon defined performance goals.
(4) Includes 450,000 shares under presently exercisable stock options. Does not
include options to acquire 150,000 shares exercisable at $3.25 which vest
upon defined performance goals.
(5) Includes shares referenced in notes (2) through (5) and 44,800 options held
by one officer, all of which are presently exercisable, who are not
directors.
(6) Includes 576,923 issuable upon conversion of $300,000 in convertible
debentures which are presently convertible as well as 150,000 shares
issuable pursuant to the exercise of warrants at a current exercise price
of $2.58 per share. Does not include shares issuable upon conversion of
$500,000 of convertible debentures which are not convertible until January
2000.
(7) Options
The Company knows of no arrangement, the operation of which may, at a
subsequent date, result in change in control of the Company.
3
<PAGE>
PROPOSAL 1-
ELECTION OF DIRECTORS
The following persons are nominated as directors of the Company for a term
of one year and until the election and qualification of their successors:
Edwin L. Adair, M.D. Pat Horsley Adair
Van A. Horsley I. Dean Bayne
Leroy I Bilanich Daniel L. Richmond
Chae U. Kim
These persons will constitute the entire Board of Directors. The person
named in the proxy intends to vote for those nominees, each of whom has been
recommended for election by the Board of Directors of the Company, unless a
shareholder withholds authority to vote for any or all of the nominees. The
seven nominees receiving the greatest number of affirmative votes will be
elected as directors. If any nominee is unable to serve or, for good cause, will
not serve, the person named in the proxy reserves the right to substitute
another person of his choice as nominee in his place. Each of the nominees has
agreed to serve, if elected. The following table sets forth the names and ages
of the nominees and the executive offices held by each such person. The Company
has no other officers. These officers serve at the pleasure of the Board of
Directors.
Identification of Directors and Executive Officers
- --------------------------------------------------
The following table sets forth certain information regarding the directors
and executive officers of Medical Dynamics and of its significant subsidiary,
Computer Age Dentist, Inc. ("CADI"):
Name Age Position
- ---- --- --------
Edwin L. Adair, M.D. (1) 69 Chairman of the Board and Treasurer of
Medical Dynamics
Van A. Horsley (2) 47 Director, President, Chief Financial
Officer and Chief Executive Officer of
Medical Dynamics; Director and Vice
President of CADI
Daniel L. Richmond 38 Director of Medical Dynamics, Inc.;
Director and Chief Executive Officer
of CADI
Chae U. Kim 38 Director of Medical Dynamics, Inc.;
Director and President of CADI
Edward L. Boggs 44 Controller of Medical Dynamics;
Controller of CADI
4
<PAGE>
Pat Horsley Adair (1) 70 Director and Secretary of Medical
Dynamics
I. Dean Bayne, M.D. (2) 72 Director and Assistant Secretary of
Medical Dynamics
Leroy I. Bilanich (2) 49 Director of Medical Dynamics
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee
No arrangement exists between any of the above officers and directors
pursuant to which any one of those persons was elected to such office or
position except that Messrs. Kim and Richmond were appointed to the Medical
Dynamics Board as a result of the acquisition of CADI, in October 1997 as
described in the Annual Report to Shareholders.
Directors hold office until the next meeting of shareholders and until a
successor is elected and qualified, or until their resignation. Executive
officers are elected at annual meetings of the Board of Directors. Each such
officer holds office for one year or until a successor has been duly elected and
qualified or until death, resignation or removal. No director of the Company is
a director of another company having securities registered under Section 12 of
the Securities Exchange Act of 1934 or a company registered under the Investment
Company Act of 1940.
A brief summary of the business experience of each person who is currently
an officer or director of the Company, and such person's service with the
Company is as follows:
Edwin L. Adair, M.D. has been a director of Medical Dynamics since June 30,
1971, Chairman of the Board since September 8, 1981 and Treasurer since March
27, 1973. From February 6, 1986 until July 13, 1990, Dr. Adair also served as
Chief Executive Officer of Medical Dynamics. Dr. Adair received B.S. and M.D.
degrees from the University of Colorado in 1951 and 1955, respectively. He
practiced medicine from 1956 until 1983 and is a board-certified urologist who
discontinued the practice of medicine due to a physical disability resulting
from an accident. Dr. Adair is currently a self-employed entrepreneur and
inventor. Dr. Adair has published articles in medical journals and has taught at
the University of Colorado School of Medicine. Dr. Adair is a member of the
American Medical Association, American Board of Urology, the American Urological
Society and the American College of Surgeons.
Van A. Horsley has been a director, President and Chief Executive Officer
of Medical Dynamics since July 13, 1990. From March 1, 1990 until July 13, 1990,
Mr. Horsley served as Chief Financial Officer. Mr. Horsley holds a B.S.B.A.
degree in finance from the University of Denver and a graduate degree from the
School of Banking at the University of Colorado. From 1974 to February, 1990,
Mr. Horsley was employed in various capacities by Affiliated Denver National
Bank in Denver, Colorado and from 1985 through February, 1990 served as
executive vice president - head of lending.
Edward L. Boggs has been Controller since August 1997. Mr. Boggs holds a
B.S. degree in accounting conferred from Rollins College, Winter Park, Florida.
From 1982 to 1987 Mr. Boggs held the position of Supervisor Financial Planning
5
<PAGE>
and Analysis for the Presbyterian/St. Luke's Hospitals and most recently as
Controller for Specialty Healthcare Management until its sale to Horizon Mental
Healthcare, Inc. Mr. Boggs has been in the Healthcare Industry in various
financial capacities since his internship at Orange County memorial Hospital
during his senior year of college.
Pat Horsley Adair has been a director and Secretary of Medical Dynamics
since September 8, 1981 and currently assists her husband, Dr. Adair, in his
activities. Mrs. Adair attended McMurray College in Abilene, Texas, taking
courses in English and business which did not lead to a degree. From June 1974
to July 1983, Mrs. Adair was employed by Medical Dynamics as office manager.
Since that time, Mrs. Adair has served as Corporate Secretary to Medical
Dynamics. From 1964 to 1975, Mrs. Adair served as executive director of the
Arapahoe County Medical Society and from 1976 to 1980 she served as executive
director of the Metro Denver Foundation for Medical Care, an organization which
serves Arapahoe, Denver, Boulder, Jefferson and Adams counties, Colorado.
Daniel L. Richmond has been a director of Medical Dynamics since October
1997. In June 1984, Mr. Richmond graduated from UCLA with a B.S. degree in
Math/Computer Science. From 1983 through 1985, Mr. Richmond founded and then
served as President of Compulink, a software company that sells to retail
jewelry stores. From 1986 until 1987, Mr. Richmond, along with Mr. Chae Kim
headed up the technical team for Emory & Associates, a software development
company specializing in custom accounting packages for large manufacturers and
distributors. In June 1987 Mr. Richmond co-founded Computer Age Dentist, Inc.
("CADI"). He has served as Chief Executive Officer of CADI from June 1987 until
present.
Chae U. Kim has been a director of Medical Dynamics since October 1997. In
June 1985, Mr. Kim Graduated from UCLA with a B.A. degree in Biology. From 1986
until 1987, Mr. Kim, along with Dan Richmond headed up the technical team for
Emory & Associates, a software development company specializing in custom
accounting packages for large manufacturers and distributors. In June 1987 Mr.
Kim co-founded CADI. He has served as President of CADI from June 1987 until
present.
I. Dean Bayne, M.D. has been a director of Medical Dynamics since July 1987
and Assistant Secretary since October 1988. Dr. Bayne received B.S. and M.D.
degrees from Louisiana State University in 1949 and 1953, respectively, and has
been engaged in private medical practice since 1958. Dr. Bayne was a resident in
obstetrics at Herman Kiefer Hospital, Detroit, Michigan, and a resident in
gynecology at Detroit Receiving Hospital, Detroit, Michigan. He is a member of
the Board of Obstetrics and Gynecology and the American College of Obstetrics
and Gynecology and is currently a practicing surgeon.
Leroy Bilanich, Ed.D. has been a director of Medical Dynamics since
September 13, 1990. Dr. Bilanich has a B.S. in journalism and broadcasting from
Pennsylvania State University, an M.A. in communication from the University of
Colorado and has an Ed.D. in organizational behavior from Harvard University.
Dr. Bilanich currently works for the Organization Effectiveness Group as a
consultant to large corporations in the area of organizational development and
in the past has held various positions in the Human Resource Departments at
Pfizer, Inc. from 1983 to March of 1988 and the Olin Corporation.
6
<PAGE>
Dr. Edwin L. Adair and Pat Horsley Adair are married. Van A. Horsley is the
son of Pat Horsley Adair. There are no other family relationships among the
officers or directors.
Meetings of the Board and Committees
- ------------------------------------
The Board of Directors held three formal meetings during the fiscal year
ended September 30, 1998 and no meetings subsequently through June 30, 1999.
Each director attended at least 75% of the formal meetings either in person or
by telephone. In addition, regular communications were maintained throughout the
year among all of the officers and directors of the Company and the directors
acted by unanimous consent five times during fiscal 1998 and six times through
June 30, 1999. The Board has a standing audit committee appointed after the
completion of the 1997 fiscal year. The members of the audit committee held
several informal discussions regarding audit committee issues but did not hold a
formal meeting outside of the normal Board meetings.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and officers and persons who own more than ten
percent of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Directors, officers and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) reports
filed.
Based solely on its review of the copies of the reports it received from
persons required to file, the Company believes that during the period from
October 1, 1997 through June 30,1999, all filing requirements applicable to its
officers, directors and greater than ten-percent shareholders were complied
with.
EXECUTIVE COMPENSATION
Summary Compensation Table
- --------------------------
The following table sets forth information regarding compensation paid to
the chief executive officer of Medical Dynamics for the three years ended
September 30, 1998. No other person who is currently an executive officer of
Medical Dynamics earned salary and bonus compensation exceeding $100,000 during
any of those years. The table below includes all compensation paid to him by the
Company and any subsidiary.
7
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------- ---------------------------------
Awards Payout
----------------------- ------
Securities
underlying
Name and Restricted Options & LTIP All Other
Position Year Salary Bonus Other Awards SAR's Payout Compensation
-------- ---- ------ ----- ----- ------ ----- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Van A. ($$)
Horsley 1998 $123,333 -0- 5,465 -0- -0- -0- $ 306
President and 1997 $110,000 -0- -0- -0- -0- -0- $ 272
Chief 1996 $105,000 -0- 925 -0- 237,174 -0- $ 260
Executive *
Officer
============================================================================================================
Chae U. Kim, ($$)
Director and 1998 $105,000 -0- 6,000 -0- 600,000 -0- $1,393
President of **
CADI
============================================================================================================
Daniel L. ($$)
Richmond, 1998 $105,000 -0- 6,000 -0- 600,000 -0- $1,400
Director and **
Chief
Executive
Officer
============================================================================================================
</TABLE>
* 100,000 options vested in 1998 were originally granted to Mr. Horsley in 1996
and, therefore are not included in the foregoing table. These include options to
acquire 50,000 shares exercisable at $2.75 and 50,000 shares exercisable at
$3.00. Does not include options to acquire 50,000 shares exercisable at a price
of $3.75 per share which vest based upon defined performance goals.
** 600,000 options to purchase common stock were granted in 1998 and are
exercisable at $3.25. 150,000 of the options vested in fiscal 1998 and are
currently exercisable. 450,000 shares, exercisable at $3.25, vest upon defined
performance goals.
On January 1, 1990, Medical Dynamics adopted an employee benefit plan under
Internal Revenue Code Section 401(k). The 401(k) plan is a profit sharing plan
under which both employees and Medical Dynamics are entitled (at their own
discretion) to contribute a portion of compensation and earnings, respectively,
to investment funds to supplement employee retirement benefits. Amounts for
matching contributions for the account of Mr. Horsley are included under "All
Other Compensation" in the Summary Compensation Table.
There are no plans to pay bonuses or deferred compensation to employees of
the Company.
The Company has adopted a medical and life insurance plan for its employees
at the Company's cost and provides a discretionary disability, dental and other
insurance plans for the benefit of its employees at their expense.
8
<PAGE>
Employment Agreements. On October 1, 1997 Medical Dynamics, in conjunction
with its purchase of Computer Age Dentist, Inc. (CADI), entered into employment
agreements with Dan Richmond (CADI's CEO) and Chae Kim (CADI's President). The
terms of the agreements are five years and call for annual compensation of
$105,000 each, car allowances of $500 per month and other benefits customarily
extended to other CADI employees. In both cases, the employment agreements
define their duties to include a continuation of their present positions with
CADI, and for a default under the employment agreements if the employee is not
re-elected to the Board of Directors of Medical Dynamics or if the Board of
Directors of Medical Dynamics is expanded otherwise than as the result of an
increase approved by a vote of a majority of the Board.
Stock Option Plans
- ------------------
During fiscal 1998, no stock options were granted by Medical Dynamics to
its Chief Executive Officer. During fiscal 1998, Medical Dynamics granted no
stock appreciation rights to any person, and no outstanding options were
repriced.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values.
- --------------------------------------------------------------------------------
The following table sets forth information regarding stock options
exercised by the chief executive officer during the 1998 fiscal year as well as
the year-end value of options held on September 30, 1998. No Stock Appreciation
Rights have been granted to, or are held by, the Chief Executive Officer:
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
- -------------- ------------------ -------------- ----------------- ---------------------
Name Shares acquired on Value realized # of unexercised Value of in-the-money
exercise options at FY end options at FY end
(exercisable/ (exercisable/
unexercisable) unexercisable)
- -------------- ------------------ -------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Van A. Horsley -0- -0- 370,680 / 50,000 $142,637 / 0
- -------------- ------------------ -------------- ----------------- ---------------------
Daniel L. -0- -0- 150,000 /450,000 $0 / 0
Richmond
- -------------- ------------------ -------------- ----------------- ---------------------
Chae U. Kim -0- -0- 150,000 /450,000 $0 / 0
- -------------- ------------------ -------------- ----------------- ---------------------
</TABLE>
Long Term Incentive Compensation Plans; Defined Benefit or Actuarial Plans
- --------------------------------------------------------------------------
Medical Dynamics has no long term incentive compensation plans, defined
benefit, or actuarial plans.
Compensation of Directors
- -------------------------
General. Medical Dynamics' directors who are not employees are authorized
to receive $200 for each directors' meeting attended by them. To date, the
directors have waived their right to receive directors fees. Dr. Bayne owns an
option to acquire 20,000 shares of common stock at $4.00 per share, expiring
June 11, 2003. Leroy Bilanich owns an option to acquire 20,000 shares of common
stock at $1.50 per share, expiring June 11, 2003.
9
<PAGE>
No options were granted during fiscal 1998 to board members.
Royalty Agreements. Dr. Adair and Dr. Bayne, directors of Medical Dynamics,
are each entitled to receive royalties equal to two percent of the net sales of
products each assigned to the Company. No royalties have been accrued or paid to
Dr. Bayne; $600,000 has been paid and $0 has been accrued to Dr. Adair through
the end of fiscal 1998. No cash amounts have been paid to Dr. Adair
subsequently. In an effort to help reduce negative cash flow during fiscal 1996,
Dr. Adair accepted 120,000 common stock options priced at $1.00 per share in
substitution for his cash royalty payment for the 1996 fiscal year. During 1997
Dr. Adair and Medical Dynamics made certain changes to the license agreement
which included an elimination of the minimum annual royalty, effective for the
1997 fiscal year. See "Certain Relationships and Related Transactions" for
further information regarding the royalty agreement.
Indemnification Agreements. Medical Dynamics has entered into
indemnification agreements with certain of its directors and officers providing
for indemnification of each such director by Medical Dynamics to the full extent
permitted by the Colorado Business Corporation Act, and it intends to enter into
similar agreements with the remaining directors. The agreements provide that in
all circumstances in which a director or officer may receive indemnification by
statute, such indemnity shall be provided.
Medical Dynamics has no other arrangements pursuant to which it compensates
its directors for acting in their capacities as such.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Transactions With Management and Others.
- ----------------------------------------
Medical Dynamics has engaged in certain transactions with members of its
Board of Directors. In each case, the Board determined in good faith that the
transaction was in the Company's best interests and the terms of the transaction
were at least as fair to Medical Dynamics as could have been obtained from an
independent person, and the transaction was approved by the disinterested
directors. Registrant will continue to follow this procedure in approving any
transactions with affiliated persons. No such transactions are contemplated at
this time.
Promissory Note Extension with Messrs. Richmond and Kim: Medical Dynamics
owes two of its officers and directors, Daniel L. Richmond and Chae U. Kim,
amounts derived from Medical Dynamics original acquisition of Computer Age
Dentist. Approximately $127,000 was outstanding under these notes which were
payable in full on August 1, 1999. Richmond and Kim agreed to extend the due
date on their respective notes for one additional year or, if earlier, upon the
sale by Medical Dynamics or Computer Age Dentist of all or substantially all of
its or their assets. These promissory notes bear interest at 12% per annum, with
interest being payable when the principal is due.
Promissory Note with Dr. and Mrs. Adair: On July 30, 1999, Medical Dynamics
issued a promissory note in the amount of $400,000 to Dr. And Mrs. Edwin Adair,
two officers and directors of Medical Dynamics. Dr. and Mrs. Adair advanced the
entire amount to Medical Dynamics on July 30, 1999. To collateralize repayment
10
<PAGE>
of the amounts due under that note, Dr. and Mrs. Adair received an assignment of
collateral from Norwest Business Credit which was repaid in full. The note bears
interest at 12% per annum, with interest payable in monthly in arrears. All
unpaid interest and principal is due on July 30, 2000 or, if earlier, upon the
sale by Medical Dynamics or Computer Age Dentist of all or substantially all of
its or their assets.
License Agreement with Dr. Adair. Medical Dynamics entered into an
exclusive revocable license agreement with its chairman, Dr. Edwin Adair,
effective June 3, 1987, as amended, relating to use of certain technology
invented and developed by Dr. Adair. Before an amendment negotiated in September
1997, Medical Dynamics was obligated to pay Dr. Adair a minimum annual royalty
of $120,000. Additionally, Dr. Adair was obligated to give Medical Dynamics a
right of first refusal for his inventions. Actual royalties never exceeded the
minimum annual royalty. As a result of negotiations between the disinterested
directors and Dr. Adair, the parties agreed to amend the license agreement to
waive the minimum annual royalty due September 30, 1997 for the year then ended
and any future minimum annual royalty, and to waive Dr. Adair's obligation to
provide Medical Dynamics with a right of first refusal on future technology.
Distribution Agreement. Medical Dynamics entered into a distribution
agreement with Micro- Medical Devices, Inc. ("MMD"), a corporation wholly-owned
by Dr. Adair, during June of fiscal year 1995. The distribution agreement
includes all products developed by Dr. Adair related to his Universal Sterile
Endoscopy System(TM) ("USES"). No revenues have been received as a result of the
distribution agreement with MMD nor are any revenues expected.
Other Related Party Transactions.
- ---------------------------------
Medical Dynamics employs one son of Pat Horsley Adair at an annual salary
rate of $105,000 as described in the compensation tables.
Except as otherwise stated above, since October 1, 1995, Medical Dynamics
has not been a party to any transaction involving in excess of $60,000, in which
any director or executive officer, nominee for election as a director, security
holder of record or beneficially of more than five percent of any class of
Medical Dynamics' securities, or any member of the immediate family of the
foregoing had or will have a direct or indirect material interest.
Medical Dynamics is not aware of any other relationship between nominees
for election as directors or its directors and Medical Dynamics that are similar
in nature and scope to those relationships listed in this Section.
INDEPENDENT AUDITORS
The independent accounting firm of Hein & Associates has been selected by
the Board of Directors with respect to audit of the consolidated financial
statements of the Company for the fiscal year ending September 30, 1999. A
representative of Hein & Associates is not expected to be present at the Annual
Meeting.
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PROPOSALS FROM SHAREHOLDERS
Proposals from shareholders intended to be present at the next Annual
Meeting of shareholders should be addressed to the Company at Medical Dynamics,
Inc., Attention: Corporate Secretary, 99 Inverness Drive East, Englewood, CO
80112 and must be received by the Company by May 1, 2000. Upon receipt of any
such proposal, the Company shall determine whether or not to include any such
proposal in the Proxy Statement and proxy in accordance with applicable law. It
is suggested that such proposals be forwarded by Certified Mail-Return Receipt
Requested.
ANNUAL REPORT TO SHAREHOLDERS
This proxy statement is being accompanied by the Company's annual report to
shareholders. The annual report to shareholders includes the audited financial
statements for the Company.
ANNUAL REPORT ON FORM 10-KSB AND QUARTERLY REPORT ON FORM 10-QSB
The Company's Annual Report on Form 10-KSB for the year ended September 30,
1998, its Quarterly Report on Form 10-QSB for the period ended June 30, 1999,
and other reports filed by Medical Dynamics under the Securities Exchange Act of
1934, are available to any shareholder at no cost upon request to: Corporate
Secretary, 99 Inverness Drive East, Englewood, CO 80112, or by telephone: (303)
790-2990.
OTHER MATTERS
Management does not know of any other matters to be brought before the
meeting. Should any other matter requiring a vote of shareholders arise at the
meeting, the persons named in the proxy will vote the proxies in accordance with
their best judgment.
By Order of the Board of Directors:
MEDICAL DYNAMICS, INC.
Van A. Horsley, President
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Medical Dynamics, Inc.
99 Inverness Drive East
Englewood, CO 80112
PROXY This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Van A. Horsley and Edwin L. Adair, or
either one of them, as Proxy, each with the power to appoint his substitute, and
hereby authorizes them to vote, as designated below, all of the shares of Common
Stock of Medical Dynamics, Inc. held of record by the undersigned on August 26,
1999, at the Annual Meeting of Shareholders to be held on September 30, 1999 and
at any adjournments or postponements thereof.
1. ELECTION OF DIRECTORS
FOR all nominees listed below
(except as marked to the contrary below) [ ]
WITHHOLD AUTHORITY
to vote for all nominees listed below [ ]
(INSTRUCTION) To withhold authority to vote for any individual nominee mark
the box next to the nominee's name below.)
[ ] Edwin L. Adair, M.D. [ ] Pat Horsley Adair [ ] Van A. Horsley
[ ] Leroy I Bilanich [ ] I Dean Bayne [ ] Chae U. Kim
[ ] Daniel L. Richmond
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(over)
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted for the election as directors of all nominees and for the approval of
all other matters.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
- -----------------------------
Signature
Date: ,1999
- ----------------------------- -------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY IN THE ENCLOSED ENVELOPE
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